10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2018

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38289AVAYA HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

Delaware	26-1119726
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4655 Great America Parkway Santa Clara, California	95054
(Address of Principal executive offices)	(Zip Code)

(908) 953-6000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller Reporting Company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨   No  ý

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ý    No  ¨

As of January 31, 2019, 110,695,523 shares of Common Stock, $.01 par value, of the registrant were outstanding.

TABLE OF CONTENTS

Item	Description	Page
	PART I—FINANCIAL INFORMATION
1.	Financial Statements	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
3.	Quantitative and Qualitative Disclosures About Market Risk	42
4.	Controls and Procedures	43
	PART II—OTHER INFORMATION
1.	Legal Proceedings	45
1A.	Risk Factors	45
2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
3.	Defaults Upon Senior Securities	45
4.	Mine Safety Disclosures	45
5.	Other Information	45
6.	Exhibits	46
	Signatures	47

When we use the terms “we,” “us,” “our,” “Avaya” or the “Company,” we mean Avaya Holdings Corp., a Delaware corporation, and its consolidated subsidiaries taken as a whole, unless the context otherwise indicates.

This Quarterly Report on Form 10-Q contains the registered and unregistered trademarks or service marks of Avaya and are the property of Avaya Holdings Corp. and/or its affiliates. This Quarterly Report on Form 10-Q also contains additional trade names, trademarks or service marks belonging to us and to other companies. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Avaya Holdings Corp.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

	Successor						Predecessor
	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
REVENUE
Products	$	324		$	71		$	253
Services	414			77			351
	738			148			604
COSTS
Products:
Costs	115			33			84
Amortization of technology intangible assets	43			7			3
Services	173			30			155
	331			70			242
GROSS PROFIT	407			78			362
OPERATING EXPENSES
Selling, general and administrative	257			50			264
Research and development	53			9			38
Amortization of intangible assets	40			7			10
Restructuring charges, net	7			10			14
	357			76			326
OPERATING INCOME	50			2			36
Interest expense	(60		)	(9		)	(14		)
Other income (expense), net	22			(2		)	(2		)
Reorganization items, net	—			—			3,416
INCOME (LOSS) BEFORE INCOME TAXES	12			(9		)	3,436
(Provision for) benefit from income taxes	(3		)	246			(459		)
NET INCOME	$	9		$	237		$	2,977
NET INCOME PER SHARE
Basic	$	0.08		$	2.16		$	5.19
Diluted	$	0.08		$	2.15		$	5.19
Weighted average shares outstanding
Basic	110.3			109.8			497.3
Diluted	111.2			110.3			497.3

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

1

Avaya Holdings Corp.

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In millions)

	Successor						Predecessor
	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Net income	$	9		$	237		$	2,977
Other comprehensive (loss) income:
Pension, post-retirement and postemployment benefit-related items, net of income taxes $(58) for the period from October 1, 2017 through December 15, 2017	—			—			655
Cumulative translation adjustment	1			(13		)	3
Change in interest rate swaps, net of income taxes of $7 for the three months ended December 31, 2018	(21		)	—			—
Other comprehensive (loss) income	(20		)	(13		)	658
Elimination of Predecessor Company accumulated other comprehensive loss	—			—			790
Total comprehensive (loss) income	$	(11	)	$	224		$	4,425

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2

Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and share amounts)

	December 31, 2018			September 30, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	743		$	700
Accounts receivable, net	327			377
Inventory	68			81
Contract assets	120			—
Contract costs	118			—
Other current assets	106			170
TOTAL CURRENT ASSETS	1,482			1,328
Property, plant and equipment, net	239			250
Deferred income taxes, net	28			29
Intangible assets, net	3,149			3,234
Goodwill	2,764			2,764
Other assets	97			74
TOTAL ASSETS	$	7,759		$	7,679
LIABILITIES
Current liabilities:
Debt maturing within one year	$	29		$	29
Accounts payable	295			266
Payroll and benefit obligations	121			145
Contract liabilities	482			484
Business restructuring reserve	50			51
Other current liabilities	152			148
TOTAL CURRENT LIABILITIES	1,129			1,123
Non-current liabilities:
Long-term debt, net of current portion	3,095			3,097
Pension obligations	652			671
Other post-retirement obligations	177			176
Deferred income taxes, net	161			140
Business restructuring reserve	43			47
Other liabilities	370			374
TOTAL NON-CURRENT LIABILITIES	4,498			4,505
TOTAL LIABILITIES	5,627			5,628
Commitments and contingencies (Note 19)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 55,000,000 shares authorized, no shares issued or outstanding at December 31, 2018 and September 30, 2018	—			—
Common stock, $0.01 par value; 550,000,000 shares authorized; 110,708,203 shares issued and 110,695,523 shares outstanding at December 31, 2018; and 110,218,653 shares issued and 110,012,790 shares outstanding at September 30, 2018	1			1
Additional paid-in capital	1,745			1,745
Retained earnings	388			287
Accumulated other comprehensive (loss) income	(2		)	18
TOTAL STOCKHOLDERS' EQUITY	2,132			2,051
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	7,759		$	7,679

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

3

Avaya Holdings Corp.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

(In millions)

	Common Stock
	Shares		Par Value		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of September 30, 2018 (Successor)	110.2		$	1	$	1,745		$	287	$	18		$	2,051
Issuance of common stock under the equity incentive plan	0.8												—
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.3	)			(6		)						(6		)
Amortization of share-based compensation					6								6
Adjustment for adoption of new accounting standard (Note 2)								92					92
Net income								9					9
Other comprehensive loss										(20		)	(20		)
Balance as of December 31, 2018 (Successor)	110.7		$	1	$	1,745		$	388	$	(2	)	$	2,132

	Common Stock
	Shares		Par Value		Additional Paid-In Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' (Deficit) Equity
Balance as of September 30, 2017 (Predecessor)	494.8		$	—	$	2,389		$	(5,954	)	$	(1,448	)	$	(5,013	)
Amortization of share-based compensation					3									3
Accrued dividends on Series A preferred stock					(2		)							(2		)
Accrued dividends on Series B preferred stock					(4		)							(4		)
Reclassifications to equity awards on redeemable shares					1									1
Net income								2,977						2,977
Other comprehensive income											658			658
Balance as of December 15, 2017 (Predecessor)	494.8		$	—	$	2,387		$	(2,977	)	$	(790	)	$	(1,380	)
Cancellation of Predecessor equity	(494.8	)	—		(2,387		)	2,977			790			1,380
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—
Issuance of Successor common stock
Common stock issued for settlement of Predecessor debt	103.9		1		1,575									1,576
Common stock issued for Pension Benefit Guaranty Corporation	6.1		—		92									92
Balance as of December 15, 2017 (Predecessor)	110.0		$	1	$	1,667		$	—		$	—		$	1,668
Balance as of December 16, 2017 (Successor)	110.0		$	1	$	1,667		$	—		$	—		$	1,668
Issuance of common stock under the equity incentive plan	—													—
Amortization of share-based compensation					1									1
Net income								237						237
Other comprehensive loss											(13		)	(13		)
Balance as of December 31, 2017 (Successor)	110.0		$	1	$	1,668		$	237		$	(13	)	$	1,893

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4

Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Successor						Predecessor
	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
OPERATING ACTIVITIES:
Net income	$	9		$	237		$	2,977
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	117			22			31
Share-based compensation	6			1			—
Amortization of debt issuance costs	4			—			—
Accretion of debt discount	1			—			—
Deferred income taxes, net	(2		)	(245		)	455
Change in fair value of emergence date warrants	(18		)	5			—
Unrealized loss (gain) on foreign currency transactions	14			(4		)	—
Other non-cash charges, net	—			1			—
Reorganization items:
Net gain on settlement of Liabilities subject to compromise	—			—			(1,778		)
Payment to Pension Benefit Guaranty Corporation	—			—			(340		)
Payment to pension trust	—			—			(49		)
Payment of unsecured claims	—			—			(58		)
Fresh start adjustments, net	—			—			(1,697		)
Non-cash and financing related reorganization items, net	—			—			26
Changes in operating assets and liabilities:
Accounts receivable	49			(21		)	40
Inventory	(11		)	2			—
Contract assets	(43		)	—			—
Contract costs	(7		)	—			—
Accounts payable	26			27			(40		)
Payroll and benefit obligations	(37		)	(22		)	16
Business restructuring reserve	(4		)	(3		)	(7		)
Contract liabilities	21			44			28
Other assets and liabilities	(39		)	(4		)	(18		)
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	86			40			(414		)
INVESTING ACTIVITIES:
Capital expenditures	(21		)	(2		)	(13		)
Other investing activities, net	(1		)	—			—
NET CASH USED FOR INVESTING ACTIVITIES	(22		)	(2		)	(13		)
FINANCING ACTIVITIES:
Proceeds from Term Loan Credit Agreement	—			—			2,896
Repayment of debtor-in-possession financing	—			—			(725		)
Repayment of first lien debt	—			—			(2,061		)
Repayment of long-term debt, including adequate protection payments	(7		)	—			(111		)
Debt issuance costs	—			—			(97		)
Payments related to sale-leaseback transactions	(4		)	—			(4		)
Other financing activities, net	(7		)	—			—
NET CASH USED FOR FINANCING ACTIVITIES	(18		)	—			(102		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(3		)	3			(2		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	43			41			(531		)
Cash, cash equivalents, and restricted cash at beginning of period	704			435			966
Cash, cash equivalents, and restricted cash at end of period	$	747		$	476		$	435

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

5

Avaya Holdings Corp.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Background and Basis of Presentation

Background

Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the “Company” or “Avaya”), is a global leader in digital communications products, solutions and services for businesses of all sizes. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. The Company's global team of professionals delivers services from initial planning and design, to implementation and integration, to ongoing managed operations, optimization, training and support. Currently, the Company manages its business operations in two segments, Products & Solutions and Services. The Company sells directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, system integrators and business partners that provide sales and services support.

Basis of Presentation

Avaya Holdings has no material assets or standalone operations other than its ownership of Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements as of December 31, 2018 and for the three months ended December 31, 2018, the period from December 16, 2017 through December 31, 2017, and the period from October 1, 2017 through December 15, 2017, reflect the operating results of Avaya Holdings and its consolidated subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial statements, and should be read in conjunction with the Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2018, included in the Company's Form 10-K filed with the SEC on December 21, 2018. In management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to state fairly the results of operations, financial position and cash flows for the periods indicated. The condensed consolidated results of operations for the interim periods reported are not necessarily indicative of the results for the entire fiscal year.

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. These estimates include assessing the collectability of accounts receivable, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, business restructuring reserves, pension and post-retirement benefit costs, the fair value of equity compensation, the fair value of assets and liabilities in connection with fresh start accounting as well as those acquired in business combinations, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, the amount of exposure from potential loss contingencies, and fair value measurements, among others. The markets for the Company's products are characterized by intense competition, rapid technological development and frequent new product introductions, all of which could affect the future recoverability of the Company's assets. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates.

During the three months ended December 31, 2018, the Company recorded an out-of-period adjustment to correct sales and marketing expense. The impact resulted in a $5 million increase to Selling, general and administrative expense and a decrease to net income of $3 million for the three months ended December 31, 2018. Management concluded that the correction was not material to previously issued consolidated financial statements and to the three months ended December 31, 2018.

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared on a basis that assumes that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

On January 19, 2017 (the “Petition Date”), Avaya Holdings, together with certain of its affiliates, namely Avaya CALA Inc., Avaya EMEA Ltd., Avaya Federal Solutions, Inc., Avaya Holdings LLC, Avaya Holdings Two, LLC, Avaya Inc., Avaya Integrated Cabinet Solutions Inc. (n/k/a Avaya Integrated Cabinet Solutions LLC), Avaya Management Services Inc., Avaya Services Inc., Avaya World Services Inc., Octel Communications LLC, Sierra Asia Pacific Inc., Sierra Communication International LLC, Technology Corporation of America, Inc., Ubiquity Software Corporation, VPNet Technologies, Inc. and Zang, Inc. (n/k/a Avaya Cloud Inc.) (the “Debtors”), filed voluntary petitions for relief (the “Bankruptcy Filing”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court"). The cases were jointly administered as Case No. 17-10089 (SMB). The Bankruptcy Court confirmed the Company's Second Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and its Debtor Affiliates filed on October 24, 2017 (the "Plan of Reorganization") on November 28, 2017. Confirmation of the plan

6

resulted in the discharge of certain claims against the Company that arose before the Petition Date and terminated all rights and interests of equity security holders as provided for in the Plan of Reorganization. The Debtors operated their businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 of the Bankruptcy Code and the orders of the Bankruptcy Court until the Plan of Reorganization was substantially consummated and they emerged from bankruptcy on December 15, 2017 (the "Emergence Date").

On the Emergence Date, the Company applied fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the Condensed Consolidated Financial Statements after the Emergence Date, are not comparable with the Condensed Consolidated Financial Statements on or before that date.

References to "Successor" or "Successor Company" relate to the financial position and results of operations of the reorganized Avaya Holdings after the Emergence Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Avaya Holdings on or before the Emergence Date.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company adopted this standard as of October 1, 2018 on a prospective basis. The adoption of this standard did not have an impact on the Company's Condensed Consolidated Financial Statements, however, the future impact of the standard will depend on the nature of any future acquisitions or dispositions made by the Company.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This standard requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard as of October 1, 2018 applying the retrospective transition method to each period presented. The adoption resulted in an increase of Net cash used for investing activities of $10 million and $21 million for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), respectively.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This standard addresses the appropriate classification of certain cash flows as operating, investing, or financing. The Company adopted this standard as of October 1, 2018 applying the retrospective transition method to each accounting period presented. The adoption of the standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)" ("ASC 606"). This standard superseded most of the previous revenue recognition guidance under GAAP and is intended to improve and converge with international standards the financial reporting requirements for revenue recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The Company adopted ASC 606 as of October 1, 2018 using the modified retrospective transition method applied to all open contracts with customers that were not completed as of September 30, 2018.

Upon adoption of ASC 606, sales that include professional services, are generally recognized as the services are performed as opposed to upon completion and acceptance of the project. When such arrangements include products, products revenue is generally recognized when the products are delivered as opposed to upon completion and acceptance of the project. Additionally, for cloud and managed services arrangements pursuant to which the customer purchases and owns the solution and Avaya provides the software as a service ("SaaS"), control of the software generally transfers to the customer and the related revenue is recognized, at the point-in-time the SaaS commences. Revenue recognition related to stand-alone product shipments, maintenance services, and certain cloud offerings remains substantially unchanged. In addition to the impacts on revenue recognition, the standard requires incremental contract acquisition costs (primarily sales commissions) to be capitalized and amortized on a systematic basis that is consistent with the transfer of goods or services to which the asset relates. These costs were formerly expensed as incurred. The impact of adopting ASC 606 is dependent upon contract-specific terms and the Company has chosen to use the allowed practical expedient whereby, incremental contract acquisition costs with an amortization period of one year or less are expensed as incurred.

7

On October 1, 2018, the beginning of fiscal 2019, the Company recorded a net increase to the opening Retained earnings balance of $92 million, net of tax, due to the cumulative impact of adopting ASC 606. The increase to Retained earnings included $93 million for the portion of the transaction price that would have been recognized as revenue under prior guidance (ASC "605"). These amounts will not be recognized as revenue in future periods and are primarily attributable to open contracts that contained professional services, both on a stand-alone basis and when sold together with hardware and software, for which revenue recognition was deferred until project completion under ASC 605.

The impact of the adoption of ASC 606 on the September 30, 2018 Condensed Consolidated Balance Sheet is as follows:

	September 30, 2018					October 1, 2018
(In millions)	As Reported		Adjustments			Upon Adoption of ASC 606
ASSETS
Accounts receivable, net	$	377	$	(1	)	$	376
Inventory	81		(24		)	57
Contract assets	—		77			77
Contract costs	—		109			109
Other current assets	170		(66		)	104
Property, plant and equipment, net	250		(1		)	249
Deferred income taxes, net	29		(2		)	27
Other assets	74		16			90
LIABILITIES
Contract liabilities	484		(16		)	468
Other current liabilities	148		4			152
Deferred income taxes, net	140		28			168
STOCKHOLDERS' EQUITY
Retained earnings	287		92			379

For additional information refer to Note 3, "Revenue Recognition," for disclosures related to the adoption of ASC 606 and an updated accounting policy related to revenue recognition and contract costs.

Recent Standards Not Yet Effective

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for the Company in fiscal year 2021, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. This update removes disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This standard is effective for the Company beginning in fiscal year 2021, with early adoption permitted. The amendments in the standard need to be applied on a retrospective basis. The Company is currently assessing the impact of the standard on its disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This standard modifies the disclosure requirements on fair value measurements by removing certain disclosures, modifying certain disclosures and adding additional disclosures. This standard is effective for the Company beginning in the first quarter of fiscal year 2021. Certain disclosures in the standard need to be applied on a retrospective basis and others on a prospective basis. The Company is currently assessing the impact of the standard on its disclosures.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standard allows companies to

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reclassify from accumulated other comprehensive income to retained earnings any stranded tax benefits resulting from the enactment of the Tax Cuts and Jobs Act. This standard is effective for the Company beginning in the first quarter of fiscal 2020. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard, along with other guidance subsequently issued by the FASB, requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This standard is effective for the Company in the first quarter of fiscal 2021 on a prospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The standard requires the recognition of assets and liabilities for all leases with lease terms of more than 12 months. Subsequently, the FASB issued other standards that clarified certain aspects of the standard, which is effective for the Company in the first quarter of fiscal 2020 with early adoption permitted. The Company is currently evaluating the method of adoption and the effect that the adoption of the standard may have on its Condensed Consolidated Financial Statements.

3. Revenue Recognition

On October 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method. Accordingly, the impact of adoption is recorded as an adjustment to retained earnings as of October 1, 2018 and represents the difference between ASC 606 and ASC 605 applied to all open contracts with customers that were not completed as of September 30, 2018. Under the modified retrospective method, results for reporting periods beginning after September 30, 2018 are presented under ASC 606 while prior period financial information is not adjusted and continues to be reported in accordance with ASC 605. The Company elected to use the contract modification practical expedient whereby, all contract modifications for each contract before October 1, 2018 are aggregated and evaluated at the adoption date.

Impact of ASC 606 on Financial Statement Line Items

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Balance Sheet as of December 31, 2018 is as follows:

	December 31, 2018
(In millions)	As Reported		Adjustments			Without Adoption of ASC 606
ASSETS
Accounts receivable, net	$	327	$	2		$	329
Inventory	68		28			96
Contract assets	120		(120		)	—
Contract costs	118		(118		)	—
Other current assets	106		83			189
Property, plant and equipment, net	239		1			240
Deferred income taxes, net	28		2			30
Other assets	97		(15		)	82
LIABILITIES
Contract liabilities	482		23			505
Other current liabilities	152		(12		)	140
Deferred income taxes, net	161		(28		)	133
STOCKHOLDERS' EQUITY
Retained earnings	388		(120		)	268

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The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Statement of Operations for the three months ended December 31, 2018 is as follows:

	Three Months Ended December 31, 2018
(In millions)	As Reported			Adjustments			Without Adoption of ASC 606
REVENUE
Products	$	324		$	(30	)	$	294
Services	414			(20		)	394
	738			(50		)	688
COSTS
Products:
Costs	115			(6		)	109
Amortization of technology intangible assets	43			—			43
Services	173			(6		)	167
	331			(12		)	319
GROSS PROFIT	407			(38		)	369
OPERATING EXPENSES
Selling, general and administrative	257			8			265
Research and development	53			—			53
Amortization of intangible assets	40			—			40
Restructuring charges, net	7			—			7
	357			8			365
OPERATING INCOME	50			(46		)	4
Interest expense	(60		)	—			(60		)
Other income, net	22			—			22
INCOME (LOSS) BEFORE INCOME TAXES	12			(46		)	(34		)
(Provision for) benefit from income taxes	(3		)	18			15
NET INCOME (LOSS)	$	9		$	(28	)	$	(19	)

The adoption of ASC 606 did not impact net cash provided by or used for operating, investing, or financing activities within the Condensed Consolidated Statement of Cash Flows for the three months ended December 31, 2018.

Revenue Recognition Policy

The Company derives revenue primarily from the sale of products and services for communications systems and applications. The Company sells directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, systems integrators and business partners that provide sales and services support.

In accordance with ASC 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance and it is at least probable that the Company will collect the consideration to which it is entitled. Revenue is recognized upon the transfer of control of the promised products and services to customers. Judgment is required in instances where the Company’s contracts include multiple products and services to determine whether each should be accounted for as a separate performance obligation. The Company enters into contracts that include various combinations of products and services, each of which is generally capable of being distinct as well as distinct within the context of the contracts.

Customer contracts are typically made pursuant to purchase orders and statements of work based on master purchase or partner agreements. Invoicing typically occurs upon customer acceptance or monthly for a series of services. Payment is due based on the Company’s standard payment terms which is typically within 30 to 60 days of invoice issuance. The Company does not typically provide financing arrangements to customers. For certain services and customer types, customers will remit payment before the services are provided. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company determined that contracts do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, not to receive financing from or to provide financing to customers. Certain contracts include performance obligations accounted for as a series which also include variable consideration (primarily usage-based fees). For these arrangements, variable consideration is

10

not estimated and allocated to the entire performance obligation, rather the variable fees are recognized in the period in which the usage occurs in accordance with the "right to invoice" practical expedient.

The total transaction price for each contract is determined based on the total consideration specified in the contract, including variable consideration such as sales incentives and other discounts. The expected value method is generally used when estimating variable consideration, which typically reduces the total transaction price due to the nature of the elements to which the variable consideration relates. These estimates reflect the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying patterns. The Company excludes from the transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales.The expected value method requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation. Depending on the facts and circumstances, a change in variable consideration estimate will either be accounted for at the contract level or using the portfolio method, in accordance with the prescribed practical expedient. Reserves for contractual stock rotation rights to channel partners to support the management of inventory and certain other sales incentives are determined using the portfolio method. The Company also considers the customers’ rights of return in determining the transaction price where applicable.

The Company allocates the transaction price to each performance obligation based on its relative standalone selling price and recognizes revenue as each performance obligation is satisfied. Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company uses a range of selling prices to estimate standalone selling price when each of the products and services is sold separately. The Company typically has more than one standalone selling price for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, the Company may use information such as the size of the customer and geographic region in determining the standalone selling price. In instances where standalone selling price is not directly observable, such as when we do not sell the product or service separately, the Company determines the standalone selling price using information that may include market conditions and other observable inputs.

Amounts billed to customers for shipping and handling activities are considered contract fulfillment activities and not a separate performance obligation of the contract. Shipping and handling fees are recorded as revenue and the related cost is a cost to fulfill the contract.

Contract modifications are accounted for as separate contracts if the additional products and services are distinct and priced at standalone selling prices. If the additional products and services are distinct, but not priced at standalone selling prices, the modification is treated as a termination of the existing contract and the creation of a new contract. Lastly, if the additional products and services are not distinct within the context of the contract, the modification is combined with the original contract and either an increase or decrease in revenue is recognized on the modification date.

Software

The Company’s software licenses provide users with access to capabilities such as voice, video, conferencing, messaging and collaboration. Software licenses also add functionality to the Company’s hardware. The Company’s software licenses for on-premise customer software provide the customer with a right to use the software as it exists when it is made available to the customer and are accounted for as distinct performance obligations. The Company’s software licenses are sold through both direct and indirect channels with terms that are either perpetual or time based, both of which provide the end-user with the same functionality. The main difference between perpetual and term licenses is the duration over which the customer benefits from the software. Revenue from on-premise customer software licenses is generally recognized at the point-in-time the software is made available to the customer, via direct sale to the end-user or indirect sale to a channel partner, based on the fixed minimum revenue commitment under the arrangement. However, revenue cannot be recognized before the beginning of the period during which the customer can use and benefit from the license. In instances where the Company’s software licenses include a usage-based fee, revenue associated with the incremental usage is recognized at the point-in-time the incremental usage occurs.

Hardware

The Company’s hardware, phones, gateways, and servers, each of which has a stand-alone functionality, are generally considered distinct performance obligations. Hardware is sold through both direct and indirect channels and revenue is recognized at the point-in-time at which control of the product is transferred to the customer, via direct sale to the end-user or indirect sale to a channel partner, generally upon delivery, as defined in the contract.

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Global Support Services

The Company’s global support services provide supplemental maintenance options to end-users in support of the Company’s products and solutions, including when and if available upgrade rights and maintenance for hardware. These services are typically accounted for as distinct performance obligations. Given that global support services consist of a series of distinct promises that are satisfied over time in the form of a single performance obligation comprised of a stand-ready obligation, these services are generally recognized ratably over the period during which the services are performed as customers simultaneously consume and receive benefits. Maintenance contracts typically have terms that range from one to five years.

Professional Services

The Company’s professional services include the design, implementation and development of communication solutions. Professional services are sold through the Company’s direct and indirect channels either on a stand-alone basis or with other hardware, software and services and are generally accounted for as distinct performance obligations. Revenue for professional services is generally recognized over time based on the cost of effort incurred to date relative to the total cost of effort expected to be incurred as customers simultaneously consume and receive benefits. Effort incurred generally represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contracts for professional services typically have terms that range from four to six weeks for simple engagements and from six months to one year for more complex engagements.

Cloud and Managed Services

The Company’s managed services provide additional support options to end-users on top of the Company’s supplemental maintenance services, including hardware support, help-desk routing and system monitoring services. The Company’s managed services are sold either on a stand-alone basis or together with the Company’s hardware, software and other services, and are generally accounted for as distinct performance obligations. The Company’s managed services are provided through both direct and indirect channels. Managed services consist of a series of distinct promises that are satisfied over time in the form of a single performance obligation comprised of a stand-ready obligation. Contracts for managed services typically have terms that range from one to five years.

The Company’s cloud offerings enable customers to take advantage of our technology via the cloud, on-premises, or a hybrid of both. The software that enables the core communications functionality is offered both as a sale of perpetual or time based licenses or through a SaaS. Cloud offerings can include supplemental maintenance and managed services and are sold through the Company’s direct and indirect channels.

Cloud and managed services offerings consist of a series of distinct promises that are satisfied over time as a single performance obligation and are generally recognized ratably over the period during which the services are performed as customers simultaneously consume and receive the benefits. The amount allocated to each performance obligation is based on the fixed contractual amount, which is recognized ratably over the period during which the services are performed as customers simultaneously consume and receive benefits. Variable consideration from incremental usage above the fixed fee is recognized at the point-in-time at which the usage occurs.

Warranties

The Company offers standard limited warranties that provide the customer with assurance that its products will function in accordance with contract specifications. The Company’s standard limited warranties are not sold separately but are included with each customer purchase. Warranties are not considered separate performance obligations, and therefore, warranty expense is accrued at the time the related revenue is recognized.

Disaggregation of Revenue

The following tables provide disaggregated revenue for the Company:

(In millions)	Three months ended December 31, 2018
REVENUE
Products & Solutions	$	326
Services	422
Unallocated Amounts	(10		)
	$	738

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	Three months ended December 31, 2018
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	150	$	251	$	(7	)	$	394
International:
Europe, Middle East and Africa	106		94		(1		)	199
Asia Pacific	38		41		(1		)	78
Americas International - Canada and Latin America	32		36		(1		)	67
Total International	176		171		(3		)	344
Total revenue	$	326	$	422	$	(10	)	$	738

Unallocated amounts represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to remaining performance obligations that are wholly or partially unsatisfied as of December 31, 2018 is $2.7 billion, of which 53% and 29% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of intellectual property, and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Contract Balances

The Company records a contract asset when revenue is recognized in advance of the right to bill, pursuant to customer contract terms. The contract asset decreases when the Company has the right to bill the customer which is generally triggered by the satisfaction of additional performance obligations or contract milestones. The Company records a contract liability when payment is received from the customer in advance of the Company satisfying a performance obligation and the contract liability is reduced as performance obligations are satisfied and revenue is recognized. The Company records the net contract asset or liability position for each customer contract.

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The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:

(In millions)	December 31, 2018		October 1, 2018		Increase (Decrease)
Accounts receivable, net	$	327	$	376	$	(49	)
Contract assets:
Current	$	120	$	77	$	43
Non-current (Other assets)	3		3		—
	$	123	$	80	$	43
Cost of obtaining a contract:
Current (Contract costs)	$	80	$	64	$	16
Non-current (Other assets)	47		36		11
	$	127	$	100	$	27
Cost to fulfill a contract:
Current (Contract costs)	$	38	$	45	$	(7	)
Contract liabilities:
Current	$	482	$	468	$	14
Non-current (Other liabilities)	61		54		7
	$	543	$	522	$	21

The change in contract assets and contract liabilities primarily results from the timing difference between the Company’s satisfaction of a performance obligation and the timing of the payment from the customer. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. The Company recognizes a contract asset when it transfers products and services to a customer in advance of scheduled billings. Contract assets decrease when the Company invoices the customer or the right to receive consideration is unconditional. The Company did not record any asset impairment charges related to contract assets during the three months ended December 31, 2018. Contract liabilities are recorded when the Company receives payment from the customer in advance of the Company’s completion of performance obligation(s). During the three months ended December 31, 2018, the Company recognized revenue of $242 million that had been recorded as a Contract liability at October 1, 2018.

Contract Costs

The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract, such as sales commissions and products and services, respectively. These costs are recognized as an asset if the Company expects to recover them and are amortized consistent with the transfer to the customer of the underlying performance obligations. Costs to obtain a contract are amortized using the portfolio approach over the average term of the customer contracts, which corresponds to the period of benefit. Costs incurred to obtain a contract with an amortization period of one year or less are expensed as incurred, in accordance with the prescribed practical expedient. For the three months ended December 31, 2018, the Company recognized $22 million for amortization of costs to obtain customer contracts, of which $20 million was included in Selling, general and administrative expense and the remaining $2 million was a reduction to Revenue.

Contract fulfillment costs are recognized consistent with the transfer to the customer of the underlying performance obligations based on the specific contracts to which they relate. For the three months ended December 31, 2018, the Company recognized $14 million of contract fulfillment costs within Costs.

4. Business Combinations

Spoken Communications

On March 9, 2018 (the “Acquisition Date”), the Company acquired Intellisist, Inc. (“Spoken”), a United States-based private technology company, which provides cloud-based Contact Center as a Service ("CCaaS") solutions and customer experience management and automation applications. The total purchase price was $172 million, consisting of $157 million in cash, $14

14

million in contingent consideration and a $1 million settlement of Spoken’s net payable to the Company which mainly related to services provided by the Company to Spoken under a co-development partnership prior to the acquisition.

Upon the achievement of three specified performance targets ("Earn-outs"), the Company may be required to pay up to $16 million of contingent consideration to Spoken's former owners and employees and up to $4 million in discretionary earn-out bonuses ("Earn-out Bonuses") to Spoken employees who have contributed to the achievement of the Earn-outs. The fair value of the Earn-outs at the Acquisition Date was $14 million, which was calculated using a probability-weighted discounted cash flow model and is remeasured to fair value at each subsequent reporting period. The Earn-out Bonuses, which are intended to incentivize remaining employees to assist in achieving the Earn-outs, are excluded from the acquisition consideration and are recognized as compensation expense in the Company's Condensed Consolidated Financial Statements ratably over the estimated Earn-out periods. As of December 31, 2018, the fair value of the Earn-out liability, including interest accretion and changes in the probability of achieving the Earn-outs, was $16 million. As of December 31, 2018, two of the three Earn-out targets were achieved, with completion of the third Earn-out target expected during the remainder of fiscal 2019. As of December 31, 2018, the Earn-out liability and accrued Earn-out Bonuses related to the targets that were achieved were $11 million and $2 million, respectively. These amounts are expected to be paid by the Company during the remainder of fiscal 2019.

In connection with this acquisition, the Company recorded goodwill of $116 million, which has been assigned to the Products & Solutions segment, identifiable intangible assets with a fair value of $64 million, and other net liabilities of $8 million. The goodwill recognized is attributable primarily to the potential that the Spoken technology, cloud platform and assembled workforce will accelerate the Company's growth in cloud-based solutions. The Company has determined that the goodwill is not deductible for tax purposes.

The acquired intangible assets of $64 million included technology and patents of $56 million with a weighted average useful life of 4.9 years, $5 million of in-process research and development ("IPR&D") activities, which are considered indefinite lived until projects are completed or abandoned, and customer relationships of $3 million with a weighted average useful life of 7.5 years. During the three months ended December 31, 2018, certain IPR&D activities have been completed and are being amortized over a weighted average useful life of 5.0 years.

Spoken became a wholly-owned subsidiary of the Company on March 9, 2018. The Company's Condensed Consolidated Financial Statements reflect the financial results of the operations of Spoken beginning on March 9, 2018. Spoken’s revenue and operating loss included in the Company’s results for the three months ended December 31, 2018, was $3 million and $8 million, respectively.

5. Goodwill and Intangible Assets

Goodwill

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level, which is one level below the Company’s operating segments. The Company has five reporting units, all of which are subject to impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company determined that no events occurred or circumstances changed during the three months ended December 31, 2018 that would more likely than not reduce the fair value of any of the Company's reporting units below their respective carrying amounts. However, if conditions deteriorate or there is a change in the business, it may be necessary to record impairment charges in the future.

Intangible Assets

Intangible assets include technology and patents, customer relationships and trademarks and trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets.

Intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.

The Company determined that no events occurred or circumstances changed during the three months ended December 31, 2018 that would indicate that its finite-lived intangible assets may not be recoverable or that it is more likely than not that its indefinite-lived intangible assets are impaired. However, if conditions deteriorate or there is a change in the business, it may be necessary to record impairment charges in the future.

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The Company's intangible assets consist of the following for the periods indicated:

(In millions)	Technology and Patents			Customer Relationships and Other Intangibles			Trademarks and Trade Names			Total
Balance as of December 31, 2018
Finite-lived intangible assets:
Cost	$	961		$	2,156		$	43		$	3,160
Accumulated amortization	(178		)	(163		)	(4		)	(345		)
Finite-lived intangible assets, net	783			1,993			39			2,815
Indefinite-lived intangible assets	2			—			332			334
Intangible assets, net	$	785		$	1,993		$	371		$	3,149
Balance as of September 30, 2018
Finite-lived intangible assets:
Cost	$	959		$	2,157		$	43		$	3,159
Accumulated amortization	(135		)	(124		)	(3		)	(262		)
Finite-lived intangible assets, net	824			2,033			40			2,897
Indefinite-lived intangible assets	5			—			332			337
Intangible assets, net	$	829		$	2,033		$	372		$	3,234

Amortization expense for the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), was $83 million, $14 million and $13 million, respectively.

6. Supplementary Financial Information

Condensed Consolidated Statements of Operations Information

The following table presents a summary of Other income (expense), net for the periods indicated:

	Successor						Predecessor
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
OTHER INCOME (EXPENSE), NET
Interest income	$	3		$	—		$	2
Foreign currency (losses) gains, net	(1		)	2			—
Income from transition services agreement, net	—			—			3
Other pension and post-retirement benefit credits (costs), net	2			1			(8		)
Change in fair value of emergence date warrants	18			(5		)	—
Other, net	—			—			1
Total other income (expense), net	$	22		$	(2	)	$	(2	)

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A summary of Reorganization items, net for the periods indicated is presented in the following table:

	Successor				Predecessor
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017
REORGANIZATION ITEMS, NET
Net gain on settlement of Liabilities subject to compromise	$	—	$	—	$	1,778
Net gain on fresh start adjustments	—		—		1,697
Bankruptcy-related professional fees	—		—		(56		)
Other items, net	—		—		(3		)
Reorganization items, net	$	—	$	—	$	3,416
Cash payments for reorganization items	$	—	$	1	$	2,524

Costs directly attributable to the implementation of the Plan of Reorganization were reported as Reorganization items, net. The cash payments for reorganization items for the period from October 1, 2017 through December 15, 2017 (Predecessor) included $2,468 million of claims paid related to Liabilities subject to compromise and $56 million for bankruptcy-related professional fees, including emergence and success fees paid on the Emergence Date.

Supplemental Cash Flow Information

	Successor				Predecessor
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017
OTHER PAYMENTS
Interest payments	$	48	$	—	$	15
Income tax payments	$	7	$	2	$	7
NON-CASH INVESTING ACTIVITIES
Increase in Accounts payable for Capital expenditures	$	4	$	1	$	—

The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:

	Successor						Predecessor
(In millions)	December 31, 2018		September 30, 2018		December 31, 2017		December 15, 2017		September 30, 2017
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	743	$	700	$	417	$	366	876
Restricted cash included in other current assets	—		—		55		65		85
Restricted cash included in other assets	4		4		4		4		5
Total cash, cash equivalents, and restricted cash	$	747	$	704	$	476	$	435	966

As of December 31, 2017 (Successor) and December 15, 2017 (Predecessor), restricted cash in other current assets consisted primarily of funds held for bankruptcy-related professional fees and funds held related to the sale of the Company's Networking business in July 2017. As of September 30, 2017 (Predecessor), restricted cash in other current assets consisted primarily of cash that was drawn from term loans under the Debtor-in-Possession credit agreement to cash collateralize existing letters of credit.

7. Business Restructuring Reserves and Programs

For the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recognized restructuring charges of $7 million, $10 million, and $14 million, respectively. The restructuring charges include changes in estimates for increases and decreases in costs or changes in the timing of payments related to the restructuring programs of

17

prior fiscal years. The Company's restructuring charges generally include separation charges which include, but are not limited to, termination payments, pension fund payments, and health care and unemployment insurance costs to be paid to, or on behalf of, the affected employees; and lease obligation charges. As the Company continues to evaluate opportunities to streamline its operations, it may identify cost savings globally and take additional restructuring actions in the future and the costs of those actions could be material. The Company does not allocate restructuring reserves to its operating segments.

Fiscal 2019 Restructuring Program

Recognized restructuring charges for the fiscal 2019 restructuring program included employee separation costs associated with employee severance actions primarily in the U.S. and Canada for which the related payments are expected to be completed by fiscal 2020.

The following table summarizes the components of the fiscal 2019 restructuring program for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations		Total
Restructuring charges	$	7		$	—	$	7
Cash payments	(1		)	—		(1		)
Balance as of December 31, 2018	$	6		$	—	$	6

Fiscal 2018 Restructuring Program

Fiscal 2018 restructuring obligations include employee separation costs associated with employee severance actions primarily in Europe, Middle East and Africa ("EMEA"), the U.S. and Asia-Pacific ("APAC"), for which the related payments are expected to be completed by the beginning of fiscal 2025.

The following table summarizes the components of the fiscal 2018 restructuring program for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations		Total
Balance as of September 30, 2018	$	54		$	—	$	54
Cash payments	(5		)	—		(5		)
Impact of foreign currency fluctuations	(1		)	—		(1		)
Balance as of December 31, 2018	$	48		$	—	$	48

Fiscal 2008 through 2017 Restructuring Programs

These obligations are primarily for costs associated with eliminating employee positions and exiting facilities. The payments related to the headcount reductions identified in those programs are expected to be substantially completed by fiscal 2023. Future rental payments, net of estimated sublease income, related to operating lease obligations for unused space in connection with the closing or consolidation of facilities are expected to continue through fiscal 2021.

The following table aggregates the remaining components of the fiscal 2008 through 2017 restructuring programs for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations			Total
Balance as of September 30, 2018	$	38		$	6		$	44
Cash payments	(4		)	(1		)	(5		)
Balance as of December 31, 2018	$	34		$	5		$	39

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8. Financing Arrangements

The following table reflects principal amounts of debt and debt net of discounts and issuance costs for the periods presented:

	December 31, 2018					September 30, 2018
(In millions)	Principal amount		Net of discounts and issuance costs			Principal amount		Net of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024	$	2,896	$	2,864		$	2,903	$	2,870
Convertible 2.25% senior notes due June 15, 2023	350		260			350		256
Total debt	$	3,246	3,124			$	3,253	3,126
Debt maturing within one year			(29		)			(29		)
Long-term debt, net of current portion			$	3,095				$	3,097

Term Loan and ABL Credit Agreements

On December 15, 2017, Avaya Inc. entered into (i) the Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent, which provided a $2,925 million term loan facility maturing on December 15, 2024 (the "Term Loan Credit Agreement") and (ii) the ABL Credit Agreement maturing on December 15, 2022, among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, which provided a revolving credit facility consisting of a U.S. tranche and a foreign tranche allowing for borrowings of up to an aggregate principal amount of $300 million from time to time, subject to borrowing base availability (the "ABL Credit Agreement" and, together with the Term Loan Credit Agreement, the “Credit Agreements”). On June 18, 2018, the Company amended the Term Loan Credit Agreement to reduce interest rates and to reduce the London Inter-bank Offered Rate ("LIBOR") floor that existed under the original agreement from 1.00% to 0.00%.

For the three months ended December 31, 2018 and the period from December 16, 2017 through December 31, 2017, the Company recognized interest expense of $50 million and $9 million, respectively, related to the Term Loan Credit Agreement, including the amortization of discounts and issuance costs.

Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At December 31, 2018, the Company had issued and outstanding letters of credit and guarantees of $46 million. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $46 million of outstanding letters of credit and guarantees, was $155 million at December 31, 2018 (Successor). As of December 31, 2018, the Company had no borrowings outstanding under the ABL.

Convertible Notes

On June 11, 2018, the Company issued its 2.25% Convertible Notes in an aggregate principal amount of $350 million (including the underwriters’ exercise in full of an over-allotment option of $50 million), which mature on June 15, 2023 (the “Convertible Notes”). The Convertible Notes were issued under an indenture, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee (the “Indenture”). For the three months ended December 31, 2018, the Company recognized interest expense of $6 million related to the Convertible Notes, which includes $4 million of amortization of the underwriting discount and issuance costs.

The net carrying amount of the Convertible Notes for the periods indicated was as follows:

(In millions)	December 31, 2018			September 30, 2018
Principal	$	350		$	350
Less:
Unamortized debt discount	(84		)	(87		)
Unamortized issuance costs	(6		)	(7		)
Net carrying amount	$	260		$	256

The weighted average contractual interest rate of the Company’s outstanding debt as of December 31, 2018 and September 30, 2018 was 6.5% and 6.4%, respectively. The effective interest rate for the Term Loan Credit Agreement as of December 31, 2018 was not materially different than its contractual interest rate including adjustments related to hedging. The effective interest rate for the Convertible Notes as of December 31, 2018 was 9.2% reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and amortization of discounts and issuance costs.

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For the period from October 1, 2017 through December 15, 2017 (Predecessor), contractual interest expense of $94 million was not recorded as interest expense, as it was not an allowed claim under the Bankruptcy Filing.

As of December 31, 2018, the Company was not in default under any of its debt agreements.

Capital Lease Obligations

Included in Other liabilities is $27 million and $31 million of capital lease obligations, net of imputed interest as of December 31, 2018 and September 30, 2018, respectively.

The Company outsources certain delivery services associated with the Avaya private cloud business, which include the sale of specified assets owned by the Company, which are being leased-back by the Company and accounted for as a capital lease. As of December 31, 2018 and September 30, 2018, capital lease obligations associated with this agreement were $22 million and $26 million, respectively.

9. Derivative Instruments and Hedging Activities

The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, "Derivatives and Hedging," ("ASC 815") and does not enter into derivatives for trading or speculative purposes.

Interest Rate Contracts

The Company, from time-to-time, enters into interest rate swap contracts as a hedge against changes in interest rates on its variable rate loans outstanding.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of December 31, 2018, the total notional amount of the six Swap Agreements was $1,800 million.

The Swap Agreements are designated as cash flow hedges as they are deemed highly effective as defined under ASC 815. As a result, the unrealized gains or losses on these contracts are initially recorded as Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive loss at December 31, 2018, approximately $8 million would be reclassified into net income in the next twelve months as interest expense.

It is management's intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.

Emergence Date Warrants

In accordance with the Plan of Reorganization, the Company issued warrants to purchase 5,645,200 shares of Successor Company common stock to the holders of the Predecessor second lien obligations pursuant to a warrant agreement ("Emergence Date Warrants"). Each Emergence Date Warrant has an exercise price of $25.55 per share and expires December 15, 2022. The Emergence Date Warrants contain certain derivative features that require them to be classified as a liability and for changes in fair value of the liability to be recognized in earnings each reporting period. On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of December 31, 2018.

The fair value of the Emergence Date Warrants was determined using a probability weighted Black-Scholes option pricing model. This model requires certain input assumptions including risk-free interest rates, volatility, expected life and dividend rates. Selection of these inputs involves significant judgment. The fair value of the Emergence Date Warrants as of December 31, 2018 and September 30, 2018 was determined using the input assumptions summarized below:

	December 31, 2018		September 30, 2018
Expected volatility	54.86	%	50.14	%
Risk-free interest rates	2.47	%	2.90	%
Expected remaining life (in years)	3.96		4.21
Price per share of common stock	$14.56		$22.14

In determining the fair value of the Emergence Date Warrants, the dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:

		December 31, 2018				September 30, 2018
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Designated as Hedging Instruments:
Interest rate contracts	Other assets	$	—	$	—	$	3	$	—
Interest rate contracts	Other current liabilities	—		7		—		7
Interest rate contracts	Other liabilities	—		24		—		—
		—		31		3		7
Derivatives Not Designated as Hedging Instruments:
Emergence Date Warrants	Other liabilities	—		16		—		34
Total derivative fair value		$	—	$	47	$	3	$	41

The following table provides information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:

	Three months ended December 31, 2018
(In millions)	Interest Expense			Other Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(60	)	$	(20	)
Impact of cash flow hedging relationships:
Loss recognized in AOCI - on interest rate swaps	—			(31		)
Interest expense from AOCI reclassified	(3		)	3

The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations:

		Successor					Predecessor
		Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
(In millions)	Location of Derivative Pre-tax Gain (Loss)
Emergence Date Warrants	Other income (expense), net	$	18	$	(5	)	$	—

The Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheets. The Company has master netting agreements with several of its financial institution counterparties. The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:

	December 31, 2018				September 30, 2018
(In millions)	Asset		Liability		Asset			Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheet	$	—	$	47	$	3		$	41
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheet	—		—		(3		)	(3		)
Net amounts	$	—	$	47	$	—		$	38

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10. Fair Value Measurements

Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The accounting guidance for fair value measurements also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:

Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable.

Level 2: Inputs that reflect quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and September 30, 2018 were as follows:

	December 31, 2018								September 30, 2018
	Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investments	$	2	$	2	$	—	$	—	$	2	$	2	$	—	$	—
Interest rate contracts	—		—		—		—		3		—		3		—
Total assets	$	2	$	2	$	—	$	—	$	5	$	2	$	3	$	—
Liabilities:
Interest rate contracts	$	31	$	—	$	31	$	—	$	7	$	—	$	7	$	—
Spoken acquisition Earn-outs	16		—		—		16		15		—		—		15
Emergence Date Warrants	16		—		—		16		34		—		—		34
Total liabilities	$	63	$	—	$	31	$	32	$	56	$	—	$	7	$	49

Investments

Investments classified as Level 1 assets are priced using quoted market prices for identical assets in active markets that are observable. Investments are recorded in Other assets in the Condensed Consolidated Balance Sheets.

Interest rate contracts

Interest rate contracts classified as Level 2 assets and liabilities are not actively traded and are valued using pricing models that use observable inputs.

Spoken acquisition Earn-outs

The Spoken acquisition Earn-outs classified as Level 3 liabilities are measured using a probability-weighted discounted cash flow model. Significant unobservable inputs, which included probability of the achievement of the earn out targets and discount rate assumption, reflected the assumptions market participants would use in valuing these liabilities.

Emergence Date Warrants

Emergence Date Warrants classified as Level 3 liabilities are priced using the Black-Scholes option pricing model. The change in fair value of the Emergence Date Warrants is recognized in Other income (expense), net in the Condensed Consolidated Statements of Operations.

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During the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), there were no transfers between Level 1 and Level 2, or into and out of Level 3.

The following table summarizes the activity for the Company's Level 3 liabilities measured at fair value on a recurring basis:

(In millions)	Emergence Date Warrants			Spoken Acquisition Earn-outs		Total
September 30, 2018	$	34		$	15	$	49
Change in fair value(1)	(18		)	1		(17		)
December 31, 2018	$	16		$	16	$	32

⁽¹⁾ Changes in fair value of the Emergence Date Warrants are included in Other income (expense), net. Changes in fair value of the Spoken acquisition Earn-outs are included in Selling, general and administrative expense.

Fair Value of Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate carrying values because of the short-term nature of these instruments.

As of December 31, 2018 and September 30, 2018, the estimated fair value of the Convertible Notes was determined based on the quoted price of the Convertible Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2.

The estimated fair values of amounts borrowed under the Company's other financing arrangements at December 31, 2018 and September 30, 2018 were estimated based on a Level 2 input based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.

The estimated fair values of the amounts borrowed under the Company’s financing agreements at December 31, 2018 and September 30, 2018 are as follows:

	December 31, 2018				September 30, 2018
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Term Loan Credit Agreement due December 15, 2024	2,896		2,800		$	2,903	$	2,932
Convertible 2.25% senior notes due June 15, 2023	350		300		350		357
Total debt	$	3,246	$	3,100	$	3,253	$	3,289

11. Income Taxes

The Company's effective income tax rate for the three months ended December 31, 2018 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Tax Cuts and Jobs Act ("the Act") relating to Global Intangible Low-Taxed Income (“GILTI”) and Foreign-Derived Intangible Income (“FDII”), (7) a limitation on the deductibility of interest expense under IRC Section 163(j), and (8) foreign tax credits.

The Company's effective income tax rate for the period from December 16, 2017 through December 31, 2017 (Successor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) an increase in estimated current year tax loss, which is eliminated as part of the attribute reduction related to the cancellation of indebtedness income ("CODI"), and (7) the impact of the Act.

The Company's effective income tax rate for the period from October 1, 2017 through December 15, 2017 (Predecessor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local taxes, and (6) the impact of reorganization and fresh start adjustments.

The Company's U.S. federal net operating loss ("NOL") and tax credits have been eliminated due to the recognition of CODI in fiscal 2018.

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During fiscal 2018, the Company centralized the management and ownership of certain intellectual property in a U.S. limited partnership, some of which was previously managed and owned by a Bermuda tax resident corporation. This action resulted in the utilization and recognition of previously unrecognized NOLs, the reversal of deferred tax liabilities established as part of fresh start accounting and the recognition of a deferred tax asset, cumulatively in the amount of $366 million.

On December 22, 2017, the Act was signed into law. The Act lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. The Company has a September 30th tax year-end and therefore many of the tax law changes became effective in the first quarter of fiscal 2019. The Company has made a policy decision to treat GILTI income as a period cost. The Company benefits from the deduction attributable to FDII and has taxable income attributable to GILTI, both of which impact the effective tax rate. During the three months ended December 31, 2018, Avaya completed its analysis of the impact of the Act as required by Staff Accounting Bulletin No. 118 issued by the SEC on December 22, 2017.

12. Benefit Obligations

The Company sponsors non-contributory defined benefit pension plans covering a portion of its U.S. employees and retirees, and post-retirement benefit plans covering a portion of its U.S. employees and retirees that include healthcare benefits and life insurance coverage. Certain non-U.S. operations have various retirement benefit programs covering substantially all of their employees. Some of these programs are considered to be defined benefit pension plans for accounting purposes.

The components of the pension and post-retirement net periodic benefit cost (credit) for the periods indicated are provided in the table below:

	Successor						Predecessor(1)
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Pension Benefits - U.S.
Components of net periodic benefit (credit) cost
Service cost	$	1		$	—		$	1
Interest cost	10			1			22
Expected return on plan assets	(15		)	(2		)	(38		)
Amortization of actuarial loss	—			—			20
Net periodic benefit (credit) cost	$	(4	)	$	(1	)	$	5
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost	$	2		$	—		$	2
Interest cost	2			—			3
Expected return on plan assets	—			—			(1		)
Amortization of actuarial loss	—			—			2
Net periodic benefit cost	$	4		$	—		$	6
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Interest cost	$	3		$	—		$	3
Expected return on plan assets	(2		)	—			(2		)
Amortization of prior service cost	—			—			(3		)
Amortization of actuarial loss	—			—			2
Net periodic benefit cost	$	1		$	—		$	—

⁽¹⁾ Excludes Plan of Reorganization related settlements that were recorded in Reorganization items, net in the Condensed Consolidated Statements of Operations.

The service components of net periodic benefit cost (credit) were recorded similar to compensation expense, while all other components were recorded in Other income (expense), net.

The Company's general funding policy with respect to its U.S. qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations, or to directly pay benefits where appropriate. Contributions to U.S. pension plans were $9 million for the three months ended December 31, 2018, which

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represented the amounts required to satisfy the minimum statutory funding requirements in the U.S. For the remainder of fiscal 2019, the Company estimates that it will make contributions totaling $17 million to satisfy the minimum statutory funding requirements in the U.S.

Contributions to the non-U.S. pension plans were $4 million for the three months ended December 31, 2018. For the remainder of fiscal 2019, the Company estimates that it will make contributions totaling $21 million for its non-U.S. plans.

Most post-retirement medical benefits are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as retiree medical benefit claims are disbursed. These payments are funded by the Company up to the maximum contribution amounts specified in the plan documents and contract with the Communications Workers of America and the International Brotherhood of Electrical Workers, and contributions from the participants, if required. During the three months ended December 31, 2018, the Company made payments for retiree medical and dental benefits of $3 million and received a $2 million reimbursement from the represented employees' post-retirement health trust related to payments in prior periods. The Company estimates it will make contributions for retiree medical and dental benefits totaling $11 million for the remainder of fiscal 2019.

13. Share-based Compensation

Successor

The Company has a share-based compensation plan under which non-employee directors, employees of the Company or any of its affiliates, and certain consultants and advisors may be granted stock options, restricted stock, restricted stock units ("RSUs"), performance awards and other forms of awards granted or denominated in shares of the Company's common stock, as well as certain cash-based awards. Share-based compensation awards granted to employees generally vest ratably over three years and awards granted to non-employee directors generally vest ratably over one year. As of the Emergence Date, forfeitures are accounted for as incurred.

Pre-tax share-based compensation expense for the three months ended December 31, 2018 and the period from December 16, 2017 through December 31, 2017 was $6 million and $1 million, respectively.

During the three months ended December 31, 2018, the Company granted 167,296 RSUs with a grant date fair value of $15.84 per RSU. There were 827,432 RSUs that vested during the three months ended December 31, 2018 with a grant date fair value of $15.16.

Predecessor

Prior to the Emergence Date, the Predecessor Company had granted share-based awards that were canceled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3 million of compensation expense in the period from October 1, 2017 through December 15, 2017, principally reflected in Reorganization costs, net.

14. Capital Stock

Preferred Stock

The Company's certificate of incorporation authorizes it to issue up to 55,000,000 shares of preferred stock with a par value of $0.01 per share. As of December 31, 2018, there were no preferred shares issued or outstanding.

Common Stock

The Company's certificate of incorporation authorizes it to issue up to 550,000,000 shares of common stock with a par value of $0.01 per share. As of December 31, 2018, there were 110,708,203 shares issued and 110,695,523 shares outstanding with the remaining 12,680 shares distributable in accordance with the Plan of Reorganization.

On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase Emergence Date Warrants for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company may adopt one or more purchase plans pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in order to implement the warrant repurchase program. The warrant repurchase program does not obligate the Company to purchase any warrants and may be terminated, increased or decreased by the Board of Directors in its discretion at any time. As of December 31, 2018, there were no warrant repurchases under the program.

15. Net Income Per Common Share

Basic earnings per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that would occur if

equity awards granted under the Company's various share-based compensation plans were vested or exercised, if the Company's Convertible Notes or the warrants the Company sold to purchase up to 12.6 million shares of its common stock in connection with the issuance of the Convertible Notes ("Call Spread Warrants") were exercised, and/or if the Emergence Date Warrants were exercised, resulting in the issuance of common shares that would participate in the earnings of the Company.

The following table sets forth the calculation of net income attributable to common shareholders and the computation of basic and diluted earnings per share for the periods indicated:

	Successor						Predecessor
(In millions, except per share amounts)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Net income per share:
Numerator
Net income	$	9		$	237		$	2,977
Dividends and accretion to preferred stockholders	—			—			(6		)
Undistributed earnings	9			237			2,971
Percentage allocated to common stockholders(1)	100.0		%	100.0		%	86.9		%
Numerator for basic and diluted earnings per common share	$	9		$	237		$	2,582
Denominator
Denominator for basic earnings per weighted average common shares	110.3			109.8			497.3
Effect of dilutive securities
Restricted stock units	0.9			0.5			—
Denominator for diluted earnings per weighted average common shares	111.2			110.3			497.3
Net income per common share
Basic	$	0.08		$	2.16		$	5.19
Diluted	$	0.08		$	2.15		$	5.19
(1) Basic weighted average common stock outstanding	110.3			109.8			497.3
Basic weighted average common stock and common stock equivalents (preferred shares)	110.3			109.8			572.4
Percentage allocated to common stock holders	100.0		%	100.0		%	86.9		%

For the three months ended December 31, 2018, the Company excluded 1.1 million stock options, 0.4 million restricted stock units and 5.6 million Emergence Date Warrants from the diluted earnings per share calculation as their effect would have been anti-dilutive. The Company’s Convertible Notes and Call Spread Warrants were also excluded for the three months ended December 31, 2018 as discussed in more detail below. For the period from December 16, 2017 through December 31, 2017, the Company excluded 1.1 million stock options and 5.6 million Emergence Date Warrants from the diluted earnings per share calculation as their effect would have been anti-dilutive.

For purposes of considering the Convertible Notes in determining diluted earnings per share, the Company has the ability and current intent to settle conversions of the Convertible Notes through combination settlement by repaying the principal portion in cash and any excess of the conversion value over the principal amount (the “Conversion Premium”) in shares of the Company's common stock. Therefore, only the impact of the Conversion Premium will be included in diluted weighted average shares outstanding using the treasury stock method. Since the Convertible Notes were out of the money and anti-dilutive as of December 31, 2018, they were excluded from the diluted earnings per share calculation for the three months ended December 31, 2018. The Call Spread Warrants will not be considered in calculating diluted weighted average shares outstanding until the price per share of the Company’s common stock exceeds the strike price of $37.3625 per share. When the price per share of the Company’s common stock exceeds the strike price per share of the Call Spread Warrants, the effect of the additional shares that may be issued upon exercise of the Call Spread Warrants will be included in diluted weighted average shares outstanding using the treasury stock method.

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16. Operating Segments

The Products & Solutions segment primarily develops, markets, and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, email, instant messaging and video. The Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize complex enterprise communications networks.

The Company’s chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company’s internal management systems. Management does not include in its segment measures of profitability selling, general, and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, impairment charges, and merger-related costs as these costs are not core to the measurement of segment performance, but rather are controlled at the corporate level.

Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:

	Successor						Predecessor
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
REVENUE
Products & Solutions	$	326		$	77		$	253
Services	422			94			351
Unallocated Amounts (1)	(10		)	(23		)	—
	$	738		$	148		$	604
GROSS PROFIT
Products & Solutions	$	214		$	49		$	169
Services	255			70			196
Unallocated Amounts (2)	(62		)	(41		)	(3		)
	407			78			362
OPERATING EXPENSES
Selling, general and administrative	257			50			264
Research and development	53			9			38
Amortization of intangible assets	40			7			10
Restructuring charges, net	7			10			14
	357			76			326
OPERATING INCOME	50			2			36
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET	(38		)	(11		)	3,400
INCOME (LOSS) BEFORE INCOME TAXES	$	12		$	(9	)	$	3,436

⁽¹⁾ Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

⁽²⁾   Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management’s performance, but rather are controlled at the corporate level.

17. Accumulated Other Comprehensive (Loss) Income

The components of accumulated other comprehensive (loss) income for the periods indicated were as follows:

(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Other		Accumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018	$	51	$	(31	)	$	(2	)	$	—	$	18
Other comprehensive income (loss) before reclassifications	—		1			(31		)	—		(30		)
Amounts reclassified to earnings	—		—			3			—		3
Benefit from income taxes	—		—			7			—		7
Balance as of December 31, 2018 (Successor)	$	51	$	(30	)	$	(23	)	$	—	$	(2	)

(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items			Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap		Other			Accumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2017 (Predecessor)	$	(1,375	)	$	(72	)	$	—	$	(1	)	$	(1,448	)
Other comprehensive (loss) income before reclassifications	(24		)	3			—		—			(21		)
Amounts reclassified to earnings	16			—			—		—			16
Pension settlement	721			—			—		—			721
Provision for income taxes	(58		)	—			—		—			(58		)
Balance as of December 15, 2017 (Predecessor)	(720		)	(69		)	—		(1		)	(790		)
Elimination of Predecessor Company Accumulated other comprehensive loss	720			69			—		1			790
Balance as of December 15, 2017 (Predecessor)	$	—		$	—		$	—	$	—		$	—
Balance as of December 16, 2017 (Successor)	$	—		$	—		$	—	$	—		$	—
Other comprehensive loss before reclassifications	—			(13		)	—		—			(13		)
Balance as of December 31, 2017 (Successor)	$	—		$	(13	)	$	—	$	—		$	(13	)

The amounts reclassified out of accumulated other comprehensive income (loss) for the unamortized pension, post-retirement and postemployment benefit-related items are recorded in Other income (expense), net in the Condensed Consolidated Statement of Operations. The amounts reclassified out of accumulated other comprehensive income (loss) for the interest rate swaps are recorded in Interest expense in the Condensed Consolidated Statement of Operations.

18. Related Party Transactions

The Company's Board of Directors is comprised of seven directors, including the Company's Chief Executive Officer and six non-employee directors. As of December 31, 2018, the Company's Board of Directors had one vacancy.

Specific Arrangements Involving the Successor Company’s Current Directors and Executive Officers

William D. Watkins is a Director and Chair of the Board of Directors of Avaya Holdings and serves on the board of directors of Flex Ltd., an electronics design manufacturer. For the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company purchased goods and services from subsidiaries of Flex Ltd. of $8 million, $2 million, and $6 million, respectively. As of December 31, 2018 (Successor) and September 30, 2018 (Successor), the Company had outstanding accounts payable due to Flex Ltd. of $8 million and $4 million, respectively.

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19. Commitments and Contingencies

Legal Proceedings

General

The Company records accruals for legal contingencies to the extent that it has concluded that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described below because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.

In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, including, but not limited to, those identified below, relating to intellectual property, commercial, employment, environmental and regulatory matters.

The Company believes that it has meritorious defenses in connection with its current lawsuits and material claims and disputes, and intends to vigorously contest each of them.

Based on the Company's experience, management believes that the damages amounts claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases.

In the opinion of the Company's management based upon information currently available to the Company, while the outcome of these lawsuits, claims and disputes is uncertain, the likely results of these lawsuits, claims and disputes are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows, although the effect could be material to the Company's consolidated results of operations or consolidated cash flows for any interim reporting period.

During the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), costs incurred in connection with the resolution of certain legal matters were $0 million, $0 million and $37 million, respectively.

Intellectual Property and Commercial Disputes

In January 2010, SAE Power Incorporated and SAE Power Company (collectively, “SAE”) filed a complaint in the New Jersey Superior Court asserting various claims including breach of contract, unjust enrichment, promissory estoppel and breach of the covenant of good faith and fair dealing arising out of Avaya’s relationship with SAE as a supplier of various power supply products. SAE has since asserted additional claims against Avaya for fraud, negligent misrepresentation, misappropriation of trade secrets and civil conspiracy. SAE seeks to recover for alleged losses stemming from Avaya’s termination of its power supply purchases from SAE, including for Avaya’s alleged disclosure of SAE’s alleged trade secret and/or confidential information to another power supply vendor. On July 19, 2016, the Court entered an order granting Avaya’s motion for partial summary judgment, dismissing certain of SAE’s claims regarding the alleged disclosure of trade secrets. In January 2017, the Company filed a Notice of Suggestion of Pendency of Bankruptcy, which informed the Court of the Company’s voluntary bankruptcy petition filing and stay of proceedings. SAE filed a proof of claim in the Bankruptcy Court. On September 28, 2017, the Company filed a motion in the Bankruptcy Court seeking to estimate SAE’s claim, and the estimation hearing took place on February 15, 2018. On June 12, 2018, the Bankruptcy Court entered an Order estimating SAE’s pre-petition misappropriation claim in the amount of $1.21 million plus interest, its fraud claim at $0 million and declined to estimate SAE’s breach of contract claim, leaving it to be resolved through the bankruptcy claims allowance process. Once the stay of proceedings is lifted, SAE may pursue its liability claims against Avaya in the New Jersey state court action, subject to the estimation Order of the Bankruptcy Court. On June 22, 2018, SAE filed a Notice of Appeal, which is still pending, and a Motion for Stay of Estimation Order Pending Appeal, which was denied by the Bankruptcy Court on August 14, 2018 and by the District Court on September 12, 2018. This matter, although not yet closed, will receive distribution in accordance with the general unsecured claims procedure in the Company's Plan of Reorganization.

In the ordinary course of business, the Company is involved in litigation alleging it has infringed upon third parties’ intellectual property rights, including patents and copyrights; some litigation may involve claims for infringement against customers, distributors and resellers by third parties relating to the use of Avaya’s products, as to which the Company may provide indemnifications of varying scope to certain parties. The Company is also involved in litigation pertaining to general commercial disputes with customers, suppliers, vendors and other third parties including royalty disputes. These matters are

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ongoing and the outcomes are subject to inherent uncertainties. As a result, the Company cannot be assured that any such matter will not have a material adverse effect on its financial position, results of operations or cash flows.

Product Warranties

The Company recognizes a liability for the estimated costs that may be incurred to remedy certain deficiencies of quality or performance of the Company’s products. These product warranties extend over a specified period of time, generally ranging up to two years from the date of sale depending upon the product subject to the warranty. The Company accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve, which is included in other current and non-current liabilities in the Condensed Consolidated Balance Sheets, for actual experience. As of December 31, 2018 and September 30, 2018, the amount reserved was $1 million and $2 million, respectively.

Guarantees of Indebtedness and Other Off-Balance Sheet Arrangements

Letters of Credit and Guarantees

The Company provides guarantees, letters of credit and surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company's performance in accordance with contractual or legal obligations. As of December 31, 2018, the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $64 million. The outstanding letters of credit are collateralized by restricted cash of $4 million included in Other assets on the Condensed Consolidated Balance Sheets as of December 31, 2018.

Purchase Commitments and Termination Fees

The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements provided by the Company. If the Company does not meet these specified purchase commitments, it could be required to purchase the inventory, or in the case of certain agreements, pay an early termination fee. Historically, the Company has not been required to pay a charge for not meeting its designated purchase commitments with these suppliers, but has been obligated to purchase certain excess inventory levels from its outsourced manufacturers due to actual sales of product varying from forecast and due to transition of manufacturing from one vendor to another.

The Company’s outsourcing agreements with its most significant contract manufacturers automatically renew in July and September for successive periods of twelve months each, subject to specific termination rights for the Company and the contract manufacturers. All manufacturing of the Company’s products is performed in accordance with either detailed requirements or specifications and product designs furnished by the Company, and is subject to rigorous quality control standards.

Transactions with Nokia

Pursuant to the Contribution and Distribution Agreement effective October 1, 2000 (the "Contribution and Distribution Agreement"), Lucent Technologies, Inc. (now Nokia) contributed to the Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the “Company’s Businesses”) and distributed the Company’s stock pro-rata to the shareholders of Lucent (“distribution”). The Contribution and Distribution Agreement, among other things, provides that, in general, the Company will indemnify Nokia for all liabilities including certain pre-distribution tax obligations of Nokia relating to the Company’s Businesses and all contingent liabilities primarily relating to the Company’s Businesses or otherwise assigned to the Company. In addition, the Contribution and Distribution Agreement provides that certain contingent liabilities not allocated to one of the parties will be shared by Nokia and the Company in prescribed percentages. The Contribution and Distribution Agreement also provides that each party will share specified portions of contingent liabilities based upon agreed percentages related to the business of the other party that exceed $50 million. The Company is unable to determine the maximum potential amount of other future payments, if any, that it could be required to make under this agreement.

In addition, in connection with the distribution, the Company and Lucent entered into a Tax Sharing Agreement effective October 1, 2000 (the "Tax Sharing Agreement") that governs Nokia’s and the Company’s respective rights, responsibilities and obligations after the distribution with respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes or benefits that are clearly attributable to the business of one party will be borne solely by that party and other pre-distribution taxes or benefits will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. The Company may be subject to additional taxes or benefits pursuant to the Tax Sharing Agreement related to future settlements of audits by state and local and foreign taxing authorities for the periods prior to the Company’s separation from Nokia.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise indicates, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “we,” “us,” “our,” “the Company,” “Avaya” and similar terms refer to Avaya Holdings Corp. and its consolidated subsidiaries. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2018, which were included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 21, 2018.

Our accompanying unaudited interim Condensed Consolidated Financial Statements as of December 31, 2018 (Successor) and for the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial statements. In our opinion, the unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, as well as fresh start and reorganization adjustments, necessary to state fairly the financial position, results of operations and cash flows for the periods indicated.

The matters discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Cautionary Note Regarding Forward-Looking Statements” at the end of this discussion.

Overview

Avaya is a global leader in digital communications products, solutions and services for businesses of all sizes. We enable organizations around the globe to succeed by creating intelligent communications experiences for customers and employees. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. Our global, experienced team of professionals delivers award-winning services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support. Our business has two operating segments: Products & Solutions and Services.

Products & Solutions

Products & Solutions encompasses our unified communications and contact center platforms, applications and devices.

Unified Communications ("UC"): Avaya unifies communications, helping companies increase employee productivity, improve customer service and reduce costs. Avaya embeds communications directly into the applications, browsers and devices employees use every day to create a single, powerful gateway for voice, video, messaging, conferencing and collaboration. We give people a more natural, efficient, and flexible way to connect, engage, respond, and share - where and how they want - for better business results.

Avaya offers an open, extensible development platform, so that customers and third parties can easily create custom applications and automated workflows for their unique needs, integrating Avaya’s capabilities into the customer's existing infrastructure and business applications.

Contact Center ("CC"): Avaya’s industry-leading omnichannel contact center solutions enable customers to build a customized portfolio of applications, driving stronger customer engagement and higher customer lifetime value. Our reliable, secure and scalable communications solutions include voice, email, chat, social media, video, performance management and ease of third-party integration that can improve customer service and help companies compete more effectively.

Avaya also focuses on ensuring an outstanding experience for mobile callers, because we integrate transformative technologies, including Artificial Intelligence ("AI"), big data analytics and cybersecurity into our contact center solutions. As organizations use these solutions to gain a deeper understanding of their customer needs, we believe that their teams become more efficient and effective and their customer loyalty grows.

Both UC and CC are supported by our portfolio of innovative business phones and multimedia devices, which is one of the broadest in the industry. Avaya brings consumer technology to the employee desktop in a way that can help our customers enhance customer service, internal and external collaboration, and employee productivity. Customers experience seamless audio and video capabilities for both Avaya and approved third-party UC platforms via open Session Initiation Protocol ("SIP") devices. SIP is used for signaling and controlling multi-media communication sessions in applications of Internet telephony for voice and video calls, along with integration with numerous apps that help connect and accelerate business. Developers can easily customize capabilities for their specific needs with our client Software Development Kit ("SDK").

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Services

Avaya Services consists of three business areas: Global Support Services, Enterprise Cloud and Managed Services and Professional Services.

• Global Support Servicesfeatures offerings that address the risk of system outages and also help businesses protect their technology investments. We help our customers maintain their competitiveness through proactive problem prevention, rapid resolution and continual solution optimization. The majority of our revenue in this business is recurring in nature.

• Enterprise Cloud and Managed Services enables customers to take advantage of our technology via the cloud, on-premises, or a hybrid of both, depending on the solution and the needs of the customer. The majority of our revenue in this business is recurring in nature and based on multi-year services contracts.

• Professional Services enable businesses worldwide to take full advantage of their solution investments to drive measurable business results. Our expert consultants and experienced engineers work with clients as a strategic partner along each step of the solution lifecycle to deliver services that drive business transformation and expand ongoing value. The majority of our revenue in this business is one-time in nature.

Together, these comprehensive services enable clients to leverage communications technology to help them maximize their business results. Our global, experienced team of experts delivers award-winning services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support.

We help our customers use communications to minimize the risk of outages, enable employee productivity and deliver a differentiated customer experience.

Our services teams also help our clients transition at their desired pace to next generation communications technology solutions, either via the cloud, on-premises, or a hybrid of both. Customers can choose various levels of support for their communications solutions, including deployment, training, monitoring, troubleshooting and optimization, and more. Our proactive, preventative system performance monitoring can quickly identify and resolve issues. Remote diagnostics and resolutions rapidly fix existing problems and avoid potential issues, helping our customers to save time and reducing the risk of an outage.

Recent Developments

Spoken Acquisition

On March 9, 2018, the Company acquired Intellisist, Inc. (“Spoken”), a United States-based private technology company, which provides cloud-based Contact Center as a Service ("CCaaS") solutions and customer experience management and automation applications. The total purchase price was $172 million, consisting of $157 million in cash, $14 million in contingent consideration and a $1 million settlement of Spoken’s net payable to the Company. Prior to the acquisition, the Company and Spoken had been working in a co-development partnership for more than a year pursuant to which the Company had recorded a net receivable from Spoken for services provided.

Spoken became a wholly-owned subsidiary of the Company on March 9, 2018. Spoken’s revenue and operating loss included in the Company’s results for the three months ended December 31, 2018 was $3 million and $8 million, respectively, including $3 million of amortization for acquired technology intangible assets.

Emergence from Bankruptcy

On January 19, 2017 (the "Petition Date"), Avaya Holdings Corp., together with certain of its affiliates (collectively, the "Debtors"), filed voluntary petitions for relief (the "Bankruptcy Filing") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").

On November 28, 2017, the Bankruptcy Court entered an order confirming the Second Amended Joint Plan of Reorganization filed by the Debtors on October 24, 2017 (the "Plan of Reorganization"). On December 15, 2017 (the "Emergence Date"), the Plan of Reorganization became effective and the Debtors emerged from bankruptcy.

Beginning on the Emergence Date, the Company applied fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the Condensed Consolidated Financial Statements after December 15, 2017 are not comparable with the Condensed Consolidated Financial Statements on or prior to that date.

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Factors and Trends Affecting Our Results of Operations

There are a number of trends and uncertainties affecting our business. For example, we are dependent on general economic conditions and the willingness of our customers to invest in technology. In addition, instability in the geopolitical environment of our customers, instability in the global credit markets and other disruptions put pressure on the global economy causing uncertainties. We are also affected by the impact of foreign currency exchange rates on our business. We believe these uncertainties have impacted our customers’ willingness to spend on IT and the manner in which they procure such technologies and services. This includes delays or rejection of capital projects, including the implementation of our products and services. In addition, as further explained below, we believe there is a growing market trend around cloud consumption preferences with more customers exploring operating expense and subscription-based models as opposed to capital expenditure (“CapEx”) models for procuring technology.

As a result of a growing market trend preferring cloud consumption, more customers are exploring subscription and pay-per-use based models, rather than CapEx models, for procuring technology. The shift to subscription and pay-per-use models enables customers to manage costs and efficiencies by paying a subscription or a per minute or per message fee for business communications services rather than purchasing the underlying products and services, infrastructure and personnel, which are owned and managed by the equipment vendor or a cloud and managed services provider. We believe the market trend toward these flexible consumption models will continue as we see an increasing number of opportunities and requests for proposals based on subscription and pay-per-use models. This trend has driven an increase in the proportion of total Company revenues attributable to software and services. In addition, we believe customers are moving away from owned and operated infrastructure, preferring cloud offerings and virtualized server defined networks, which reduce our associated maintenance support opportunities. We continue to evolve into a software and services business and focus our go-to-market efforts by introducing new solutions and innovations, particularly on workflow automation, multi-channel customer engagement and cloud-enabled communications applications. The Company is focused on growing products and services with a recurring revenue stream. Recurring revenue includes products and services that are delivered pursuant to multi-period contracts including revenue recurring from sales of software, maintenance, and Cloud and Avaya private cloud services, which was recently renamed Enterprise Cloud and Managed Services.

Despite the benefits of a robust indirect channel, which include expanding our sales reach, our channel partners have direct contact with our customers that may foster independent relationships between them and a loss of certain services agreements for us. We have been able to offset these impacts by focusing on utilizing partners in a sales agent relationship, whereby partners perform selling activities but the contract remains with Avaya. We are also offering higher-value services in support of our software offerings, such as professional services and cloud-managed services, which are not traditionally provided by our channel partners.

The Company has maintained its focus on profitability levels and investing in future results. As the Company continues its transformation to a software and service-led organization, it has implemented programs designed to streamline its operations, generate cost savings and eliminate overlapping processes and resources. These cost savings programs include: (1) reducing headcount, (2) eliminating real estate costs associated with unused or under-utilized facilities and (3) implementing gross margin improvement and other cost reduction initiatives. The Company continues to evaluate opportunities to streamline its operations and identify cost savings globally and may take additional restructuring actions in the future. The costs of those actions could be material.

Financial Results Summary

Our financial results for the period from October 1, 2017 through December 15, 2017 are referred to as those of the “Predecessor” period. Our financial results for the three months ended December 31, 2018 and the period from December 16, 2017 through December 31, 2017 are referred to as those of the “Successor” period. Our results of operations as reported in our unaudited interim Condensed Consolidated Financial Statements are reported separately for each of these periods and therefore are prepared in accordance with GAAP. Although GAAP requires that we report on our results for the period from October 1, 2017 through December 15, 2017 and the period from December 16, 2017 through December 31, 2017 separately, management views and assesses the Company’s operating results for the three months ended December 31, 2017 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to the current period.

The Company cannot adequately compare the operating results of the period from December 16, 2017 through December 31, 2017 against the current period reported in its Condensed Consolidated Financial Statements without combining it with the period from October 1, 2017 through December 15, 2017 and does not believe that reviewing the results of this period in isolation would be useful in identifying any trends in or reaching any conclusions regarding the Company’s overall operating performance. Management believes that the key performance metrics such as revenue, gross margin and operating income (loss) for the Successor period when combined with the Predecessor period provides more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as

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reported in our Condensed Consolidated Financial Statements in accordance with GAAP, the table and discussion below also presents the combined results for the three months ended December 31, 2017.

The combined results for the three months ended December 31, 2017, which we refer to herein as results for the "three months ended December 31, 2017," represent the sum of the reported amounts for the Predecessor period from October 1, 2017 through December 15, 2017 and the Successor period from December 16, 2017 through December 31, 2017. These combined results are not considered to be prepared in accordance with GAAP and have not been prepared as pro forma results under applicable regulations. The combined operating results may not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers ("ASU 2014-09").” This standard superseded most of the previous revenue recognition guidance under GAAP and is intended to improve and converge with international standards the financial reporting requirements for revenue recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. Subsequently, the FASB issued several standards that clarified certain aspects of ASU 2014-09 but did not significantly change the original standard. The Company adopted ASU 2014-09 and its related amendments (collectively "ASC 606") as of October 1, 2018 using the modified retrospective transition method. Refer to Note 2, "Recent Accounting Pronouncements" and Note 3, “Revenue Recognition” to our Condensed Consolidated Financial Statements for disclosures related to the adoption of ASC 606 and an updated accounting policy related to revenue recognition and contract costs.

With the adoption of ASC 606, sales that include professional services, are generally recognized as the services are performed as opposed to upon completion and acceptance of the promised services. Additionally, when such arrangements also include products, certain products revenue is recognized when the products are delivered as opposed to upon completion and acceptance of the related services. Revenue recognition related to stand-alone product shipments, maintenance services, and certain cloud offerings remains substantially unchanged. In addition to the impacts on revenue recognition, the standard requires incremental contract acquisition costs (primarily sales commissions) to be capitalized and amortized over the term of the related performance obligation as opposed to expensed as incurred. The actual impacts are dependent upon contract-specific terms.

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The following table displays our consolidated net income for the periods indicated:

	Successor						Predecessor			Non-GAAP Combined
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2017
REVENUE
Products	$	324		$	71		$	253		$	324
Services	414			77			351			428
	738			148			604			752
COSTS
Products:
Costs	115			33			84			117
Amortization of technology intangible assets	43			7			3			10
Services	173			30			155			185
	331			70			242			312
GROSS PROFIT	407			78			362			440
OPERATING EXPENSES
Selling, general and administrative	257			50			264			314
Research and development	53			9			38			47
Amortization of intangible assets	40			7			10			17
Restructuring charges, net	7			10			14			24
	357			76			326			402
OPERATING INCOME	50			2			36			38
Interest expense	(60		)	(9		)	(14		)	(23		)
Other income (expense), net	22			(2		)	(2		)	(4		)
Reorganization items, net	—			—			3,416			3,416
INCOME (LOSS) BEFORE INCOME TAXES	12			(9		)	3,436			3,427
(Provision for) benefit from income taxes	(3		)	246			(459		)	(213		)
NET INCOME	$	9		$	237		$	2,977		$	3,214

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The following table displays the impact of the fair value adjustments resulting from the Company's application of fresh start accounting upon emergence from bankruptcy, excluding those related to the amortization of intangible assets, on the Company's operating income for the periods indicated:

(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017
REVENUE
Products	$	(2	)	$	(6	)
Services	(8		)	(17		)
	(10		)	(23		)
COSTS
Products	3			5
Services	6			7
	9			12
GROSS PROFIT	(19		)	(35		)
OPERATING EXPENSES
Selling, general and administrative	—			(2		)
Research and development	1			—
	1			(2		)
OPERATING INCOME	$	(20	)	$	(33	)

Three Months Ended December 31, 2018 Compared with the Three Months Ended December 31, 2017 Combined Results

Revenue

Revenue for the three months ended December 31, 2018 was $738 million compared to $752 million for the three months ended December 31, 2017. The decrease was primarily driven by lower demand for the Company's unified communications products which contributed to a decline in professional services revenue; a continued decline in maintenance services revenue; and the unfavorable impact of foreign currency exchange rates. The lower demand for our products in prior periods also contributed, in part, to the decline in lower maintenance services revenue. The decrease was partially offset by the favorable impact of adopting ASC 606 ($50 million); a lower impact of applying fresh start accounting upon emergence from bankruptcy, which resulted in the recognition of deferred revenue at fair value and lower revenue in subsequent periods; and incremental revenue from the Spoken acquisition.

The following table displays revenue and the percentage of revenue to total sales by operating segment for the periods indicated:

												Percentage of Total Revenue
	Successor						Predecessor		Non-GAAP Combined			Successor		Non-GAAP Combined				Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017		Three months ended December 31, 2017			Three months ended December 31, 2018		Three months ended December 31, 2017		Yr. to Yr. Percentage Change
Products & Solutions	$	326		$	77		$	253	$	330		44	%	44	%	(1	)%	(1	)%
Services	422			94			351		445			57	%	59	%	(5	)%	(4	)%
Unallocated amounts	(10		)	(23		)	—		(23		)	(1	)%	(3	)%	(1)		(1)
Total revenue	$	738		$	148		$	604	$	752		100	%	100	%	(2	)%	(1	)%

⁽¹⁾  Not meaningful

Products & Solutions revenue for the three months ended December 31, 2018 was $326 million compared to $330 million for the three months ended December 31, 2017. The decrease was primarily attributable to lower unified communications and contact center revenue, partially offset by the favorable impact of adopting ASC 606 ($30 million) and incremental revenue from the Spoken acquisition.

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Services revenue for the three months ended December 31, 2018 was $422 million compared to $445 million for the three months ended December 31, 2017. The decrease was primarily due to lower professional services revenue as a result of lower demand for the Company's unified communications products; a continued decline in maintenance services revenue; and the unfavorable impact of foreign currency exchange rates, partially offset by the favorable impact of adopting ASC 606 ($20 million).

Unallocated amounts for the three months ended December 31, 2018 and the three months ended December 31, 2017 represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

The following table displays revenue and the percentage of revenue to total sales by location for the periods indicated:

									Percentage of Total Revenue
	Successor				Predecessor		Non-GAAP Combined		Successor		Non-GAAP Combined				Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017		Three months ended December 31, 2017		Three months ended December 31, 2018		Three months ended December 31, 2017		Yr. to Yr. Percentage Change
U.S.	$	394	$	81	$	331	$	412	53	%	55	%	(4	)%	(4	)%
International:
Europe, Middle East and Africa	199		35		166		201		27	%	27	%	(1	)%	—	%
Asia Pacific	78		17		57		74		11	%	10	%	5	%	8	%
Americas International - Canada and Latin America	67		15		50		65		9	%	8	%	3	%	7	%
Total International	344		67		273		340		47	%	45	%	1	%	3	%
Total revenue	$	738	$	148	$	604	$	752	100	%	100	%	(2	)%	(1	)%

Revenue in the U.S. for the three months ended December 31, 2018 was $394 million compared to $412 million for the three months ended December 31, 2017. The decrease in U.S. revenue was the result of lower demand for the Company's unified communications and contact center products which contributed to a decline in professional and maintenance services revenue. The decrease was partially offset by the favorable impact of adopting ASC 606 ($26 million); a lower impact of applying fresh start accounting upon emergence from bankruptcy; and incremental revenue from the Spoken acquisition. Revenue in Europe, Middle East and Africa ("EMEA") for the three months ended December 31, 2018 was $199 million compared to $201 million for the three months ended December 31, 2017. The decrease in EMEA revenue was primarily attributable to lower demand for our unified communications products and related professional services, and the unfavorable impact of foreign currency exchange rates, partially offset by the favorable impact of adopting ASC 606 ($8 million) and a lower impact of fresh start accounting. Revenue in Asia Pacific ("APAC") for the three months ended December 31, 2018 was $78 million compared to $74 million for the three months ended December 31, 2017. The increase in APAC revenue was primarily attributable to the favorable impact of adopting ASC 606 ($8 million) and higher contact center revenue, partially offset by the unfavorable impact of foreign currency exchange rates. Revenue in Americas International for the three months ended December 31, 2018 was $67 million compared to $65 million for the three months ended December 31, 2017. The increase in Americas International revenue was primarily attributable to the favorable impact of adopting ASC 606 ($8 million) and higher contact center revenue, partially offset by lower professional services revenue and the unfavorable impact of foreign currency exchange rates.

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We sell our products and solutions both directly to end users and through an indirect sales channel. The following table provides a comparison of direct and indirect products and solutions revenue for the periods indicated:

									Percentage of Total Products & Solutions Revenue
	Successor				Predecessor		Non-GAAP Combined		Successor		Non-GAAP Combined				Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017		Three months ended December 31, 2017		Three months ended December 31, 2018		Three months ended December 31, 2017		Yr. to Yr. Percentage Change
Direct	$	100	$	23	$	80	$	103	31	%	31	%	(3	)%	(2	)%
Indirect	226		54		173		227		69	%	69	%	—	%	—	%
Total Products & Solutions revenue	$	326	$	77	$	253	$	330	100	%	100	%	(1	)%	(1	)%

Gross Profit

The following table sets forth gross profit and gross margin by operating segment for the periods indicated:

													Gross Margin
	Successor						Predecessor			Non-GAAP Combined			Successor		Non-GAAP Combined		Change
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2017			Three months ended December 31, 2018		Three months ended December 31, 2017		Amount			Percent
Products & Solutions	$	214		$	49		$	169		$	218		65.6	%	66.1	%	$	(4	)	(2	)%
Services	255			70			196			266			60.4	%	59.8	%	(11		)	(4	)%
Unallocated amounts	(62		)	(41		)	(3		)	(44		)	(1	)	(1)		(18		)	(1)
Total	$	407		$	78		$	362		$	440		55.1	%	58.5	%	$	(33	)	(8	)%

⁽¹⁾  Not meaningful

Gross profit for the three months ended December 31, 2018 was $407 million compared to $440 million for the three months ended December 31, 2017. The decrease was primarily driven by the decline in revenue described above; amortization of technology intangibles with higher asset values due to the application of fresh start accounting upon emergence from bankruptcy; and incremental amortization of technology intangibles acquired from the Spoken acquisition, partially offset by the unfavorable impact of costs recognized on an accelerated basis under ASC 606 ($12 million).

Products & Solutions gross profit for the three months ended December 31, 2018 was $214 million compared to $218 million for the three months ended December 31, 2017. The decrease was mainly attributable to the decline in revenue described above. Products & Solutions gross margin decreased from 66.1% to 65.6% in the first quarter of fiscal 2019. The decline was driven by unfavorable product and geography mix, partially offset by a lower impact of fair value adjustments recorded upon application of fresh start accounting.

Services gross profit for the three months ended December 31, 2018 was $255 million compared to $266 million for the three months ended December 31, 2017. The decrease was due to the decline in revenue described above, partially offset by an increase in cloud services gross profit. Services gross margin increased from 59.8% to 60.4% in the first quarter of fiscal 2019. The increase was driven by a lower impact of fair value adjustments recorded upon application of fresh start accounting, partially offset by an unfavorable geographical mix.

Unallocated amounts for the three months ended December 31, 2018 and the three months ended December 31, 2017 include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment performance, but rather are controlled at the corporate level.

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Operating Expenses

The following table sets forth operating expenses and the percentage of operating expenses to total revenue for the periods indicated:

									Percentage of Total Revenue
	Successor				Predecessor		Non-GAAP Combined		Successor		Non-GAAP Combined		Change
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017		Three months ended December 31, 2017		Three months ended December 31, 2018		Three months ended December 31, 2017		Amount			Percent
Selling, general and administrative	$	257	$	50	$	264	$	314	34.8	%	41.7	%	$	(57	)	(18	)%
Research and development	53		9		38		47		7.2	%	6.3	%	6			13	%
Amortization of intangible assets	40		7		10		17		5.4	%	2.3	%	23			135	%
Restructuring charges, net	7		10		14		24		0.9	%	3.2	%	(17		)	(71	)%
Total operating expenses	$	357	$	76	$	326	$	402	48.3	%	53.5	%	$	(45	)	(11	)%

Selling, general and administrative expenses for the three months ended December 31, 2018 were $257 million compared to $314 million for the three months ended December 31, 2017. The decrease was primarily attributable to costs incurred in the prior year in connection with certain legal matters and advisory fees to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure; the favorable impact of capitalizing sales commissions in the current year due to the adoption of ASC 606 ($8 million); and the favorable impact of foreign currency exchange rates. The decrease was partially offset by a higher impact of fresh start accounting and an increase in non-cash share-based compensation in the current period. The impact of applying fresh start accounting resulted in additional depreciation expense as property, plant and equipment was recorded at fair value, resulting in higher asset values. The increase in share-based compensation was due to a longer amortization period for Successor Company stock awards included in the current year. Share-based compensation expense related to cancelled Predecessor Company stock awards was recorded within Reorganization items, net during the period from October 1, 2017 through December 15, 2017 (Predecessor).

Research and development expenses for the three months ended December 31, 2018 were $53 million compared to $47 million for the three months ended December 31, 2017. The increase was primarily attributable to incremental expenses associated with the Spoken acquisition and investments in new product development.

Amortization of intangible assets for the three months ended December 31, 2018 was $40 million compared to $17 million for the three months ended December 31, 2017. The carrying value of intangible assets was adjusted upon the application of fresh start accounting, which resulted in higher asset values and an increase in amortization during the current year period.

Restructuring charges, net, for the three months ended December 31, 2018 were $7 million compared to $24 million for the three months ended December 31, 2017. Restructuring charges during the three months ended December 31, 2018 consisted of employee separation costs primarily associated with employee severance actions in the U.S. and Canada. Restructuring charges during the three months ended December 31, 2017 included employee separation costs of $13 million primarily associated with employee severance actions in the U.S. and EMEA and lease obligations of $11 million, primarily in EMEA.

Operating Income

Operating income for the three months ended December 31, 2018 was $50 million compared to $38 million for the three months ended December 31, 2017. Our operating results for the three months ended December 31, 2018 as compared to the three months ended December 31, 2017 reflect, among other things:

• lower revenue and gross profit for the three months ended December 31, 2018, as described above;

• costs incurred in connection with certain legal matters of $37 million for the three months ended December 31, 2017;

• lower restructuring charges for the three months ended December 31, 2018;

• lower advisory fees incurred to assist in the assessment of strategic and financial alternatives to improve the Company’s capital structure during the three months ended December 31, 2018 of $10 million;

• operating results from the Spoken acquisition completed in March 2018;

36

• higher amortization of intangible assets due to the application of fresh start accounting upon emergence from bankruptcy; and

• the favorable impact of adopting ASC 606 on October 1, 2018.

Interest Expense

Interest expense for the three months ended December 31, 2018 was $60 million compared to $23 million for the three months ended December 31, 2017. For the period from October 1, 2017 through December 15, 2017, contractual interest expense of $94 million was not recorded, as it was not an allowed claim under the Company's bankruptcy filing. The decline in interest expense, when including the contractual interest expense of $94 million not recorded in the prior year period, was driven by lower average debt balances outstanding in the current year period as a result of the Company’s Plan of Reorganization upon emergence from bankruptcy.

Other Income (Expense), Net

Other income, net for the three months ended December 31, 2018 was $22 million as compared to other expense, net of $4 million for the three months ended December 31, 2017. Other income, net for the three months ended December 31, 2018 consisted of a change in fair value of the warrants issued in accordance with the Plan of Reorganization to certain holders of the Predecessor second lien obligations pursuant to a warrant agreement ("Emergence Date Warrants") of $18 million; interest income of $3 million; and other, net of $1 million. Other expense, net for the three months ended December 31, 2017 included other pension and post-retirement benefit costs of $7 million and a change in fair value of the Emergence Date Warrants of $5 million, partially offset by income from a transition services agreement entered into in connection with the sale of the Networking business to Extreme (the "TSA") of $3 million; interest income of $2 million; net foreign currency gains of $2 million; and other, net of $1 million.

Reorganization Items, Net

Reorganization items, net for the three months ended December 31, 2017 were $3,416 million and primarily consists of the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities. Reorganization items, net also represent amounts incurred subsequent to the Bankruptcy Filing as a direct result of the Bankruptcy Filing and are comprised of professional service fees and contract rejection fees.

Provision for Income Taxes

The provision for income taxes was $3 million for the three months ended December 31, 2018 compared with $213 million for the three months ended December 31, 2017.

The Company's effective income tax rate for the three months ended December 31, 2018 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Tax Cuts and Jobs Act ("the Act") relating to Global Intangible Low-Taxed Income (“GILTI”) and Foreign-Derived Intangible Income (“FDII”) and (7) foreign tax credits.

The Company's effective income tax rate for the period from December 16, 2017 through December 31, 2017 (Successor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) an increase in estimated current year tax loss, which is eliminated as part of the attribute reduction related to the cancellation of indebtedness income ("CODI"), and (7) the impact of the Act, which only affects the period from December 16, 2017 through December 31, 2017 (Successor).

The Company's effective income tax rate for the period from October 1, 2017 through December 15, 2017 (Predecessor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local taxes, and (6) the impact of reorganization and fresh start adjustments.

Net Income

Net income was $9 million for the three months ended December 31, 2018 compared to $3,214 million for the three months ended December 31, 2017, with the decline primarily driven by the reorganization gain of $3,416 million in the prior year period resulting from our emergence from bankruptcy and the items discussed above.

37

Liquidity and Capital Resources

We expect our existing cash balance, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity. Our ability to meet our cash requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe these sources will be adequate to meet our liquidity needs for at least the next twelve months.

Cash Flow Activity

The following table provides a summary of the statements of cash flows for the periods indicated:

	Successor						Predecessor			Non-GAAP Combined
	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2017
(In millions)
Net cash provided by (used for):
Operating activities	$	86		$	40		$	(414	)	$	(374	)
Investing activities	(22		)	(2		)	(13		)	(15		)
Financing activities	(18		)	—			(102		)	(102		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(3		)	3			(2		)	1
Net increase (decrease) in cash, cash equivalents, and restricted cash	43			41			(531		)	(490		)
Cash, cash equivalents, and restricted cash at beginning of period	704			435			966			966
Cash, cash equivalents, and restricted cash at end of period	$	747		$	476		$	435		$	476

Operating Activities

Cash provided by (used for) operating activities was $86 million and ($374) million for the three months ended December 31, 2018 and 2017, respectively. The change between the three months ended December 31, 2018 and 2017 was primarily due to payments made during the three months ended December 31, 2017 related to the Company's reorganization and emergence from bankruptcy, which included payments to the Pension Benefit Guaranty Corporation ($340 million), general unsecured creditor claims ($58 million) and the Avaya Pension Plan trust ($49 million); lower restructuring payments; lower advisory fees to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure; and the timing of vendor and customer payments. These lower payments were partially offset by higher interest and pension and other post-retirement benefits due to the cessation of such payments in January 2017 during the bankruptcy process.

Investing Activities

Cash used for investing activities for the three months ended December 31, 2018 and 2017 was $22 million and $15 million, respectively. The increase was primarily due to higher capital expenditures for IT-related projects.

Financing Activities

Cash used for financing activities for the three months ended December 31, 2018 and 2017 was $18 million and $102 million, respectively.

Cash used for financing activities for the three months ended December 31, 2018 included:

• scheduled debt repayments under the Term Loan Credit Agreement of $7 million;

• repayments in connection with financing the use of equipment for the performance of services under our agreement with HP Enterprise Services, LLC ("HP") of $4 million; and

• other financing activities, net of $7 million.

Cash used for financing activities for the three months ended December 31, 2017 included:

• repayments to the Predecessor Company first lien debt holders of $2,061 million;

• repayment of the Predecessor Company debtor-in-possession credit agreement of $725 million;

• adequate protection payments related to the bankruptcy of $111 million;

38

• payment of debt issuance costs of $97 million; and

• repayments in connection with financing the use of equipment for the performance of services under our agreement with HP of $4 million, partially offset by:

• proceeds of $2,896 million from the Term Loan Credit Agreement entered into on the Emergence Date.

As of December 31, 2018, the Company was not in default under any of its debt agreements.

Future Cash Requirements

Our primary future cash requirements will be to fund debt service, restructuring payments, capital expenditures, and benefit obligations. In addition, we may use cash in the future to make strategic acquisitions.

Specifically, we expect our primary cash requirements for the remainder of fiscal 2019 to be as follows:

• Debt service—We expect to make payments of approximately $187 million during the remainder of fiscal 2019 in principal and interest associated with the Term Loan Credit Agreement, and interest and fees associated with our ABL Credit Agreement and 2.25% Convertible Notes due 2023. In the ordinary course of business, we may from time to time borrow and repay amounts under our ABL Credit Agreement.

• Restructuring payments—We expect to make payments of approximately $30 million to $35 million during the remainder of fiscal 2019 for employee separation costs and lease termination obligations associated with restructuring actions we have taken through December 31, 2018. The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.

• Capital expenditures—We expect to spend approximately $55 million to $65 million for capital expenditures and capitalized software development costs during the remainder of fiscal 2019.

• Benefit obligations—We estimate we will make payments under our pension and post-retirement benefit obligations totaling $49 million during the remainder of fiscal 2019. These payments include: $17 million to satisfy the minimum statutory funding requirements of our U.S. qualified pension plans; $21 million for our non-U.S. benefit plans, which are predominantly not pre-funded; and $11 million for represented retiree post-retirement benefits. See discussion in Note 12, “Benefit Obligations,” to our unaudited interim Condensed Consolidated Financial Statements for further details.

In addition to the matters identified above, in the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, including but not limited to those identified in Note 19, "Commitments and Contingencies," to our unaudited interim Condensed Consolidated Financial Statements, relating to intellectual property, commercial, employment, environmental and regulatory matters, which may require us to make cash payments. These and other legal matters could have a material adverse effect on the manner in which the Company does business and the Company's financial position, results of operations, cash flows and liquidity. During the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recognized $0 million, $0 million, and $37 million, respectively, of costs incurred in connection with the resolution of certain legal matters.

We and our subsidiaries and affiliates may from time to time seek to retire or purchase our outstanding equity (common stock and warrants) and/or debt (including publicly issued debt) through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. 

Future Sources of Liquidity

We expect our cash balance, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity.

As of December 31, 2018 and September 30, 2018, our cash and cash equivalent balances held outside the U.S. were $218 million and $169 million, respectively. As of December 31, 2018, cash and cash equivalents held outside the U.S. in excess of in-country needs and, which could not be distributed to the U.S. without restriction, were not material.

Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At December 31, 2018, the Company had issued and outstanding letters of credit and guarantees of $46 million. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $46 million of outstanding letters of credit and guarantees, was $155 million at December 31, 2018.

We believe that our existing cash and cash equivalents of $743 million as of December 31, 2018, future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash

39

requirements for at least the next twelve months. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Off-Balance Sheet Arrangements

See discussion in Note 19, “Commitments and Contingencies,” to our unaudited interim Condensed Consolidated Financial Statements for further details.

Debt Ratings

As of December 31, 2018, the Company's debt ratings were as follows:

• Moody’s Investors Service issued a corporate family rating of "B2" with a stable outlook and a rating of the 7-year $2,925 million Term Loan Credit Agreement of "B2";

• Standard and Poor's issued a definitive corporate credit rating of "B" with a stable outlook and a rating of the Term Loan Credit Agreement of "B"; and

• Fitch Ratings Inc. issued a Long-Term Issuer Default Rating of "B" with a stable outlook and a rating of the Term Loan Credit Agreement of "BB-".

Our ability to obtain additional external financing and the related cost of borrowing may be affected by our ratings, which are periodically reviewed by the major credit rating agencies. The ratings are subject to change or withdrawal at any time by the respective credit rating agencies.

Critical Accounting Policies and Estimates

Management has reassessed the critical accounting policies as disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 21, 2018 and determined that there were no significant changes to our critical accounting policies for the three months ended December 31, 2018, except for recently adopted accounting policy changes as discussed in the Notes to our unaudited interim Condensed Consolidated Financial Statements.

New Accounting Pronouncements

See discussion in Note 2, "Recent Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial Statements for further details.

EBITDA and Adjusted EBITDA

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization and excludes the results of discontinued operations. EBITDA provides us with a measure of operating performance that excludes certain non-operating and/or non-cash expenses, which can differ significantly from company to company depending on capital structure, the tax jurisdictions in which companies operate and capital investments.

Adjusted EBITDA is EBITDA as further adjusted by the items noted in the reconciliation table below. We believe Adjusted EBITDA provides a measure of our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization, and therefore presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years. In addition, Adjusted EBITDA serves as a basis for determining certain management and employee compensation. We also present EBITDA and Adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Under the Company's debt agreements, the ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied in part to ratios based on a measure of Adjusted EBITDA.

EBITDA and Adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Further, Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations but could be substantial. In particular, our formulation of Adjusted EBITDA adjusts for certain amounts that are included in calculating net income (loss) as set forth in the following table including, but not limited to, restructuring charges, impairment charges, certain fees payable to our Predecessor private equity sponsors and other advisors, resolution of certain legal matters and a portion of our pension costs and post-retirement benefits costs, which represents the amortization of pension service costs and actuarial gain (loss) associated with these benefits. However, these are expenses that may recur, may vary and/or may be difficult to predict.

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The unaudited reconciliation of net income, which is a GAAP measure, to EBITDA and Adjusted EBITDA, which are non-GAAP measures, is presented below for the periods indicated:

		Successor						Predecessor
(In millions)		Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Net income		$	9		$	237		$	2,977
Interest expense	(a)	60			9			14
Interest income		(3		)	—			(2		)
Provision for (benefit from) income taxes		3			(246		)	459
Depreciation and amortization		117			22			31
EBITDA		186			22			3,479
Impact of fresh start accounting adjustments	(b)	3			27			—
Restructuring charges, net		7			10			14
Advisory fees	(c)	1			8			3
Acquisition-related costs		3			—			—
Reorganization items, net		—			—			(3,416		)
Non-cash share-based compensation		6			1			—
Loss on sale/disposal of long-lived assets, net		—			—			1
Resolution of certain legal matters	(d)	—			—			37
Change in fair value of Emergence Date Warrants		(18		)	5			—
Loss (gain) on foreign currency transactions		1			(2		)	—
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs	(e)	—			—			17
Adjusted EBITDA		$	189		$	71		$	135

^(a)  Effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise. For the period from October 1, 2017 through December 15, 2017, contractual interest expense related to debt subject to compromise of $94 million had not been recorded as interest expense, as it was not an allowed claim under the Bankruptcy Filing.

^(b)  The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy.

^(c)  Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure.

^(d)  Costs in connection with the resolution of certain legal matters include reserves and settlements, as well as associated legal costs.

^(e)  Represents that portion of our pension and post-retirement benefit costs which represent the amortization of prior service costs and net actuarial gain (loss) associated with these benefits.

41

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, including statements containing words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “model,” “can,” “could,” “may,” “should,” “will,” “would” or similar words or the negative thereof, constitute “forward-looking statements.” These forward-looking statements, which are based on our current plans, expectations, estimates and projections about future events, should not be unduly relied upon. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. We caution you therefore against relying on any of these forward-looking statements.

The forward-looking statements included herein are based upon our assumptions, estimates and beliefs and involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and may be affected by a variety of risks and other factors, which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. See, among other things, Part I, Item 1A "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" to our Annual Report on Form 10-K filed with the SEC on December 21, 2018 for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company has exposure to changing interest rates primarily under the Term Loan Credit Agreement and ABL Credit Agreement, each of which bears interest at variable rates based on LIBOR. The Company had $2,896 million of variable rate loans outstanding as of December 31, 2018.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of December 31, 2018, the total notional amount of the six Swap Agreements was $1,800 million.

It is management’s intention that the notional amount of the Swap Agreements be less than the variable rate loans outstanding during the life of the derivatives. For the three months ended December 31, 2018, the Company recognized a loss on its hedge contracts of $3 million, which is reflected in Interest expense in the Condensed Consolidated Statements of Operations. At December 31, 2018, the fair value of the outstanding Swap Agreements was a deferred loss of $31 million. Based on the payment dates of the contracts, $7 million and $24 million was recorded in Other current liabilities and Other liabilities in the Condensed Consolidated Balance Sheets, respectively. On an annual basis, a hypothetical one percent change in interest rates for the $1,096 million of unhedged variable rate debt as of December 31, 2018 would affect interest expense by approximately $11 million.

Foreign Currency Risk

Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. ("foreign") operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are Euros, Canadian Dollars, British Pound Sterling, Chinese Renminbi, Indian Rupee, Australian Dollars, and Brazilian Real.

Non-U.S. denominated revenue was $158 million for the three months ended December 31, 2018. We estimate a 10% change in the value of the U.S. dollar relative to all foreign currencies would affect our revenue for the three months ended December 31, 2018 by $16 million.

42

Item 4. Controls and Procedures

As of the end of the period covered by this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2018 solely because of the material weaknesses in the Company's internal control over financial reporting described below.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the preparation of the Company’s Condensed Consolidated Financial Statements for the quarter ended June 30, 2017, the Company identified the following control deficiencies that constituted material weaknesses in our internal control over financial reporting:

• The appropriate complement of resources in our tax department commensurate with the volume and complexity of accounting for income taxes subsequent to the Company’s Bankruptcy Filing were not maintained, which contributed to the following control deficiencies, each of which are individually considered to be material weaknesses, relating to the completeness and accuracy of the Company’s accounting for income taxes, including the related tax assets and liabilities:

• Control activities over the completeness and accuracy of interim forecasts by tax jurisdiction used in accounting for the Company’s interim income tax provision were not performed at the appropriate level of precision.

• Control activities over the completeness and accuracy of the allocation of the tax provision calculations (the “intraperiod allocation”) were insufficient to ensure that the intraperiod allocation balances were accurately determined.

These control deficiencies resulted in material adjustments to our income tax provision for the quarter ended June 30, 2017, which were detected and corrected prior to the release of the related financial statements.

The Company also identified a material weakness in connection with the preparation of the Company's Condensed Consolidated Financial Statements for the quarter ended March 31, 2018 related to the reconciliation of cash and accounts receivable upon the adoption of fresh start accounting. Specifically, the Company's internal controls with respect to the mid-month reconciliation of cash receipts and accounts receivable required in connection with the adoption of fresh start accounting, in accordance with GAAP, did not operate effectively to record certain cash receipts that were received on December 15, 2017, the date the Company emerged from bankruptcy.

This control deficiency resulted in an adjustment in the financial statements of our cash and accounts receivable as of December 15, 2017, our cash flow statements, and the revision of our consolidated financial statements for the predecessor period ended December 15, 2017 and the successor period ended December 31, 2017.

In connection with the preparation of the Company’s consolidated financial statements for the successor period from December 16, 2017 through September 30, 2018, the Company identified an additional material weakness in our internal control over financial reporting related to the review of certain journal entries. Specifically, we did not maintain effective controls to ensure that appropriate segregation of duties related to recording journal entries was achieved. This material weakness did not result in a misstatement.

Additionally, each of the above material weaknesses could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Notwithstanding the above identified material weaknesses, management believes the Condensed Consolidated Financial Statements as included in Part I of this Quarterly Report on Form 10-Q fairly represent, in all material respects, the Company's financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles in the United States.

Remediation Efforts to Address Material Weaknesses

Management has implemented a remediation plan to address the control deficiencies that led to the material weaknesses referenced above. The remediation plan includes the following:

• Implemented specific additional review procedures over the income tax provision calculations for interim quarters to ensure that the results of such calculations are not inconsistent with the actual results and trends being observed in the business. The deficiency, and the related remediation, applies only to interim quarters in which the income tax

43

provision is based on forecast results for the year. The controls and processes related to the income tax provision for our fiscal year-end are not affected as they are based on actual results for the year.

• Hired additional personnel, including a Vice President of Tax, with the appropriate experience and technical expertise in income taxes.

• Provided additional training for employees involved in the cash and accounts receivable reconciliation processes, as well as certain other reconciliation processes, and supplemented existing reviewers with higher skilled resources.

• Implemented changes to posting rights and responsibilities to eliminate segregation of duties conflicts. We also provided additional training so that appropriate segregation of duties related to recording journal entries is achieved and performed on a timely basis as designed.

Changes in Internal Control Over Financial Reporting

Except for the implementation and modification of certain internal controls over financial reporting relating to the adoption of ASC 606 “Revenue from Contracts with Customers” effective October 1, 2018 (and changes to implement the remediation efforts described above), there were no changes in the Company's internal control over financial reporting during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under Note 19, "Commitments and Contingencies," to the unaudited interim Condensed Consolidated Financial Statements is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes during the quarterly period ended December 31, 2018 to the risk factors previously disclosed in the Company's Form 10-K filed with the Securities and Exchange Commission on December 21, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information with respect to purchases by the Company of shares of common stock during the three months ended December 31, 2018:

	Issuer Purchases of Equity Securities
	(a)	(b)		(c)	(d)
Period	Total Number of Shares (or Units) Purchased(1)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under Plans or Programs(2)
October 1 - 31, 2018	3,706	$	18.8000	—	$	—
November 1 - 30, 2018	—	$	—	—	15,000,000
December 1 - 31, 2018	334,176	$	17.5800	—	15,000,000
Total	337,882	$	17.5934	—	$	15,000,000

⁽¹⁾ Represents shares of common stock withheld for taxes on restricted stock units that vested.

⁽²⁾ On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Company’s outstanding warrants to purchase shares of the Company’s common stock for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On February 12, 2019, the Board of Directors (the “Board”) of Avaya Holdings Corp. (the “Company”) adopted and approved certain amendments to the Company’s Code of Ethics and Business Conduct (the “Code”). The changes to the Code, among other things: (i) clarified and refined provisions relating to conflicts of interest and data privacy, (ii) added provisions relating to cyber security and gifts and entertainment; and (iii) updated other administrative and non-substantive matters.

The summary of the amendments to the Code included in this Quarterly Report on Form 10-Q is qualified in its entirety by reference to the full text of the Code, as amended, which will be posted on the Company’s investor relations website at https://investors.avaya.com as soon as possible.

45

Item 6. Exhibits

Exhibit Number	Exhibit Description
10.1	Form of Performance Restricted Stock Unit Award Agreement pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan
10.2	Form of Performance Restricted Stock Unit Award Agreement for the Chief Executive Officer pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan
10.3	Form of Restricted Stock Unit Award Agreement for Non-Employee Directors pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan
10.4	First Amendment to Avaya Inc. Change in Control Severance Plan, dated May 16, 2018, effective February 11, 2019
31.1	Certification of James M. Chirico, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Patrick J. O'Malley, III pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of James M. Chirico, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Patrick J. O'Malley, III pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Labels Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

46

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AVAYA HOLDINGS CORP.
By:	/s/ L. DAVID DELL'OSSO
Name:	L. David Dell'Osso
Title:	Vice President, Controller & Chief Accounting Officer

February 14, 2019

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EX-10.1

Exhibit 10.1

PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
PURSUANT TO THE
AVAYA HOLDINGS CORP. 2017 EQUITY INCENTIVE PLAN

*    *    *

Participant:        [Participant Name]    

Grant Date:        [Grant Date]        

Grant Number:     [Client Grant ID]    

Number of Performance Restricted Stock Units (“PRSUs”) Granted:    [_Target PRSUs_]    

*    *    *

ThisPERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT (together with all appendices attached hereto, this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and

WHEREAS, the Committee has determined under the Plan that it would be in the best interests of the Company to grant the Participant a Performance Award in the form of the PRSUs provided herein, each of which represents the right to receive one share of Common Stock upon vesting of such PRSU, subject to the terms and conditions contained in this Agreement and in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1.Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2.Grant of PRSUs. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of PRSUs specified above, subject to adjustment as provided for in the Plan, on the terms and conditions set forth in this Agreement, including, without limitation, in Appendix I, II and III attached hereto, and the Plan. The number of PRSUs granted under this Agreement represents the target number of PRSUs that can be earned by the Participant under this Agreement. The PRSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company. The Participant’s interest in the book-entry account shall be that of a general, unsecured creditor of the Company.

3.Vesting. Subject to the Plan and the other terms of this Agreement, the PRSUs subject to this Agreement shall vest in accordance with the performance matrix set forth on Appendix I (the “Performance Matrix”).

4.Settlement. Any PRSUs subject to this Award that vest in accordance with the terms of this Agreement and the Performance Matrix shall be settled in the manner set forth in the Performance Matrix.

5.Non-Transferability. No portion of the PRSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the PRSUs as provided herein.

6.Governing Law. All questions concerning the construction, validity and interpretation of this Agreement, including but not limited to Appendix I, Appendix II and III hereto, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.9 of the Plan.

7.Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, if any, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 7.

8.Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that:

(a)The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 8.

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(b)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and the Company is under no obligation to register such shares of Common Stock (or to file a “re-offer prospectus”).

(c)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 shall not be available unless (A) a public trading market then exists for the Common Stock, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.

9.Entire Agreement; Amendment. Except as expressly set forth herein, this Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter; provided however, that the restrictive covenants contained in Appendix III hereto are in addition to and not in lieu of any other restrictive covenants by which the Participant may be bound. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

10.Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to PRSUs awarded under the Plan or future PRSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

11.No Right to Employment or Service. Any questions as to whether and when there has been a Termination of Employment and the cause of such Termination of Employment shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the

    3

Participant’s employment or service at any time, for any reason and with or without Cause, and shall not guarantee any right to future employment.

12.Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the PRSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan), to the extent permitted under applicable law. This authorization and consent is freely given by the Participant.

13.Compliance with Laws. Notwithstanding anything in this Agreement to the contrary, the grant of PRSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the PRSUs or any shares of Common Stock or other property pursuant to this Agreement if any such issuance would violate any such requirements or laws. As a condition to the settlement of the PRSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.

14.Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns.

15.Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

16.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

17.Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

18.Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

    4

19.Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of PRSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the PRSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation and shall not be considered as part of such compensation in the event of severance, redundancy or resignation.

20.Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60^th) day following the Grant Date (the “Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award shall be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion.

21.No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself.

22.No Rights as a Stockholder. The Participant’s interest in the PRSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until such shares have been issued to the Participant in accordance with this Agreement and the Plan.

23.Withholding. Notwithstanding the withholding provision in the Plan or anything else in this Agreement:

(a)If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon vesting of the PRSUs (regardless of when the Common Stock underlying the PRSUs are delivered to the Participant), on each date that all or a portion of the PRSUs actually vests, if (1) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell Common Stock or (2) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation.

(b)If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon delivery of the Common Stock underlying the PRSUs (regardless of when vesting occurs), then following each date that all or a portion of the PRSUs actually vests, the

    5

Company will defer the delivery of the Common Stock otherwise deliverable to the Participant until the earliest of: (1) the date of the Participant’s Termination of Employment, (2) the date that the short-term deferral period under Section 409A of the Code expires with respect to such vested RSUs, or (3) the date on which the Company has in place an effective registration statement under the Securities Act or there is a Securities Act exemption available under which the Participant may sell Common Stock and on which the Participant is not subject to a Company-imposed trading blackout (the earliest of such dates, the “Delivery Date”). If on the Delivery Date (x) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell shares of Common Stock or (y) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation.

24.Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the PRSUs are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent.

[Remainder of Page Intentionally Left Blank]

    6

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●].

AVAYA HOLDINGS CORP.

By: /s/ Shefali Shah

Name: Shefali Shah

Title: Senior Vice President, Chief Administrative Officer

PARTICIPANT

[To be executed electronically.]

    7

Appendix I

PRSUs Performance Matrix

The “target” number of PRSUs eligible to vest and be earned under this Agreement in accordance with this Performance Matrix is [Target PRSUs] (the “Target PRSUs”). However, the Participant is eligible to earn between 0%-150% of the Target PRSUs based on the Company’s level of achievement of the performance factors described below. In no event shall the Participant be eligible to earn more than 150% of the Target PRSUs (the “Maximum PRSUs”).

This performance award consists of three, separately measured fiscal year performance periods, each from October 1 of each of 2018, 2019, and 2020 through September 30 of each of 2019, 2020, and 2021, respectively (each, a “Performance Year”, and collectively, the “Performance Period”).

The “Performance Factor” shall be Adjusted EBITDA, as separately measured for each applicable Performance Year.

“Adjusted EBITDA” shall mean EBITDA as reported in the Company’s Form 10-K for the applicable Performance Year, excluding the impact of: adjustments for fresh start accounting; restructuring costs; advisory fees; investment banking, legal fees, integration costs and accelerated compensation expense relating to actual or potential acquisitions or divestitures, non-cash share-based compensation, asset impairment charges, gain or loss on sale/disposal of long-lived assets, gain or loss on the sale of a business, gain or loss on extinguishment or modification of debt, gain or loss on equity investment, resolution of legal matters (including reserves, settlements, and certain legal costs), changes in fair value of derivatives and Emergence Date Warrants as defined within Form 10-K, securities registration fees, gain or loss on foreign currency transactions, and pension/OPEB/nonretirement post-employment retirement benefits and long-term disability costs. In addition, the Compensation Committee shall equitably adjust Adjusted EBITDA for any Performance Year to reflect the impact of other special or non-recurring events not known as of the grant date of the Award if it determines such adjustment is necessary in order to prevent the enlargement or dilution of any benefits with respect to the Award; except that, any adjustment for the results of operations of acquired businesses shall be excluded for the Performance Year in which such acquisition occurs.

For each Performance Year, up to 1/3^rd of the Maximum PRSUs shall become eligible to vest (subject to the other terms and conditions set forth herein) based on the Company’s actual level of achievement of the Performance Factor as compared to the threshold, target and maximum levels set forth on Appendix II, as illustrated in the table below:

    8

Performance Year	Level of Achievement	Percentage of PRSUs Eligible to be Earned (as a percentage of 1/3 of the Target PRSUs)
Fiscal 2019: October 1, 2018 -September 30, 2019	Below Threshold	0%
	Threshold	75%
	Target	100%
	Maximum	150%
Fiscal 2020: October 1, 2019-September 30, 2020	Below Threshold	0%
	Threshold	75%
	Target	100%
	Maximum	150%
Fiscal 2021: October 1, 2020-September 30, 2021	Below Threshold	0%
	Threshold	75%
	Target	100%
	Maximum	150%

If, upon conclusion of the applicable Performance Year, achievement of the Performance Factor exceeds a specified level for such Performance Factor, but is below the next specified level, the percentage of PRSUs earned and eligible to vest shall be linearly interpolated on a straight-line basis. No PRSUs shall be earned in respect of the Performance Factor for any Performance Year for which achievement of the Performance Factor falls below the “Threshold” level established for that Performance Year.

Determination of Eligible Units. As soon as reasonably practicable following the completion of the applicable Performance Year, the Committee will determine (i) whether and to what extent the Performance Factor has been achieved, and (ii) the number of PRSUs that are deemed earned in respect of such Performance Year, which PRSUs shall remain eligible to vest on February 15, 2022 (the “Vesting Date”), so long as the Participant has not incurred a Termination of Employment prior to such date (the “Eligible Units”). The number of Eligible Units (if any) will be further adjusted following the end of the Performance Period (but prior to the Vesting Date) based on the TSR Modifier described below. Following the end of the Performance Period, any PRSUs that do not constitute Eligible Units following the Committee’s determination thereof will be automatically forfeited by the Participant without consideration. Except as otherwise set forth herein, if the Participant incurs a Termination of Employment prior to the Vesting Date, all PRSUs granted under this Agreement shall be forfeited.

Modifier Based on TSR (the “TSR Modifier”). Notwithstanding the foregoing, following the end of the Performance Period, the Company will measure its total shareholder return (“TSR”) relative to the other entities in the TSR Index (as defined below), as measured from the grant date through the last day of the Performance Period, in order to determine whether a performance modifier

    9

equal to +/- 25% will be applied to the number of Eligible Units certified by the Compensation Committee as “earned” as a result of achievement of the Performance Factor for the Performance Period.

If, following the end of the Performance Period, the Company’s Percentile is above 75%, then an additional number of PRSUs granted under this Agreement shall constitute Eligible Units, with such additional number to be calculated by multiplying (i) the number of Eligible Units earned in respect of the Performance Factor during the Performance Period by (ii) 1.25; provided, that in no event shall more than the Maximum PRSUs vest under this Agreement and, provided, further that if the Company’s absolute TSR is negative for the Performance Period, that in no event shall more than the Target PRSUs vest under this Agreement.

If, following the end of the Performance Period, the Company’s Percentile is at or below 25%, then the number of Eligible Units earned in respect of the Performance Factor during the Performance Period and that are eligible to vest shall be reduced to a number of PRSUs to be calculated by multiplying (i) the number of Eligible Units earned in respect of the Performance Factor during the Performance Period by (ii) 0.75.

Determination of TSR: TSR for the Company and each other entity in the TSR Index shall be determined in accordance with the following formula. TSR shall be equal to (a) divided by (b), expressed as a percentage, where:

(a)     is equal to the sum of (i) and (ii), where (i) is the difference determined by the Ending Price minus the Starting Price (each as defined below); and (ii) is the sum of all dividends paid on common stock during the Performance Period, provided that all dividends are treated as reinvested in the Company’s common stock on the ex-dividend date; and

(b)    is equal to the Starting Price.

For purposes of determining TSR:

“Starting Price” means, with respect to the Company, the average closing price of one share of the Company’s common stock on the applicable stock exchange during the 30 days immediately preceding and including the grant date, and, for each other entity in the TSR Index, means such entity’s closing price on the grant date.

“Ending Price” means, with respect to the Company, the average closing price of one share of the Company’s common stock on the applicable stock exchange during the 30 days immediately preceding and including the last day of the Performance Period, and, for each other entity in the TSR Index, means such entity’s closing price on the last trading day included in the Performance Period.

The Company’s “Percentile” shall be equal to the absolute value of the difference obtained by 100% minus the quotient of (A) the Rank (as defined below), divided by (B) the total number of entities

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in the TSR Index (including the Company, but after removal of any entities in accordance with calculation of the Rank), expressed as a percentage.

The Company’s “Rank” shall be determined by the Company’s position within the ranking of each entity in the TSR Index (as defined below, which includes the Company) in descending order based on their respective TSRs (with the highest TSR having a Rank of one). For purposes of developing the ordering provided in the immediately-preceding sentence, (A) any entity that filed for bankruptcy protection under the United States Bankruptcy Code during the Performance Period shall be assigned the lowest order of any entity in the TSR Index, and (B) any entity that is acquired during the Performance Period, or otherwise no longer listed on a national securities exchange at the end of the Performance Period (other than the Company), shall be removed from the TSR Index and shall be excluded for purposes of ordering the entities in the TSR Index (and for purposes of calculating the Company’s Percentile).

In addition to the Company, the “TSR Index” shall be comprised of the Russell 2000 Index as in effect on the grant date, subject to adjustment at end of the Performance Period as set forth in the definition of Rank above.

Treatment upon a Change in Control; Qualifying Terminations. The provisions of Section 10.1 of the Plan shall govern the treatment of the PRSUs upon the occurrence of a Change in Control; provided, that if the Committee determines to treat the PRSUs in accordance with Section 10(1)(a) of the Plan (i.e., if the PRSUs are continued, assumed or substituted in connection with such Change in Control), the following provisions shall apply: in the event the Participant incurs a Termination of Employment prior to the Vesting Date as a result of the Participant’s Termination of Employment without Cause (other than death or Disability), or by the Participant for Good Reason (any such Termination of Employment, a “Qualifying Termination”), and such Qualifying Termination occurs (i) only to the extent the Participant is also a participant in the Avaya Inc. Change in Control Severance Plan, during a Potential Change in Control Period, as such term is defined in the Avaya Inc. Change in Control Severance Plan or (ii) within the twelve (12) month period immediately following a Change in Control, subject to the Participant’s execution, delivery and non-revocation of a customary release of claims in favor of the Company and its subsidiaries and affiliates within sixty (60) days of such Termination of Employment and continued compliance with Appendix I to this Agreement,

(1) any Eligible Units attributable to a Performance Year ending prior to the date of such Termination of Employment shall immediately vest and be settled, and

(2) any PRSUs eligible to be earned based upon achievement of the Performance Factor for (i) the Performance Year in which such Termination of Employment occurs and (ii) any Performance Year commencing following the date of such Termination of Employment, shall immediately vest and be settled at “target” level achievement. Any PRSUs that do not vest as a result of the foregoing sentence shall immediately be cancelled and forfeited for no consideration.

Upon a Change in Control, the Compensation Committee will apply the TSR Modifier to the number of Eligible Units attributable to any Performance Year that has elapsed as of the Change in Control

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date, with the last day of the Performance Period being deemed to be the effective date of the Change in Control for purposes of applying the TSR Modifier.

Settlement of Eligible Units. Any PRSUs that become vested on the Vesting Date will be settled within 10 business days following the Vesting Date, subject to Section 23 of the Agreement.

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Appendix II

Threshold, Target and Maximum Levels Applicable to the Performance Factor

(Adjusted EBITDA, in Millions)

Performance Year	Threshold	Target	Maximum
Fiscal 2019: October 1, 2018 -September 30, 2019
Fiscal 2020: October 1, 2019-September 30, 2020
Fiscal 2021: October 1, 2020-September 30, 2021

Levels shown above are subject to any applicable adjustments permitted under the Plan.

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Appendix III

NON-DISCLOSURE, IP ASSIGNMENT, NON-COMPETITION AND NON-SOLICITATION

By executing the Award Agreement, the Participant acknowledges the importance to Avaya Holdings Corp. and its Affiliates existing now or in the future (hereinafter referred to collectively as the “Company” or “Avaya”), of protecting its confidential information and other legitimate business interests, including, without limitation, the valuable trade secrets and good will that it develops or acquires. The Participant further acknowledges that the Company is engaged in a highly competitive business, that its success in the marketplace depends upon the preservation of its confidential information and industry reputation, and that obtaining agreements such as this one from its employees is reasonable and necessary. The Participant undertakes the obligations in this Appendix I in consideration of the Participant’s initial and/or ongoing relationship with the Company, this Award, the Participant’s being granted access to trade secrets and other confidential information of the Company, and for other good and valuable consideration, the receipt and sufficiency of which the Participant acknowledges. As used in this Appendix I, “relationship” refers to a Participant’s employment or association as an advisor, consultant or contractor, with the Company, as applicable.

1.    Loyalty and Conflicts of Interest

1.1.    Exclusive Duty. During the Participant’s relationship with the Company, the Participant will not engage in any other business activity that creates a conflict of interest except as permitted by the Company’s Code of Conduct, as in effect from time to time.

1.2.    Compliance with Company Policy. The Participant will comply with all lawful policies, practices and procedures of the Company, as these may be implemented and/or changed by the Company from time to time. Without limiting the generality of the foregoing, the Participant acknowledges that the Company may from time to time have agreements with other Persons which impose obligations or restrictions on the Company regarding Intellectual Property, as defined below, created during the course of work under such agreements and/or regarding the confidential nature of such work. The Participant will comply with and be bound by all such obligations and restrictions which the Company conveys to the Participant and will take all actions necessary (to the extent within Participant’s power and authority) to discharge the obligations of the Company under such agreements.

2.    Confidentiality

2.1.    Nondisclosure and Nonuse of Confidential Information. All Confidential Information, as defined below, which the Participant creates or has access to as a result of the Participant’s relationship with the Company, is and shall remain the sole and exclusive property of the Company. The Participant will never, directly or indirectly, use or disclose any Confidential Information, except (a) as required for the proper performance of the Participant’s regular duties for the Company, (b) as expressly authorized in writing in advance by the Company’s General Counsel, (c) as required by applicable law or regulation, or (d) as may be reasonably determined by the Participant to be necessary in connection with the enforcement of Participant’s rights in connection with this Appendix I. This restriction shall continue to apply after the termination of the Participant’s relationship with the Company or any restriction time period set forth in this Appendix I, howsoever caused. The Participant shall furnish prompt notice to the Company’s General Counsel of any required disclosure of Confidential Information sought pursuant to subpoena, court

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order or any other legal process or requirement, and shall provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure, to the greatest extent time and circumstances permit.

2.2.    Permissible Disclosure. Nothing in the Award Agreement or this Appendix I shall prohibit or restrict the Company, the Participant or their respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to the Award Agreement, including without limitation, this Appendix I, or the Plan, or as required by law or legal process, including with respect to possible violations of law; (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency or legislative body, any self-regulatory organization, and/or pursuant to the Sarbanes-Oxley Act; or (iii) accepting any U.S. Securities and Exchange Commission awards. In addition, nothing in this Agreement or the Plan prohibits or restricts Avaya or the Participant from initiating communications with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation.

2.3.    Trade Secrets. Pursuant to 18 U.S.C. § 1833(b), the Participant will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of Avaya that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to the Participant’s attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Participant files a lawsuit for retaliation by Avaya for reporting a suspected violation of law, the Participant may disclose the trade secret to the Participant’s attorney and use the trade secret information in the court proceeding, so long as the Participant files any document containing the trade secret under seal and does not disclose the trade secret except under court order. Nothing in this Agreement or the Plan is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section.

2.4.    Use and Return of Documents. All documents, records, and files, in any media of whatever kind and description, relating to the business, present or otherwise, of the Company, and any copies (including, without limitation, electronic), in whole or in part, thereof (the “Documents” and each individually, a “Document”), whether or not prepared by the Participant, shall be the sole and exclusive property of the Company. Except as required for the proper performance of the Participant’s regular duties for the Company or as expressly authorized in writing in advance by the Company, the Participant will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Participant will safeguard, and return to the Company immediately upon termination of the Participant’s relationship with the Company, and at such other times as may be specified by the Company, all Documents and other property of the Company, and all documents, records and files of its customers, subcontractors, vendors, and suppliers (“Third-Party Documents” and each individually a “Third-Party Document”), as well as all other property of such customers, subcontractors, vendors and suppliers, then in the Participant’s possession or control. Provided, however, if a Document or Third-Party Document is on electronic media, the Participant may, in lieu of surrender of the Document or Third-Party Document, provide a copy on electronic media to the Company and delete and overwrite all other electronic media copies thereof. Upon request of any duly authorized officer of the Company, the Participant will disclose all passwords necessary or desirable to enable the Company to obtain access to the Documents and Third-Party Documents. Notwithstanding any provision of this Section 2.4 to the contrary, the Participant shall be permitted to retain copies of all Documents evidencing Participant’s hire, equity, compensation rate and benefits, this Appendix I, and any other agreements between the Participant and the Company that the Participant has signed or electronically accepted.

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3.    Non-Competition, Non-Solicitation, and Other Restricted Activity

3.1.    Non-Competition. This paragraph is applicable to Participants who hold Senior Director and higher positions as of the date this Award is accepted. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, whether paid or not, (a) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for, (b) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of, or (c) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate him or herself with, any business whose business, product(s) or operations are in any respect competitive with or otherwise similar to the Company’s business. The foregoing covenant shall cover the Participant’s activities in every part of the Territory. “Territory” shall mean (a) all states of the United States of America from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company; and (b) all other countries from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company. The foregoing shall not prevent: (a) passive ownership by the Participant of no more than two percent (2%) of the equity securities of any publicly traded company; or (b) the Participant’s providing services to a division or subsidiary of a multi-division entity or holding company, so long as (i) no division or subsidiary to which the Participant provides services is in any way competitive with or similar to the business of the Company, and (ii) the Participant is not involved in, and does not otherwise engage in competition on behalf of, the multi-division entity or any competing division or subsidiary thereof.

3.2.    Good Will. Any and all good will which the Participant develops during his or her relationship with the Company with any of the customers, prospective customers, subcontractors or suppliers of the Company shall be the sole, exclusive and permanent property of the Company, and shall continue to be such after termination of the Participant’s relationship with the Company, howsoever caused.

3.3.    Non-Solicitation of Customers. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, contact, or cause to be contacted, directly or indirectly, or engage in any form of oral, verbal, written, recorded, transcribed, or electronic communication with any customer of the Company for the purposes of conducting business that is competitive with or similar to that of the Company or for the purpose of disadvantaging the Company’s business in any way; provided that this restriction applies (i) only with respect to those customers who are or have been a customer of the Company at any time within the immediately preceding one-year period or whose business has been solicited on behalf of the Company by any of its officers, employees or agents within said one-year period, other than by form letter, blanket mailing or published advertisement, and (ii) only if the Participant has performed work for such customer during his or her relationship with the Company, has been introduced to, or otherwise had contact with, such customer as a result of his or her relationship with the Company, or has had access to Confidential Information which would assist in the solicitation of such customer. The foregoing restrictions shall not apply to general solicitation or advertising, including through media and trade publications.

3.4.    Non-Solicitation/Non-Hiring of Employees and Independent Contractors. During his or her relationship with the Company and for a period of twelve (12) months immediately following the

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termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, and will not assist anyone else to, (a) hire or solicit for hiring any employee of the Company or seek to persuade or induce any employee of the Company to discontinue employment with the Company, or (b) hire or engage any independent contractor providing services to the Company, or solicit, encourage or induce any independent contractor providing services to the Company to terminate or diminish in any substantial respect its relationship with the Company. For the purposes of this Appendix I, an “employee” or “independent contractor” of the Company is any person who is or was such at any time within the preceding six-month period. The foregoing restrictions shall not apply to general solicitation or advertising, including through media, trade publications and general job postings.

3.5.    Non-Solicitation of Others. The Participant agrees that for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will not solicit, encourage, or induce, or cause to be solicited, encouraged or induced, directly or indirectly, any franchisee, joint venture, supplier, vendor or contractor who conducted business with the Company at any time during the two year period preceding the termination of his or her relationship with the Company, to terminate or adversely modify any business relationship with the Company, or not to proceed with, or enter into, any business relationship with the Company, nor shall the Participant otherwise interfere with any business relationship between the Company and any such franchisee, joint venture, supplier, vendor or contractor.

3.6.    Notice of New Address and Employment. During the twelve (12)month period immediately following the termination of Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will promptly provide the Company with pertinent information concerning each new job or other business activity in which the Participant engages or plans to engage during such twelve (12)-month period as the Company may reasonably request in order to determine the Participant’s continued compliance with his or her obligations under this Appendix I. The Participant shall notify any new employer(s) of the Participant’s obligations under this Appendix I, and hereby consents to notification by the Company to such employer(s) concerning his or her obligations under this Appendix I. The Company shall treat any such notice and information as confidential, and will not use or disclose the information contained therein except to enforce its rights hereunder. Any breach of this Section 3.6 shall constitute a material breach of this agreement.

3.7.    Acknowledgement of Reasonableness; Remedies. In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has carefully read and considered all the terms and conditions hereof. The Participant acknowledges without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the good will, Confidential Information and other legitimate business interests of the Company, that each and every one of those restraints is reasonable in respect to subject matter, length of time, and geographic area; and that these restraints will not prevent the Participant from obtaining other suitable employment during the period in which Participant is bound by them. The Participant will never assert, or permit to be asserted on the Participant’s behalf, in any forum, any position contrary to the foregoing. Were the Participant to breach any of the provisions of this Appendix I, the harm to the Company would be irreparable. Therefore, in the event of such a breach or threatened breach, the Company shall, in addition to any other remedies available to it, have the right to obtain preliminary and permanent injunctive relief against any such breach or threatened breach without having to post bond, and the Participant agrees that injunctive relief is an appropriate remedy to address any such breach. Without limiting the generality of the foregoing, or other forms of relief available to the Company, in the event of the Participant’s breach of any of the provisions of this Appendix I, the Participant will forfeit any award or payment made pursuant to any applicable severance

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or other incentive plan or program, or if a payment has already been made, the Participant will be obligated to return the proceeds to the Company.

3.8.    Unenforceability. In the event that any provision of this Appendix I shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. The 12-month period of restriction set forth in Sections 3.1, 3.3, 3.4 and 3.5 hereof and the 12-month period of obligation set forth in Section 3.6 hereof shall be tolled, and shall not run, during any period of time in which the Participant is in violation of the terms thereof, in order that the Company shall have the agreed-upon temporal protection recited herein.

3.9.    Limited Exception for Attorneys. Insofar as the restrictions set forth in this Section 3 prohibit the solicitation, inducement or attempt to hire a licensed attorney who is employed at the Company, they shall not apply if the Participant is a licensed attorney and the restrictions contained herein are illegal, unethical or unenforceable under the laws, rules and regulations of the jurisdiction in which the Participant is licensed as an attorney.

3.10.    Attorneys’ Fees and Costs. Except as prohibited by law, the Participant shall indemnify the Company from any and all costs and fees, including attorneys’ fees, incurred by the Company in successfully enforcing the terms of this Award Agreement against the Participant, (including, but not limited to, a court partially or fully granting any application, motion, or petition by the Company for a temporary restraining order, preliminary injunction, or permanent injunction), as a result of the Participant’s breach or threatened breach of any provision contained herein. Upon successful enforcement, the Company shall be entitled to recover from the Participant its costs and fees incurred to date at any time during the course of a dispute (i.e., final resolution of such dispute is not a prerequisite) upon written demand to the Participant.

3.11.    Enforcement. The Company agrees that it will not enforce Sections 3.1, 3.3, 3.5 or the portion of Section 3.4 that prohibits Participant from hiring Company employees and independent contractors to restrict Participant’s employment in any jurisdiction in which such enforcement is contrary to law or regulation to the extent that Participant is a resident of such jurisdiction at the time Participant’s relationship with the Company terminates and does not otherwise change residency during the restriction period.

4.    Intellectual Property

4.1.    In signing or electronically accepting the Award Agreement, the Participant hereby assigns and shall assign to the Company all of his or her rights, title and interest in and to all inventions, discoveries, improvements, ideas, mask works, computer or other apparatus programs and related documentation, and other works of authorship (hereinafter each designated “Intellectual Property”), whether or not patentable, copyrightable or subject to other forms of protection, made, created, developed, written or conceived by the Participant during the period of his or her relationship with the Company, whether during or outside of regular working hours, either solely or jointly with another, in whole or in part, either: (a) in the course of such relationship, (b) relating to the actual or anticipated business or research development of the Company, or (c) with the use of Company time, material, private or proprietary information, or facilities, except as provided in Section 4.5 below.

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4.2.    The Participant will, without charge to the Company, but at its expense, execute a specific assignment of title to the Company and do anything else reasonably necessary, including but not limited to providing or signing additional documentation that is reasonably necessary to the Company or its designee, to enable the Company to secure, maintain and/or perfect a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. Participant agrees that this obligation shall continue after Participant’s relationship with the Company terminates. If the Company is unable because of Participant’s mental or physical incapacity or for any other reason to secure Participant’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Intellectual Property assigned to the Company as above, then Participant hereby irrevocably designates and appoints the Company or its designee and its duly authorized officers and agents as Participant’s agent and attorney in fact, to act for and on Participant’s behalf and instead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Participant.

4.3.    The Participant acknowledges that the copyrights in Intellectual Property created with the scope of his or her relationship with the Company belong to the Company by operation of law. Participant further acknowledges and agrees that the decision whether or not to commercialize or market any Intellectual Property developed by Participant solely or jointly with others is within the Company’s sole benefit and discretion and that no payment will be due to Participant as a result of the Company’s efforts to commercialize or market such Intellectual Property.

4.4.    The Participant has previously provided to the Company a list (the “Prior Invention List”) describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by the Participant prior to his or her relationship with the Company, which belong to the Participant and which are not assigned to the Company hereunder (collectively referred to as “Prior Inventions”); and, if no Prior Invention List was previously provided, the Participant represents and warrants that there are no such Prior Inventions. Participant will not incorporate, or permit to be incorporated, any Prior Invention into an Avaya product, process, machine, solution or system without the Company’s prior written consent. Notwithstanding the foregoing sentence, if, in the course of Participant’s relationship with the Company, Participant incorporates into an Avaya product, process, machine, solution or system a Prior Invention owned by Participant or in which Participant has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use, sell, offer for sale and import, such Prior Invention as part of or in connection with such product, process, machine, solution or system.

4.5.    Exception to Assignments. THE PARTICIPANT UNDERSTANDS THAT THE PROVISIONS OF THIS AWARD AGREEMENT REQUIRING ASSIGNMENT OF INTELLECTUAL PROPERTY (AS DEFINED ABOVE) TO THE COMPANY DO NOT APPLY TO ANY INTELLECTUAL PROPERTY FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON PARTICIPANT’S OWN TIME, UNLESS (A) THE INVENTION RELATES (i) DIRECTLY TO THE BUSINESS OF THE COMPANY, OR (ii) TO THE COMPANY’S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT; (B) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY PARTICIPANT FOR THE COMPANY; OR (C) THE INTELLECTUAL PROPERTY OTHERWISE QUALIFIES FULLY UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 (ATTACHED HERETO AS EXHIBIT A). THE PARTICIPANT WILL ADVISE THE COMPANY PROMPTLY IN WRITING OF ANY INVENTIONS THAT PARTICIPANT BELIEVES MEET THE CRITERIA FOR

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THIS SECTION 4.5 EXCEPTION TO ASSIGNMENTS AND WHICH WERE NOT OTHERWISE DISCLOSED ON THE PRIOR INVENTION LIST PREVIOUSLY DELIVERED TO THE COMPANY TO PERMIT A DETERMINATION OF OWNERSHIP BY THE COMPANY. ANY SUCH DISCLOSURE WILL BE RECEIVED IN CONFIDENCE.

5.    Definitions

Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section 5 and as provided elsewhere in this Appendix I. For purposes of this Appendix I, the following definitions apply:

“Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by management authority, contract or equity interest.

“Confidential Information” means any and all information of the Company, whether or not in writing, that is not generally known by others with whom the Company competes or does business, or with whom it plans to compete or do business, and any and all information, which, if disclosed, would assist in competition against the Company, including but not limited to (a) all proprietary information of the Company, including but not limited to the products and services, technical data, methods, processes, know-how, developments, inventions, and formulae of the Company, (b) the development, research, testing, marketing and financial activities and strategic plans of the Company, (c) the manner in which the Company operates, (d) its costs and sources of supply, (e) the identity and special needs of the customers, prospective customers and subcontractors of the Company, and (f) the people and organizations with whom the Company has business relationships and the substance of those relationships. Without limiting the generality of the foregoing, Confidential Information shall specifically include: (i) any and all product testing methodologies, product test results, research and development plans and initiatives, marketing research, plans and analyses, strategic business plans and budgets, and technology grids; (ii) any and all vendor, supplier and purchase records, including without limitation the identity of contacts at any vendor, any list of vendors or suppliers, any lists of purchase transactions and/or prices paid; and (iii) any and all customer lists and customer and sales records, including without limitation the identity of contacts at purchasers, any list of purchasers, and any list of sales transactions and/or prices charged by the Company. Confidential Information also includes any information that the Company may receive or has received from customers, subcontractors, suppliers or others, with any understanding, express or implied, that the information would not be disclosed. Notwithstanding the foregoing, Confidential Information does not include information that (A) is known or becomes known to the public in general (other than as a result of a breach of Section 2 hereof by the Participant), (B) is or has been independently developed or conceived by the Participant without use of the Company’s Confidential Information or (C) is or has been made known or disclosed to the Participant by a third party without a breach of any obligation of confidentiality such third party may have to the Company of which the Participant is aware.

“Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company.

6.    Compliance with Other Agreements and Obligations

The Participant represents and warrants that his or her employment or other relationship with the Company and execution and performance of the Award Agreement, including this Appendix I, will not breach or be in conflict with any other agreement to which the Participant is a party or is bound, and that the

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Participant is not now subject to any covenants against competition or similar covenants or other obligations to third parties or to any court order, judgment or decree that would affect the performance of the Participant’s obligations hereunder or the Participant’s duties and responsibilities to the Company, except as disclosed in writing to the Company’s General Counsel no later than the time an executed copy of the Award Agreement, including this Appendix I, is returned by the Participant. The Participant will not disclose to or use on behalf of the Company, or induce the Company to use, any proprietary information of any previous employer or other third party without that party’s consent. Participant agrees that if in the course of his or her relationship with the Company, Participant is asked for information relating to Participant’s former employers’ business that would require Participant to reveal information that is not publicly available, Participant will refrain from using and providing such information.

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7.    Entire Agreement; Severability; Modification

With respect to the subject matter hereof, this Appendix I sets forth the entire agreement between the Participant and the Company, and, except as otherwise expressly set forth herein, supersedes all prior and contemporaneous communications, agreements and understandings, written or oral, regarding the same. If the Participant previously executed an Award Agreement with an Appendix I or other schedule containing similar provisions, this Appendix I shall supersede such agreement. In the event of conflict between this Appendix I and any prior agreement between the Participant and the Company with respect to the subject matter hereof, this Appendix I shall govern. The provisions of this Appendix I are severable, and no breach of any provision of this Appendix I by the Company, or any other claimed breach of contract or violation of law, shall operate to excuse the Participant’s obligation to fulfill the requirements of Sections 2, 3 and 4 hereof. No deletion, addition, marking, notation or other change to the body of this Appendix I shall be of any force or effect, and this Appendix I shall be interpreted as if such change had not been made. This Appendix I may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by the Participant and the Company’s General Counsel. If any provision of this Appendix I should, for any reason, be held invalid or unenforceable in any respect, it shall not affect any other provisions, and shall be construed by limiting it so as to be enforceable to the maximum extent permissible by law. Provisions of this Appendix I shall survive any termination if so provided in this Appendix I or if necessary or desirable to accomplish the purpose of other surviving provisions. It is agreed and understood that no changes to the nature or scope of the Participant’s relationship with the Company shall operate to extinguish the Participant’s obligations hereunder or require that a new agreement concerning the subject matter of this Appendix I be executed.

8.    Assignment

Neither the Company nor the Participant may make any assignment of this Appendix I or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, the Company may assign its rights and obligations under this Appendix I without the Participant’s consent (a) in the event that the Participant is transferred to a position with one of the Company’s Affiliates or (b) in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into any company or entity or transfer to any company or entity all or substantially all of the business, properties or assets of the Company or any division or line of business of the Company with which the Participant is at any time associated. This Appendix I shall inure to the benefit of and be binding upon the Participant and the Company, and each of their respective successors, executors, administrators, heirs, representatives and permitted assigns.

9.    Successors

The Participant consents to be bound by the provisions of this Appendix I for the benefit of the Company, and any successor or permitted assign to whose employ the Participant may be transferred, without the necessity that a new agreement concerning the subject matter or this Appendix I be re-signed at the time of such transfer.

10.    Acknowledgement of Understanding

In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has read and understood all of its terms; that the Participant has had a full and reasonable opportunity to consider its terms and to consult with any person of his or her choosing before signing or electronically accepting; that the Participant has not relied on any agreements or representations, express or implied, that are not set forth expressly in the Award Agreement, including this Appendix I; and that the Participant has signed the Award Agreement knowingly and voluntarily.

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EXHIBIT A

CALIFORNIA LABOR CODE SECTION 2870

INVENTION ON OWN TIME-EXEMPTION FROM AGREEMENT

“(a)    Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1)    Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2)    Result from any work performed by the employee for the employer.

(b)    To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.”

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EX-10.2

Exhibit 10.2

PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
PURSUANT TO THE
AVAYA HOLDINGS CORP. 2017 EQUITY INCENTIVE PLAN

(Chief Executive Officer)

*    *    *

Participant:        [Participant Name]    

Grant Date:        February 11, 2019        

Grant Number:     [Client Grant ID]    

Number of Performance Restricted Stock Units (“PRSUs”) Granted:    274,223    

*    *    *

ThisPERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and

WHEREAS, the Committee has determined under the Plan that it would be in the best interests of the Company to grant the Participant a Performance Award in the form of the PRSUs provided herein, each of which represents the right to receive one share of Common Stock upon vesting of such PRSU, subject to the terms and conditions contained in this Agreement and in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1.Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement

    1

shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. The terms set forth herein are intended to be the sole treatment of the PRSUs in connection with any termination of the Participant’s employment and supersede any provisions set forth in the Participant’s Employment Agreement dated as of November 13, 2017 (the “Employment Agreement”).

2.Grant of PRSUs. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of PRSUs specified above, subject to adjustment as provided for in the Plan, on the terms and conditions set forth in this Agreement and the Plan. The PRSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company. The Participant’s interest in the book-entry account shall be that of a general, unsecured creditor of the Company.

3.Vesting.

(a)General. Subject to the Plan and the other terms of this Agreement, the PRSUs subject to this Agreement shall become eligible to vest if, prior to February 11, 2022 (the “Vesting Date”), the average closing price of one share of the Company’s Common Stock on the applicable exchange for sixty (60) consecutive days equals or exceeds $23.50 (the “Stock Price Threshold”) and the Participant has not incurred a Termination of Employment prior to the Vesting Date. The PRSUs shall be cancelled for no value if the Stock Price Threshold has not been met on or prior to the Vesting Date, or, subject to the provisions set forth in Section 3, if the Participant incurs a Termination of Employment prior to the Vesting Date.

(b)Treatment on Change in Control. If upon a Change in Control prior to the Vesting Date, (1) the value of the consideration received by the Company’s stockholders (as determined on a per share basis) equals or exceeds the Stock Price Threshold or (2) the Stock Price Threshold has previously been achieved in accordance with Section 3(a), then the provisions of Section 10.1 of the Plan shall govern the treatment of the PRSUs upon the occurrence of a Change in Control; provided, that if the Committee determines to treat the PRSUs in accordance with Section 10(1)(a) of the Plan (i.e., if the PRSUs are continued, assumed or substituted in connection with such Change in Control), then the PRSUs subject to this Agreement shall convert to time-vesting awards upon the Change in Control and will remain eligible to vest on the originally-scheduled Vesting Date so long as the Participant has not incurred a Termination of Employment prior to the Vesting Date (the “Converted Awards”). If upon a Change in Control prior to the Vesting Date, (1) the value of the consideration received by the Company’s stockholders (as determined on a per share basis) is less than the Stock Price Threshold and (2) the Stock Price Threshold has not previously been achieved in accordance with Section 3(a), the PRSUs subject to this Agreement shall be cancelled for no value as of the Change in Control.

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(c)Termination of Employment (No Change in Control). If the Participant incurs a Termination of Employment prior to the Vesting Date as a result of the Participant’s Termination of Employment by the Company without Cause (other than death or disability), or by the Participant for Good Reason (any such Termination of Employment, a “Qualifying Termination”) and, as of the date of such termination, the Stock Price Threshold has been met, then the Participant will immediately vest in a number of PRSUs equal to (i) the number of PRSUs subject to this Agreement, multiplied by (ii) a fraction, the numerator of which is the number of days the Participant was employed by the Company during the Performance Period (as defined below) and the denominator of which is the total number of days in the Performance Period. Any PRSUs subject to this Agreement that do not vest as a result of the immediately preceding sentence, including all PRSUs subject to this Agreement if the Stock Price Threshold has not been met as of the date of such termination, will be automatically cancelled and forfeited.

(d)Termination of Employment (Change in Control). In the event the Participant incurs a Qualifying Termination within the twenty-four (24) month period immediately following a Change in Control, the Participant will immediately vest in the Converted Awards (if any).

(e)Notwithstanding anything in this Agreement to the contrary, the vesting of any PRSUs in connection with a Qualifying Termination shall be subject to the Participant’s execution, delivery and non-revocation of a customary release of claims in favor of the Company and its subsidiaries and affiliates within sixty (60) days of such Termination of Employment and the Participant’s continued compliance with the restrictive covenants set forth in Section 8 of the Employment Agreement.

For purposes of this Agreement, “Performance Period” means the period beginning on February 11, 2019 and ending on February 11, 2022.

4.Delivery of Shares. Except as otherwise expressly provided for in Section 23, promptly following the vesting of the PRSUs (but in no event more than sixty (60) days thereafter) (or, in the event of a Qualifying Termination pursuant to Section 3(c) or (d) above, on the sixtieth (60th) day following the date on which the Participant’s Termination of Employment occurs, provided the conditions set forth in Section 3(e), as applicable, have been met), the Participant shall receive the number of shares of Common Stock (or any consideration paid in respect of such Common Stock in connection with a Change in Control) that correspond to the number of PRSUs that have become vested on the applicable vesting date, less any shares of Common Stock withheld by the Company pursuant to Section 13.4 of the Plan, and such vested PRSUs shall be cancelled upon receipt of the shares of Common Stock (or any consideration paid in respect of such Common Stock in connection with a Change in Control).

5.Non-Transferability. No portion of the PRSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the PRSUs as provided herein.

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6.Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.9 of the Plan.

7.Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, if any, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 7.

8.Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that:

(a)The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 8.

(b)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and the Company is under no obligation to register such shares of Common Stock (or to file a “re-offer prospectus”).

(c)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 shall not be available unless (A) a public trading market then exists for the Common Stock, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.

9.Entire Agreement; Amendment. Except as expressly set forth herein, this Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

    4

10.Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to PRSUs awarded under the Plan or future PRSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

11.No Right to Employment or Service. Any questions as to whether and when there has been a Termination of Employment and the cause of such Termination of Employment shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s employment or service at any time, for any reason and with or without Cause, and shall not guarantee any right to future employment.

12.Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the PRSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan), to the extent permitted under applicable law. This authorization and consent is freely given by the Participant.

13.Compliance with Laws. Notwithstanding anything in this Agreement to the contrary, the grant of PRSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the PRSUs or any shares of Common Stock or other property pursuant to this Agreement if any such issuance would violate any such requirements or laws. As a condition to the settlement of the PRSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.

14.Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns.

15.Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

    5

16.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

17.Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

18.Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

19.Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of PRSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the PRSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation and shall not be considered as part of such compensation in the event of severance, redundancy or resignation.

20.Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60^th) day following the Grant Date (the “Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award shall be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion.

21.No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself.

22.No Rights as a Stockholder. The Participant’s interest in the PRSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until such shares have been issued to the Participant in accordance with this Agreement and the Plan.

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23.Withholding. Notwithstanding the withholding provision in the Plan or anything else in this Agreement:

(a)If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon vesting of the PRSUs (regardless of when the Common Stock underlying the PRSUs are delivered to the Participant), on each date that all or a portion of the PRSUs actually vests, if (1) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell Common Stock or (2) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation.

(b)If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon delivery of the Common Stock underlying the PRSUs (regardless of when vesting occurs), then following each date that all or a portion of the PRSUs actually vests, the Company will defer the delivery of the Common Stock otherwise deliverable to the Participant until the earliest of: (1) the date of the Participant’s Termination of Employment, (2) the date that the short-term deferral period under Section 409A of the Code expires with respect to such vested RSUs, or (3) the date on which the Company has in place an effective registration statement under the Securities Act or there is a Securities Act exemption available under which the Participant may sell Common Stock and on which the Participant is not subject to a Company-imposed trading blackout (the earliest of such dates, the “Delivery Date”). If on the Delivery Date (x) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell shares of Common Stock or (y) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation.

24.Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the PRSUs are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●].

AVAYA HOLDINGS CORP.

By: /s/ Shefali Shah

Name: Shefali Shah

Title: Senior Vice President, Chief Administrative Officer and General Counsel

PARTICIPANT

[To be executed electronically.]

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EX-10.3

Exhibit 10.3

RESTRICTED STOCK UNIT NON-EMPLOYEE DIRECTOR AWARD AGREEMENT

PURSUANT TO THE

AVAYA HOLDINGS CORP.

2017 EQUITY INCENTIVE PLAN

* * * * *

Participant:    [Participant Name]        

Grant Date:    [Grant Date ]            

Grant Number:[Client Grant ID]

Number of Restricted Stock Units (“RSUs”) Granted:    [RSUs Granted]    

* * * * *

This RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and

WHEREAS, the Committee has determined under the Plan that it would be in the best interests of the Company to grant the Participant an Other Stock-Based Award in the form of the RSUs provided herein, each of which represents the right to receive one share of Common Stock on the Settlement Date (as defined below), subject to the terms and conditions contained herein and in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1.Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time, unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

2.Grant of RSUs. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of RSUs specified above, subject to adjustment as provided for in the Plan, on the terms and conditions set forth in this Agreement and otherwise provided for in the Plan. Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the RSUs, except as otherwise specifically provided for in the Plan or this Agreement. The RSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company. The Participant’s interest in the book-entry account shall be that of a general, unsecured creditor of the Company.

3.Vesting. The RSUs subject to this Award shall vest immediately upon grant.

4.Delivery of Shares. Within sixty (60) days following the first to occur among (a) the Participant’s Termination of Directorship (provided that such termination also constitutes a “separation from service” for purposes of Section 409A of the Code), (b) the consummation of a Change in Control (provided that such Change in Control also constitutes a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code), and (c) the third anniversary of the grant date (as applicable, the “Settlement Date”), the Participant shall receive the number of shares of Common Stock that corresponds to the number of RSUs that are vested RSUs as of the Settlement Date (“Vested RSUs”), and such Vested RSUs shall be cancelled upon receipt of the shares of Common Stock.

5.Non-Transferability. No portion of the RSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the RSUs as provided herein.

6.Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.9 of the Plan.

7.Tax Liability; Section 409A of the Code.

(a)The Participant agrees and acknowledges that the Company has no withholding obligation with respect to the Participant, and accordingly, the Participant is solely responsible and liable for any and all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting of the RSUs or the subsequent sale of any shares and (ii) does not commit to structure the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items.

(b)The intent of the parties is that the RSUs granted hereunder comply with Section 409A of the Code, and accordingly, to the maximum extent permitted, this Agreement shall

2

be interpreted to be in compliance therewith. However, in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Participant by Section 409A of the Code or damages for failing to comply with Section 409A of the Code.

(c)As noted above, a termination of service shall not be deemed to have occurred for purposes of this Agreement unless such termination is also a “separation from service” within the meaning of Section 409A of the Code, and for purposes of any such provision of this Agreement, references to a “termination,” “termination of service” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if the Participant is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then the delivery of shares of Common Stock in respect of the Vested RSUs pursuant to Section 4 shall not occur until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of the Participant’s death, to the extent required under Section 409A of the Code. Upon the expiration of the foregoing delay period, the Company shall deliver all shares of Common Stock delayed pursuant to this Section 7(c) at the same time.

(d)Whenever this Agreement specifies a settlement period with reference to a number of days, the actual settlement date within the specified period shall be within the sole discretion of the Company.

(e)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any settlement in shares of Common Stock under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Section 409A of the Code be subject to offset by any other amount unless otherwise permitted by Section 409A of the Code.

8.Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, if any, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 8.

9.Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that:

(a)The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 9.

(b)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and

3

the Company is under no obligation to register such shares of Common Stock (or to file a “re-offer prospectus”).

(c)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 shall not be available unless (A) a public trading market then exists for the Common Stock, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.

10.Entire Agreement; Amendment. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

11.Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to RSUs awarded under the Plan or future RSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this RSU Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

12.No Right to Service. Any questions as to whether and when there has been a Termination of Directorship and the cause of such Termination of Directorship shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s service at any time, for any reason and with or without Cause.

13.Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the RSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan). This authorization and consent is freely given by the Participant.

14.Compliance with Laws. The grant of RSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without

4

limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the RSUs or any shares of Common Stock pursuant to this Agreement if any such issuance would violate any such requirements. As a condition to the settlement of the RSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.

15.Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns.

16.Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

17.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

18.Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

19.Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

20.Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of RSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the RSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation, and shall not be considered as part of such compensation in the event of termination or resignation.

21.Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60^th) day following the Grant Date (the “Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award will be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion.

5

22.No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself.

23.No Rights as a Stockholder. The Participant’s interest in the RSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until such shares have been delivered to the Participant in accordance with Section 4.

[Remainder of Page Intentionally Left Blank]

6

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●].

AVAYA HOLDINGS CORP.

By:

Name:

Title:

PARTICIPANT

[To be executed electronically.]

7

EX-10.4

Exhibit 10.4

AVAYA INC.

CHANGE IN CONTROL SEVERANCE PLAN

First Amendment

The Compensation Committee of the Board of Directors of Avaya Holdings Corp. (the “Committee”), having reserved the right under Section 8 of the Avaya Inc. Change in Control Severance Plan (as amended from time to time, the “CIC Plan”) to amend the CIC Plan, does hereby amend the CIC Plan, effective as of February 11, 2019 (the “Amendment Effective Date”), as follows:

1.Section 2.1(iv) of the CIC Plan is hereby amended and restated in its entirety as follows:

“With respect to any outstanding equity awards granted prior to the Amendment Effective Date, full vesting of any such equity awards, with any performance-based awards vesting based upon deemed achievement of the performance metrics at the target level. With respect to any outstanding equity awards granted on or following the Amendment Effective Date, vesting of any such equity awards as set forth in the applicable award agreement.”

2.Except as amended hereby, the CIC Plan shall remain in full force and effect in accordance with its terms.

Avaya Holdings Corp.

By: /s/ James M. Chirico Jr.

Name: James M. Chirico, Jr.

Title: President & Chief Executive Officer

1

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, James M. Chirico, Jr., certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Avaya Holdings Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2019

/s/    JAMES M. CHIRICO, JR.

James M. Chirico, Jr.

Director, President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Patrick J. O'Malley, III, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Avaya Holdings Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2019

/s/    PATRICK J. O'MALLEY, III

Patrick J. O'Malley, III

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Avaya Holdings Corp. (the “Company”) on Form 10-Q for the period ending December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James M. Chirico, Jr., Director, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    JAMES M. CHIRICO, JR.

James M. Chirico, Jr.

Director, President and Chief Executive Officer

(Principal Executive Officer)

Date: February 14, 2019

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Avaya Holdings Corp. (the “Company”) on Form 10-Q for the period ending December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick J. O'Malley, III, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    PATRICK J. O'MALLEY, III

Patrick J. O'Malley, III

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: February 14, 2019

XML

Document and Entity Information - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2018	Jan. 31, 2019	Mar. 29, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	AVAYA HOLDINGS CORP.
Entity Central Index Key	0001418100
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		110,695,523
Entity Public Float			$ 2,459
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false

XML

Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
REVENUE
Revenue	$ 148		$ 738
COSTS
Total Cost of Goods and Services			331
TOTAL COST OF REVENUE	70		331
GROSS PROFIT	78		407
OPERATING EXPENSES
Selling, general and administrative	50		257
Research and development	9		53
Amortization of intangible assets	7		40
Restructuring charges, net	10		7
TOTAL OPERATING EXPENSES	76		357
OPERATING INCOME	2		50
Interest expense	(9)		(60)
Other income (expense), net	(2)		22
Reorganization items, net	0		0
INCOME (LOSS) BEFORE INCOME TAXES	(9)		12
(Provision for) benefit from income taxes	246		(3)
NET INCOME (LOSS)	$ 237		$ 9
NET INCOME PER SHARE
Net income (loss) per common share - basic (in usd per share)	$ 2.16		$ 0.08
Net income (loss) per common share - diluted (in usd per share)	$ 2.15		$ 0.08
Weighted average shares outstanding
Weighted average number of shares - basic (in shares)	109.8		110.3
Weighted average number of shares - diluted (in shares)	110.3		111.2
Products
REVENUE
Revenue	$ 71		$ 324
COSTS
Total Cost of Goods and Services	33		115
Amortization of technology intangible assets	7		43
Services
REVENUE
Revenue	77		414
COSTS
Total Cost of Goods and Services	$ 30		$ 173
Predecessor
REVENUE
Revenue		$ 604
COSTS
TOTAL COST OF REVENUE		242
GROSS PROFIT		362
OPERATING EXPENSES
Selling, general and administrative		264
Research and development		38
Amortization of intangible assets		10
Restructuring charges, net		14
TOTAL OPERATING EXPENSES		326
OPERATING INCOME		36
Interest expense		(14)
Other income (expense), net		(2)
Reorganization items, net		3,416
INCOME (LOSS) BEFORE INCOME TAXES		3,436
(Provision for) benefit from income taxes		(459)
NET INCOME (LOSS)		$ 2,977
NET INCOME PER SHARE
Net income (loss) per common share - basic (in usd per share)		$ 5.19
Net income (loss) per common share - diluted (in usd per share)		$ 5.19
Weighted average shares outstanding
Weighted average number of shares - basic (in shares)		497.3
Weighted average number of shares - diluted (in shares)		497.3
Predecessor | Products
REVENUE
Revenue		$ 253
COSTS
Total Cost of Goods and Services		84
Amortization of technology intangible assets		3
Predecessor | Services
REVENUE
Revenue		351
COSTS
Total Cost of Goods and Services		$ 155

XML

Consolidated Statements of Comprehensive Income (Loss) Statement - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Net income (loss)	$ 237		$ 9
Pension, post-retirement and postemployment benefit-related items, net of income taxes $(58) for the period from October 1, 2017 through December 15, 2017	0		0
Cumulative translation adjustment	(13)		1
Change in interest rate swaps, net of income taxes of $7 for the three months ended December 31, 2018	0		(21)
Other comprehensive (loss) income	(13)		(20)
Elimination of Predecessor Company accumulated other comprehensive loss	0		0
Total comprehensive (loss) income	$ 224		$ (11)
Predecessor
Net income (loss)		$ 2,977
Pension, post-retirement and postemployment benefit-related items, net of income taxes $(58) for the period from October 1, 2017 through December 15, 2017		655
Cumulative translation adjustment		3
Change in interest rate swaps, net of income taxes of $7 for the three months ended December 31, 2018		0
Other comprehensive (loss) income		658
Elimination of Predecessor Company accumulated other comprehensive loss		790
Total comprehensive (loss) income		$ 4,425

XML

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Pension, post-retirement and postemployment benefit-related items, tax	$ 0		$ 0
Change in interest rate swaps, tax	$ 0		$ 7
Predecessor
Pension, post-retirement and postemployment benefit-related items, tax		$ (58)
Change in interest rate swaps, tax		$ 0

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018
Current assets:
Cash and cash equivalents	$ 743	$ 700
Accounts receivable, net	327	377
Inventory	68	81
Contract assets	120	0
Contract costs	118	0
Other current assets	106	170
TOTAL CURRENT ASSETS	1,482	1,328
Property, plant and equipment, net	239	250
Deferred income taxes, net	28	29
Intangible assets, net	3,149	3,234
Goodwill	2,764	2,764
Other assets	97	74
TOTAL ASSETS	7,759	7,679
Current liabilities:
Debt maturing within one year	29	29
Accounts payable	295	266
Payroll and benefit obligations	121	145
Contract liabilities	482	484
Business restructuring reserve, current portion	50	51
Other current liabilities	152	148
TOTAL CURRENT LIABILITIES	1,129	1,123
Non-current liabilities:
Long-term debt	3,095	3,097
Pension obligations	652	671
Other post-retirement obligations	177	176
Deferred income taxes, net	161	140
Business restructuring reserve, non-current portion	43	47
Other liabilities	370	374
TOTAL NON-CURRENT LIABILITIES	4,498	4,505
TOTAL LIABILITIES	5,627	5,628
Preferred stock	0	0
STOCKHOLDER'S DEFICIENCY
Common stock	1	1
Additional paid-in capital	1,745	1,745
Accumulated deficit	388	287
Accumulated other comprehensive loss	(2)	18
TOTAL STOCKHOLDER'S DEFICIENCY	2,132	2,051
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY	$ 7,759	$ 7,679

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Sep. 30, 2018
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized	550,000,000	550,000,000
Common stock, shares issued	110,708,203	110,218,653
Common stock, shares outstanding	110,695,523	110,012,790
Preferred stock, par value (in usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	55,000,000	55,000,000
Convertible Series B Preferred Stock
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0

XML

Consolidated Statements of Changes in Stockholders' Equity (Deficit) - USD ($) shares in Millions, $ in Millions	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Series A Preferred Stock	Series A Preferred Stock Additional Paid-in Capital	Series B Preferred Stock	Series B Preferred Stock Additional Paid-in Capital
Beginning Balance (in shares) (Predecessor) at Sep. 30, 2017		494.8
Beginning Balance (Predecessor) at Sep. 30, 2017	$ (5,013)	$ 0	$ 2,389	$ (5,954)	$ (1,448)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Amortization of share-based compensation | Predecessor	3		3
Accrued dividends on Series A preferred stock | Predecessor						$ (2)	$ (2)	$ (4)	$ (4)
Reclassifications to equity awards on redeemable shares | Predecessor	1		1
Net income (loss) | Predecessor	2,977			2,977
Other comprehensive income (loss) | Predecessor	658				658
Cancellation of Predecessor equity (in shares) | Predecessor		(494.8)
Cancellation of Predecessor equity | Predecessor	1,380		(2,387)	2,977	790
Ending Balance (Predecessor) at Dec. 15, 2017	1,668	$ 1	1,667	0	0
Ending Balance at Dec. 15, 2017	1,668	$ 1	1,667	0	0
Ending Balance (in shares) (Predecessor) at Dec. 15, 2017		110.0
Ending Balance (in shares) at Dec. 15, 2017		110.0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance as of December 15, 2017 (Predecessor) (in shares) | Predecessor		494.8
Balance as of December 15, 2017 (Predecessor) | Predecessor	(1,380)		2,387	(2,977)	(790)
Common stock issued for Predecessor debt (in shares) | Predecessor		103.9
Common stock issued for Predecessor debt | Predecessor	1,576	$ 1	1,575
Common stock issued for Pension Benefit Guaranty Corporation (in shares) | Predecessor		6.1
Common stock issued for Pension Benefit Guaranty Corporation | Predecessor	92		92
Net income (loss)	237
Other comprehensive income (loss)	(13)
Ending Balance at Dec. 31, 2017	1,893	$ 1	1,668	237	(13)
Ending Balance (in shares) at Dec. 31, 2017		110.0
Beginning Balance (in shares) (Predecessor) at Dec. 15, 2017		110.0
Beginning Balance (in shares) at Dec. 15, 2017		110.0
Beginning Balance (Predecessor) at Dec. 15, 2017	1,668	$ 1	1,667	0	0
Beginning Balance at Dec. 15, 2017	1,668	$ 1	1,667	0	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan (in shares)		0.0
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan	0
Amortization of share-based compensation	1		1
Net income (loss)	237			237
Other comprehensive income (loss)	(13)				(13)
Ending Balance at Sep. 30, 2018	2,051	$ 1	1,745	287	18
Ending Balance (in shares) at Sep. 30, 2018		110.2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan (in shares)		0.8
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan	0
Stock Repurchased During Period, Shares		(0.3)
Amortization of share-based compensation	6		6
Net income (loss)	9
Other comprehensive income (loss)	(20)				(20)
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(6)		(6)
Ending Balance at Dec. 31, 2018	$ 2,132	$ 1	$ 1,745	$ 388	$ (2)
Ending Balance (in shares) at Dec. 31, 2018		110.7

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
OPERATING ACTIVITIES:
Net income (loss)	$ 237		$ 9
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization	22		117
Share-based compensation	1		6
Amortization of debt issuance costs	0		4
Accretion of debt discount	0		1
Deferred income taxes, net	(245)		(2)
Change in fair value of emergence date warrants	5		(18)
Unrealized loss (gain) on foreign currency transactions	(4)		14
Other non-cash charges, net	1		0
Reorganization items:
Net gain on settlement of Liabilities subject to compromise	0		0
Payment to Pension Benefit Guaranty Corporation	0		0
Payment to pension trust	0		0
Payment of unsecured claims	0		0
Fresh start adjustments, net	0		0
Non-cash and financing related reorganization items, net	0		0
Changes in operating assets and liabilities:
Accounts receivable	(21)		49
Inventory	2		(11)
Contract assets	0		(43)
Increase (decrease) in cost incurred to fulfill a contract, current	0		(7)
Accounts payable	27		26
Payroll and benefit obligations	(22)		(37)
Business restructuring reserve	(3)		(4)
Contract liabilities	44		21
Other assets and liabilities	(4)		(39)
NET CASH PROVIDED BY OPERATING ACTIVITIES	40		86
INVESTING ACTIVITIES:
Capital expenditures	(2)		(21)
Other investing activities, net	0		(1)
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES	(2)		(22)
FINANCING ACTIVITIES:
Repayment of debtor-in-possession financing	0		0
Repayment of first lien debt	0		0
Repayment of long-term debt	0		(7)
Debt issuance costs	0		0
Payments related to sale-leaseback transactions	0		(4)
Other financing activities, net	0		(7)
NET CASH USED FOR FINANCING ACTIVITIES	0		(18)
Effect of exchange rate changes on cash and cash equivalents	3		(3)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	41		43
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	476	$ 435	747
Term Loan Credit Agreement due December 15, 2024
FINANCING ACTIVITIES:
Proceeds from Term Loan Credit Agreement	$ 0		$ 0
Predecessor
OPERATING ACTIVITIES:
Net income (loss)		2,977
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization		31
Share-based compensation		0
Amortization of debt issuance costs		0
Accretion of debt discount		0
Deferred income taxes, net		455
Change in fair value of emergence date warrants		0
Unrealized loss (gain) on foreign currency transactions		0
Other non-cash charges, net		0
Reorganization items:
Net gain on settlement of Liabilities subject to compromise		(1,778)
Payment to Pension Benefit Guaranty Corporation		(340)
Payment to pension trust		(49)
Payment of unsecured claims		(58)
Fresh start adjustments, net		(1,697)
Non-cash and financing related reorganization items, net		26
Changes in operating assets and liabilities:
Accounts receivable		40
Inventory		0
Contract assets		0
Increase (decrease) in cost incurred to fulfill a contract, current		0
Accounts payable		(40)
Payroll and benefit obligations		16
Business restructuring reserve		(7)
Contract liabilities		28
Other assets and liabilities		(18)
NET CASH PROVIDED BY OPERATING ACTIVITIES		(414)
INVESTING ACTIVITIES:
Capital expenditures		(13)
Other investing activities, net		0
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES		(13)
FINANCING ACTIVITIES:
Repayment of debtor-in-possession financing		(725)
Repayment of first lien debt		(2,061)
Repayment of long-term debt		(111)
Debt issuance costs		(97)
Payments related to sale-leaseback transactions		(4)
Other financing activities, net		0
NET CASH USED FOR FINANCING ACTIVITIES		(102)
Effect of exchange rate changes on cash and cash equivalents		(2)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(531)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents		435
Predecessor | Term Loan Credit Agreement due December 15, 2024
FINANCING ACTIVITIES:
Proceeds from Term Loan Credit Agreement		$ 2,896

XML

Background and Basis of Presentation

3 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background and Basis of Presentation

Background and Basis of Presentation

Background

Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the “Company” or “Avaya”), is a global leader in digital communications products, solutions and services for businesses of all sizes. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. The Company's global team of professionals delivers services from initial planning and design, to implementation and integration, to ongoing managed operations, optimization, training and support. Currently, the Company manages its business operations in two segments, Products & Solutions and Services. The Company sells directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, system integrators and business partners that provide sales and services support.

Basis of Presentation

Avaya Holdings has no material assets or standalone operations other than its ownership of Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements as of December 31, 2018 and for the three months ended December 31, 2018, the period from December 16, 2017 through December 31, 2017, and the period from October 1, 2017 through December 15, 2017, reflect the operating results of Avaya Holdings and its consolidated subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial statements, and should be read in conjunction with the Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2018, included in the Company's Form 10-K filed with the SEC on December 21, 2018. In management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to state fairly the results of operations, financial position and cash flows for the periods indicated. The condensed consolidated results of operations for the interim periods reported are not necessarily indicative of the results for the entire fiscal year.

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. These estimates include assessing the collectability of accounts receivable, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, business restructuring reserves, pension and post-retirement benefit costs, the fair value of equity compensation, the fair value of assets and liabilities in connection with fresh start accounting as well as those acquired in business combinations, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, the amount of exposure from potential loss contingencies, and fair value measurements, among others. The markets for the Company's products are characterized by intense competition, rapid technological development and frequent new product introductions, all of which could affect the future recoverability of the Company's assets. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates.

During the three months ended December 31, 2018, the Company recorded an out-of-period adjustment to correct sales and marketing expense. The impact resulted in a $5 million increase to Selling, general and administrative expense and a decrease to net income of $3 million for the three months ended December 31, 2018. Management concluded that the correction was not material to previously issued consolidated financial statements and to the three months ended December 31, 2018.

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared on a basis that assumes that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

On January 19, 2017 (the “Petition Date”), Avaya Holdings, together with certain of its affiliates, namely Avaya CALA Inc., Avaya EMEA Ltd., Avaya Federal Solutions, Inc., Avaya Holdings LLC, Avaya Holdings Two, LLC, Avaya Inc., Avaya Integrated Cabinet Solutions Inc. (n/k/a Avaya Integrated Cabinet Solutions LLC), Avaya Management Services Inc., Avaya Services Inc., Avaya World Services Inc., Octel Communications LLC, Sierra Asia Pacific Inc., Sierra Communication International LLC, Technology Corporation of America, Inc., Ubiquity Software Corporation, VPNet Technologies, Inc. and Zang, Inc. (n/k/a Avaya Cloud Inc.) (the “Debtors”), filed voluntary petitions for relief (the “Bankruptcy Filing”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court"). The cases were jointly administered as Case No. 17-10089 (SMB). The Bankruptcy Court confirmed the Company's Second Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and its Debtor Affiliates filed on October 24, 2017 (the "Plan of Reorganization") on November 28, 2017. Confirmation of the plan resulted in the discharge of certain claims against the Company that arose before the Petition Date and terminated all rights and interests of equity security holders as provided for in the Plan of Reorganization. The Debtors operated their businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 of the Bankruptcy Code and the orders of the Bankruptcy Court until the Plan of Reorganization was substantially consummated and they emerged from bankruptcy on December 15, 2017 (the "Emergence Date").

On the Emergence Date, the Company applied fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the Condensed Consolidated Financial Statements after the Emergence Date, are not comparable with the Condensed Consolidated Financial Statements on or before that date.

References to "Successor" or "Successor Company" relate to the financial position and results of operations of the reorganized Avaya Holdings after the Emergence Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Avaya Holdings on or before the Emergence Date.

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Recent Accounting Pronouncements

3 Months Ended

Dec. 31, 2018

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company adopted this standard as of October 1, 2018 on a prospective basis. The adoption of this standard did not have an impact on the Company's Condensed Consolidated Financial Statements, however, the future impact of the standard will depend on the nature of any future acquisitions or dispositions made by the Company.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This standard requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard as of October 1, 2018 applying the retrospective transition method to each period presented. The adoption resulted in an increase of Net cash used for investing activities of $10 million and $21 million for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), respectively.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This standard addresses the appropriate classification of certain cash flows as operating, investing, or financing. The Company adopted this standard as of October 1, 2018 applying the retrospective transition method to each accounting period presented. The adoption of the standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)" ("ASC 606"). This standard superseded most of the previous revenue recognition guidance under GAAP and is intended to improve and converge with international standards the financial reporting requirements for revenue recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The Company adopted ASC 606 as of October 1, 2018 using the modified retrospective transition method applied to all open contracts with customers that were not completed as of September 30, 2018.

Upon adoption of ASC 606, sales that include professional services, are generally recognized as the services are performed as opposed to upon completion and acceptance of the project. When such arrangements include products, products revenue is generally recognized when the products are delivered as opposed to upon completion and acceptance of the project. Additionally, for cloud and managed services arrangements pursuant to which the customer purchases and owns the solution and Avaya provides the software as a service ("SaaS"), control of the software generally transfers to the customer and the related revenue is recognized, at the point-in-time the SaaS commences. Revenue recognition related to stand-alone product shipments, maintenance services, and certain cloud offerings remains substantially unchanged. In addition to the impacts on revenue recognition, the standard requires incremental contract acquisition costs (primarily sales commissions) to be capitalized and amortized on a systematic basis that is consistent with the transfer of goods or services to which the asset relates. These costs were formerly expensed as incurred. The impact of adopting ASC 606 is dependent upon contract-specific terms and the Company has chosen to use the allowed practical expedient whereby, incremental contract acquisition costs with an amortization period of one year or less are expensed as incurred.

On October 1, 2018, the beginning of fiscal 2019, the Company recorded a net increase to the opening Retained earnings balance of $92 million, net of tax, due to the cumulative impact of adopting ASC 606. The increase to Retained earnings included $93 million for the portion of the transaction price that would have been recognized as revenue under prior guidance (ASC "605"). These amounts will not be recognized as revenue in future periods and are primarily attributable to open contracts that contained professional services, both on a stand-alone basis and when sold together with hardware and software, for which revenue recognition was deferred until project completion under ASC 605.

The impact of the adoption of ASC 606 on the September 30, 2018 Condensed Consolidated Balance Sheet is as follows:

	September 30, 2018					October 1, 2018
(In millions)	As Reported		Adjustments			Upon Adoption of ASC 606
ASSETS
Accounts receivable, net	$	377	$	(1	)	$	376
Inventory	81		(24		)	57
Contract assets	—		77			77
Contract costs	—		109			109
Other current assets	170		(66		)	104
Property, plant and equipment, net	250		(1		)	249
Deferred income taxes, net	29		(2		)	27
Other assets	74		16			90
LIABILITIES
Contract liabilities	484		(16		)	468
Other current liabilities	148		4			152
Deferred income taxes, net	140		28			168
STOCKHOLDERS' EQUITY
Retained earnings	287		92			379

For additional information refer to Note 3, "Revenue Recognition," for disclosures related to the adoption of ASC 606 and an updated accounting policy related to revenue recognition and contract costs.

Recent Standards Not Yet Effective

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for the Company in fiscal year 2021, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. This update removes disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This standard is effective for the Company beginning in fiscal year 2021, with early adoption permitted. The amendments in the standard need to be applied on a retrospective basis. The Company is currently assessing the impact of the standard on its disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This standard modifies the disclosure requirements on fair value measurements by removing certain disclosures, modifying certain disclosures and adding additional disclosures. This standard is effective for the Company beginning in the first quarter of fiscal year 2021. Certain disclosures in the standard need to be applied on a retrospective basis and others on a prospective basis. The Company is currently assessing the impact of the standard on its disclosures.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standard allows companies to reclassify from accumulated other comprehensive income to retained earnings any stranded tax benefits resulting from the enactment of the Tax Cuts and Jobs Act. This standard is effective for the Company beginning in the first quarter of fiscal 2020. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard, along with other guidance subsequently issued by the FASB, requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This standard is effective for the Company in the first quarter of fiscal 2021 on a prospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The standard requires the recognition of assets and liabilities for all leases with lease terms of more than 12 months. Subsequently, the FASB issued other standards that clarified certain aspects of the standard, which is effective for the Company in the first quarter of fiscal 2020 with early adoption permitted. The Company is currently evaluating the method of adoption and the effect that the adoption of the standard may have on its Condensed Consolidated Financial Statements.

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Revenue Recognition

3 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

On October 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method. Accordingly, the impact of adoption is recorded as an adjustment to retained earnings as of October 1, 2018 and represents the difference between ASC 606 and ASC 605 applied to all open contracts with customers that were not completed as of September 30, 2018. Under the modified retrospective method, results for reporting periods beginning after September 30, 2018 are presented under ASC 606 while prior period financial information is not adjusted and continues to be reported in accordance with ASC 605. The Company elected to use the contract modification practical expedient whereby, all contract modifications for each contract before October 1, 2018 are aggregated and evaluated at the adoption date.

Impact of ASC 606 on Financial Statement Line Items

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Balance Sheet as of December 31, 2018 is as follows:

	December 31, 2018
(In millions)	As Reported		Adjustments			Without Adoption of ASC 606
ASSETS
Accounts receivable, net	$	327	$	2		$	329
Inventory	68		28			96
Contract assets	120		(120		)	—
Contract costs	118		(118		)	—
Other current assets	106		83			189
Property, plant and equipment, net	239		1			240
Deferred income taxes, net	28		2			30
Other assets	97		(15		)	82
LIABILITIES
Contract liabilities	482		23			505
Other current liabilities	152		(12		)	140
Deferred income taxes, net	161		(28		)	133
STOCKHOLDERS' EQUITY
Retained earnings	388		(120		)	268

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Statement of Operations for the three months ended December 31, 2018 is as follows:

	Three Months Ended December 31, 2018
(In millions)	As Reported			Adjustments			Results under ASC 605
REVENUE
Products	$	324		$	(30	)	$	294
Services	414			(20		)	394
	738			(50		)	688
COSTS
Products:
Costs	115			(6		)	109
Amortization of technology intangible assets	43			—			43
Services	173			(6		)	167
	331			(12		)	319
GROSS PROFIT	407			(38		)	369
OPERATING EXPENSES
Selling, general and administrative	257			8			265
Research and development	53			—			53
Amortization of intangible assets	40			—			40
Restructuring charges, net	7			—			7
	357			8			365
OPERATING INCOME	50			(46		)	4
Interest expense	(60		)	—			(60		)
Other income, net	22			—			22
INCOME (LOSS) BEFORE INCOME TAXES	12			(46		)	(34		)
(Provision for) benefit from income taxes	(3		)	18			15
NET INCOME (LOSS)	$	9		$	(28	)	$	(19	)

The adoption of ASC 606 did not impact net cash provided by or used for operating, investing, or financing activities within the Condensed Consolidated Statement of Cash Flows for the three months ended December 31, 2018.

Revenue Recognition Policy

The Company derives revenue primarily from the sale of products and services for communications systems and applications. The Company sells directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, systems integrators and business partners that provide sales and services support.

In accordance with ASC 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance and it is at least probable that the Company will collect the consideration to which it is entitled. Revenue is recognized upon the transfer of control of the promised products and services to customers. Judgment is required in instances where the Company’s contracts include multiple products and services to determine whether each should be accounted for as a separate performance obligation. The Company enters into contracts that include various combinations of products and services, each of which is generally capable of being distinct as well as distinct within the context of the contracts.

Customer contracts are typically made pursuant to purchase orders and statements of work based on master purchase or partner agreements. Invoicing typically occurs upon customer acceptance or monthly for a series of services. Payment is due based on the Company’s standard payment terms which is typically within 30 to 60 days of invoice issuance. The Company does not typically provide financing arrangements to customers. For certain services and customer types, customers will remit payment before the services are provided. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company determined that contracts do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, not to receive financing from or to provide financing to customers. Certain contracts include performance obligations accounted for as a series which also include variable consideration (primarily usage-based fees). For these arrangements, variable consideration is not estimated and allocated to the entire performance obligation, rather the variable fees are recognized in the period in which the usage occurs in accordance with the "right to invoice" practical expedient.

The total transaction price for each contract is determined based on the total consideration specified in the contract, including variable consideration such as sales incentives and other discounts. The expected value method is generally used when estimating variable consideration, which typically reduces the total transaction price due to the nature of the elements to which the variable consideration relates. These estimates reflect the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying patterns. The Company excludes from the transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales.The expected value method requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation. Depending on the facts and circumstances, a change in variable consideration estimate will either be accounted for at the contract level or using the portfolio method, in accordance with the prescribed practical expedient. Reserves for contractual stock rotation rights to channel partners to support the management of inventory and certain other sales incentives are determined using the portfolio method. The Company also considers the customers’ rights of return in determining the transaction price where applicable.

The Company allocates the transaction price to each performance obligation based on its relative standalone selling price and recognizes revenue as each performance obligation is satisfied. Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company uses a range of selling prices to estimate standalone selling price when each of the products and services is sold separately. The Company typically has more than one standalone selling price for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, the Company may use information such as the size of the customer and geographic region in determining the standalone selling price. In instances where standalone selling price is not directly observable, such as when we do not sell the product or service separately, the Company determines the standalone selling price using information that may include market conditions and other observable inputs.

Amounts billed to customers for shipping and handling activities are considered contract fulfillment activities and not a separate performance obligation of the contract. Shipping and handling fees are recorded as revenue and the related cost is a cost to fulfill the contract.

Contract modifications are accounted for as separate contracts if the additional products and services are distinct and priced at standalone selling prices. If the additional products and services are distinct, but not priced at standalone selling prices, the modification is treated as a termination of the existing contract and the creation of a new contract. Lastly, if the additional products and services are not distinct within the context of the contract, the modification is combined with the original contract and either an increase or decrease in revenue is recognized on the modification date.

Software

The Company’s software licenses provide users with access to capabilities such as voice, video, conferencing, messaging and collaboration. Software licenses also add functionality to the Company’s hardware. The Company’s software licenses for on-premise customer software provide the customer with a right to use the software as it exists when it is made available to the customer and are accounted for as distinct performance obligations. The Company’s software licenses are sold through both direct and indirect channels with terms that are either perpetual or time based, both of which provide the end-user with the same functionality. The main difference between perpetual and term licenses is the duration over which the customer benefits from the software. Revenue from on-premise customer software licenses is generally recognized at the point-in-time the software is made available to the customer, via direct sale to the end-user or indirect sale to a channel partner, based on the fixed minimum revenue commitment under the arrangement. However, revenue cannot be recognized before the beginning of the period during which the customer can use and benefit from the license. In instances where the Company’s software licenses include a usage-based fee, revenue associated with the incremental usage is recognized at the point-in-time the incremental usage occurs.

Hardware

The Company’s hardware, phones, gateways, and servers, each of which has a stand-alone functionality, are generally considered distinct performance obligations. Hardware is sold through both direct and indirect channels and revenue is recognized at the point-in-time at which control of the product is transferred to the customer, via direct sale to the end-user or indirect sale to a channel partner, generally upon delivery, as defined in the contract.

Global Support Services

The Company’s global support services provide supplemental maintenance options to end-users in support of the Company’s products and solutions, including when and if available upgrade rights and maintenance for hardware. These services are typically accounted for as distinct performance obligations. Given that global support services consist of a series of distinct promises that are satisfied over time in the form of a single performance obligation comprised of a stand-ready obligation, these services are generally recognized ratably over the period during which the services are performed as customers simultaneously consume and receive benefits. Maintenance contracts typically have terms that range from one to five years.

Professional Services

The Company’s professional services include the design, implementation and development of communication solutions. Professional services are sold through the Company’s direct and indirect channels either on a stand-alone basis or with other hardware, software and services and are generally accounted for as distinct performance obligations. Revenue for professional services is generally recognized over time based on the cost of effort incurred to date relative to the total cost of effort expected to be incurred as customers simultaneously consume and receive benefits. Effort incurred generally represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contracts for professional services typically have terms that range from four to six weeks for simple engagements and from six months to one year for more complex engagements.

Cloud and Managed Services

The Company’s managed services provide additional support options to end-users on top of the Company’s supplemental maintenance services, including hardware support, help-desk routing and system monitoring services. The Company’s managed services are sold either on a stand-alone basis or together with the Company’s hardware, software and other services, and are generally accounted for as distinct performance obligations. The Company’s managed services are provided through both direct and indirect channels. Managed services consist of a series of distinct promises that are satisfied over time in the form of a single performance obligation comprised of a stand-ready obligation. Contracts for managed services typically have terms that range from one to five years.

The Company’s cloud offerings enable customers to take advantage of our technology via the cloud, on-premises, or a hybrid of both. The software that enables the core communications functionality is offered both as a sale of perpetual or time based licenses or through a SaaS. Cloud offerings can include supplemental maintenance and managed services and are sold through the Company’s direct and indirect channels.

Cloud and managed services offerings consist of a series of distinct promises that are satisfied over time as a single performance obligation and are generally recognized ratably over the period during which the services are performed as customers simultaneously consume and receive the benefits. The amount allocated to each performance obligation is based on the fixed contractual amount, which is recognized ratably over the period during which the services are performed as customers simultaneously consume and receive benefits. Variable consideration from incremental usage above the fixed fee is recognized at the point-in-time at which the usage occurs.

Warranties

The Company offers standard limited warranties that provide the customer with assurance that its products will function in accordance with contract specifications. The Company’s standard limited warranties are not sold separately but are included with each customer purchase. Warranties are not considered separate performance obligations, and therefore, warranty expense is accrued at the time the related revenue is recognized.

Disaggregation of Revenue

The following tables provide disaggregated revenue for the Company:

(In millions)	Three months ended December 31, 2018
REVENUE
Products & Solutions	$	326
Services	422
Unallocated Amounts	(10		)
	$	738

	Three months ended December 31, 2018
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	150	$	251	$	(7	)	$	394
International:
Europe, Middle East and Africa	106		94		(1		)	199
Asia Pacific	38		41		(1		)	78
Americas International - Canada and Latin America	32		36		(1		)	67
Total International	176		171		(3		)	344
Total revenue	$	326	$	422	$	(10	)	$	738

Unallocated amounts represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to remaining performance obligations that are wholly or partially unsatisfied as of December 31, 2018 is $2.7 billion, of which 53% and 29% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of intellectual property, and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Contract Balances

The Company records a contract asset when revenue is recognized in advance of the right to bill, pursuant to customer contract terms. The contract asset decreases when the Company has the right to bill the customer which is generally triggered by the satisfaction of additional performance obligations or contract milestones. The Company records a contract liability when payment is received from the customer in advance of the Company satisfying a performance obligation and the contract liability is reduced as performance obligations are satisfied and revenue is recognized. The Company records the net contract asset or liability position for each customer contract.

The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:

(In millions)	December 31, 2018		October 1, 2018		Increase (Decrease)
Accounts receivable, net	$	327	$	376	$	(49	)
Contract assets:
Current	$	120	$	77	$	43
Non-current (Other assets)	3		3		—
	$	123	$	80	$	43
Cost of obtaining a contract:
Current (Contract costs)	$	80	$	64	$	16
Non-current (Other assets)	47		36		11
	$	127	$	100	$	27
Cost to fulfill a contract:
Current (Contract costs)	$	38	$	45	$	(7	)
Contract liabilities:
Current	$	482	$	468	$	14
Non-current (Other liabilities)	61		54		7
	$	543	$	522	$	21

The change in contract assets and contract liabilities primarily results from the timing difference between the Company’s satisfaction of a performance obligation and the timing of the payment from the customer. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. The Company recognizes a contract asset when it transfers products and services to a customer in advance of scheduled billings. Contract assets decrease when the Company invoices the customer or the right to receive consideration is unconditional. The Company did not record any asset impairment charges related to contract assets during the three months ended December 31, 2018. Contract liabilities are recorded when the Company receives payment from the customer in advance of the Company’s completion of performance obligation(s). During the three months ended December 31, 2018, the Company recognized revenue of $242 million that had been recorded as a Contract liability at October 1, 2018.

Contract Costs

The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract, such as sales commissions and products and services, respectively. These costs are recognized as an asset if the Company expects to recover them and are amortized consistent with the transfer to the customer of the underlying performance obligations. Costs to obtain a contract are amortized using the portfolio approach over the average term of the customer contracts, which corresponds to the period of benefit. Costs incurred to obtain a contract with an amortization period of one year or less are expensed as incurred, in accordance with the prescribed practical expedient. For the three months ended December 31, 2018, the Company recognized $22 million for amortization of costs to obtain customer contracts, of which $20 million was included in Selling, general and administrative expense and the remaining $2 million was included in Costs.

Contract fulfillment costs are recognized consistent with the transfer to the customer of the underlying performance obligations based on the specific contracts to which they relate. For the three months ended December 31, 2018, the Company recognized $14 million of contract fulfillment costs within Costs.

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Business Combinations

3 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Business Combinations

Business Combinations

Spoken Communications

On March 9, 2018 (the “Acquisition Date”), the Company acquired Intellisist, Inc. (“Spoken”), a United States-based private technology company, which provides cloud-based Contact Center as a Service ("CCaaS") solutions and customer experience management and automation applications. The total purchase price was $172 million, consisting of $157 million in cash, $14 million in contingent consideration and a $1 million settlement of Spoken’s net payable to the Company which mainly related to services provided by the Company to Spoken under a co-development partnership prior to the acquisition.

Upon the achievement of three specified performance targets ("Earn-outs"), the Company may be required to pay up to $16 million of contingent consideration to Spoken's former owners and employees and up to $4 million in discretionary earn-out bonuses ("Earn-out Bonuses") to Spoken employees who have contributed to the achievement of the Earn-outs. The fair value of the Earn-outs at the Acquisition Date was $14 million, which was calculated using a probability-weighted discounted cash flow model and is remeasured to fair value at each subsequent reporting period. The Earn-out Bonuses, which are intended to incentivize remaining employees to assist in achieving the Earn-outs, are excluded from the acquisition consideration and are recognized as compensation expense in the Company's Condensed Consolidated Financial Statements ratably over the estimated Earn-out periods. As of December 31, 2018, the fair value of the Earn-out liability, including interest accretion and changes in the probability of achieving the Earn-outs, was $16 million. As of December 31, 2018, two of the three Earn-out targets were achieved, with completion of the third Earn-out target expected during the remainder of fiscal 2019. As of December 31, 2018, the Earn-out liability and accrued Earn-out Bonuses related to the targets that were achieved were $11 million and $2 million, respectively. These amounts are expected to be paid by the Company during the remainder of fiscal 2019.

In connection with this acquisition, the Company recorded goodwill of $116 million, which has been assigned to the Products & Solutions segment, identifiable intangible assets with a fair value of $64 million, and other net liabilities of $8 million. The goodwill recognized is attributable primarily to the potential that the Spoken technology, cloud platform and assembled workforce will accelerate the Company's growth in cloud-based solutions. The Company has determined that the goodwill is not deductible for tax purposes.

The acquired intangible assets of $64 million included technology and patents of $56 million with a weighted average useful life of 4.9 years, $5 million of in-process research and development ("IPR&D") activities, which are considered indefinite lived until projects are completed or abandoned, and customer relationships of $3 million with a weighted average useful life of 7.5 years. During the three months ended December 31, 2018, certain IPR&D activities have been completed and are being amortized over a weighted average useful life of 5.0 years.

Spoken became a wholly-owned subsidiary of the Company on March 9, 2018. The Company's Condensed Consolidated Financial Statements reflect the financial results of the operations of Spoken beginning on March 9, 2018. Spoken’s revenue and operating loss included in the Company’s results for the three months ended December 31, 2018, was $3 million and $8 million, respectively.

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Supplementary Financial Information

3 Months Ended

Dec. 31, 2018

Supplementary Financial Information [Abstract]

Supplementary Financial Information

Supplementary Financial Information

Condensed Consolidated Statements of Operations Information

The following table presents a summary of Other income (expense), net for the periods indicated:

	Successor						Predecessor
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
OTHER INCOME (EXPENSE), NET
Interest income	$	3		$	—		$	2
Foreign currency (losses) gains, net	(1		)	2			—
Income from transition services agreement, net	—			—			3
Other pension and post-retirement benefit credits (costs), net	2			1			(8		)
Change in fair value of emergence date warrants	18			(5		)	—
Other, net	—			—			1
Total other income (expense), net	$	22		$	(2	)	$	(2	)

A summary of Reorganization items, net for the periods indicated is presented in the following table:

	Successor				Predecessor
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017
REORGANIZATION ITEMS, NET
Net gain on settlement of Liabilities subject to compromise	$	—	$	—	$	1,778
Net gain on fresh start adjustments	—		—		1,697
Bankruptcy-related professional fees	—		—		(56		)
Other items, net	—		—		(3		)
Reorganization items, net	$	—	$	—	$	3,416
Cash payments for reorganization items	$	—	$	1	$	2,524

Costs directly attributable to the implementation of the Plan of Reorganization were reported as Reorganization items, net. The cash payments for reorganization items for the period from October 1, 2017 through December 15, 2017 (Predecessor) included $2,468 million of claims paid related to Liabilities subject to compromise and $56 million for bankruptcy-related professional fees, including emergence and success fees paid on the Emergence Date.

Supplemental Cash Flow Information

	Successor				Predecessor
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017
OTHER PAYMENTS
Interest payments	$	48	$	—	$	15
Income tax payments	$	7	$	2	$	7
NON-CASH INVESTING ACTIVITIES
Increase in Accounts payable for Capital expenditures	$	4	$	1	$	—

The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:

	Successor						Predecessor
(In millions)	December 31, 2018		September 30, 2018		December 31, 2017		December 15, 2017		September 30, 2017
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	743	$	700	$	417	$	366	876
Restricted cash included in other current assets	—		—		55		65		85
Restricted cash included in other assets	4		4		4		4		5
Total cash, cash equivalents, and restricted cash	$	747	$	704	$	476	$	435	966

As of December 31, 2017 (Successor) and December 15, 2017 (Predecessor), restricted cash in other current assets consisted primarily of funds held for bankruptcy-related professional fees and funds held related to the sale of the Company's Networking business in July 2017. As of September 30, 2017 (Predecessor), restricted cash in other current assets consisted primarily of cash that was drawn from term loans under the Debtor-in-Possession credit agreement to cash collateralize existing letters of credit.

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Business Restructuring Reserves and Programs

3 Months Ended

Dec. 31, 2018

Restructuring Reserve [Abstract]

Business Restructuring Reserves and Programs

Business Restructuring Reserves and Programs

For the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recognized restructuring charges of $7 million, $10 million, and $14 million, respectively. The restructuring charges include changes in estimates for increases and decreases in costs or changes in the timing of payments related to the restructuring programs of prior fiscal years. The Company's restructuring charges generally include separation charges which include, but are not limited to, termination payments, pension fund payments, and health care and unemployment insurance costs to be paid to, or on behalf of, the affected employees; and lease obligation charges. As the Company continues to evaluate opportunities to streamline its operations, it may identify cost savings globally and take additional restructuring actions in the future and the costs of those actions could be material. The Company does not allocate restructuring reserves to its operating segments.

Fiscal 2019 Restructuring Program

Recognized restructuring charges for the fiscal 2019 restructuring program included employee separation costs associated with employee severance actions primarily in the U.S. and Canada for which the related payments are expected to be completed by fiscal 2020.

The following table summarizes the components of the fiscal 2019 restructuring program for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations		Total
Restructuring charges	$	7		$	—	$	7
Cash payments	(1		)	—		(1		)
Balance as of December 31, 2018	$	6		$	—	$	6

Fiscal 2018 Restructuring Program

Fiscal 2018 restructuring obligations include employee separation costs associated with employee severance actions primarily in Europe, Middle East and Africa ("EMEA"), the U.S. and Asia-Pacific ("APAC"), for which the related payments are expected to be completed by the beginning of fiscal 2025.

The following table summarizes the components of the fiscal 2018 restructuring program for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations		Total
Balance as of September 30, 2018	$	54		$	—	$	54
Cash payments	(5		)	—		(5		)
Impact of foreign currency fluctuations	(1		)	—		(1		)
Balance as of December 31, 2018	$	48		$	—	$	48

Fiscal 2008 through 2017 Restructuring Programs

These obligations are primarily for costs associated with eliminating employee positions and exiting facilities. The payments related to the headcount reductions identified in those programs are expected to be substantially completed by fiscal 2023. Future rental payments, net of estimated sublease income, related to operating lease obligations for unused space in connection with the closing or consolidation of facilities are expected to continue through fiscal 2021.

The following table aggregates the remaining components of the fiscal 2008 through 2017 restructuring programs for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations			Total
Balance as of September 30, 2018	$	38		$	6		$	44
Cash payments	(4		)	(1		)	(5		)
Balance as of December 31, 2018	$	34		$	5		$	39

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Financing Arrangements

3 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Financing Arrangements

Financing Arrangements

The following table reflects principal amounts of debt and debt net of discounts and issuance costs for the periods presented:

	December 31, 2018					September 30, 2018
(In millions)	Principal amount		Net of discounts and issuance costs			Principal amount		Net of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024	$	2,896	$	2,864		$	2,903	$	2,870
Convertible 2.25% senior notes due June 15, 2023	350		260			350		256
Total debt	$	3,246	3,124			$	3,253	3,126
Debt maturing within one year			(29		)			(29		)
Long-term debt, net of current portion			$	3,095				$	3,097

Term Loan and ABL Credit Agreements

On December 15, 2017, Avaya Inc. entered into (i) the Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent, which provided a $2,925 million term loan facility maturing on December 15, 2024 (the "Term Loan Credit Agreement") and (ii) the ABL Credit Agreement maturing on December 15, 2022, among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, which provided a revolving credit facility consisting of a U.S. tranche and a foreign tranche allowing for borrowings of up to an aggregate principal amount of $300 million from time to time, subject to borrowing base availability (the "ABL Credit Agreement" and, together with the Term Loan Credit Agreement, the “Credit Agreements”). On June 18, 2018, the Company amended the Term Loan Credit Agreement to reduce interest rates and to reduce the London Inter-bank Offered Rate ("LIBOR") floor that existed under the original agreement from 1.00% to 0.00%.

For the three months ended December 31, 2018 and the period from December 16, 2017 through December 31, 2017, the Company recognized interest expense of $50 million and $9 million, respectively, related to the Term Loan Credit Agreement, including the amortization of discounts and issuance costs.

Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At December 31, 2018, the Company had issued and outstanding letters of credit and guarantees of $46 million. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $46 million of outstanding letters of credit and guarantees, was $155 million at December 31, 2018 (Successor). As of December 31, 2018, the Company had no borrowings outstanding under the ABL.

Convertible Notes

On June 11, 2018, the Company issued its 2.25% Convertible Notes in an aggregate principal amount of $350 million (including the underwriters’ exercise in full of an over-allotment option of $50 million), which mature on June 15, 2023 (the “Convertible Notes”). The Convertible Notes were issued under an indenture, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee (the “Indenture”). For the three months ended December 31, 2018, the Company recognized interest expense of $6 million related to the Convertible Notes, which includes $4 million of amortization of the underwriting discount and issuance costs.

The net carrying amount of the Convertible Notes for the periods indicated was as follows:

(In millions)	December 31, 2018			September 30, 2018
Principal	$	350		$	350
Less:
Unamortized debt discount	(84		)	(87		)
Unamortized issuance costs	(6		)	(7		)
Net carrying amount	$	260		$	256

The weighted average contractual interest rate of the Company’s outstanding debt as of December 31, 2018 and September 30, 2018 was 6.5% and 6.4%, respectively. The effective interest rate for the Term Loan Credit Agreement as of December 31, 2018 was not materially different than its contractual interest rate including adjustments related to hedging. The effective interest rate for the Convertible Notes as of December 31, 2018 was 9.2% reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and amortization of discounts and issuance costs.

For the period from October 1, 2017 through December 15, 2017 (Predecessor), contractual interest expense of $94 million was not recorded as interest expense, as it was not an allowed claim under the Bankruptcy Filing.

As of December 31, 2018, the Company was not in default under any of its debt agreements.

Capital Lease Obligations

Included in Other liabilities is $27 million and $31 million of capital lease obligations, net of imputed interest as of December 31, 2018 and September 30, 2018, respectively.

The Company outsources certain delivery services associated with the Avaya private cloud business, which include the sale of specified assets owned by the Company, which are being leased-back by the Company and accounted for as a capital lease. As of December 31, 2018 and September 30, 2018, capital lease obligations associated with this agreement were $22 million and $26 million, respectively.

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Derivative Instruments and Hedging Activities

3 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, "Derivatives and Hedging," ("ASC 815") and does not enter into derivatives for trading or speculative purposes.

Interest Rate Contracts

The Company, from time-to-time, enters into interest rate swap contracts as a hedge against changes in interest rates on its variable rate loans outstanding.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of December 31, 2018, the total notional amount of the six Swap Agreements was $1,800 million.

The Swap Agreements are designated as cash flow hedges as they are deemed highly effective as defined under ASC 815. As a result, the unrealized gains or losses on these contracts are initially recorded as Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive loss at December 31, 2018, approximately $8 million would be reclassified into net income in the next twelve months as interest expense.

It is management's intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.

Emergence Date Warrants

In accordance with the Plan of Reorganization, the Company issued warrants to purchase 5,645,200 shares of Successor Company common stock to the holders of the Predecessor second lien obligations pursuant to a warrant agreement ("Emergence Date Warrants"). Each Emergence Date Warrant has an exercise price of $25.55 per share and expires December 15, 2022. The Emergence Date Warrants contain certain derivative features that require them to be classified as a liability and for changes in fair value of the liability to be recognized in earnings each reporting period. On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of December 31, 2018.

The fair value of the Emergence Date Warrants was determined using a probability weighted Black-Scholes option pricing model. This model requires certain input assumptions including risk-free interest rates, volatility, expected life and dividend rates. Selection of these inputs involves significant judgment. The fair value of the Emergence Date Warrants as of December 31, 2018 and September 30, 2018 was determined using the input assumptions summarized below:

	December 31, 2018		September 30, 2018
Expected volatility	54.86	%	50.14	%
Risk-free interest rates	2.47	%	2.90	%
Expected remaining life (in years)	3.96		4.21
Price per share of common stock	$14.56		$22.14

In determining the fair value of the Emergence Date Warrants, the dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:

		December 31, 2018				September 30, 2018
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Designated as Hedging Instruments:
Interest rate contracts	Other assets	$	—	$	—	$	3	$	—
Interest rate contracts	Other current liabilities	—		7		—		7
Interest rate contracts	Other liabilities	—		24		—		—
		—		31		3		7
Derivatives Not Designated as Hedging Instruments:
Emergence Date Warrants	Other liabilities	—		16		—		34
Total derivative fair value		$	—	$	47	$	3	$	41

The following table provides information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:

	Three months ended December 31, 2018
(In millions)	Interest Expense			Other Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(60	)	$	(20	)
Impact of cash flow hedging relationships:
Loss recognized in AOCI - on interest rate swaps	—			(31		)
Interest expense from AOCI reclassified	(3		)	3

The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations:

		Successor					Predecessor
		Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
(In millions)	Location of Derivative Pre-tax Gain (Loss)
Emergence Date Warrants	Other income (expense), net	$	18	$	(5	)	$	—

The Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheets. The Company has master netting agreements with several of its financial institution counterparties. The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:

	December 31, 2018				September 30, 2018
(In millions)	Asset		Liability		Asset			Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheet	$	—	$	47	$	3		$	41
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheet	—		—		(3		)	(3		)
Net amounts	$	—	$	47	$	—		$	38

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Intangible Assets

3 Months Ended

Dec. 31, 2018

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets

Intangible Assets

Goodwill

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level, which is one level below the Company’s operating segments. The Company has five reporting units, all of which are subject to impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company determined that no events occurred or circumstances changed during the three months ended December 31, 2018 that would more likely than not reduce the fair value of any of the Company's reporting units below their respective carrying amounts. However, if conditions deteriorate or there is a change in the business, it may be necessary to record impairment charges in the future.

Intangible Assets

Intangible assets include technology and patents, customer relationships and trademarks and trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets.

Intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.

The Company determined that no events occurred or circumstances changed during the three months ended December 31, 2018 that would indicate that its finite-lived intangible assets may not be recoverable or that it is more likely than not that its indefinite-lived intangible assets are impaired. However, if conditions deteriorate or there is a change in the business, it may be necessary to record impairment charges in the future.

The Company's intangible assets consist of the following for the periods indicated:

(In millions)	Technology and Patents			Customer Relationships and Other Intangibles			Trademarks and Trade Names			Total
Balance as of December 31, 2018
Finite-lived intangible assets:
Cost	$	961		$	2,156		$	43		$	3,160
Accumulated amortization	(178		)	(163		)	(4		)	(345		)
Finite-lived intangible assets, net	783			1,993			39			2,815
Indefinite-lived intangible assets	2			—			332			334
Intangible assets, net	$	785		$	1,993		$	371		$	3,149
Balance as of September 30, 2018
Finite-lived intangible assets:
Cost	$	959		$	2,157		$	43		$	3,159
Accumulated amortization	(135		)	(124		)	(3		)	(262		)
Finite-lived intangible assets, net	824			2,033			40			2,897
Indefinite-lived intangible assets	5			—			332			337
Intangible assets, net	$	829		$	2,033		$	372		$	3,234

Amortization expense for the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), was $83 million, $14 million and $13 million, respectively.

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Fair Value Measurements

3 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The accounting guidance for fair value measurements also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:

Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable.

Level 2: Inputs that reflect quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and September 30, 2018 were as follows:

	December 31, 2018								September 30, 2018
	Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investments	$	2	$	2	$	—	$	—	$	2	$	2	$	—	$	—
Interest rate contracts	—		—		—		—		3		—		3		—
Total assets	$	2	$	2	$	—	$	—	$	5	$	2	$	3	$	—
Liabilities:
Interest rate contracts	$	31	$	—	$	31	$	—	$	7	$	—	$	7	$	—
Spoken acquisition Earn-outs	16		—		—		16		15		—		—		15
Emergence Date Warrants	16		—		—		16		34		—		—		34
Total liabilities	$	63	$	—	$	31	$	32	$	56	$	—	$	7	$	49

Investments

Investments classified as Level 1 assets are priced using quoted market prices for identical assets in active markets that are observable. Investments are recorded in Other assets in the Condensed Consolidated Balance Sheets.

Interest rate contracts

Interest rate contracts classified as Level 2 assets and liabilities are not actively traded and are valued using pricing models that use observable inputs.

Spoken acquisition Earn-outs

The Spoken acquisition Earn-outs classified as Level 3 liabilities are measured using a probability-weighted discounted cash flow model. Significant unobservable inputs, which included probability of the achievement of the earn out targets and discount rate assumption, reflected the assumptions market participants would use in valuing these liabilities.

Emergence Date Warrants

Emergence Date Warrants classified as Level 3 liabilities are priced using the Black-Scholes option pricing model. The change in fair value of the Emergence Date Warrants is recognized in Other income (expense), net in the Condensed Consolidated Statements of Operations.

During the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), there were no transfers between Level 1 and Level 2, or into and out of Level 3.

The following table summarizes the activity for the Company's Level 3 liabilities measured at fair value on a recurring basis:

(In millions)	Emergence Date Warrants			Spoken Acquisition Earn-outs		Total
September 30, 2018	$	34		$	15	$	49
Change in fair value(1)	(18		)	1		(17		)
December 31, 2018	$	16		$	16	$	32

⁽¹⁾ Changes in fair value of the Emergence Date Warrants are included in Other income (expense), net. Changes in fair value of the Spoken acquisition Earn-outs are included in Selling, general and administrative expense.

Fair Value of Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate carrying values because of the short-term nature of these instruments.

As of December 31, 2018 and September 30, 2018, the estimated fair value of the Convertible Notes was determined based on the quoted price of the Convertible Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2.

The estimated fair values of amounts borrowed under the Company's other financing arrangements at December 31, 2018 and September 30, 2018 were estimated based on a Level 2 input based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.

The estimated fair values of the amounts borrowed under the Company’s financing agreements at December 31, 2018 and September 30, 2018 are as follows:

	December 31, 2018				September 30, 2018
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Term Loan Credit Agreement due December 15, 2024	2,896		2,800		$	2,903	$	2,932
Convertible 2.25% senior notes due June 15, 2023	350		300		350		357
Total debt	$	3,246	$	3,100	$	3,253	$	3,289

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Income Taxes

3 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's effective income tax rate for the three months ended December 31, 2018 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Tax Cuts and Jobs Act ("the Act") relating to Global Intangible Low-Taxed Income (“GILTI”) and Foreign-Derived Intangible Income (“FDII”), (7) a limitation on the deductibility of interest expense under IRC Section 163(j), and (8) foreign tax credits.

The Company's effective income tax rate for the period from December 16, 2017 through December 31, 2017 (Successor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) an increase in estimated current year tax loss, which is eliminated as part of the attribute reduction related to the cancellation of indebtedness income ("CODI"), and (7) the impact of the Act.

The Company's effective income tax rate for the period from October 1, 2017 through December 15, 2017 (Predecessor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local taxes, and (6) the impact of reorganization and fresh start adjustments.

The Company's U.S. federal net operating loss ("NOL") and tax credits have been eliminated due to the recognition of CODI in fiscal 2018.

During fiscal 2018, the Company centralized the management and ownership of certain intellectual property in a U.S. limited partnership, some of which was previously managed and owned by a Bermuda tax resident corporation. This action resulted in the utilization and recognition of previously unrecognized NOLs, the reversal of deferred tax liabilities established as part of fresh start accounting and the recognition of a deferred tax asset, cumulatively in the amount of $366 million.

On December 22, 2017, the Act was signed into law. The Act lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. The Company has a September 30th tax year-end and therefore many of the tax law changes became effective in the first quarter of fiscal 2019. The Company has made a policy decision to treat GILTI income as a period cost. The Company benefits from the deduction attributable to FDII and has taxable income attributable to GILTI, both of which impact the effective tax rate. During the three months ended December 31, 2018, Avaya completed its analysis of the impact of the Act as required by Staff Accounting Bulletin No. 118 issued by the SEC on December 22, 2017.

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Benefit Obligations

3 Months Ended

Dec. 31, 2018

Retirement Benefits [Abstract]

Benefit Obligations

Benefit Obligations

The Company sponsors non-contributory defined benefit pension plans covering a portion of its U.S. employees and retirees, and post-retirement benefit plans covering a portion of its U.S. employees and retirees that include healthcare benefits and life insurance coverage. Certain non-U.S. operations have various retirement benefit programs covering substantially all of their employees. Some of these programs are considered to be defined benefit pension plans for accounting purposes.

The components of the pension and post-retirement net periodic benefit cost (credit) for the periods indicated are provided in the table below:

	Successor						Predecessor(1)
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Pension Benefits - U.S.
Components of net periodic benefit (credit) cost
Service cost	$	1		$	—		$	1
Interest cost	10			1			22
Expected return on plan assets	(15		)	(2		)	(38		)
Amortization of actuarial loss	—			—			20
Net periodic benefit (credit) cost	$	(4	)	$	(1	)	$	5
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost	$	2		$	—		$	2
Interest cost	2			—			3
Expected return on plan assets	—			—			(1		)
Amortization of actuarial loss	—			—			2
Net periodic benefit cost	$	4		$	—		$	6
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Interest cost	$	3		$	—		$	3
Expected return on plan assets	(2		)	—			(2		)
Amortization of prior service cost	—			—			(3		)
Amortization of actuarial loss	—			—			2
Net periodic benefit cost	$	1		$	—		$	—

⁽¹⁾ Excludes Plan of Reorganization related settlements that were recorded in Reorganization items, net in the Condensed Consolidated Statements of Operations.

The service components of net periodic benefit cost (credit) were recorded similar to compensation expense, while all other components were recorded in Other income (expense), net.

The Company's general funding policy with respect to its U.S. qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations, or to directly pay benefits where appropriate. Contributions to U.S. pension plans were $9 million for the three months ended December 31, 2018, which represented the amounts required to satisfy the minimum statutory funding requirements in the U.S. For the remainder of fiscal 2019, the Company estimates that it will make contributions totaling $17 million to satisfy the minimum statutory funding requirements in the U.S.

Contributions to the non-U.S. pension plans were $4 million for the three months ended December 31, 2018. For the remainder of fiscal 2019, the Company estimates that it will make contributions totaling $21 million for its non-U.S. plans.

Most post-retirement medical benefits are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as retiree medical benefit claims are disbursed. These payments are funded by the Company up to the maximum contribution amounts specified in the plan documents and contract with the Communications Workers of America and the International Brotherhood of Electrical Workers, and contributions from the participants, if required. During the three months ended December 31, 2018, the Company made payments for retiree medical and dental benefits of $3 million and received a $2 million reimbursement from the represented employees' post-retirement health trust related to payments in prior periods. The Company estimates it will make contributions for retiree medical and dental benefits totaling $11 million for the remainder of fiscal 2019.

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Share-based Compensation

3 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based Compensation

Share-based Compensation

Successor

The Company has a share-based compensation plan under which non-employee directors, employees of the Company or any of its affiliates, and certain consultants and advisors may be granted stock options, restricted stock, restricted stock units ("RSUs"), performance awards and other forms of awards granted or denominated in shares of the Company's common stock, as well as certain cash-based awards. Share-based compensation awards granted to employees generally vest ratably over three years and awards granted to non-employee directors generally vest ratably over one year. As of the Emergence Date, forfeitures are accounted for as incurred.

Pre-tax share-based compensation expense for the three months ended December 31, 2018 and the period from December 16, 2017 through December 31, 2017 was $6 million and $1 million, respectively.

During the three months ended December 31, 2018, the Company granted 167,296 RSUs with a grant date fair value of $15.84 per RSU. There were 827,432 RSUs that vested during the three months ended December 31, 2018 with a grant date fair value of $15.16.

Predecessor

Prior to the Emergence Date, the Predecessor Company had granted share-based awards that were canceled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3 million of compensation expense in the period from October 1, 2017 through December 15, 2017, principally reflected in Reorganization costs, net.

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Capital Stock

3 Months Ended

Dec. 31, 2018

Equity [Abstract]

Capital Stock

Capital Stock

Preferred Stock

The Company's certificate of incorporation authorizes it to issue up to 55,000,000 shares of preferred stock with a par value of $0.01 per share. As of December 31, 2018, there were no preferred shares issued or outstanding.

Common Stock

The Company's certificate of incorporation authorizes it to issue up to 550,000,000 shares of common stock with a par value of $0.01 per share. As of December 31, 2018, there were 110,708,203 shares issued and 110,695,523 shares outstanding with the remaining 12,680 shares distributable in accordance with the Plan of Reorganization.

On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase Emergence Date Warrants for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company may adopt one or more purchase plans pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in order to implement the warrant repurchase program. The warrant repurchase program does not obligate the Company to purchase any warrants and may be terminated, increased or decreased by the Board of Directors in its discretion at any time. As of December 31, 2018, there were no warrant repurchases under the program.

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Net Income (Loss) Per Common Share

3 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share

Income Per Common Share

Basic earnings per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that would occur if equity awards granted under the Company's various share-based compensation plans were vested or exercised, if the Company's Convertible Notes or the warrants the Company sold to purchase up to 12.6 million shares of its common stock in connection with the issuance of the Convertible Notes ("Call Spread Warrants") were exercised, and/or if the Emergence Date Warrants were exercised, resulting in the issuance of common shares that would participate in the earnings of the Company.

The following table sets forth the calculation of net income attributable to common shareholders and the computation of basic and diluted earnings per share for the periods indicated:

	Successor						Predecessor
(In millions, except per share amounts)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Net income per share:
Numerator
Net income	$	9		$	237		$	2,977
Dividends and accretion to preferred stockholders	—			—			(6		)
Undistributed earnings	9			237			2,971
Percentage allocated to common stockholders(1)	100.0		%	100.0		%	86.9		%
Numerator for basic and diluted earnings per common share	$	9		$	237		$	2,582
Denominator
Denominator for basic earnings per weighted average common shares	110.3			109.8			497.3
Effect of dilutive securities
Restricted stock units	0.9			0.5			—
Denominator for diluted earnings per weighted average common shares	111.2			110.3			497.3
Net income per common share
Basic	$	0.08		$	2.16		$	5.19
Diluted	$	0.08		$	2.15		$	5.19
(1) Basic weighted average common stock outstanding	110.3			109.8			497.3
Basic weighted average common stock and common stock equivalents (preferred shares)	110.3			109.8			572.4
Percentage allocated to common stock holders	100.0		%	100.0		%	86.9		%

For the three months ended December 31, 2018, the Company excluded 1.1 million stock options, 0.4 million restricted stock units and 5.6 million Emergence Date Warrants from the diluted earnings per share calculation as their effect would have been anti-dilutive. The Company’s Convertible Notes and Call Spread Warrants were also excluded for the three months ended December 31, 2018 as discussed in more detail below. For the period from December 16, 2017 through December 31, 2017, the Company excluded 1.1 million stock options and 5.6 million Emergence Date Warrants from the diluted earnings per share calculation as their effect would have been anti-dilutive.

For purposes of considering the Convertible Notes in determining diluted earnings per share, the Company has the ability and current intent to settle conversions of the Convertible Notes through combination settlement by repaying the principal portion in cash and any excess of the conversion value over the principal amount (the “Conversion Premium”) in shares of the Company's common stock. Therefore, only the impact of the Conversion Premium will be included in diluted weighted average shares outstanding using the treasury stock method. Since the Convertible Notes were out of the money and anti-dilutive as of December 31, 2018, they were excluded from the diluted earnings per share calculation for the three months ended December 31, 2018. The Call Spread Warrants will not be considered in calculating diluted weighted average shares outstanding until the price per share of the Company’s common stock exceeds the strike price of $37.3625 per share. When the price per share of the Company’s common stock exceeds the strike price per share of the Call Spread Warrants, the effect of the additional shares that may be issued upon exercise of the Call Spread Warrants will be included in diluted weighted average shares outstanding using the treasury stock method.

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Operating Segments

3 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Operating Segments

Segments

The Products & Solutions segment primarily develops, markets, and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, email, instant messaging and video. The Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize complex enterprise communications networks.

The Company’s chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company’s internal management systems. Management does not include in its segment measures of profitability selling, general, and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, impairment charges, and merger-related costs as these costs are not core to the measurement of segment performance, but rather are controlled at the corporate level.

Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:

	Successor						Predecessor
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
REVENUE
Products & Solutions	$	326		$	77		$	253
Services	422			94			351
Unallocated Amounts (1)	(10		)	(23		)	—
	$	738		$	148		$	604
GROSS PROFIT
Products & Solutions	$	214		$	49		$	169
Services	255			70			196
Unallocated Amounts (2)	(62		)	(41		)	(3		)
	407			78			362
OPERATING EXPENSES
Selling, general and administrative	257			50			264
Research and development	53			9			38
Amortization of intangible assets	40			7			10
Restructuring charges, net	7			10			14
	357			76			326
OPERATING INCOME	50			2			36
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET	(38		)	(11		)	3,400
INCOME (LOSS) BEFORE INCOME TAXES	$	12		$	(9	)	$	3,436

⁽¹⁾ Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

⁽²⁾   Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management’s performance, but rather are controlled at the corporate level.

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Accumulated Other Comprehensive (Loss) Income

3 Months Ended

Dec. 31, 2018

Equity [Abstract]

Accumulated Other Comprehensive (Loss) Income

Accumulated Other Comprehensive (Loss) Income

The components of accumulated other comprehensive (loss) income for the periods indicated were as follows:

(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Other		Accumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018	$	51	$	(31	)	$	(2	)	$	—	$	18
Other comprehensive income (loss) before reclassifications	—		1			(31		)	—		(30		)
Amounts reclassified to earnings	—		—			3			—		3
Benefit from income taxes	—		—			7			—		7
Balance as of December 31, 2018 (Successor)	$	51	$	(30	)	$	(23	)	$	—	$	(2	)

(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items			Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap		Other			Accumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2017 (Predecessor)	$	(1,375	)	$	(72	)	$	—	$	(1	)	$	(1,448	)
Other comprehensive (loss) income before reclassifications	(24		)	3			—		—			(21		)
Amounts reclassified to earnings	16			—			—		—			16
Pension settlement	721			—			—		—			721
Provision for income taxes	(58		)	—			—		—			(58		)
Balance as of December 15, 2017 (Predecessor)	(720		)	(69		)	—		(1		)	(790		)
Elimination of Predecessor Company Accumulated other comprehensive loss	720			69			—		1			790
Balance as of December 15, 2017 (Predecessor)	$	—		$	—		$	—	$	—		$	—
Balance as of December 16, 2017 (Successor)	$	—		$	—		$	—	$	—		$	—
Other comprehensive loss before reclassifications	—			(13		)	—		—			(13		)
Balance as of December 31, 2017 (Successor)	$	—		$	(13	)	$	—	$	—		$	(13	)

The amounts reclassified out of accumulated other comprehensive income (loss) for the unamortized pension, post-retirement and postemployment benefit-related items are recorded in Other income (expense), net in the Condensed Consolidated Statement of Operations. The amounts reclassified out of accumulated other comprehensive income (loss) for the interest rate swaps are recorded in Interest expense in the Condensed Consolidated Statement of Operations.

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Related Party Transactions

3 Months Ended

Dec. 31, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The Company's Board of Directors is comprised of seven directors, including the Company's Chief Executive Officer and six non-employee directors. As of December 31, 2018, the Company's Board of Directors had one vacancy.

Specific Arrangements Involving the Successor Company’s Current Directors and Executive Officers

William D. Watkins is a Director and Chair of the Board of Directors of Avaya Holdings and serves on the board of directors of Flex Ltd., an electronics design manufacturer. For the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company purchased goods and services from subsidiaries of Flex Ltd. of $8 million, $2 million, and $6 million, respectively. As of December 31, 2018 (Successor) and September 30, 2018 (Successor), the Company had outstanding accounts payable due to Flex Ltd. of $8 million and $4 million, respectively.

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Commitments and Contingencies

3 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings

General

The Company records accruals for legal contingencies to the extent that it has concluded that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described below because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.

In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, including, but not limited to, those identified below, relating to intellectual property, commercial, employment, environmental and regulatory matters.

The Company believes that it has meritorious defenses in connection with its current lawsuits and material claims and disputes, and intends to vigorously contest each of them.

Based on the Company's experience, management believes that the damages amounts claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases.

In the opinion of the Company's management based upon information currently available to the Company, while the outcome of these lawsuits, claims and disputes is uncertain, the likely results of these lawsuits, claims and disputes are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows, although the effect could be material to the Company's consolidated results of operations or consolidated cash flows for any interim reporting period.

During the three months ended December 31, 2018 (Successor), the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), costs incurred in connection with the resolution of certain legal matters were $0 million, $0 million and $37 million, respectively.

Intellectual Property and Commercial Disputes

In January 2010, SAE Power Incorporated and SAE Power Company (collectively, “SAE”) filed a complaint in the New Jersey Superior Court asserting various claims including breach of contract, unjust enrichment, promissory estoppel and breach of the covenant of good faith and fair dealing arising out of Avaya’s relationship with SAE as a supplier of various power supply products. SAE has since asserted additional claims against Avaya for fraud, negligent misrepresentation, misappropriation of trade secrets and civil conspiracy. SAE seeks to recover for alleged losses stemming from Avaya’s termination of its power supply purchases from SAE, including for Avaya’s alleged disclosure of SAE’s alleged trade secret and/or confidential information to another power supply vendor. On July 19, 2016, the Court entered an order granting Avaya’s motion for partial summary judgment, dismissing certain of SAE’s claims regarding the alleged disclosure of trade secrets. In January 2017, the Company filed a Notice of Suggestion of Pendency of Bankruptcy, which informed the Court of the Company’s voluntary bankruptcy petition filing and stay of proceedings. SAE filed a proof of claim in the Bankruptcy Court. On September 28, 2017, the Company filed a motion in the Bankruptcy Court seeking to estimate SAE’s claim, and the estimation hearing took place on February 15, 2018. On June 12, 2018, the Bankruptcy Court entered an Order estimating SAE’s pre-petition misappropriation claim in the amount of $1.21 million plus interest, its fraud claim at $0 million and declined to estimate SAE’s breach of contract claim, leaving it to be resolved through the bankruptcy claims allowance process. Once the stay of proceedings is lifted, SAE may pursue its liability claims against Avaya in the New Jersey state court action, subject to the estimation Order of the Bankruptcy Court. On June 22, 2018, SAE filed a Notice of Appeal, which is still pending, and a Motion for Stay of Estimation Order Pending Appeal, which was denied by the Bankruptcy Court on August 14, 2018 and by the District Court on September 12, 2018. This matter, although not yet closed, will receive distribution in accordance with the general unsecured claims procedure in the Company's Plan of Reorganization.

In the ordinary course of business, the Company is involved in litigation alleging it has infringed upon third parties’ intellectual property rights, including patents and copyrights; some litigation may involve claims for infringement against customers, distributors and resellers by third parties relating to the use of Avaya’s products, as to which the Company may provide indemnifications of varying scope to certain parties. The Company is also involved in litigation pertaining to general commercial disputes with customers, suppliers, vendors and other third parties including royalty disputes. These matters are ongoing and the outcomes are subject to inherent uncertainties. As a result, the Company cannot be assured that any such matter will not have a material adverse effect on its financial position, results of operations or cash flows.

Product Warranties

The Company recognizes a liability for the estimated costs that may be incurred to remedy certain deficiencies of quality or performance of the Company’s products. These product warranties extend over a specified period of time, generally ranging up to two years from the date of sale depending upon the product subject to the warranty. The Company accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve, which is included in other current and non-current liabilities in the Condensed Consolidated Balance Sheets, for actual experience. As of December 31, 2018 and September 30, 2018, the amount reserved was $1 million and $2 million, respectively.

Guarantees of Indebtedness and Other Off-Balance Sheet Arrangements

Letters of Credit and Guarantees

The Company provides guarantees, letters of credit and surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company's performance in accordance with contractual or legal obligations. As of December 31, 2018, the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $64 million. The outstanding letters of credit are collateralized by restricted cash of $4 million included in Other assets on the Condensed Consolidated Balance Sheets as of December 31, 2018.

Purchase Commitments and Termination Fees

The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements provided by the Company. If the Company does not meet these specified purchase commitments, it could be required to purchase the inventory, or in the case of certain agreements, pay an early termination fee. Historically, the Company has not been required to pay a charge for not meeting its designated purchase commitments with these suppliers, but has been obligated to purchase certain excess inventory levels from its outsourced manufacturers due to actual sales of product varying from forecast and due to transition of manufacturing from one vendor to another.

The Company’s outsourcing agreements with its most significant contract manufacturers automatically renew in July and September for successive periods of twelve months each, subject to specific termination rights for the Company and the contract manufacturers. All manufacturing of the Company’s products is performed in accordance with either detailed requirements or specifications and product designs furnished by the Company, and is subject to rigorous quality control standards.

Transactions with Nokia

Pursuant to the Contribution and Distribution Agreement effective October 1, 2000 (the "Contribution and Distribution Agreement"), Lucent Technologies, Inc. (now Nokia) contributed to the Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the “Company’s Businesses”) and distributed the Company’s stock pro-rata to the shareholders of Lucent (“distribution”). The Contribution and Distribution Agreement, among other things, provides that, in general, the Company will indemnify Nokia for all liabilities including certain pre-distribution tax obligations of Nokia relating to the Company’s Businesses and all contingent liabilities primarily relating to the Company’s Businesses or otherwise assigned to the Company. In addition, the Contribution and Distribution Agreement provides that certain contingent liabilities not allocated to one of the parties will be shared by Nokia and the Company in prescribed percentages. The Contribution and Distribution Agreement also provides that each party will share specified portions of contingent liabilities based upon agreed percentages related to the business of the other party that exceed $50 million. The Company is unable to determine the maximum potential amount of other future payments, if any, that it could be required to make under this agreement.

In addition, in connection with the distribution, the Company and Lucent entered into a Tax Sharing Agreement effective October 1, 2000 (the "Tax Sharing Agreement") that governs Nokia’s and the Company’s respective rights, responsibilities and obligations after the distribution with respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes or benefits that are clearly attributable to the business of one party will be borne solely by that party and other pre-distribution taxes or benefits will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. The Company may be subject to additional taxes or benefits pursuant to the Tax Sharing Agreement related to future settlements of audits by state and local and foreign taxing authorities for the periods prior to the Company’s separation from Nokia.

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Revenue Recognition (Tables)

3 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Impact of Adoption

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Balance Sheet as of December 31, 2018 is as follows:

	December 31, 2018
(In millions)	As Reported		Adjustments			Without Adoption of ASC 606
ASSETS
Accounts receivable, net	$	327	$	2		$	329
Inventory	68		28			96
Contract assets	120		(120		)	—
Contract costs	118		(118		)	—
Other current assets	106		83			189
Property, plant and equipment, net	239		1			240
Deferred income taxes, net	28		2			30
Other assets	97		(15		)	82
LIABILITIES
Contract liabilities	482		23			505
Other current liabilities	152		(12		)	140
Deferred income taxes, net	161		(28		)	133
STOCKHOLDERS' EQUITY
Retained earnings	388		(120		)	268

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Statement of Operations for the three months ended December 31, 2018 is as follows:

	Three Months Ended December 31, 2018
(In millions)	As Reported			Adjustments			Results under ASC 605
REVENUE
Products	$	324		$	(30	)	$	294
Services	414			(20		)	394
	738			(50		)	688
COSTS
Products:
Costs	115			(6		)	109
Amortization of technology intangible assets	43			—			43
Services	173			(6		)	167
	331			(12		)	319
GROSS PROFIT	407			(38		)	369
OPERATING EXPENSES
Selling, general and administrative	257			8			265
Research and development	53			—			53
Amortization of intangible assets	40			—			40
Restructuring charges, net	7			—			7
	357			8			365
OPERATING INCOME	50			(46		)	4
Interest expense	(60		)	—			(60		)
Other income, net	22			—			22
INCOME (LOSS) BEFORE INCOME TAXES	12			(46		)	(34		)
(Provision for) benefit from income taxes	(3		)	18			15
NET INCOME (LOSS)	$	9		$	(28	)	$	(19	)

Disaggregation of Revenue

Disaggregation of Revenue

The following tables provide disaggregated revenue for the Company:

(In millions)	Three months ended December 31, 2018
REVENUE
Products & Solutions	$	326
Services	422
Unallocated Amounts	(10		)
	$	738

	Three months ended December 31, 2018
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	150	$	251	$	(7	)	$	394
International:
Europe, Middle East and Africa	106		94		(1		)	199
Asia Pacific	38		41		(1		)	78
Americas International - Canada and Latin America	32		36		(1		)	67
Total International	176		171		(3		)	344
Total revenue	$	326	$	422	$	(10	)	$	738

Contract with Customer, Asset and Liability

The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:

(In millions)	December 31, 2018		October 1, 2018		Increase (Decrease)
Accounts receivable, net	$	327	$	376	$	(49	)
Contract assets:
Current	$	120	$	77	$	43
Non-current (Other assets)	3		3		—
	$	123	$	80	$	43
Cost of obtaining a contract:
Current (Contract costs)	$	80	$	64	$	16
Non-current (Other assets)	47		36		11
	$	127	$	100	$	27
Cost to fulfill a contract:
Current (Contract costs)	$	38	$	45	$	(7	)
Contract liabilities:
Current	$	482	$	468	$	14
Non-current (Other liabilities)	61		54		7
	$	543	$	522	$	21

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Supplementary Financial Information (Tables)

3 Months Ended

Dec. 31, 2018

Supplementary Financial Information [Abstract]

Consolidated Statements of Operations Information

The following table presents a summary of Other income (expense), net for the periods indicated:

	Successor						Predecessor
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
OTHER INCOME (EXPENSE), NET
Interest income	$	3		$	—		$	2
Foreign currency (losses) gains, net	(1		)	2			—
Income from transition services agreement, net	—			—			3
Other pension and post-retirement benefit credits (costs), net	2			1			(8		)
Change in fair value of emergence date warrants	18			(5		)	—
Other, net	—			—			1
Total other income (expense), net	$	22		$	(2	)	$	(2	)

Summary of Reorganization Items

A summary of Reorganization items, net for the periods indicated is presented in the following table:

	Successor				Predecessor
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017
REORGANIZATION ITEMS, NET
Net gain on settlement of Liabilities subject to compromise	$	—	$	—	$	1,778
Net gain on fresh start adjustments	—		—		1,697
Bankruptcy-related professional fees	—		—		(56		)
Other items, net	—		—		(3		)
Reorganization items, net	$	—	$	—	$	3,416
Cash payments for reorganization items	$	—	$	1	$	2,524

Supplemental Cash Flow Information

	Successor						Predecessor
(In millions)	December 31, 2018		September 30, 2018		December 31, 2017		December 15, 2017		September 30, 2017
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	743	$	700	$	417	$	366	876
Restricted cash included in other current assets	—		—		55		65		85
Restricted cash included in other assets	4		4		4		4		5
Total cash, cash equivalents, and restricted cash	$	747	$	704	$	476	$	435	966

As of December 31, 2017 (Successor) and December 15, 2017 (Predecessor), restricted cash in other current assets consisted primarily of funds held for bankruptcy-related professional fees and funds held related to the sale of the Company's Networking business in July 2017. As of September 30, 2017 (Predecessor), restricted cash in other current assets consisted primarily of cash that was drawn from term loans under the Debtor-in-Possession credit agreement to cash collateralize existing letters of credit.

	Successor				Predecessor
(In millions)	Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017
OTHER PAYMENTS
Interest payments	$	48	$	—	$	15
Income tax payments	$	7	$	2	$	7
NON-CASH INVESTING ACTIVITIES
Increase in Accounts payable for Capital expenditures	$	4	$	1	$	—

The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:

	Successor						Predecessor
(In millions)	December 31, 2018		September 30, 2018		December 31, 2017		December 15, 2017		September 30, 2017
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	743	$	700	$	417	$	366	876
Restricted cash included in other current assets	—		—		55		65		85
Restricted cash included in other assets	4		4		4		4		5
Total cash, cash equivalents, and restricted cash	$	747	$	704	$	476	$	435	966

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Business Restructuring Reserves and Programs (Tables)

3 Months Ended

Dec. 31, 2018

Restructuring Reserve [Abstract]

Schedule of Restructuring and Related Costs

The following table aggregates the remaining components of the fiscal 2008 through 2017 restructuring programs for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations			Total
Balance as of September 30, 2018	$	38		$	6		$	44
Cash payments	(4		)	(1		)	(5		)
Balance as of December 31, 2018	$	34		$	5		$	39

The following table summarizes the components of the fiscal 2018 restructuring program for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations		Total
Balance as of September 30, 2018	$	54		$	—	$	54
Cash payments	(5		)	—		(5		)
Impact of foreign currency fluctuations	(1		)	—		(1		)
Balance as of December 31, 2018	$	48		$	—	$	48

The following table summarizes the components of the fiscal 2019 restructuring program for the three months ended December 31, 2018:

(In millions)	Employee Separation Costs			Lease Obligations		Total
Restructuring charges	$	7		$	—	$	7
Cash payments	(1		)	—		(1		)
Balance as of December 31, 2018	$	6		$	—	$	6

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Financing Arrangements (Tables)

3 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The following table reflects principal amounts of debt and debt net of discounts and issuance costs for the periods presented:

	December 31, 2018					September 30, 2018
(In millions)	Principal amount		Net of discounts and issuance costs			Principal amount		Net of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024	$	2,896	$	2,864		$	2,903	$	2,870
Convertible 2.25% senior notes due June 15, 2023	350		260			350		256
Total debt	$	3,246	3,124			$	3,253	3,126
Debt maturing within one year			(29		)			(29		)
Long-term debt, net of current portion			$	3,095				$	3,097

Convertible Debt

The net carrying amount of the Convertible Notes for the periods indicated was as follows:

(In millions)	December 31, 2018			September 30, 2018
Principal	$	350		$	350
Less:
Unamortized debt discount	(84		)	(87		)
Unamortized issuance costs	(6		)	(7		)
Net carrying amount	$	260		$	256

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Assumptions Used

The fair value of the Emergence Date Warrants as of December 31, 2018 and September 30, 2018 was determined using the input assumptions summarized below:

	December 31, 2018		September 30, 2018
Expected volatility	54.86	%	50.14	%
Risk-free interest rates	2.47	%	2.90	%
Expected remaining life (in years)	3.96		4.21
Price per share of common stock	$14.56		$22.14

Schedule of Derivative Instruments in Balance Sheet

The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:

		December 31, 2018				September 30, 2018
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Designated as Hedging Instruments:
Interest rate contracts	Other assets	$	—	$	—	$	3	$	—
Interest rate contracts	Other current liabilities	—		7		—		7
Interest rate contracts	Other liabilities	—		24		—		—
		—		31		3		7
Derivatives Not Designated as Hedging Instruments:
Emergence Date Warrants	Other liabilities	—		16		—		34
Total derivative fair value		$	—	$	47	$	3	$	41

Derivatives Designated as Cash Flow Hedges

The following table provides information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:

	Three months ended December 31, 2018
(In millions)	Interest Expense			Other Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(60	)	$	(20	)
Impact of cash flow hedging relationships:
Loss recognized in AOCI - on interest rate swaps	—			(31		)
Interest expense from AOCI reclassified	(3		)	3

Derivatives Not Designated As Hedging Instruments

The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations:

		Successor					Predecessor
		Three months ended December 31, 2018		Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
(In millions)	Location of Derivative Pre-tax Gain (Loss)
Emergence Date Warrants	Other income (expense), net	$	18	$	(5	)	$	—

Schedule of Outstanding Derivative Positions Presented on a Net Basis

The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:

	December 31, 2018				September 30, 2018
(In millions)	Asset		Liability		Asset			Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheet	$	—	$	47	$	3		$	41
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheet	—		—		(3		)	(3		)
Net amounts	$	—	$	47	$	—		$	38

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Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2018

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Schedule of Finite-Lived and Indefinite-Lived Intangible Assets by Major Class

The Company's intangible assets consist of the following for the periods indicated:

(In millions)	Technology and Patents			Customer Relationships and Other Intangibles			Trademarks and Trade Names			Total
Balance as of December 31, 2018
Finite-lived intangible assets:
Cost	$	961		$	2,156		$	43		$	3,160
Accumulated amortization	(178		)	(163		)	(4		)	(345		)
Finite-lived intangible assets, net	783			1,993			39			2,815
Indefinite-lived intangible assets	2			—			332			334
Intangible assets, net	$	785		$	1,993		$	371		$	3,149
Balance as of September 30, 2018
Finite-lived intangible assets:
Cost	$	959		$	2,157		$	43		$	3,159
Accumulated amortization	(135		)	(124		)	(3		)	(262		)
Finite-lived intangible assets, net	824			2,033			40			2,897
Indefinite-lived intangible assets	5			—			332			337
Intangible assets, net	$	829		$	2,033		$	372		$	3,234

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Fair Value Measurements (Tables)

3 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements, Recurring and Nonrecurring

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and September 30, 2018 were as follows:

	December 31, 2018								September 30, 2018
	Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investments	$	2	$	2	$	—	$	—	$	2	$	2	$	—	$	—
Interest rate contracts	—		—		—		—		3		—		3		—
Total assets	$	2	$	2	$	—	$	—	$	5	$	2	$	3	$	—
Liabilities:
Interest rate contracts	$	31	$	—	$	31	$	—	$	7	$	—	$	7	$	—
Spoken acquisition Earn-outs	16		—		—		16		15		—		—		15
Emergence Date Warrants	16		—		—		16		34		—		—		34
Total liabilities	$	63	$	—	$	31	$	32	$	56	$	—	$	7	$	49

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table summarizes the activity for the Company's Level 3 liabilities measured at fair value on a recurring basis:

(In millions)	Emergence Date Warrants			Spoken Acquisition Earn-outs		Total
September 30, 2018	$	34		$	15	$	49
Change in fair value(1)	(18		)	1		(17		)
December 31, 2018	$	16		$	16	$	32

⁽¹⁾ Changes in fair value of the Emergence Date Warrants are included in Other income (expense), net.

Fair Value, by Balance Sheet Grouping

The estimated fair values of the amounts borrowed under the Company’s financing agreements at December 31, 2018 and September 30, 2018 are as follows:

	December 31, 2018				September 30, 2018
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Term Loan Credit Agreement due December 15, 2024	2,896		2,800		$	2,903	$	2,932
Convertible 2.25% senior notes due June 15, 2023	350		300		350		357
Total debt	$	3,246	$	3,100	$	3,253	$	3,289

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Benefit Obligations (Tables)

3 Months Ended

Dec. 31, 2018

Retirement Benefits [Abstract]

Schedule of Net Benefit Costs

The components of the pension and post-retirement net periodic benefit cost (credit) for the periods indicated are provided in the table below:

	Successor						Predecessor(1)
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Pension Benefits - U.S.
Components of net periodic benefit (credit) cost
Service cost	$	1		$	—		$	1
Interest cost	10			1			22
Expected return on plan assets	(15		)	(2		)	(38		)
Amortization of actuarial loss	—			—			20
Net periodic benefit (credit) cost	$	(4	)	$	(1	)	$	5
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost	$	2		$	—		$	2
Interest cost	2			—			3
Expected return on plan assets	—			—			(1		)
Amortization of actuarial loss	—			—			2
Net periodic benefit cost	$	4		$	—		$	6
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Interest cost	$	3		$	—		$	3
Expected return on plan assets	(2		)	—			(2		)
Amortization of prior service cost	—			—			(3		)
Amortization of actuarial loss	—			—			2
Net periodic benefit cost	$	1		$	—		$	—

⁽¹⁾ Excludes Plan of Reorganization related settlements that were recorded in Reorganization items, net in the Condensed Consolidated Statements of Operations.

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Net Income (Loss) Per Common Share (Tables)

3 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Schedule of Earnings (Loss) Per Share

The following table sets forth the calculation of net income attributable to common shareholders and the computation of basic and diluted earnings per share for the periods indicated:

	Successor						Predecessor
(In millions, except per share amounts)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
Net income per share:
Numerator
Net income	$	9		$	237		$	2,977
Dividends and accretion to preferred stockholders	—			—			(6		)
Undistributed earnings	9			237			2,971
Percentage allocated to common stockholders(1)	100.0		%	100.0		%	86.9		%
Numerator for basic and diluted earnings per common share	$	9		$	237		$	2,582
Denominator
Denominator for basic earnings per weighted average common shares	110.3			109.8			497.3
Effect of dilutive securities
Restricted stock units	0.9			0.5			—
Denominator for diluted earnings per weighted average common shares	111.2			110.3			497.3
Net income per common share
Basic	$	0.08		$	2.16		$	5.19
Diluted	$	0.08		$	2.15		$	5.19
(1) Basic weighted average common stock outstanding	110.3			109.8			497.3
Basic weighted average common stock and common stock equivalents (preferred shares)	110.3			109.8			572.4
Percentage allocated to common stock holders	100.0		%	100.0		%	86.9		%

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Operating Segments (Tables)

3 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Summarized Financial Information of Operating Segments

Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:

	Successor						Predecessor
(In millions)	Three months ended December 31, 2018			Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017
REVENUE
Products & Solutions	$	326		$	77		$	253
Services	422			94			351
Unallocated Amounts (1)	(10		)	(23		)	—
	$	738		$	148		$	604
GROSS PROFIT
Products & Solutions	$	214		$	49		$	169
Services	255			70			196
Unallocated Amounts (2)	(62		)	(41		)	(3		)
	407			78			362
OPERATING EXPENSES
Selling, general and administrative	257			50			264
Research and development	53			9			38
Amortization of intangible assets	40			7			10
Restructuring charges, net	7			10			14
	357			76			326
OPERATING INCOME	50			2			36
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET	(38		)	(11		)	3,400
INCOME (LOSS) BEFORE INCOME TAXES	$	12		$	(9	)	$	3,436

⁽¹⁾ Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

⁽²⁾   Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management’s performance, but rather are controlled at the corporate level.

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Accumulated Other Comprehensive (Loss) Income (Tables)

3 Months Ended

Dec. 31, 2018

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive (loss) income for the periods indicated were as follows:

(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Other		Accumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018	$	51	$	(31	)	$	(2	)	$	—	$	18
Other comprehensive income (loss) before reclassifications	—		1			(31		)	—		(30		)
Amounts reclassified to earnings	—		—			3			—		3
Benefit from income taxes	—		—			7			—		7
Balance as of December 31, 2018 (Successor)	$	51	$	(30	)	$	(23	)	$	—	$	(2	)

(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items			Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap		Other			Accumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2017 (Predecessor)	$	(1,375	)	$	(72	)	$	—	$	(1	)	$	(1,448	)
Other comprehensive (loss) income before reclassifications	(24		)	3			—		—			(21		)
Amounts reclassified to earnings	16			—			—		—			16
Pension settlement	721			—			—		—			721
Provision for income taxes	(58		)	—			—		—			(58		)
Balance as of December 15, 2017 (Predecessor)	(720		)	(69		)	—		(1		)	(790		)
Elimination of Predecessor Company Accumulated other comprehensive loss	720			69			—		1			790
Balance as of December 15, 2017 (Predecessor)	$	—		$	—		$	—	$	—		$	—
Balance as of December 16, 2017 (Successor)	$	—		$	—		$	—	$	—		$	—
Other comprehensive loss before reclassifications	—			(13		)	—		—			(13		)
Balance as of December 31, 2017 (Successor)	$	—		$	(13	)	$	—	$	—		$	(13	)

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Background and Basis of Presentation - Narrative (Details) $ in Millions	1 Months Ended	3 Months Ended	10 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($) segment	Sep. 30, 2018 USD ($)
Quantifying Misstatement in Current Year Financial Statements, Amount		$ 3
Number of segments | segment		2
Quantifying Misstatement in Current Year Financial Statements, Amount	$ 237	$ 9	$ 237
Selling, General and Administrative Expenses [Member]
Quantifying Misstatement in Current Year Financial Statements, Amount		$ 5

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Recent Accounting Pronouncements - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018	Oct. 01, 2018	Sep. 30, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase of net cash used in investing activities	$ (2)		$ (22)
Accounts receivable, net			327	$ 376	$ 377
Inventory			68	57	81
Contract assets			120	77	0
Contract costs			118	109	0
Other current assets			106	104	170
Property, Plant and Equipment, Net			239	249	250
Deferred income taxes, net			28	27	29
Other assets			97	90	74
Contract liabilities			482	468	484
Other current liabilities			152	152	148
Deferred income taxes, net			161	168	140
Retained Earnings (Accumulated Deficit)			388	379	$ 287
Accounting Standards Update 2016-18 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase of net cash used in investing activities	$ (10)
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net				(1)
Inventory				(24)
Contract assets				77
Contract costs				109
Other current assets				(66)
Property, Plant and Equipment, Net				(1)
Deferred income taxes, net				(2)
Other assets				16
Contract liabilities				(16)
Other current liabilities				4
Deferred income taxes, net				28
Predecessor
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase of net cash used in investing activities		$ (13)
Predecessor | Accounting Standards Update 2016-18 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase of net cash used in investing activities		$ (21)
Accumulated Deficit | Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Retained Earnings (Accumulated Deficit)				92
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net			2
Inventory			28
Contract assets			(120)
Contract costs			(118)
Other current assets			83
Property, Plant and Equipment, Net			1
Deferred income taxes, net			2
Other assets			(15)
Contract liabilities			23
Other current liabilities			(12)
Deferred income taxes, net			(28)
Retained Earnings (Accumulated Deficit)			$ (120)
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accumulated Deficit | Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Retained Earnings (Accumulated Deficit)				$ 93

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Revenue Recognition - Impact of Adoption (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	10 Months Ended
	Dec. 31, 2017	Dec. 31, 2018	Sep. 30, 2018	Oct. 01, 2018
ASSETS
Accounts receivable, net		$ 327	$ 377	$ 376
Inventory		68	81	57
Contract assets		120	0	77
Contract costs		118	0	109
Other current assets		106	170	104
Property, plant and equipment, net		239	250	249
Deferred income taxes, net		28	29	27
Other assets		97	74	90
LIABILITIES
Contract liabilities		482	484	468
Other current liabilities		152	148	152
Deferred income taxes, net		161	140	168
Other liabilities		370	374
STOCKHOLDERS' EQUITY
Retained Earnings (Accumulated Deficit)		388	287	379
REVENUE
Revenue	$ (148)	(738)
COSTS
Total Cost of Goods and Services		(331)
GROSS PROFIT	(78)	(407)
OPERATING EXPENSES
Selling, general and administrative	(50)	(257)
Research and development	(9)	(53)
Amortization of intangible assets	(7)	(40)
Restructuring charges, net	(10)	(7)
Total operating Expenses	(76)	(357)
Operating Income (Loss) [Abstract]
OPERATING INCOME	(2)	(50)
Interest expense	(9)	(60)
Other income (expense), net	2	(22)
INCOME (LOSS) BEFORE INCOME TAXES	9	(12)
(Provision for) benefit from income taxes	246	(3)
Net income (loss)	(237)	(9)	$ (237)
Accounting Standards Update 2014-09
ASSETS
Accounts receivable, net				(1)
Inventory				(24)
Contract assets				77
Contract costs				109
Other current assets				(66)
Property, plant and equipment, net				(1)
Deferred income taxes, net				(2)
Other assets				16
LIABILITIES
Contract liabilities				(16)
Other current liabilities				4
Deferred income taxes, net				$ 28
REVENUE
Revenue		(688)
COSTS
Total Cost of Goods and Services		(319)
GROSS PROFIT		(369)
OPERATING EXPENSES
Selling, general and administrative		(265)
Research and development		(53)
Amortization of intangible assets		(40)
Restructuring charges, net		(7)
Total operating Expenses		(365)
Operating Income (Loss) [Abstract]
OPERATING INCOME		(4)
Interest expense		(60)
Other income (expense), net		(22)
INCOME (LOSS) BEFORE INCOME TAXES		34
(Provision for) benefit from income taxes		15
Net income (loss)		19
Adjustments | Accounting Standards Update 2014-09
ASSETS
Accounts receivable, net		2
Inventory		28
Contract assets		(120)
Contract costs		(118)
Other current assets		83
Property, plant and equipment, net		1
Deferred income taxes, net		2
Other assets		(15)
LIABILITIES
Contract liabilities		23
Other current liabilities		(12)
Deferred income taxes, net		(28)
STOCKHOLDERS' EQUITY
Retained Earnings (Accumulated Deficit)		(120)
Without Adoption of ASC 606
ASSETS
Accounts receivable, net		329
Inventory		96
Contract assets		0
Contract costs		0
Other current assets		189
Property, plant and equipment, net		240
Deferred income taxes, net		30
Other assets		82
LIABILITIES
Contract liabilities		505
Other current liabilities		140
Deferred income taxes, net		133
STOCKHOLDERS' EQUITY
Retained Earnings (Accumulated Deficit)		268
Products
REVENUE
Revenue	(71)	(324)
COSTS
Total Cost of Goods and Services	(33)	(115)
Amortization of technology intangible assets	(7)	(43)
Products | Accounting Standards Update 2014-09
REVENUE
Revenue		(294)
COSTS
Total Cost of Goods and Services		(109)
Amortization of technology intangible assets		(43)
Services
REVENUE
Revenue	(77)	(414)
COSTS
Total Cost of Goods and Services	$ (30)	(173)
Services | Accounting Standards Update 2014-09
REVENUE
Revenue		(394)
COSTS
Total Cost of Goods and Services		(167)
Adjustments | Accounting Standards Update 2014-09
REVENUE
Revenue		(50)
COSTS
Total Cost of Goods and Services		(12)
GROSS PROFIT		(38)
OPERATING EXPENSES
Selling, general and administrative		8
Research and development		0
Amortization of intangible assets		0
Restructuring charges, net		0
Total operating Expenses		8
Operating Income (Loss) [Abstract]
OPERATING INCOME		(46)
Interest expense		0
Other income (expense), net		0
INCOME (LOSS) BEFORE INCOME TAXES		(46)
(Provision for) benefit from income taxes		(18)
Net income (loss)		(28)
Adjustments | Products | Accounting Standards Update 2014-09
REVENUE
Revenue		(30)
COSTS
Total Cost of Goods and Services		(6)
Amortization of technology intangible assets		0
Adjustments | Services | Accounting Standards Update 2014-09
REVENUE
Revenue		(20)
COSTS
Total Cost of Goods and Services		$ (6)

XML

Revenue Recognition - Narrative (Details) $ in Millions	3 Months Ended
	Dec. 31, 2018 USD ($)
Disaggregation of Revenue [Line Items]
Capitalized Contract Cost to Obtain a Contract, Amortization	$ 22
Capitalized Contract Cost to Fulfill, Amortization	14
Revenue recognized that was previously recorded as a contract liability	242
Revenue, Remaining Performance Obligation, Amount	2,700
Selling, General and Administrative Expenses
Disaggregation of Revenue [Line Items]
Capitalized Contract Cost to Obtain a Contract, Amortization	20
Cost of Sales [Member]
Disaggregation of Revenue [Line Items]
Capitalized Contract Cost to Obtain a Contract, Amortization	$ 2

XML

Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Revenue	$ 148	$ 738
U.S.
Disaggregation of Revenue [Line Items]
Revenue		394
International
Disaggregation of Revenue [Line Items]
Revenue		344
Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Revenue		199
Asia Pacific
Disaggregation of Revenue [Line Items]
Revenue		78
Americas International - Canada and Latin America
Disaggregation of Revenue [Line Items]
Revenue		67
Products & Solutions
Disaggregation of Revenue [Line Items]
Revenue		326
Products & Solutions | U.S.
Disaggregation of Revenue [Line Items]
Revenue		150
Products & Solutions | International
Disaggregation of Revenue [Line Items]
Revenue		176
Products & Solutions | Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Revenue		106
Products & Solutions | Asia Pacific
Disaggregation of Revenue [Line Items]
Revenue		38
Products & Solutions | Americas International - Canada and Latin America
Disaggregation of Revenue [Line Items]
Revenue		32
Services
Disaggregation of Revenue [Line Items]
Revenue		422
Services | U.S.
Disaggregation of Revenue [Line Items]
Revenue		251
Services | International
Disaggregation of Revenue [Line Items]
Revenue		171
Services | Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Revenue		94
Services | Asia Pacific
Disaggregation of Revenue [Line Items]
Revenue		41
Services | Americas International - Canada and Latin America
Disaggregation of Revenue [Line Items]
Revenue		36
Unallocated
Disaggregation of Revenue [Line Items]
Revenue	$ (23)	(10)
Unallocated | U.S.
Disaggregation of Revenue [Line Items]
Revenue		(7)
Unallocated | International
Disaggregation of Revenue [Line Items]
Revenue		(3)
Unallocated | Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Revenue		(1)
Unallocated | Asia Pacific
Disaggregation of Revenue [Line Items]
Revenue		(1)
Unallocated | Americas International - Canada and Latin America
Disaggregation of Revenue [Line Items]
Revenue		$ (1)
Minimum | Professional Services, simple contracts
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P28D
Minimum | Global Support Services
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P1Y
Minimum | Professional Services, complex contracts
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P6M
Minimum | Cloud and Managed Services
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P1Y
Maximum | Professional Services, simple contracts
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P42D
Maximum | Global Support Services
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P5Y
Maximum | Professional Services, complex contracts
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P1Y
Maximum | Cloud and Managed Services
Disaggregation of Revenue [Line Items]
Contract with Customer, Timing of Satisfaction of Performance Obligation and Payment		P5Y

XML

Revenue Recognition - Transaction Price Allocated to the Remaining Performance Obligations (Details) $ in Millions	Dec. 31, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, amount	$ 2,700
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction, period	1 year
Remaining performance obligation, amount	$ 0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction, period	1 year
Remaining performance obligation, amount	$ 0

XML

Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2018	Oct. 01, 2018	Sep. 30, 2018
Accounts receivable, net
Accounts receivable, net		$ 327	$ 376	$ 377
Increase (decrease) in accounts receivable, net	$ 21	(49)
Contract assets:
Contract assets, current		120	77	0
Increase (decrease) in contract assets, current		43
Contract assets, non-current		3	3
Increase (decrease) in contract assets, non-current		0
Total contract assets		123	80
Increase (decrease) in total contract assets	0	43
Cost of obtaining a contract:
Cost of obtaining a contract, current		80	64
Increase (decrease) in cost of obtaining a contract, current		16
Cost of obtaining a contract, non-current		47	36
Increase (decrease) in cost of obtaining a contract, non-current		11
Total cost of obtaining a contract		127	100
Increase (decrease) in total cost of obtaining a contract		27
Cost incurred to fulfill a contract:
Cost incurred to fulfill a contract, current		38	45
Increase (decrease) in cost incurred to fulfill a contract, current	0	(7)
Contract liabilities:
Contract liabilities, current		482	468	$ 484
Increase (decrease) in contract liabilities, current		14
Contract liabilities, non-current		61	54
Increase (decrease) in contract liabilities, non-current		7
Total contract liabilities		543	$ 522
Increase (decrease) in total contract liabilities	$ 44	$ 21

XML

Business Combinations (Details) $ in Millions		1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 09, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2018 USD ($) earn_out_target	Sep. 30, 2018 USD ($)
Business Acquisition [Line Items]
Goodwill			$ 2,764	$ 2,764
Revenue		$ 148	738
Operating income (loss)		$ 2	50
Spoken
Business Acquisition [Line Items]
Purchase price	$ 172
Cash considerations	157
Contingent consideration	14		$ 16
Earn-out targets achieved | earn_out_target			2
Earn-out bonuses available | earn_out_target			3
Business Combination, Contingent Consideration, Earout Liability			$ 11
Earn-out bonus			2
Net payable to company in settlement of contingent consideration	1
Goodwill				$ 116
Net liabilities acquired	8
Fair value of intangible assets acquired	$ 64
Revenue			3
Operating income (loss)			$ (8)
Estimate of Fair Value Measurement | Spoken
Business Acquisition [Line Items]
Performance targets	3
Former Owners and Employees | Spoken
Business Acquisition [Line Items]
Contingent consideration	$ 16
Spoken Employees | Spoken
Business Acquisition [Line Items]
Contingent consideration	4
Technology-Based Intangible Assets | Spoken
Business Acquisition [Line Items]
Acquired intangible assets	56
Maximum | Technology-Based Intangible Assets | Spoken
Business Acquisition [Line Items]
Acquired intangible assets, weighted average useful life				4 years 11 months
In Process Research and Development | Spoken
Business Acquisition [Line Items]
Acquired intangible assets	5
Acquired intangible assets, weighted average useful life			5 years
Customer relationships and other intangibles | Spoken
Business Acquisition [Line Items]
Acquired intangible assets	$ 3
Acquired intangible assets, weighted average useful life				7 years 6 months

XML

Supplementary Financial Information - Consolidated Statements of Operations Information (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
OTHER INCOME (EXPENSE), NET
Interest income	$ 0		$ 3
Foreign currency (losses) gains, net	2		(1)
Income from transition services agreement, net	0		0
Net Periodic Defined Benefits Expense (Reversal of Expense), Excluding Service Cost Component	(1)		(2)
Change in fair value of emergence date warrants	(5)		18
Other, net	0		0
Total other income (expense), net	$ (2)		$ 22
Predecessor
OTHER INCOME (EXPENSE), NET
Interest income		$ 2
Foreign currency (losses) gains, net		0
Income from transition services agreement, net		3
Net Periodic Defined Benefits Expense (Reversal of Expense), Excluding Service Cost Component		8
Change in fair value of emergence date warrants		0
Other, net		1
Total other income (expense), net		$ (2)

XML

Supplementary Financial Information - Reorganization Items (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Supplementary Financial Information [Line Items]
Net gain on settlement of Liabilities subject to compromise	$ 0		$ 0
Net gain on fresh start adjustments	0		0
Bankruptcy-related professional fees	0		0
Other items, net	0		0
Reorganization items, net	0		0
Cash payments for reorganization items	$ 1		$ 0
Predecessor
Supplementary Financial Information [Line Items]
Net gain on settlement of Liabilities subject to compromise		$ 1,778
Net gain on fresh start adjustments		1,697
Bankruptcy-related professional fees		(56)
Other items, net		(3)
Reorganization items, net		3,416
Cash payments for reorganization items		2,524
Claims paid		2,468
Payments for emergence and success fees		$ 56

XML

Supplementary Financial Information - Supplementary Cash Flow Information (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018	Sep. 30, 2018	Sep. 30, 2017
Other Significant Noncash Transactions [Line Items]
Restricted Cash, Current	$ 55	$ 65	$ 0	$ 0	$ 85
Restricted Cash, Noncurrent	4	4	4	4	5
Cash	417	366	743	700	876
OTHER PAYMENTS
Interest payments	0		48
Income tax payments	2		7
NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures	1		4
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 476	435	$ 747	$ 704	966
Predecessor
OTHER PAYMENTS
Interest payments		15
Income tax payments		7
NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures		0
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents		$ 435			$ 966

XML

Business Restructuring Reserves and Programs (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Restructuring Cost and Reserve [Line Items]
Restructuring charges, net	$ 10		$ 7
Restructuring Reserve [Roll Forward]
Restructuring charges, net	$ 10		7
Cash payments			(1)
Restructuring Reserve, ending balance			6
Fiscal 2019 Restructuring Program [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges, net			7
Restructuring Reserve [Roll Forward]
Restructuring charges, net			7
Fiscal 2018 Restructuring Program
Restructuring Reserve [Roll Forward]
Restructuring Reserve, beginning balance			54
Cash payments			(5)
Impact of foreign currency fluctuations			(1)
Restructuring Reserve, ending balance			48
Fiscal 2008-2015 Restructuring Programs
Restructuring Reserve [Roll Forward]
Restructuring Reserve, beginning balance			44
Cash payments			(5)
Restructuring Reserve, ending balance			39
Employee Separation Costs | Fiscal 2019 Restructuring Program [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges, net			7
Restructuring Reserve [Roll Forward]
Restructuring charges, net			7
Cash payments			(1)
Restructuring Reserve, ending balance			6
Employee Separation Costs | Fiscal 2018 Restructuring Program
Restructuring Reserve [Roll Forward]
Restructuring Reserve, beginning balance			54
Cash payments			(5)
Impact of foreign currency fluctuations			(1)
Restructuring Reserve, ending balance			48
Employee Separation Costs | Fiscal 2008-2015 Restructuring Programs
Restructuring Reserve [Roll Forward]
Restructuring Reserve, beginning balance			38
Cash payments			(4)
Restructuring Reserve, ending balance			34
Lease Obligations | Fiscal 2019 Restructuring Program [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges, net			0
Restructuring Reserve [Roll Forward]
Restructuring charges, net			0
Cash payments			0
Restructuring Reserve, ending balance			0
Lease Obligations | Fiscal 2018 Restructuring Program
Restructuring Reserve [Roll Forward]
Restructuring Reserve, beginning balance			0
Cash payments			0
Impact of foreign currency fluctuations			0
Restructuring Reserve, ending balance			0
Lease Obligations | Fiscal 2008-2015 Restructuring Programs
Restructuring Reserve [Roll Forward]
Restructuring Reserve, beginning balance			6
Cash payments			(1)
Restructuring Reserve, ending balance			$ 5
Predecessor
Restructuring Cost and Reserve [Line Items]
Restructuring charges, net		$ 14
Restructuring Reserve [Roll Forward]
Restructuring charges, net		$ 14

XML

Financing Arrangements - Schedule of Debt (Details) - USD ($)	Dec. 31, 2018	Sep. 30, 2018	Jun. 11, 2018
Debt Instrument [Line Items]
Principal	$ 3,246,000,000	$ 3,253,000,000
Net of discounts and issuance costs	3,124,000,000	3,126,000,000
Debt maturing within one year	(29,000,000)	(29,000,000)
Long-term debt, net of current portion	3,095,000,000	3,097,000,000
Term Loan Credit Agreement due December 15, 2024
Debt Instrument [Line Items]
Principal	2,896,000,000	2,903,000,000
Net of discounts and issuance costs	2,864,000,000	2,870,000,000
Convertible 2.25% senior notes due June 15, 2023
Debt Instrument [Line Items]
Principal	350,000,000	350,000,000	$ 350,000,000
Net of discounts and issuance costs	$ 260,000,000	$ 256,000,000

XML

Financing Arrangements - Narrative (Details) - USD ($)			1 Months Ended	3 Months Ended
	Jun. 18, 2018	Dec. 15, 2017	Dec. 31, 2017	Dec. 31, 2018	Sep. 30, 2018	Jun. 11, 2018
Debt Instrument [Line Items]
Debt face amount				$ 3,246,000,000	$ 3,253,000,000
Weighted average contractual interest rate of debt				6.50%	6.40%
Amortization of debt issuance costs			$ 0	$ 4,000,000
Term Loan
Debt Instrument [Line Items]
Debt face amount				2,896,000,000	$ 2,903,000,000
Interest expense on debt			$ 9,000,000	50,000,000
Term Loan | Term Loan Credit Agreement due December 15, 2024
Debt Instrument [Line Items]
Debt face amount		$ 2,925,000,000
Term Loan | Revolving Credit Facility | LIBOR Loans | Floor | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	0.00%	1.00%
Line of Credit | Revolving Credit Facility | ABL Credit Agreement
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity		$ 300,000,000
Line of Credit | Letter of Credit | ABL Credit Agreement
Debt Instrument [Line Items]
Letters of credit, maximum amount		$ 150,000,000
Letters of credit outstanding				46,000,000
Letter of credit, remaining borrowing capacity				155,000,000
Convertible Notes
Debt Instrument [Line Items]
Debt face amount				350,000,000	350,000,000	$ 350,000,000
Interest rate, stated percentage						2.25%
Interest expense on debt				$ 6,000,000
Effective interest rate				9.20%
Over-Allotment Option | Convertible Notes
Debt Instrument [Line Items]
Debt face amount						$ 50,000,000
Other liabilities
Debt Instrument [Line Items]
Capital lease obligations				$ 27,000,000	31,000,000
Sale Lease Back Transaction [Member] | Avaya Private Cloud Services Business | Other liabilities
Debt Instrument [Line Items]
Capital lease obligations				$ 22,000,000	$ 26,000,000

XML

Financing Arrangements - Carrying Amount of Convertible Debt (Details) - USD ($)	Dec. 31, 2018	Sep. 30, 2018	Jun. 11, 2018
Debt Instrument [Line Items]
Principal	$ 3,246,000,000	$ 3,253,000,000
Convertible Notes
Debt Instrument [Line Items]
Principal	350,000,000	$ 350,000,000	$ 350,000,000
Less:
Unamortized debt discount	(87,000,000)
Unamortized issuance costs	(7,000,000)
Net carrying amount	$ 256,000,000

XML

Derivative Instruments and Hedging Activities - Narrative (Details) $ / shares in Units, $ in Millions		3 Months Ended
	May 16, 2018 counterparty	Dec. 31, 2018 USD ($) agreement	Dec. 15, 2017 $ / shares shares
Derivative [Line Items]
Number of counterparties | counterparty	6
Class of warrant or right, number of securities called by each warrant or right (in shares) | shares			5,645,200
Class of warrant or right, exercise price of warrants or rights (in USD per share) | $ / shares			$ 25.55
Interest rate contracts
Derivative [Line Items]
Derivative fixed interest rate	2.935%
Number of instruments held (agreement) | agreement		6
Derivative notional amount		$ 1,800
Expected gain (loss) to be reclassified within twelve months		$ 8

XML

Derivative Instruments and Hedging Activities - Assumptions Used (Details)	Dec. 31, 2018 year $ / shares	Sep. 30, 2018 year $ / shares
Expected volatility
Derivative [Line Items]
Warrants, measurement input	0.5486	0.5014
Risk-free interest rates
Derivative [Line Items]
Warrants, measurement input	0.0247	0.0290
Expected remaining life (in years)
Derivative [Line Items]
Warrants, measurement input | year	3.96	4.21
Warrants
Derivative [Line Items]
Price per share of common stock (in usd per share) | $ / shares	$ 14.56	$ 22.14

XML

Derivative Instruments and Hedging Activities - Fair Value (Details) - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018	Sep. 30, 2017
Derivative [Line Items]
Derivative Asset	$ 0	$ 3
Derivative Liability	47
Derivatives Designated as Hedging Instruments:
Derivative [Line Items]
Derivative Asset	0
Derivative Liability	31
Derivatives Designated as Hedging Instruments: | Other assets | Interest rate contracts
Derivative [Line Items]
Derivative Asset	0	3
Derivative Liability	0	0
Derivatives Designated as Hedging Instruments: | Other current liabilities | Interest rate contracts
Derivative [Line Items]
Derivative Asset	0	0
Derivative Liability	7	7
Derivatives Not Designated as Hedging Instruments: | Other liabilities | Warrants
Derivative [Line Items]
Derivative Asset	0	0
Derivative Liability	$ 16	$ 34
Predecessor
Derivative [Line Items]
Derivative Asset			$ 3
Derivative Liability			41
Predecessor | Derivatives Designated as Hedging Instruments:
Derivative [Line Items]
Derivative Asset			3
Derivative Liability			$ 7

XML

Derivative Instruments and Hedging Activities - Derivatives Designated as Cash Flow Hedges (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	10 Months Ended
	Dec. 31, 2017	Dec. 31, 2018	Sep. 30, 2018
Derivative [Line Items]
Interest Expense	$ 9	$ 60
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	$ (13)	(20)	$ (13)
Accumulated Other Comprehensive (Loss) Income
Derivative [Line Items]
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent		$ (20)	$ (13)

XML

Derivative Instruments and Hedging Activities - Derivatives Not Designated as Hedging Instruments (Details) - Other income (expense), net - Derivatives Not Designated as Hedging Instruments: - Emergence Date Warrants - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Derivative [Line Items]
Derivative, gain (loss)	$ (5)		$ 18
Predecessor
Derivative [Line Items]
Derivative, gain (loss)		$ 0

XML

Derivative Instruments and Hedging Activities - Presented on a Net Basis (Details) - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018	Sep. 30, 2017
Derivative [Line Items]
Gross amounts recognized in the consolidated balance sheet, Asset	$ 0	$ 3
Gross amounts recognized in the consolidated balance sheet, Liability	47	41
Gross amount subject to offset in master netting arrangements not offset in the Consolidated Balance Sheet, Asset	0	(3)
Gross amount subject to offset in master netting arrangements not offset in the Consolidated Balance Sheet, Liability	0	(3)
Derivative Asset	0
Derivative Liability	$ 47
Predecessor
Derivative [Line Items]
Gross amounts recognized in the consolidated balance sheet, Asset			$ 3
Derivative Asset		0
Derivative Liability		$ 38

XML

Intangible Assets (Details) - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Cost	$ 3,160	$ 3,159
Accumulated amortization	(345)	(262)
Finite-lived intangible assets, net	2,815	2,897
Indefinite-lived intangible assets, net	334	337
Intangible assets, net	3,149	3,234
Acquired technology and patents
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Cost	961	959
Accumulated amortization	(178)	(135)
Finite-lived intangible assets, net	783	824
Customer relationships and other intangibles
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Cost	2,156	2,157
Accumulated amortization	(163)	(124)
Finite-lived intangible assets, net	1,993	2,033
Trademarks and trade names
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Cost	43	43
Accumulated amortization	(4)	(3)
Finite-lived intangible assets, net	39	40
Acquired technology and patents
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived intangible assets, net	2	5
Trademarks and trade names
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived intangible assets, net	332	332
Trademarks and trade names
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Intangible assets, net	371	372
Customer relationships and other intangibles
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Intangible assets, net	1,993	2,033
Acquired technology and patents
Finite-lived and Indefinite-lived Intangible Assets [Line Items]
Intangible assets, net	$ 785	$ 829

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Intangible Assets - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 14		$ 83
Predecessor
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets		$ 13

XML

Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	$ 2	$ 5
Liabilities	63	56
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	2	2
Liabilities	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	3
Liabilities	31	7
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	0
Liabilities	32	49
Investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	2	2
Investments | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	2	2
Investments | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	0
Investments | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	0
Interest rate contracts
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	3
Liabilities	31	7
Interest rate contracts | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	0
Liabilities	0	0
Interest rate contracts | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	3
Liabilities	31	7
Interest rate contracts | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets	0	0
Liabilities	0	0
Spoken acquisition Earn-outs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	16	15
Spoken acquisition Earn-outs | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	0	0
Spoken acquisition Earn-outs | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	0	0
Spoken acquisition Earn-outs | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities		15
Emergence Date Warrants | Foreign currency forward contracts
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	16	34
Emergence Date Warrants | Foreign currency forward contracts | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	0	0
Emergence Date Warrants | Foreign currency forward contracts | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	0	0
Emergence Date Warrants | Foreign currency forward contracts | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	$ 16	$ 34

XML

Fair Value Measurements - Level 3 Liabilities Measured at Fair Value on a Recurring Basis (Details) - Level 3 $ in Millions	3 Months Ended
	Dec. 31, 2018 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair value of derivative liability, beginning balance	$ 49
Change in fair value	(17)
Fair value of derivative liability, ending balance	32
Emergence Date Warrants
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair value of derivative liability, beginning balance	34
Change in fair value	(18)
Fair value of derivative liability, ending balance	16
Spoken acquisition Earn-outs
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair value of derivative liability, beginning balance	15
Change in fair value	1
Fair value of derivative liability, ending balance	$ 16

XML

Fair Value Measurements - Fair Value of Financial Instruments (Details) - USD ($)	Dec. 31, 2018	Sep. 30, 2018	Jun. 11, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt face amount	$ 3,246,000,000	$ 3,253,000,000
Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	3,100,000,000	3,289,000,000
Term Loan Credit Agreement due December 15, 2024
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt face amount	2,896,000,000	2,903,000,000
Term Loan Credit Agreement due December 15, 2024 | Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	2,800,000,000	2,932,000,000
Convertible 2.25% senior notes due June 15, 2023
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt face amount	350,000,000	350,000,000	$ 350,000,000
Convertible 2.25% senior notes due June 15, 2023 | Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	$ 300,000,000	$ 357,000,000

XML

Income Taxes - Income Taxes Narrative (Details) $ in Millions	10 Months Ended
	Sep. 30, 2018 USD ($)
Income Tax Disclosure [Abstract]
Net operating loss recognition and intellectual property	$ (366)

XML

Benefit Obligations - Narrative (Details) $ in Millions	3 Months Ended
	Dec. 31, 2018 USD ($)
Post-retirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Contributions by employer	$ 3
Reimbursement of prior period payments	(2)
U.S. | Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Estimated future employer contributions in current fiscal year	17
U.S. | Postretirement Health Coverage
Defined Benefit Plan Disclosure [Line Items]
Expected future benefit payments, next 12 months	11
Non-US
Defined Benefit Plan Disclosure [Line Items]
Contributions by employer	4
Non-US | Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Estimated future employer contributions in next fiscal year	21
Not Pre-Funded | U.S.
Defined Benefit Plan Disclosure [Line Items]
Contributions by employer	$ 9

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Benefit Obligations - Components of the Pension and Post-Retirement Net Periodic Benefit Cost (Credit) (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
U.S. | Pension Plan
Components of net periodic benefit (credit) cost
Service cost	$ 0		$ 1
Interest cost	1		10
Expected return on plan assets	(2)		(15)
Amortization of actuarial loss	0		0
Net periodic benefit cost (credit)	(1)		(4)
U.S. | Pension Plan | Predecessor
Components of net periodic benefit (credit) cost
Service cost		$ 1
Interest cost		22
Expected return on plan assets		(38)
Amortization of actuarial loss		20
Net periodic benefit cost (credit)		5
U.S. | Post-retirement Benefits
Components of net periodic benefit (credit) cost
Interest cost	0
Expected return on plan assets	0		3
Amortization of prior service cost	0		(2)
Amortization of actuarial loss	0		0
Curtailment, settlement gain			0
Net periodic benefit cost (credit)	0		1
U.S. | Post-retirement Benefits | Predecessor
Components of net periodic benefit (credit) cost
Interest cost		3
Expected return on plan assets		(2)
Amortization of prior service cost		(3)
Amortization of actuarial loss		2
Net periodic benefit cost (credit)		0
Non-US | Pension Plan
Components of net periodic benefit (credit) cost
Service cost	0		2
Interest cost	0		2
Expected return on plan assets	0		0
Amortization of actuarial loss	0
Curtailment, settlement gain			0
Net periodic benefit cost (credit)	$ 0		$ 4
Non-US | Pension Plan | Predecessor
Components of net periodic benefit (credit) cost
Service cost		2
Interest cost		3
Expected return on plan assets		(1)
Amortization of actuarial loss		2
Net periodic benefit cost (credit)		$ 6

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Share-based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 1		$ 6
2017 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			3 years
Director | 2017 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			1 year
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			167,296
Grants in period, weighted average grant date fair value (in dollars per share)			$ 15.84
Predecessor
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Accelerated compensation cost		$ 3

XML

Capital Stock - Narrative (Details) - USD ($)	Dec. 31, 2018	Nov. 14, 2018	Sep. 30, 2018
Class of Stock [Line Items]
Preferred Stock, Shares Authorized	55,000,000
Preferred stock, par value (in usd per share)			$ 0.01
Preferred shares issued	0
Common stock, shares authorized	550,000,000		550,000,000
Common stock, par value (usd per share)	$ 0.01		$ 0.01
Common stock, shares issued	110,708,203		110,218,653
Common stock, shares outstanding	110,695,523		110,012,790
Common stock, issued for GUC (shares)	12,680
Warrant repurchase program, authorized amount		$ 15,000,000
As Previously Reported
Class of Stock [Line Items]
Common stock, shares issued	110,708,203

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Net Income (Loss) Per Common Share - Reconciliation (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended	10 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018	Sep. 30, 2018
Numerator
Net income (loss)	$ 237		$ 9	$ 237
Dividends and accretion to preferred stockholders	0		0
Undistributed earnings	$ 237		$ 9
Percentage allocated to common stockholders	100.00%		100.00%
Numerator for basic and diluted earnings per common share	$ 237		$ 9
Weighted average shares outstanding
Denominator for basic earnings per weighted average common shares (in shares)	109.8		110.3
Effect of dilutive securities
Denominator for diluted earnings (loss) per weighted average common shares (in shares)	110.3		111.2
Net income per common share
Basic (in usd per share)	$ 2.16		$ 0.08
Diluted (in usd per share)	$ 2.15		$ 0.08
Weighted average number of shares - basic (in shares)	109.8		110.3
Basic weighted average common stock and common stock equivalents (preferred shares) (in shares)	109.8		110.3
Restricted stock units
Effect of dilutive securities
Share-based payment arrangements (in shares)	0.5		0.9
Predecessor
Numerator
Net income (loss)		$ 2,977
Dividends and accretion to preferred stockholders		(6)
Undistributed earnings		$ 2,971
Percentage allocated to common stockholders		86.90%
Numerator for basic and diluted earnings per common share		$ 2,582
Weighted average shares outstanding
Denominator for basic earnings per weighted average common shares (in shares)		497.3
Effect of dilutive securities
Denominator for diluted earnings (loss) per weighted average common shares (in shares)		497.3
Net income per common share
Basic (in usd per share)		$ 5.19
Diluted (in usd per share)		$ 5.19
Weighted average number of shares - basic (in shares)		497.3
Basic weighted average common stock and common stock equivalents (preferred shares) (in shares)		572.4
Predecessor | Restricted stock units
Effect of dilutive securities
Share-based payment arrangements (in shares)		0.0

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Net Income (Loss) Per Common Share - Narrative (Details) shares in Millions	3 Months Ended
	Dec. 31, 2018 $ / shares shares
Bond Hedge and Call Spread Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Conversion price (in usd per share) | $ / shares	$ 37.3625
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	1.1
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	0.4
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	5.6

XML

Operating Segments - Summarized Financial Information of Operating Segments (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018	Sep. 30, 2018
Segment Reporting Information
REVENUE	$ 148		$ 738
GROSS PROFIT	78		407
OPERATING EXPENSES
Selling, general and administrative	50		257
Research and development	9		53
Amortization of intangible assets	7		40
Restructuring charges, net	10		7
TOTAL OPERATING EXPENSES	76		357
OPERATING INCOME	2		50
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET	(11)		(38)
(LOSS) INCOME BEFORE INCOME TAXES	(9)		12
Total Assets			7,759	$ 7,679
Products & Solutions
Segment Reporting Information
REVENUE			326
Services
Segment Reporting Information
REVENUE			422
Operating Segments | Products & Solutions
Segment Reporting Information
REVENUE	77		326
GROSS PROFIT	49		214
Operating Segments | Services
Segment Reporting Information
REVENUE	94		422
GROSS PROFIT	70		255
Unallocated
Segment Reporting Information
REVENUE	(23)		(10)
GROSS PROFIT	$ (41)		$ (62)
Predecessor
Segment Reporting Information
REVENUE		$ 604
GROSS PROFIT		362
OPERATING EXPENSES
Selling, general and administrative		264
Research and development		38
Amortization of intangible assets		10
Restructuring charges, net		14
TOTAL OPERATING EXPENSES		326
OPERATING INCOME		36
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET		3,400
(LOSS) INCOME BEFORE INCOME TAXES		3,436
Predecessor | Operating Segments | Products & Solutions
Segment Reporting Information
REVENUE		253
GROSS PROFIT		169
Predecessor | Operating Segments | Services
Segment Reporting Information
REVENUE		351
GROSS PROFIT		196
Predecessor | Unallocated
Segment Reporting Information
REVENUE		0
GROSS PROFIT		$ (3)

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Accumulated Other Comprehensive (Loss) Income - Components (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	$ 1,668		$ 2,051
Other comprehensive income (loss) before reclassifications	(13)		(30)
Ending Balance	1,893	$ 1,668	2,132
Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0		51
Other comprehensive income (loss) before reclassifications	0		0
Ending Balance	0	0	51
Foreign Currency Translation
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0		(31)
Other comprehensive income (loss) before reclassifications	(13)		1
Ending Balance	(13)	0	(30)
Unrealized Loss on Term Loan Interest Rate Swap
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0		(2)
Other comprehensive income (loss) before reclassifications	0		(31)
Ending Balance	0	0	(23)
Other
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0		0
Other comprehensive income (loss) before reclassifications	0		0
Ending Balance	0	0	0
Accumulated Other Comprehensive (Loss) Income
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0		18
Ending Balance	(13)	0	$ (2)
Predecessor
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	1,668	(5,013)
Other comprehensive income (loss) before reclassifications		(21)
Amounts reclassified to earnings		16
Pension settlement		721
(Provision for) benefit from income taxes		(58)
Ending Balance		1,668
Predecessor | Eliminations
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	790
Ending Balance		790
Predecessor | Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0	(1,375)
Other comprehensive income (loss) before reclassifications		(24)
Amounts reclassified to earnings		16
Pension settlement		721
(Provision for) benefit from income taxes		(58)
Ending Balance		0
Stockholders' Equity Attributable to Parent, Before Elimination Of Predecessor Company Accumulated Other Comprehensive Loss		(720)
Predecessor | Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items | Eliminations
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	720
Ending Balance		720
Predecessor | Foreign Currency Translation
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0	(72)
Other comprehensive income (loss) before reclassifications		3
Amounts reclassified to earnings		0
(Provision for) benefit from income taxes		0
Ending Balance		0
Stockholders' Equity Attributable to Parent, Before Elimination Of Predecessor Company Accumulated Other Comprehensive Loss		(69)
Predecessor | Foreign Currency Translation | Eliminations
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	69
Ending Balance		69
Predecessor | Unrealized Loss on Term Loan Interest Rate Swap
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0	0
Other comprehensive income (loss) before reclassifications		0
Amounts reclassified to earnings		0
(Provision for) benefit from income taxes		0
Ending Balance		0
Stockholders' Equity Attributable to Parent, Before Elimination Of Predecessor Company Accumulated Other Comprehensive Loss		0
Predecessor | Unrealized Loss on Term Loan Interest Rate Swap | Eliminations
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0
Ending Balance		0
Predecessor | Other
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	0	(1)
Other comprehensive income (loss) before reclassifications		0
Amounts reclassified to earnings		0
(Provision for) benefit from income taxes		0
Ending Balance		0
Stockholders' Equity Attributable to Parent, Before Elimination Of Predecessor Company Accumulated Other Comprehensive Loss		(1)
Predecessor | Other | Eliminations
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	1
Ending Balance		1
Predecessor | Accumulated Other Comprehensive (Loss) Income
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning Balance	$ 0	(1,448)
Ending Balance		0
Stockholders' Equity Attributable to Parent, Before Elimination Of Predecessor Company Accumulated Other Comprehensive Loss		$ (790)

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Related Party Transactions (Details) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 15, 2017 USD ($)	Dec. 31, 2018 USD ($) director	Sep. 30, 2018 USD ($)
Related Party Transaction [Line Items]
Number of directors | director			7
Flex Ltd | Affiliated Entity
Related Party Transaction [Line Items]
Accounts payable, related parties			$ 8	$ 4
Flex Ltd | Purchased Goods And Services From Flex Ltd. | Board of Directors Chairman
Related Party Transaction [Line Items]
Cost of goods and services sold	$ 2		$ 8
Flex Ltd | Predecessor | Purchased Goods And Services From Flex Ltd. | Board of Directors Chairman
Related Party Transaction [Line Items]
Cost of goods and services sold		$ 6
Non-Employee Director
Related Party Transaction [Line Items]
Number of directors | director			6

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Commitments and Contingencies - General (Details) - USD ($) $ in Millions	1 Months Ended	2 Months Ended	3 Months Ended
	Dec. 31, 2017	Dec. 15, 2017	Dec. 31, 2018
Loss Contingencies [Line Items]
Legal costs	$ 0		$ 0
Predecessor
Loss Contingencies [Line Items]
Legal costs		$ 37

XML

Commitments and Contingencies - Intellectual Property and Commercial Disputes (Details) $ in Thousands	Jun. 12, 2018 USD ($)
Misappropriations Claim
Loss Contingencies [Line Items]
Estimated litigation liability	$ 1,210
Fraud Claim
Loss Contingencies [Line Items]
Estimated litigation liability	$ 0

XML

Commitments and Contingencies - Product Warranties (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2018	Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]
Product warranties, maximum term	2 years
Amount reserved for product warranties	$ 1	$ 2

XML

Commitments and Contingencies - Letters of Credit and Guarantees (Details) $ in Millions	Dec. 31, 2018 USD ($)
Line of Credit Facility [Line Items]
Restricted cash	$ 4
Standby Letters of Credit
Line of Credit Facility [Line Items]
Letters of credit, maximum amount	$ 64

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Commitments and Contingencies - Transactions with Nokia (Details) $ in Millions	3 Months Ended
	Dec. 31, 2018 USD ($)
Indemnification Agreement
Loss Contingencies [Line Items]
Threshold amount of contribution and distribution agreement	$ 50