Contract Costs

6 Months Ended

Jun. 30, 2024

Capitalized Contract Cost [Abstract]

Contract Costs

Revenue from Contracts with Customers

Disaggregation of Revenue from Contracts with Customers

The following table presents a disaggregation of revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
in millions	2024		2023		2024		2023
Americas
Recurring	$	222	$	230	$	466	$	486
Perpetual software licenses, hardware and other	2		3		7		8
Consulting services	26		35		54		66
Total Americas	250		268		527		560
EMEA
Recurring	93		89		192		176
Perpetual software licenses, hardware and other	1		5		3		12
Consulting services	22		24		46		47
Total EMEA	116		118		241		235
APJ
Recurring	53		52		98		98
Perpetual software licenses, hardware and other	2		5		3		6
Consulting services	15		19		32		39
Total APJ	70		76		133		143
Total Revenue	$	436	$	462	$	901	$	938

Rental revenue, which is included in recurring revenue in the above table, was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
in millions	2024		2023		2024		2023
Rental revenue*	$	54	$	56	$	109	$	107

*Rental revenue includes hardware maintenance.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:

	As of
in millions	June 30, 2024		December 31, 2023
Accounts receivable, net	$	248	$	286
Contract assets	$	4	$	9
Current deferred revenue	$	529	$	570
Long-term deferred revenue	$	10	$	22

Revenue recognized during the six months ended June 30, 2024 from amounts included in deferred revenue at the beginning of the period was $355 million.

Transaction Price Allocated to Unsatisfied Obligations

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at June 30, 2024:

in millions	Total at June 30, 2024		Year 1		Year 2 and Thereafter
Remaining unsatisfied obligations	$	2,300	$	1,367	$	933

The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,165 million of the amount is under contracts that are subject to customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us of cancellation. The Company expects to recognize revenue of approximately $576 million in the next year from contracts that are non-cancelable. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.

Contract Costs

The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in capitalized contract costs, net on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:

in millions	December 31, 2023		Capitalized		Amortization		June 30, 2024
Capitalized contract costs	$	68	$	2	$	(18)	$	52

in millions	December 31, 2022		Capitalized		Amortization		June 30, 2023
Capitalized contract costs	$	92	$	6	$	(22)	$	76