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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K

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

For The Fiscal Year Ended September 30, 2020
or

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

Commission File Number: 001-38289

AVAYA HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

2605 Meridian Parkway, Suite 200

Durham, North Carolina

(Address of Principal executive offices)

26-1119726

(I.R.S. Employer Identification No.)

27713
(Zip Code)

Registrant's telephone number, including area code: (908) 953-6000
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock

Trading Symbol(s)
AVYA

Name of Each Exchange on Which Registered
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ 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 ☒ 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 ☐ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant's Common Stock held by non-affiliates on March 31, 2020, the last business day of the
registrant's most recently completed second quarter, was $662 million.

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 ☒ No ☐
As of October 31, 2020, 83,392,096 shares of Common Stock, $.01 par value, of the registrant were outstanding.

Part III of this Annual Report on Form 10-K will be incorporated by reference from certain portions of the registrant's definitive proxy
statement for its 2021 Annual General Meeting of Stockholders, or will be included in an amendment hereto, to be filed with the
Securities and Exchange Commission not later than 120 days after the close of the registrant's fiscal year ended September 30, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

Description

PART I

PART II

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

PART III

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Exhibits, Financial Statement Schedules
Form 10-K Summary

PART IV

Item

1.
1A.
1B.
2.
3.
4.

5.

6.
7.

7A.
8.
9.

9A.
9B.

10.
11.
12.

13.
14.

15.
16.

Page

2
15
38
38
38
38

39
41
43
58
59
145
145
145

146
146

146
146
146

147
151

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 Annual Report on Form 10-K contains the registered and unregistered trademarks or service marks of Avaya and are the
property of Avaya Holdings Corp. and/or its affiliates. This Annual Report on Form 10-K 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.

i

[THIS PAGE INTENTIONALLY LEFT BLANK]

Cautionary Note Regarding Forward-looking Statements

Certain statements in this Annual Report on Form 10-K, 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, uncertainties 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. Risks, uncertainties
and other factors that may cause these forward-looking statements to be inaccurate include, among others: the risks and factors
discussed in Part I, Item 1A "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" to this Annual Report on Form 10-K.

All forward-looking statements are made as of the date of this Annual Report on Form 10-K and the risk that actual results will
differ materially from the expectations expressed in this Annual 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 Annual 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 Annual
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 Annual Report will be achieved.

Marketing, Ranking and Other Industry Data

This Annual Report on Form 10-K includes industry and trade association data, forecasts and information that we have
prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry
publications and surveys and other information available to us. Some data is also based on our good faith estimates, which are
derived from management’s knowledge of the industry and independent sources. Industry publications and surveys and
forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. We have
not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic
assumptions relied upon therein. In particular, the Aragon reports described below represent research opinion or viewpoints
published, as part of a syndicated subscription service, by Aragon Research, Inc., ("Aragon") and are not representations of fact.
Each of the Aragon reports speaks as of its original publication date (and not as of the date of this filing) and the opinions
expressed in the Aragon reports are subject to change without notice. Aragon does not endorse any vendor, product or service
depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings
or other designation. Aragon research publications consist of the opinions of Aragon's research organizations and should not be
construed as statements of fact. Aragon disclaim all warranties, expressed or implied, with respect to this research, including
any warranties of merchantability or fitness for a particular purpose. Statements as to our market position are based on market
data currently available to us. Our estimates involve risks and uncertainties and are subject to change based on various factors,
including those discussed under the heading Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Certain information
in the text of this Annual Report on Form 10-K is contained in industry publications or data compiled by a third-party. The
sources of these industry publications and data are provided below:

•

•

Aragon Report: The Aragon Research GlobeTM for Unified Communications and Collaboration, 2020, Jim Lundy, et
al., April 2020

Aragon Report: The Aragon Research GlobeTM for Intelligent Contact Center, 2020, Jim Lundy, June 2020

1

Item 1.

Business

Our Company

PART I

Avaya is a global leader in digital communications products, solutions and services for businesses of all sizes delivering most of
its technology through software and services. We enable organizations around the globe to succeed by creating
intelligent communications experiences for our clients, their employees and their customers. Avaya builds open, converged and
innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premise 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.

Businesses are built by the experiences they provide, and everyday Avaya delivers millions of those experiences globally
through its software and solutions. Avaya is shaping the future of businesses and workplaces, with innovation and partnerships
that deliver significant, tangible business results. Our cloud communications solutions and multi-cloud software ecosystem
power tailored, intelligent, and effortless customer and employee experiences that enable our clients to effectively engage and
interact with their customers.

During fiscal 2020, Avaya shifted its entire comprehensive portfolio of capabilities to Avaya OneCloud, which offers
significant capabilities across contact center, unified communications and collaboration, and communications platform as a
service (“CPaaS”). We believe Avaya OneCloud uniquely positions us to address a customer’s needs in creating a Digital
Workplace for their campus-based and remote employees through Unified Communications and Collaboration and the
Customer Experience Center, our name for contact centers, helping clients deliver tangible business results.

Avaya offers a range of sales and licensing models that can be deployed on-premise or via a public, private, or hybrid cloud.
During fiscal 2020, our investments to transform our revenue generation model from one that was legacy on-premise to one that
is cloud-facing began positively contributing to our financial performance. Avaya offers an open, extensible development
platform, enabling customers and third parties to easily create custom applications and automated workflows for their unique
needs, integrating Avaya’s capabilities into the customer's existing infrastructure and business applications. Our solutions
enable a seamless communications experience that adapts to how employees work instead of changing how they work.

Avaya also offers one of the broadest portfolios of business devices in the industry, including handsets, video conferencing
units and headsets to meet the needs of every type of worker across a customer’s organization and help them get the most out of
their communications investments. Avaya IP-enabled handsets, multimedia devices and conferencing systems enhance
collaboration and productivity, and position organizations to incorporate future technological advancements.

Operating Segments

Our business has two operating segments: Products & Solutions and Services.

Products & Solutions

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

•

•

Unified Communications and Collaboration ("UCC"): Avaya's UCC solutions enable organizations to reimagine
collaborative work environments and help companies increase employee productivity, improve customer service and
reduce costs. With Avaya's UCC solutions, organizations can provide their workers with a single application, or “app,”
for all-channel calling, messaging, meetings and team collaboration with the same ease of use as existing consumer
apps. Avaya embeds communications directly into the apps, browsers and devices employees use every day giving
them a more natural, efficient and flexible way to connect, engage, respond and share - where and how they want.
During fiscal 2020, we expanded our UCC portfolio to include cloud-based solutions.

Contact Center ("CC"): Avaya’s industry-leading digital contact center solutions enable clients to build a customized
portfolio of applications to drive 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 third-party integration that can improve customer service and help companies compete more
effectively. Like the UCC business, Avaya is evolving CC solutions for cloud deployment and, in fiscal 2020, we
expanded our CC portfolio to include cloud-based solutions.

• We are also focused on ensuring an outstanding experience for mobile callers by integrating transformative

technologies, including Artificial Intelligence ("AI"), mobility, big data analytics and cybersecurity into our CC
solutions. As our customers use these solutions to gain a deeper understanding of their customer needs, we believe that
their teams become more efficient and effective and, as a result, their customer loyalty grows.

2

Services

Complementing our product and solutions portfolio is a global, award-winning services portfolio, delivered by Avaya and our
extensive partner ecosystem. Our services portfolio consists of our global support services, enterprise cloud and managed
services and professional services. We also classify customers who upgrade and acquire new technology through our
subscription offerings as part of our Services segment.

•

•

•

Global Support Services provide offerings that help businesses protect their technology investments and address the
risk of system outages. We help our customers gain a competitive edge through proactive problem prevention, rapid
resolution and continual solution optimization. Most of our global support services revenue is recurring in nature.

Enterprise Cloud and Managed Services enable customers to take advantage of our technology via the cloud, on-
premise, or a hybrid of both, depending on the solution and the needs of the customer. Most of our enterprise cloud
and managed services revenue is recurring in nature and based on multi-year services contracts.

Professional Services enable our customers to take full advantage of their IT and communications solution investments
to drive measurable business results. Our experienced consultants and engineers partner with customers along each
step of the solution lifecycle to deliver services that add value and drive business transformation. Most of our
professional services revenue is non-recurring in nature.

With these comprehensive services, customers can leverage communications technology to help them maximize their business
results. We help our customers use communications to minimize the risk of outages, drive employee productivity and deliver a
differentiated customer experience.

Our services teams also help our customers transition at their desired pace to next generation communications technology
solutions. Our customers can choose the level of support for their communications solutions best suited for their needs, which
may include deployment, training, monitoring, solution management, optimization and more. Our systems and service team’s
performance monitoring can quickly identify and address issues before they arise. Remote diagnostics and resolutions focus on
fixing existing problems and avoiding potential issues in order to help our customers save time and reduce the risk of an outage.

Avaya OneCloud Deployment Options and Capabilities

Cloud and Software-as-a-Service (“SaaS”) models generally refer to the products and services that allow organizations to move
from owning, managing and running solutions to paying only for the capabilities they need. Avaya OneCloud provides an
option for customers to access all of this and customize as they see fit.

Avaya OneCloud provides the full spectrum of deployment options, including via private, public and hybrid cloud, as well as
on-premise. This enables organizations to deploy our solutions in the way that best serves their business requirements and
complements their existing investments, while moving with the speed and agility they require.

Avaya OneCloud, delivered as Private, Public, Hybrid or On-Premise

•

•

Private cloud: Each organization has its own instance of the software, although the platform is shared across multiple
organizations.

Public cloud: Each organization has a tenant of a shared instance of the software on a shared platform.

• Hybrid cloud: In a hybrid deployment, customers are able to leverage private cloud features that are already

performing to their specifications and then integrate newly developed capabilities from the broader public cloud
portfolio.

Avaya’s solutions are addressing the convergence of private and public cloud deployments observed across the industry. Used
in conjunction with our private cloud solution, a customer can use a public cloud to provide capability at the edge of their
network in a cost effective manner. Avaya’s investments in data-driven intelligent automation mean that if an organization
needs to deploy an advanced, integrated, value-focused solution via a private cloud but needs it deployed in just hours, Avaya
can deliver such a solution on the requested timeline. The benefit to the organization is “always available” access to the latest
capabilities and innovation, quickly and at scale.

Avaya OneCloud, delivered as Subscription

Subscription begins the customer’s journey to the cloud by changing the commercial model from an ownership model with an
existing on-premise solution to a usage model, with monthly or annual subscription payments. The customer only pays for the
software and solutions that they need as opposed to buying an off the shelf solution that cannot be easily tailored to their needs,
while providing access to the latest software.

3

Avaya OneCloud, delivered as a Managed Service

An organization can leverage its existing technology infrastructure investments without having to operate them. In this model,
the organization will transition from a commercial model to a usage model and engage Avaya or a business partner to operate
its investments on their behalf. The customer receives a tailored solution using the latest software with standardized cloud
contracts.

Avaya OneCloud Migration

We believe our migration methodology differentiates us from many other cloud vendors in the market because of our range of
services and ability to seamlessly migrate our customers to the cloud. We provide a range of cloud-facing deployment options
best suited to a customer’s business and the capabilities to help our customers deploy these options. Our approach also provides
flexible options based on standardized methodologies, a range of services, enterprise software expertise and tools to help
organizations along every step of their journey to the cloud, by reducing transition complexities and risks as they move from
their current deployment to a cloud-based one.

With our comprehensive Avaya OneCloud portfolio and a long-term technology development roadmap in place, we are helping
our customers build state-of-the-art digital workplaces and contact centers. Our customers can take advantage of public, private
and hybrid cloud solutions at any stage in their journey, and leverage new capabilities and innovations from Avaya and its ever-
expanding partner ecosystem by consuming these software capabilities from the cloud, over-the-top of their on-premise
solutions.

On-Premise

While a growing portion of our business is transitioning to our private, public and hybrid cloud-facing consumption models,
there are customers that have business models and/ or requirements that mandate a premise-based infrastructure and therefore
we will continue to support such solutions.

Application Developer Products

Along with off-the-shelf integrations with frequently used business applications used across an organization, Avaya’s unified
communications platform simplifies the embedding of Avaya One Cloud communications and collaboration capabilities into
business applications, including customer relationship management and enterprise resources planning. Our platform enables
customers, third parties to work with Avaya to create customized engagement applications and to meet the unique operating
requirements of a customer with unified communications and contact center capabilities including voice, video, messaging and
meetings. Avaya also offers a cloud-based execution and test environment for developing proof-of-concept applications.

Avaya Client SDK provides a developer-friendly set of tools that enables the building of innovative user experiences for
vertical or business specific applications. Any functionality Avaya uses in its own clients and applications is available to
developers through the SDK. Developers can mix and match functionality from both our unified communications and contact
center solutions.

Avaya has an extensive developer program boasting over one million active developers. Avaya DevConnect enables third
parties to support and extend the capabilities of Avaya solutions to address business challenges. Thousands of companies
around the world are program members, including developers, system integrators, service providers and Avaya customers.

Cloud, Alliance Partner and Subscription Revenues (“CAPS”)

We measure our success in transforming our business to the cloud and our ability to reduce our dependence on premise-based
perpetual licensing models by analyzing the contribution of our “CAPS revenue” to total consolidated revenue. CAPS revenue
refers to revenue from cloud based solutions, together with revenues from our Strategic Alliance Partnerships and Subscription
revenue. Our CAPS revenue as a percentage of total consolidated revenue, excluding the impact of fresh start accounting
adjustments recognized upon the Company's emergence from bankruptcy, has grown over the past three fiscal years,
representing 26%, 15% and 14% of total consolidated revenue for fiscal 2020, 2019 and 2018, respectively.

Alliances and Partnerships

Avaya has formed commercial and partnering arrangements through global alliances to expand the availability of our products
and services, enhance the value derived by customers and grow our revenue opportunity.

Global Alliances

Avaya global alliances are strategically oriented technical and commercial relationships with key partners that we believe
enhance both companies' go-to-market strategy. We have three primary types of global alliances: Global Service Provider
alliances, Global Systems Integrator alliances and Ecosystem alliances.

4

•

•

•

Global Service Provider alliances: Through these partnering arrangements with leading telecommunications service
providers, we pursue sell-to and sell-through opportunities for Avaya solutions and services. These alliances are
integral in selling and implementing our cloud-based services. We also see them as a principal route to market for our
UCaaS and CCaaS solutions. During fiscal 2020, we entered a strategic partnership with RingCentral, Inc.
(“RingCentral") and began deployment of Avaya Cloud Office, our OneCloud UCaaS solution.

Global Systems Integrator alliances: These are similar to our Global Service Provider alliances, but refer to
arrangements with systems integrator partners, as well as key channel partners with strong professional services and
systems integration capabilities.

Ecosystem alliances: These partnering arrangements are with industry leaders and leading technology companies.
They feature deeper, R&D-led integrations and/or expanded go-to-market efforts, such as the DevConnect Select
Product Program or the Avaya & Friends Program for international markets.

Channel Partners

Our channel partners serve our customers worldwide through Avaya Edge, our business partner program. Through
certifications, the Avaya Edge program positions Value Added Reseller partners to sell, implement and maintain our
communications systems, applications and services. Avaya Edge offers clearly defined partner categories with financial,
technical, sales and marketing benefits that grow with levels of certification and revenue contribution. We support partners in
the program by providing our comprehensive Avaya OneCloud portfolio of solutions in addition to sales, marketing and
technical support. Although the terms of individual channel partner agreements may deviate from our standard program terms,
our standard program agreements for resellers generally provide for a term of one year, with automatic renewal for successive
one-year terms. Agreements may generally be terminated by either party for convenience upon 30-days' prior notice, and our
standard program agreements for distributors may generally be terminated by either party for convenience upon 90 days prior
notice. Certain of our contractual agreements with our largest distributors and resellers, however, permit termination of the
relationship by either party for convenience upon prior notice of 180 days. Our partner agreements generally provide for
responsibilities, conduct, order and delivery, pricing and payment, and include customary indemnification, warranty and other
similar provisions. The Company's largest distributor, ScanSource Inc., is also its largest customer and represented 8% of the
Company's total consolidated revenue for fiscal 2020. See Item 1A, "Risk Factors-Risks Related to Our Business-Our
Operations, Markets and Competition-Our strategy depends in part on our reliance on our indirect sales channel" for additional
information on the Company's reliance on its indirect sales channel.

Our Business Today

Our solutions address the needs of a diverse range of businesses, including large multinational enterprises, small and medium-
sized businesses and government organizations. Our customers operate in a broad range of industries, including financial
services, healthcare, hospitality, education, government, manufacturing, retail, transportation, energy, media and
communications. We employ a flexible go-to-market strategy with direct or indirect presence in approximately 190 countries.
As of September 30, 2020, we had more than 4,000 active channel partners and for fiscal 2020 our product revenue from
indirect sales through our channel partners represented 67% of our total Products & Solutions segment revenue.

For fiscal 2020, 2019 and 2018 (on a combined basis), we generated revenue of $2,873 million, $2,887 million and $2,851
million, of which 37%, 42% and 44% was generated by Products & Solutions and 63%, 58% and 56% by Services,
respectively. Revenue by business area is presented in the following table for the periods indicated:

5

(In millions)

Products & Solutions:

Unified Communications and
Collaboration

Contact Center

Services:

Global Support Services
Enterprise Cloud and Managed
Services

Professional Services

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor (1)

Period from
October 1, 2017
through
December 15, 2017

Non-GAAP
Combined

Fiscal year
ended
September 30,
2018

$

710 $

863 $

363

1,073

1,238

282

280

1,800

359

1,222

1,086

297

282

1,665

$

2,873 $

2,887 $

$

718

271

989

786

245

227

1,258

2,247

$

180

73

253

244

57

50

351

604

$

$

898

344

1,242

1,030

302

277

1,609

2,851

(1) Upon our emergence from bankruptcy on December 15, 2017, we adopted fresh start accounting, which resulted in a new basis of accounting and the
Company became a new entity for financial reporting purposes. For additional information on the effects of adopting fresh start accounting, see “Emergence
from Bankruptcy” below.

One of our key focuses is increasing our recurring revenue. We define recurring revenue as revenue from products and services
that are delivered pursuant to multi-period contracts including recurring subscription-based software revenue, maintenance,
global support services and enterprise cloud and managed services. Non-recurring revenue consists of hardware, non-recurring
perpetual-based software and one-time professional services. Hardware predominantly consists of endpoints, which include
phones, video conferencing equipment and headsets. Non-recurring software is predominantly comprised of perpetual licenses.
One-time professional services include installation services, as well as project-based deployment, design and optimization
services.

Trends Shaping Our Industry

We believe several trends are shaping our industry, creating a substantial opportunity for us and other market participants to
capitalize on these trends. These trends include:

•

•

•

•

•

•

Unified Communications and Collaboration, CPaaS and Contact Center are converging to become part of an integrated
services offering delivering next-generation communications capabilities across a host of devices and channels. Avaya
already has more than 10,000 customers that range in size from 10 seats to 250,000 seats on a converged premise-
based UCC and CC platform.

Businesses will continue to invest in more than one unified communications platform as they build a collaboration
portfolio to be used by their employees to address use cases specific to their ability to service their end customers.

Remote worker and workforce mobility requirements are growing as the needs to work from home, or from anywhere,
accelerate—driving increased usage of mobile devices by consumers and employees. These trends are further
amplified as business leaders shift IT priorities to digitally transform their companies and take advantage of disruptive
technologies like cloud-based solutions and delivery models, big data, IoT, cybersecurity and AI.

Preference for cloud delivery of applications and management of multiple and varied devices continues to grow, all of
which must be handled with the security their business demands.

Demand for multi-experience as an evolution of omnichannel customer service continues to become an increasingly
critical element of contact center solutions as consumers embrace new technologies and devices in creative ways.

The Experience Economy will drive decision making in the future. These experience expectations mean that
communications in serving the customer are continuing to become an increasingly critical element in contact center
solutions, as consumers embrace new technologies and devices in creative ways and at an accelerating pace. Avaya is
continuing to invest in AI-derived solutions delivered through cloud and subscription models to create “Experiences
that Matter” for customers, employees and agents. This increased adoption and deployment of AI is providing
significant new opportunities for enhanced UCC and CC solutions that improve the customer experience and transform
the Digital Workplace. By expanding the use of AI, we can potentially reduce adoption costs, increase solution
effectiveness and offer expanded alternatives to traditional methods for rendered services.

6

Our Market Opportunity

We believe that these trends create significant market opportunity for the next-generation UCaaS, Collaboration, CCaaS and
CPaaS solutions that Avaya has brought to the market in fiscal 2020. The limitations of traditional premise-based
communications solutions and services and capital-intensive buying models present an opportunity for differentiated vendors to
gain market share in the cloud. We believe that the total available market for these solutions includes spending on
communications applications, and the business devices that improve the application experience, as well as spending on one-
time and recurring professional, enterprise cloud and managed services, and support services to implement, maintain and
manage these solutions.

We are expanding our business in several of these areas, primarily with cloud-facing and subscription-based consumption
models for customers, as well as providing them with managed services offerings. We are also growing in the customer
segments that we serve, including large enterprises with more than 1,000 employees, as well as midmarket enterprises with
between 50 and 250 agents in the contact center market and between 100 and 1,000 employees for customers using our UCC
solutions. The growth opportunity in these markets comes from the need for enterprises to increase productivity and upgrade
their unified communications and collaboration and contact center strategy to a more integrated approach, to account for the
accelerated work from home / work from anywhere trend, increased mobility, and a host of devices and multiple
communications channels. In response to these needs, we expect that aggregate total spending on UCC, CPaaS, CC, services
and support, and enterprise cloud and managed services to grow, with the majority of growth coming from cloud services.

Although the decision makers for our solutions and services have traditionally been senior IT leadership, up to and including
Chief Information Officers (“CIOs”), our research finds that now more of the buying decisions are being influenced by business
units and the broader C-suite, including Chief Executive Officers (“CEOs”), Chief Marketing Officers (“CMOs”) and Chief
Digital Officers (“CDOs”). They have become more involved as digital transformation has expanded beyond the data center
and IT infrastructure to encompass lines of business operations and customer experiences. CEOs, CMOs and CDOs are
recognizing growing customer and employee demand for better interactions across multiple channels of their choosing, and
they see an opportunity to differentiate their companies and lines of business by providing their employees with an opportunity
to deliver a superior customer experience.

We believe that due to the increasing importance of technology as both an internal and external-facing presence of the
enterprise, as well as the high stakes of data breaches, CEOs are increasingly engaged in the decision-making process. CMOs
and CDOs are gaining additional budget authority as they are tasked with managing customer experience and marketing
activities using sophisticated communications technology and rich data. We believe that because of the shifts in decision-
making roles, the focus of customer experience solutions should be to provide businesses with better ways to engage with end
users securely across multiple platforms and channels, creating better customer experiences, and ultimately, higher revenues for
the business.

In our experience, decision makers have three critical priorities:

•

•

Shift to cloud-based solutions: Companies today seek technology that helps them lower Total Cost of Ownership
(“TCO”) and increase deployment speed and application agility, including a variety of public, private and hybrid cloud
solutions. They are also shifting away from a complex, proprietary capital-intensive consumption model to one that is
more flexible and efficient in gaining access to the latest technology.

Leverage existing technology infrastructure while positioning for the future: The speed at which new technology
enters the market is challenging companies to rapidly adopt and install new technology. We believe this pressure
creates strong demand for scalable systems that do not require enterprise-wide overhauls of existing technology to
implement newer solutions and technologies. Instead, it favors incremental, flexible, extensible technologies that are
easy to adopt and compatible with, existing infrastructures.

• Manage the reliable and secure integration of an increasing number and variety of devices and endpoints: Today,
business users leverage laptops, smartphones and tablets just as often – if not more than – desk-based devices. The
ability to communicate seamlessly and securely across devices, applications and endpoints must be managed as part of
an integrated communications infrastructure.

Our Answer

Position Avaya as the leader in cloud-based Digital Workplace and Customer Experience Solutions. To accomplish this, we
plan to:

•

Define innovation in our core market segments by delivering powerful AI-enabled cloud communications solutions,

• Win with global services capabilities that support customer cloud adoption and drive expansion, and

7

•

Activate, convert and transform our installed base by providing a customer journey that enables them to effortlessly
migrate to, and consume Avaya cloud services.

In addition, Avaya intends to:

•

•

•

•

Increase our Midmarket Capabilities and Market Share: We believe our market opportunity for the portion of the
midmarket segment that Avaya serves is growing. We define the midmarket as firms with between 50 and 250 agents
for CC and between 100 and 1,000 employees for UCC. Not only do we believe this segment is growing, but we also
believe midmarket businesses are underserved and willing to invest in IT enhancements. We intend to continue to
invest in our midmarket offerings and go-to-market resources to increase market share and meet the growing demands
of this segment.

Increase Sales to Existing Customers and Pursue New Customers: We believe that we have a significant opportunity
to increase our sales to our existing customers by offering new solutions from our Avaya OneCloud portfolio. This set
of cloud capabilities is supported by our market leadership, global scale and extensive customer interaction, including
at the C-suite level, and creates a strong platform from which to drive and shape the evolution of enterprise
communications. Our track record with our customers has earned us credibility that we believe provides us with a
competitive advantage in helping them cope with this evolution.

We also believe our refreshed product and services portfolio provides increased potential for acquiring new customers.

We have worked to become both HIPAA and PCI DSS compliant as we believe the ability to service these two areas
will significantly expand our potential customer base and total addressable market. These certifications allow for
market penetration into otherwise restrictive and difficult markets, including healthcare and pharmaceuticals.

Invest in Sales and Distribution Capabilities: Our flexible go-to-market strategy consists of both a direct sales force
and indirect sales through our alliances and channel partners, allowing us to reach customers across industries and
around the globe. We believe our channel partner network is a valuable competitive differentiator. We intend to
continue investing in our channel partners and sales force in order to optimize their market focus and enter new
vertical segments. We provide our channel partners, including master agents and sales agents, with training, marketing
programs and technical support through our Avaya Edge program that helps to further differentiate our offerings.
These agents are our primary distribution channel for small to midmarket customers. Under our master agent program,
small to midmarket sales agents connect potential customers with us and we then handle the rest of the transaction
including contracting, provisioning, managing and billing the Avaya services for the business. The master agent
program provides an option that rounds out the available choices for customers, channel partners and sales agents to
access Avaya’s industry-leading communications solutions.
We also leverage our sales and distribution channels to accelerate customer adoption of our cloud-based solutions and
generate an increasing percentage of our revenue from our new high-value software products, video collaboration,
midmarket offerings and user experience applications.

Expand Margins and Profitability: We maintain a tight focus on profitability levels and are continually evaluating the
efficacy of our cost-saving initiatives. These initiatives have contributed to improvements in our gross margin and we
expect to pursue additional cost-reduction opportunities. While we anticipate margin and profitability growth to
increase over the long-term as a result of these cost-saving initiatives, we expect slight decreases in margin during
fiscal 2021 as we invest in our new Avaya OneCloud offerings.

Our Competitive Strengths

We believe the following competitive strengths position us to capitalize on the opportunities created by the market trends
affecting our industry.

A Leading Position across our Primary Markets

With a full suite of UCC and CC solutions offered under Avaya OneCloud and our expansive go-to-market capability, we are a
leader in business communications. We maintain a leading market share in worldwide contact center agents and are among the
leaders in unified communications and collaboration seats. We were recognized as a Leader in the Aragon Research Globe for
Unified Communications and Collaboration and Aragon Research Globe for Unified Communications and Collaboration 2020
reports. Additionally, we believe that we are a leading provider of private cloud and managed services and that our market
leadership and incumbent position within our customer base provides us with a superior opportunity to cross-sell to existing
customers and position ourselves to win over new customers.

8

Our Open Standards Technology Supports Multi-vendor, Multi-platform Environments

Our open, standards-based technology is designed to accommodate customers with multi-vendor environments seeking to
leverage existing investments. Providing enterprises with strong integration capabilities allows them to take advantage of new
UCC and CC technology as it is introduced. It does not limit customers to a single vendor or add to the backlog of integration
work. We also continue to invest in our developer ecosystem, Avaya DevConnect, which has grown to include more than
119,000 members as of September 30, 2020. Avaya DevConnect, together with our Application Programming Interfaces
("APIs"), which are a set of routines, protocols and tools for building software applications and applications development
environments, allow our customers to derive unique and additional value from our architecture.

Building on our Leading Service Capabilities for a Significant Recurring Revenue Stream

Avaya services relationships have long been significant contributors to our large recurring revenue base, and provide us with
significant visibility into our customers’ future collaboration needs. Our global support services and enterprise cloud and
managed services are typically provided to customers through recurring contracts. These contracts generally have terms that
range from one- to five-years for support services, and one- to seven-years terms for enterprise cloud and managed services.
The launch of our Avaya OneCloud Subscription offer is a further evolution of our global support services business and
provides our customers with flexibility in how they consume our solutions.

In addition to insights into their ongoing operational needs, our professional services team engages in migration planning,
security services, custom application integration and other consulting activities that position us to understand our customers’
business needs today and in the future.

•

•

•

Support Services: Avaya is a leading provider of recurring support services for business communications solutions.
Our worldwide services-delivery infrastructure and capabilities help customers address critical business
communications needs from initial planning and design through implementation, maintenance and day-to-day
operation, monitoring and solution management. With more than 4,000 trained and certified services professionals
worldwide, we can help customers find and implement the right communications solutions.

We believe the Avaya support services team continues to be well-positioned for success due to our close collaboration
between our R&D and service planning teams in advance of new product releases. We offer high levels of automation
to onboard and manage a customer’s communications infrastructure, delivering faster, more effective deployments
from proof of concept to production. This includes a robust communications automation platform with full event
orchestration leveraging advanced AI functionality. As a pioneer of the omnichannel support experience in enterprise
support, Avaya also gives customers the option to interact with our "Ava" virtual agent, to access immediate support
answers online. Customers can also connect with one of our experts via web chat, web talk or web video. When
necessary, Avaya Services can also directly access our R&D teams to resolve customer issues. All combined, these
capabilities position Avaya to provide the highest-quality service for Avaya products.

Professional Services: Avaya offers a broad portfolio of capabilities through its professional services, including
implementation/enablement services, system optimization, innovation services, partner solution integration and custom
applications development.

Enterprise Cloud and Managed Services: With a focus on customer performance and growth, Avaya’s enterprise cloud
solutions and managed services solutions range from managing software releases, to operating customer cloud,
premise or hybrid-based communication systems, to helping customers migrate to next-generation business
communications environments. We believe that our deep understanding of application management supporting unified
communications, collaboration and contact center solutions positions us to best manage and operate cloud-based
communications systems for our customers.

We believe our employees and consultants are among the best in our industry because they are trained and supported by the
best in the industry. The high level of customer satisfaction ratings we receive for support transactions is a testament to the
expertise of our people. These dedicated professionals are focused on satisfying customer needs, driving a proactive and
preventive agenda to help customers maintain optimum levels of service.

We continue to broaden the options for cloud-based service offerings, expanding our consulting services capabilities and
upselling our existing customers to our cloud-based and managed services offerings. We are investing to provide additional
options along the spectrum of support service offerings, constantly developing our tools and infrastructure to improve our
service levels. In addition, as our custom applications development team complete customer-funded application development
engagements, they identify opportunities to monetize those solutions across our broader customer base.

9

Expanding Cloud Offerings and Capabilities

In our experience, technology and business leaders are increasingly turning to cloud-based technologies and business models
that help enterprises cut costs, increase productivity, simplify IT environments and shift, when possible, to subscription-based
models. We are investing in the expansion of our cloud and hybrid cloud solutions and through our Avaya OneCloud portfolio,
offer solutions and technologies that span on-premise, private, public and hybrid cloud development models. Avaya Cloud
Office, launched in fiscal 2020, will position us to further meet market demand for cloud-based unified communications and
collaboration applications, while the launch of our next-generation CCaaS offering will support customer demand in contact
center applications.

Open Standards, Product Differentiation and Innovation

Avaya’s open architecture provides a competitive advantage for us as potential customers consider migrating to our solutions
and services because we can integrate with incumbent competitor systems and provide a path for gradual transition, while
immediately achieving overall cost savings and improved functionality.

Throughout fiscal 2020, we enhanced our Avaya OneCloud portfolio by rolling out new solutions to address growing demand
for our CCaaS, CPaaS, UCaaS and Subscription offerings, as customers transition to cloud-based and subscription consumption
models to support public, private and hybrid cloud or on-premise deployments.

We expect to continue investing in innovation across the portfolio to bring further enhancements and breakthroughs to market,
encouraging customers to continue to add innovative new capabilities to their systems. As we expand our cloud and mobility
opportunities, we are also identifying new ways to leverage virtual desktop infrastructure to securely deliver business
communications to users. We are developing AI solutions internally and with partners to help organizations transform customer
experiences. We are deploying these disruptive solutions to drive incremental value for our customers, and their customers.

Research and Development ("R&D")

Avaya makes substantial investments in R&D to develop new systems, solutions and software in support of business
communications, including, but not limited to, converged communications systems, communications applications, multimedia
contact center innovations, collaboration tools, messaging applications, video, speech-enabled applications, business
infrastructure and architecture, converged mobility systems, cloud offerings, web services, artificial intelligence,
communications-enabled business processes and applications, and services for our customers. Over the past three fiscal years,
we have invested approximately $780 million in R&D, including technology acquisitions.

We invested 19.3%, 16.7% and 16.9% in R&D as a percentage of product revenue in fiscal 2020, 2019 and 2018, respectively,
reflecting a consistent investment in R&D as a percentage of product revenue and evidencing our commitment to innovation.
Our investments in fiscal 2020 focused on driving innovative cloud solutions across our portfolio and new releases of our UCC
and CC solutions.

Patents, Trademarks and Other Intellectual Property

We own a significant number of patents important to our business and we expect to continue to file patent applications to
protect our R&D investments in new products and services across all areas of our business. As of September 30, 2020, we had
more than 4,400 patents and pending patent applications, including foreign counterpart patents and foreign applications. These
patents and pending patent applications cover a wide range of products and services involving a variety of technologies. For the
U.S., patents terms may be 20 years from the date of the patent's filing, depending upon term adjustments made by the patent
office. In addition, we hold numerous trademarks in the U.S. and in other countries. We also have licenses to intellectual
property for the manufacture, use and sale of our products.

We obtain patent and other intellectual property rights used in connection with our business when practicable and appropriate.
Historically, we have done so both organically, through commercial relationships, and in connection with acquisitions.
We manage our patent portfolio to maximize return on investment by selectively selling patents at market prices and cross
licensing with other parties when such sales or licensing are in best our interests. These monetization programs are conducted in
a manner that helps to preserve Avaya’s freedom to operate and to help ensure that Avaya retains patents needed for defensive
use.

From time to time, assertions of infringement of certain patents or other intellectual property rights of others have been made
against us, and certain pending claims are in various stages of litigation. Based on our experience and customary industry
practice, we believe that any licenses or other rights that might be necessary for us to continue with our current business could
be obtained on commercially reasonable terms. For more information concerning the risks related to patents, trademarks and
other intellectual property, see Item 1A, "Risk Factors-Risks Related to Our Business-Intellectual Property and Information
Security-We may be subject to litigation and infringement claims, which could cause us to incur significant expenses or prevent
us from selling our products or services."

10

Customers

Avaya employs a flexible, go-to-market strategy to support our diverse customer base, ranging in size from small businesses
employing a few employees to large government agencies and multinational companies with more than 100,000 employees.
Our customers operate in a broad range of industries, including financial services, manufacturing, retail, transportation, energy,
media and communications, hospitality, health care, education and government. Our customers include leading Forbes Global
2000 companies across all these industries. For more information concerning the risks related to contracts with the U.S. federal
government, see Item 1A, "Risk Factors - Risks Related to Our Business-Our Operations, Markets and Competition-
Contracting with government entities can be complex, expensive and time-consuming."

Sales and Distribution

Our global go-to-market strategy is designed to focus and strengthen our reach and impact on large multinational enterprises,
midmarket and regional enterprises and small businesses. Our go-to-market strategy is intended to serve our customers in the
way they prefer to work with us, either directly with Avaya or indirectly through our sales channel, which includes our global
network of strategic alliances, channel partners, distributors, dealers, value-added resellers, telecommunications service
providers, system integrators, master agents and sub-agents. Our sales organizations are equipped to sell our comprehensive
Avaya OneCloud portfolio complemented by services offerings including product support, integration and other professional
services, and enterprise cloud and managed services.

We continue to focus on efficient deployment of Avaya sales resources, both directly and indirectly through our channel
partners, for maximum market penetration and global growth. Our investment in our sales organization includes fully integrated
curricula on the sales process, guided selling, sales enablement and our solutions for all roles within our sales organization.

Seasonal trends impact the sale of our products. Typically, our second fiscal quarter is our weakest and our fourth fiscal quarter
is our strongest, see Item 1A, "Risk Factors - Risks Related to Our Financial Results, Finances and Capital Structure-In addition
to experiencing some seasonal trends, our quarterly and annual revenues and operating results have historically fluctuated and
the results of one period may not provide a reliable indicator of our future performance."

Development Partnerships

The Avaya DevConnect program is designed to promote the development, compliance-testing and co-marketing of innovative
third-party products that are compatible with Avaya’s standards-based products. Member organizations have expertise in a
broad range of technologies, including IP telephony, contact center and unified communications and collaboration applications.

As of September 30, 2020, over 32,000 companies have registered with the program, including over 280 companies operating at
higher program levels, eligible for technical support and to submit their products or services for compatibility testing through
the program by the Avaya Solution Interoperability and Test Lab ("Avaya Test Lab"). Avaya DevConnect engineers work in
concert with each submitting member company to develop comprehensive test plans for each application to validate the product
integrations.

Manufacturing and Suppliers

We have outsourced substantially all of our manufacturing operations to several contract manufacturers. Our contract
manufacturers produce the vast majority of our products in facilities located in southern China, with other products
manufactured in facilities located in Mexico, Taiwan, Germany, Ireland and the U.S. All manufacturing of our products is
performed in accordance with detailed specifications and product designs, furnished or approved by Avaya, and is subject to
rigorous quality control standards. We periodically review our product manufacturing operations and consider changes we
believe may be necessary or appropriate. We also purchase certain hardware components and license certain software
components from third-party Original Equipment Manufacturers ("OEMs"), which we then resell separately or as part of our
products under the Avaya brand.

In some cases, certain components are available only from a single source or from a limited number of suppliers. Delays or
shortages associated with these components could cause significant disruption to our operations, although we have not yet had
any such event have a material impact on us. We have also outsourced substantially all our warehousing and distribution
logistics operations to several providers of such services on a global basis, and any delays or material changes in such services
could cause significant disruption to our operations, although many alternative suppliers are active in the market today. For
more information on risks related to products, components and logistics, see Item 1A, "Risk Factors-Risks Related to Our
Business-Our Operations, Markets and Competition-We rely on third-party contract manufacturers, component suppliers and
partners (some of which are sole source and limited source suppliers) and warehousing and distribution logistics providers. If
these relationships are disrupted and we are unable to obtain substitute manufacturers, suppliers or partners, on favorable terms
or at all, our business, operating results and financial condition may be harmed."

The Company has not experienced any material impacts from the tariffs levied by the U.S. Government on goods manufactured
in China and sold into U.S. markets.

11

Competition

Although we believe we are differentiated from any single competitor, the following represent the Company's primary
competitors in various lines of our business:

•

Enterprise UCC: Cisco, Microsoft, NEC, Atos Unify, Alcatel-Lucent Enterprise and Huawei.

• Midmarket UCC: Mitel, NEC, Cisco and Microsoft.

•

•

•

Cloud Products and Services: Cisco, Microsoft, RingCentral, 8x8, Mitel, Google, LogMeIn, Fuze, Zoom and Twilio.

Video Products and Solutions: Cisco, Microsoft, Zoom, LogMeIn, Google, Poly, Huawei, ZTE, Ring Central,
BlueJeans, and LifeSize.

Enterprise Contact Center Products and Services: Genesys, Cisco, Aspect Software, Huawei, NEC and Enghouse
Interactive.

• Midmarket Contact Center Products and Services: Genesys, Cisco, Five9, NICE InContact, Amazon, Twilio,

Talkdesk and Vonage.

We also face competition in certain geographies with companies that have a particular strength and focus in these regions, such
as Huawei in China and Intelbras in Latin America.

While we believe our global, in-house end-to-end services organization as well as our indirect channel provide us with a
competitive advantage, we face competition from companies offering products and services directly or indirectly through their
channel partners, as well as resellers, consulting and systems integration firms and network service providers.

For more information on risks related to our competition, see Item 1A, "Risk Factors-Risks Related to Our Business-Our
Operations, Markets and Competition- We face formidable competition from providers of unified communications and contact
center solutions and services, including cloud-based solutions, and this competition may negatively impact our business and
limit our growth."

Employees and Human Capital Management

As of September 30, 2020, we had 8,266 employees with 2,774 located in the U.S. and 5,492 located outside the U.S. There
were 7,941 employees not represented by unions or similar organizations and 325 that were represented and covered by
collective bargaining agreements. Of the 325 full-time employees covered by collective bargaining agreements, 310 were
located in the U.S. Over recent years, we have assembled a new senior management team that is action-oriented with a
disruptive mindset and the willingness to move the business forward to achieve our objectives.

The Compensation Committee of our Board of Directors is responsible for monitoring our human capital management,
including, among other aspects, management depth and strength assessment, leadership development, talent assessment,
diversity, equality and inclusion and our employee survey results. While human capital management is overseen at the highest
level of our Company, it is woven into the everyday fabric of Avaya’s culture.

At Avaya, our people – and the richness of their ethnicities, perspectives, experiences and skills - are the driving force behind
our every success. We established cultural principles that are the foundation of our success and put these into action by living
our cultural principles in everything we do. Our cultural principles are: simplicity, accountability, teamwork, trust and
empowerment. These cultural principles serve as the framework in which we hire, train and manage and assess the performance
our global employee population. We believe these principles help differentiate us and, in part, allowed us to retain 96.4% of our
top-rated employees throughout fiscal 2020. This represents a 2.1 point increase year over year.

As part of Avaya’s overall dedication and investment in its employees and consistent with its people first strategy, we conduct
employee engagement surveys. The surveys in each of fiscal 2018 and fiscal 2019 focused on a variety of different areas,
including employee trust in the leadership, effectiveness of leadership communication, and personal and professional employee
development. As a result of our transition to a largely work from home workforce in response to global efforts to contain the
impact of the COVID-19 pandemic, our engagement survey in fiscal 2020 focused on remote working, including topics such as
the employees’ continued effectiveness in a remote environment, access to the necessary resources to be successful in their
roles, continued customer focus in a virtual environment and gauging our employees’ health and wellbeing. Avaya intends to
continue to monitor engagement through different surveys.

Lastly, Avaya continues to strive to make diversity, equality and inclusion a priority. As of September 30, 2020, 22% of the
global employee headcount was female and 26% of our employees in the United States self-identified as part of a minority
group. For additional information on the workplace elements of Avaya’s Corporate Responsibility Program see “--Corporate
Responsibility and Culture at Avaya.”

12

Corporate Responsibility and Culture at Avaya

Creating experiences that matter not only defines how Avaya does business, but how we aspire to impact the world. The Avaya
OneCloud portfolio of communications solutions contributes to environmental sustainability, supporting remote working
initiatives through unified communications solutions such as video, collaboration and team rooms. Our company and our
associates also drive positive change by taking action and building partnerships to address pressing environmental and
community issues as part of our commitment to Corporate Responsibility. We are leveraging sustainability as an opportunity
for innovation, such as developing new initiatives to eliminate single-use plastics in our operations and supply chain. Our
employees, customers, partners and suppliers continue to make meaningful and lasting differences in the world, including
donating their time and money to support charities and non-profit organizations worldwide. And we are advancing awareness of
diversity and inclusion by engaging in dialogue with our employees and leaders.

Avaya’s Corporate Responsibility Program incorporates four key elements: Environment, Community, Marketplace and
Workplace. For the Environment element, Avaya looks to implement environmental stewardship practices at our global
locations. Community represents Avaya working to positively impact society and supporting the communities where we are
located. Marketplace includes engaging in fair and ethical business dealings with our customers, our partners and our supply
chain. Workplace focuses on developing a desirable place to work for our employees across the globe.

• With 8,266 global employees, diversity, inclusion and equity have been fundamental to Avaya’s core values. Avaya is
a member of the CEO Action for Diversity & Inclusion program to work toward a more inclusive and progressive
workplace that values differences and evolves understanding and is also a signatory to the statement from the Silicon
Valley Leadership Group standing up for racial justice and equality. This statement is available on www.avaya.com.
Information on our website is not a part of this report.

•

•

•

•

•

Avaya has also made a commitment to a newly established Avaya Diversity & Inclusion Council. This council, which
is to be created by Avaya employees, aims to build a workplace where individuality is celebrated and harnessed,
creating a culture of engagement, innovation and inclusivity.

Avaya has also created new employee resource groups, including the WIN@A (Women Inspired Network @ Avaya)
group focused on women, and ABLE (Avaya Blacks Leading Empowerment) and is also creating new groups for
Veterans, LGBTQ employees, Hispanics/Latinos and other employee-defined priority groups.

These Company-sponsored groups provide the global Avaya team with an opportunity to share open dialogue around
issues, promote a culture of Diversity and Inclusion, and provide new business and audience insights into the
Company’s diverse customer base.

Avaya conducts unconscious bias training for all employees. This is not a new program, but has been accelerated to
allow for more timely discussions and a greater sense of urgency.

The Company’s Talent Acquisition program has led to steady year-over-year increases in female and minority
representation in leadership positions across Avaya, and the team is currently implementing a series of new tools and
practices to further increase diversity in the Company’s candidate pools for hiring and advancement.

The Company has taken an employee-first view of diversity and inclusion, and employees are encouraged to support each other
and Avaya communities in light of recent events. We are closely tracking progress on these key items, while exploring other
initiatives, from corporate social responsibility, to investments in non-profit organizations, to supporting employee efforts and
supporting the global communities where Avaya employees live and work.

Environmental, Health and Safety Matters

Avaya is subject to a wide range of governmental requirements relating to safety, health and environmental protection,
including:

•

•

•

certain provisions of environmental laws governing the cleanup of soil and groundwater contamination;

various local, federal and international laws and regulations regarding the material content and electrical design of our
products that require us to be financially responsible for the collection, treatment, recycling and disposal of those
products; and

various employee safety and health regulations that are imposed in various countries within which we operate.

We are currently involved in a few remediations at currently or formerly owned or leased sites, which we do not believe will
have a material impact on our business or results of operations. See Item 1A, "Risk Factors-Risks Related to Our Business-
Global Operations and Regulations-We may be adversely affected by environmental, health and safety laws, regulations, costs
and other liabilities" for a discussion of the potential impact such governmental requirements and climate change risks may
have on our business.

13

Cybersecurity

Avaya has a vigorous, risk-based cybersecurity program, dedicated to protecting our data as well as data belonging to our
customers and partners. We utilize a defensive in-depth strategy, with multiple layers of security controls to protect our data and
solutions. Organizationally, we have a Product Security Council, cross-functional Cyber Incident Response teams, Security
Operations Centers, and strong governance to ensure compliance with our security policies and protocols. These teams are
comprised of experts across our enterprise, as well as outside experts, to ensure that we are monitoring the effectiveness of our
cybersecurity governance and vulnerability management programs.

For more information on risks related to data security, see Item 1A, "Risk Factors-Risks Related to Our Business-Intellectual
Property and Information Security- A breach of the security of our information systems, products or services or of the
information systems of our third-party providers could adversely affect our business, operating results and financial condition."

Corporate Information

Our principal executive offices are located at 2605 Meridian Parkway, Suite 200, Durham, North Carolina. Our corporate
telephone number is (908) 953-6000. Our website address is www.avaya.com. Information contained in, and that can be
accessed through our website is not incorporated into and does not form a part of this Annual Report on Form 10-K.

Avaya Holdings is a holding company with no stand-alone operations and has no material assets other than its ownership
interest in Avaya Inc. and its subsidiaries. All of the Company’s operations are conducted through its various subsidiaries,
which are organized and operated according to the laws of their jurisdiction of incorporation or formation, as applicable, and
consolidated by the Company.

The Company's corporate governance documents, including the Board of Directors' Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee charters are available, free of charge, on Avaya’s website at
https://investors.avaya.com.

All of the Company's periodic reports filed with the Securities and Exchange Commission ("SEC") pursuant to Section 13(a),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on Avaya’s website, including its
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and any
amendments to those reports. These reports and amendments are available on Avaya’s website as soon as reasonably
practicable after the Company electronically files the reports or amendments with the SEC. The SEC maintains a website
(www.sec.gov) that contains these reports, proxy and information statements and other information.

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 Consolidated Financial Statements after December 15,
2017 are not comparable with the Consolidated Financial Statements on or prior to that date. 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 period from December 16, 2017 through September 30, 2018 are referred to as those of the "Successor" period or periods.
Our results of operations as reported in our Consolidated Financial Statements for these periods are in accordance with
accounting principles generally accepted in the United States of America ("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
September 30, 2018 separately, we have in certain instances in this report presented operating results for the fiscal year ended
September 30, 2018 by combining the results of the Predecessor and Successor periods because such presentation provides the
most meaningful comparison of our results to prior periods.

For a more detailed discussion of our bankruptcy proceedings (the "Restructuring"), see Part II, Item 7 "Management’s
Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 8, Note 24, "Fresh Start
Accounting," to our Consolidated Financial Statements.

14

Item 1A. Risk Factors

Summary of Risk Factors

The risk factors summarized and detailed below could materially harm our business, operating results and/or financial
condition, impair our future prospects and/or cause the price of our common stock to decline. These are not all of the risks we
face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they
occur. Material risks that may affect our business, operating results and financial condition include, but are not necessarily
limited to, those relating to:

Risks Related to our Business

•

•

•

•

executing our strategic operating plan, including our strategic partnership with Ring Central, Inc.;

shifting more of our business to a subscription-based operating expense model which may harm our cash flows;

the novel coronavirus (“COVID-19”) pandemic and other future epidemics and public health crises;

completing acquisitions and/or strategic alliances, including those needed to increase our share of the cloud
communications industry and integrating such acquired businesses and alliances;

• market opportunities may not develop for our solutions and services in ways that we anticipate and we may not

succeed in developing new innovative solutions and services to keep pace with rapidly changing technology, evolving
industry standards and customer preferences;

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

industry consolidation and competition from providers of unified communications and contact center solutions and
services, including cloud-based solutions;

our ability to continue to expand our cloud-based solutions and services offerings;

our reliance on our indirect sales channel;

disruptions to our third-party contract manufacturers, component suppliers and partners (some of which are sole source
and limited source suppliers) and warehousing and distribution logistics providers;

changes in U.S. trade policy, including the imposition of tariffs;

compliance with laws and regulations relating to the formation, administration, performance and pricing of contracts
with government entities;

the ability to detect and correct design defects, errors, failures or “bugs” in our products and services;

disruptions to our business due to catastrophic disasters or events, including health epidemics;

protection of our proprietary rights to our intellectual property;

some of our products contain software from open source code sources;

litigation, intellectual property, infringement claims and the protection of our intellectual property;

failure to comply with laws and contractual obligations related to data privacy and protection;

security breaches of our information systems, products or services or of the information systems of our third-party
providers;

operational, logistical, economic and/or political challenges in a specific country or region, which could negatively
affect our revenue, costs, expenses and financial condition or those of our channel partners and distributors;

compliance with certain telecommunications or other rules and regulations, which could subject us to enforcement
actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services;

compliance with U.S. and foreign government laws and regulations, including environmental, health, safety and data
privacy laws and regulations and economic sanctions;

Risks Related to Our Financial Results, Finances and Capital Structure

•

•

•

our revenues and operating results have historically fluctuated and may not be a reliable indicator of our future
performance;

shifts in the mix of sizes or types of organizations that purchase our solutions or the mix of products, solutions and
services purchased by our customers could affect our gross margins and operating results;

not realizing the expected benefit from cost-reduction initiatives;

15

•

•

•

•

•

•

•

•

we may be required to record a significant charge to earnings if our goodwill or intangible assets become impaired;

our degree of leverage;

restrictions included in our financing agreements and indentures;

our ability to service all of our indebtedness and other ongoing liquidity needs and to raise additional capital to fund
our operations;

the price of our common stock may be volatile and fluctuate substantially;

potential for significantly dilutive issuance of common stock, including upon the conversion of our convertible notes
and preferred stock;

our intention not to pay dividends on our common stock for the foreseeable future; and

the holders of our Series A Preferred Stock have certain consent rights over charter amendments and issuances of
senior equity and they may exercise their redemption or put rights.

16

Risks Related to Our Business

Our Operations, Markets and Competition

If we do not successfully execute our strategic operating plan, or if our strategic operating plan is flawed, our business,
operating results and financial condition could be materially and adversely affected.

Each year, we develop our strategic operating plan that serves as a roadmap for implementing our business strategy and the
basis for the allocation of resources, capital, investment decisions, product life cycles, process improvements and strategic
alliances and acquisitions. In developing the strategic plan, we make certain assumptions including, but not limited to, those
related to the market environment, customer demand, evolving technologies, competition, market consolidation, the global
economy and our overall strategic priorities for the upcoming fiscal year. We sell business communications solutions and
services in markets where the technology available and the utilized go-to-market models are rapidly changing. Actual
economic, market and other conditions may be different from our assumptions and we may not be able to successfully execute
our strategic operating plan. Moreover, because we deliver sophisticated products and solutions, our sales process for a portion
of our business is complex, lengthy and complicated. If we do not successfully execute our strategic operating plan, or if actual
results vary significantly from our assumptions, our business, operating results and financial condition could be adversely
impacted. Potential adverse impacts include, but are not limited to, investments made in research and development that do not
develop into commercially successful products, operating inefficiencies, unsuccessful strategic alliances or acquisitions or
lower revenues due to our sales focus being misaligned with customer demand or an inability to compete effectively against
competitors. In addition, unforeseen events, such as the COVID-19 pandemic, could have a significant effect on our ability to
execute our strategic plan.

The timing of our cash flows may be negatively impacted as we shift more of our business to a subscription-based model.

We intend to increase our recurring revenue by shifting more of our business to a subscription-based model instead of a
perpetual license model. To do this, we need to offer relevant cloud-enabled unified communications and contact center
solutions and services at competitive prices, which will both attract new customers and which we can bundle and upsell to
existing customers. If we successfully increase our subscription revenues, we expect that it will result in more of our cash
receipts being deferred relative to our historical perpetual license model as payments are spread over a pre-determined time
period (e.g. monthly or annually) rather than being received upfront.

The COVID-19 pandemic could have a material adverse effect on the Company’s business, results of operations and
financial condition and/or cash flows.

On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic, and
the responses of governments worldwide to COVID-19, are having a negative impact on regional, national and global
economies, disrupting supply chains and reducing international trade and business activity. The pandemic has caused many
governments throughout the world to implement stay-at-home orders, quarantines, significant restrictions on travel and other
social distancing measures including restrictions that prohibit many employees from commuting to their customary work
locations and require these employees to work remotely if possible. Many of these restrictions have remained in place for
months and in light of recent resurgences in the outbreak may continue in one fashion or another for the foreseeable future.

The impact of the COVID-19 pandemic has and may continue to adversely impact our financial condition and results of
operations in a variety of ways, including, but not limited to:

•

•

•

Our ability to operate, as well as our partners’ and/or customers’ ability to operate in affected areas, has been and may
continue to be hindered, which may cause our business and operating results to decline.

The inability of our employees to access customers’ sites has and will continue to hinder our ability to offer services
that can only be provided on site, as well as our ability to make in person sales visits and demonstrations.

Clients and customers have had and may continue to have difficulty meeting their payment obligations to us, resulting
in late or non-payment of amounts owed.

• We may experience significant reductions or volatility in demand for our solutions as customers may not be able to
enter into new purchase commitments or otherwise invest in their business due to financial downturns or general
economic uncertainty.

• We may experience temporary or long-term disruptions in our supply chain, which may significantly impact our

distribution network, results of operations (including sales) or business.

•

The effects of shelter-in-place orders may negatively disrupt our business as a number of our employees, customers
and partners, work remotely, the magnitude of which will depend, in part, on the length and severity of the restrictions
and other limitations on our ability to conduct our business in the ordinary course.

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•

To the extent a number of our employees, including our executive officers and other members of our management
team, are impacted in significant numbers by the outbreak of the pandemic and are not available to conduct work, our
business and operating results may be negatively impacted.

• We may not be able to ensure business continuity in the event our continuity of operations and crisis management

plans are not effective or are improperly implemented.

•

The significant disruption of global financial markets, which has impacted the value of our common stock and could
further materially impact the value of our stock in the future, may reduce our ability to access further capital, which
could in the future negatively affect our liquidity and could affect our business in the near and long-term.

The extent of the impact of the COVID-19 pandemic on our business, financial performance and liquidity, including our ability
to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future
developments, including the duration and severity of the pandemic, as well the timing of the development of vaccines and other
therapeutic measures, none of which can be predicted. Any of the foregoing factors, or other cascading effects of the
COVID-19 pandemic that are not currently foreseeable, could have a material adverse effect on our business, results of
operations, financial condition and/or cash flows. Some economists are predicting that the recession caused by the COVID-19
pandemic, including as a result of the actions by governments to slow the spread of the disease will be steep and severe. The
effectiveness of economic stabilization efforts, including government stimulus efforts, is not assured. Additionally, as pandemic
conditions wane, we cannot predict how quickly the marketplaces in which we operate will return to normal.

Furthermore, our business could be adversely affected in the future by the effects of other health epidemics and the widespread
outbreak of different contagious diseases other than COVID-19. Any outbreak of contagious diseases, and other adverse public
health developments, could have a material and adverse effect on our business operations. These could include supply-chain
disruptions, restrictions on our ability to distribute our products and restrictions on our abilities to provide services in the
regions affected. Any prolonged and significant supply-chain disruptions or inability to provide products or services would
likely impact our sales in the affected region, increase our costs and negatively affect our operating results. In addition, as we
have seen in fiscal 2020, a significant outbreak of a contagious disease in the human population could result in a widespread
health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic
downturn that could affect demand for our products and services and likely impact our operating results.

There is no assurance that we will be able to successfully complete acquisitions and/or strategic alliances, including those
needed to increase our share of the cloud communications market, so that we may accelerate the execution of our growth
strategy.

Our strategic operating plan requires continued investments in acquisitions and strategic alliances with other companies in
various areas, specifically, with respect to, accelerating the development, sales and delivery of our cloud-based solutions and
services. Identifying and evaluating potential strategic alternatives and/or partners may be time consuming and divert the
attention and focus of management and other key personnel. In addition, we may incur substantial expenses as part of that
process. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including
among other things, economic conditions, market consolidation, industry trends and competing bidders. There is no assurance
that we will be able to complete any acquisition or strategic alliance even if we expend significant sums and efforts in
connection with a potential transaction. Without such transactions it may be challenging for us to execute on our strategic
operating plan in our desired time frame and our business, operating results and financial condition could be harmed.

Our strategic operating plan relies in part upon the successful execution of our strategic partnership with RingCentral, Inc.
("RingCentral"), which may not be successful.

Our strategy relies on market acceptance of our cloud-based solutions and investing in being at the forefront of offering these
solutions. Our ability to implement this strategy relies, at least in part, on our strategic partnership with RingCentral. A strategic
partnership between two independent businesses is a complex, costly, and time-consuming process that will require significant
management attention and resources. Realizing the benefits of our strategic partnership with RingCentral will depend in part on
our ability to work with RingCentral to develop, market and sell Avaya Cloud Office by RingCentral ("Avaya Cloud Office" or
"ACO"). Setting up the operations and processes under which we and RingCentral will work together may disrupt our business
and, if implemented ineffectively, would limit the expected benefits to us. While the efforts of our strategic partnership and the
launch of ACO has been successful to date, this alliance is still in a nascent stage and unforeseen challenges may arise, which
could impact the ultimate benefits achieved from the alliance. In addition, the process of bringing ACO to market in additional
countries may take longer than anticipated, which could negate some of our anticipated benefits and revenue opportunities.

The failure to meet the challenges involved in having two businesses work together could harm our ability to realize the
anticipated benefits of this partnership and cause an interruption of, or a loss of momentum in, our business activities in a way
that could adversely affect our results of operations. Due to this, as well as the potential that we may incur significant costs

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associated with this partnership but our revenues may not increase as anticipated, our business, operating results and financial
condition may be materially and adversely affected.

If we are unable to integrate acquired businesses effectively, our business, operating results and financial condition may be
adversely affected.

Our strategic operating plan requires continued investments in acquisitions, such as our acquisition of Intellisist, Inc. (d/b/a
Spoken), a U.S. based private technology company, which provides cloud-based CCaaS solutions and customer experience
management and automation applications, in March 2018. We may not be able to successfully integrate acquired businesses
and, where desired, their product portfolios into ours, resulting in the failure to realize the intended benefits. If we fail to
successfully integrate acquisitions or product portfolios, or if they fail to perform as we anticipate, our existing businesses and
our revenue and operating results could be adversely affected. If the due diligence of the operations and customer arrangements
of acquired businesses performed by us and by third parties on our behalf is inadequate or flawed, or if we later discover
unforeseen financial or business liabilities, acquired businesses and their assets may not perform as expected or we may come
to realize that our initial investment was too large or unwarranted. Additionally, acquisitions could result in difficulties
integrating acquired operations and, where deemed desirable, transitioning overlapping products into a single product line,
thereby resulting in the diversion of capital and the attention of management and other key personnel away from other business
issues and opportunities. We may fail to retain employees acquired through acquisitions, which may negatively impact our
integration efforts. Consequently, the failure to integrate acquired businesses effectively may adversely impact our business,
operating results and financial condition.

The market opportunity for business communications solutions and services may not develop in the ways that we anticipate,
and we may not succeed in developing new, innovative solutions and services, which could harm our business, operating
results and financial condition.

The demand for our solutions and services can change quickly and in ways that we may not anticipate because the market in
which we operate is characterized by rapid, and sometimes disruptive, technological developments, evolving industry standards,
frequent new product introductions and enhancements, changes in customer requirements and a limited ability to accurately
forecast future customer orders. Our operating results may be adversely affected if the market opportunity for our solutions and
services does not develop in the ways that we anticipate or if other technologies become more accepted or standard in our
industry or disrupt our technology platforms.

Our solutions and services may fail to keep pace with rapidly changing technology, evolving industry standards and
customer preferences.

Both traditional and new competitors are investing heavily in our markets and competing for customers. As next-generation
business communications technology continues to evolve, including, without limitation, cloud-based communications solutions,
we must keep pace in order to maintain or expand our market leading position. We are increasingly focused on new, high value
software solutions to drive revenue. If we are not able to successfully develop and bring these new solutions to market in a
timely manner, achieve market acceptance of our solutions and services or identify new market opportunities for our solutions
and services, our business, operating results and financial condition may be materially and adversely affected.

In addition, our solutions need to keep pace with new smart devices and the release of new operating systems so that our
customers may continue to use and manage our cloud-based solutions on smart devices. The creation, support and maintenance
of our mobile applications may require significant resources and requires us to maintain good relations with the application
developers and users. If we are unable to support the mobile platforms which our customers use or maintain good working
relationships with these developers and users, our growth, business and operating results may be impacted.

We face formidable competition from providers of unified communications and contact center solutions and services,
including cloud-based solutions, and this competition may negatively impact our business and limit our growth.

The markets for our solutions and services are characterized by rapid changes in customer demands, ongoing technological
changes, evolving industry standards, new product introductions, and evolving methods of building and operating networks.
Both traditional and new competitors are investing heavily in this market and competing for customers. As these markets
evolve, we expect competition to intensify and to expand to include companies that do not currently compete against us.

Because we offer solutions for contact centers and unified communications which are cloud-based, on-premise or hybrid, we
face a wide range of competitors. Some of our competitors include:

•

Enterprise UCC: Cisco, Microsoft, NEC, Atos Unify, Alcatel-Lucent Enterprise and Huawei.

• Midmarket UCC: Mitel, NEC, Cisco and Microsoft.

•

Cloud Products and Services: Cisco, Microsoft, RingCentral, 8x8, Mitel, Google, LogMeIn, Fuze, Zoom and Twilio.

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•

•

Video Products and Solutions: Cisco, Microsoft, Zoom, LogMeIn, Google, Poly, Huawei, ZTE, RingCentral,
BlueJeans and LifeSize.

Enterprise Contact Center Products and Services: Genesys, Cisco, Aspect Software, Huawei, NEC and Enghouse
Interactive.

• Midmarket Contact Center Products and Services: Genesys, Cisco, Five9, NICE InContact, Amazon, Twilio,

Talkdesk and Vonage.

We also face competition in certain geographies with companies that have a particular strength and focus in some of the
geographic regions in which we operate, such as Huawei in China and Intelbras in Latin America.

Several of our existing competitors have, and many of our future competitors may have, greater financial, personnel, technical,
R&D and other resources, more well-established brands or reputations and broader customer bases than we do and, as a result,
these competitors may be in a stronger position to respond quickly to potential acquisitions and other market opportunities, new
or emerging technologies and changes in customer requirements. On the other hand, smaller competitors may be able to
respond to technological evolution and changes in customer demand with more speed and agility than we can. In addition, some
competitors may have customer bases that are more geographically balanced than ours and, therefore, may be less affected by
an economic downturn in a particular region. Other companies may have relationships with channel partners, distributors,
resellers, consulting and systems integration firms and/or network service providers which pose a competitive threat to us.
Moreover, other competitors may have deeper expertise in a particular stand-alone technology that develops more quickly than
we anticipate. Competitors with greater resources may also be able to offer lower prices, additional products or services or other
incentives that we cannot match or do not offer.

In addition, because the business communications market continues to evolve and technology continues to develop rapidly, we
may face competition in the future from companies that do not currently compete against us, but whose current business
activities may bring them into competition with us in the future. In particular, this may be the case as business, information
technology and communications applications deployed on converged networks become more integrated to support business
communications. We may face increased competition from current leaders in IT infrastructure, consumer products, personal and
business applications and the software that connects the network infrastructure to those applications. With respect to services,
we may also face competition from companies that seek to sell remotely hosted services or software as a service directly to end
customers. Competition from these potential market entrants may take many forms, including offering products and solutions
similar to those that we offer. In addition, certain of these technologies continue to move from a proprietary environment to an
open standards-based environment.

We cannot predict which competitors may enter our markets, what forms such competition may take or whether we will be able
to respond effectively to new competitors or to the rapid evolution in technology and product development that has
characterized our businesses. In addition, in order to effectively compete with any new technology or a new market entrant, we
may need to make additional investments in our business, use more capital resources than our business currently requires or
reduce prices, any of which may materially and adversely affect particular parts of our business, or our business as a whole.

Industry consolidation may lead to stronger competition and may harm our business, operating results and financial
condition.

There has been a trend toward industry consolidation in the markets in which we compete and companies which provide unified
communications are purchasing contact center providers. We expect this trend to continue as companies attempt to strengthen
or hold their positions in an evolving market and as companies are acquired or sell businesses because they are unable to
continue all or a portion of their operations. Companies that are strategic alliance partners in some areas of our business may
acquire or form alliances with our competitors, thereby reducing their business with us. Furthermore, rapid consolidation,
particularly in the value-added reseller (“VAR”) and service provider markets, will lead to fewer customers, with the effect that
loss of a major customer could have a material impact on our business.

We also believe that industry consolidation may result in stronger competitors that are better able to compete as sole-source
vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on
our business, operating results and financial condition.

Our growth strategy depends on our ability to continue to expand our cloud-based solutions and services offerings and grow
our share of the cloud communications market for such offerings through customer acceptance.

An important element of our growth strategy is our ability to significantly increase revenues generated from sales of our cloud-
based communications solutions and related services. To increase our revenue, we must continue to expand and develop new
cloud-based solutions and services offerings as the market rapidly develops and changes. Our cloud enabled unified
communications and contact center solutions and services must offer relevant features and provide consistent high-quality
services at competitive prices to attract new customers and to migrate existing customers to such solutions and services. While

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we have entered into a strategic partnership with RingCentral that enhances our cloud-based offerings, there is no assurance that
this partnership will provide us with the desired long-term growth opportunities and results as there are a number of
dependencies, including customer acceptance of ACO.

The cloud communications industry is competitive and rapidly evolving, and we expect competition to increase. The
functionality, relevance and customer acceptance of our cloud-based solutions and services will depend, in part, on our ability
and our partners' ability to integrate these with third-party applications and platforms, including enterprise collaboration,
enterprise resource planning, customer relationship management, human capital management and other proprietary application
suites.

As is typical of any new solution introduced in a rapidly evolving market, the level of demand for, and market acceptance of
these new solutions is uncertain. If we successfully expand and develop our cloud-based solutions and services, including,
without limitation, Avaya OneCloud Private and Avaya Cloud Office, our business will remain dependent on customer
decisions to migrate their legacy communications infrastructures to cloud solutions based on newer technology. While these
investment decisions are often driven by macroeconomic factors, customers may also delay the purchase of newer technology
due to a range of other factors, including prioritization of other IT projects, delays or failures to meet customers' certification
requirements, the weighing of the costs and benefits of deploying new infrastructures and devices and the need to deploy capital
to respond to unforeseen circumstances, such as COVID-19. In addition, customers’ focus on the architecture, management and
integration of such new technologies, possible cyber breaches and other security considerations could also affect market
acceptance of new solutions. If the market for cloud-based communications fails to develop, develops more slowly than we
anticipate, or develops in a manner different than we expect, or if we are not able to successfully develop and expand our cloud-
based solutions and services offerings, our cloud-based solutions and services could fail to achieve market acceptance, which in
turn could impact our growth strategy and materially and adversely affect our business, operating results and financial
condition.

Our strategy depends in part on our reliance on our indirect sales channel.

An important element of our go-to-market strategy to expand sales coverage, penetrate new markets and increase market
absorption of new solutions is the use of our global network of alliance partners, distributors, dealers, value-added resellers,
telecommunications service providers and system integrators, who are collectively referred to as our "channel partners". Our
financial results could be adversely affected if our relationships with these channel partners were to deteriorate, if our support
pricing or other services strategies conflict with those of our channel partners, if any of our competitors were to enter into
strategic relationships with or acquire any of our channel partners, if some or all of our channel partners do not become enabled
to sell new solutions and services or if the financial condition of some or all of our channel partners were to weaken. In
addition, we may expend time, money and other resources on developing and maintaining channel relationships that are
ultimately unsuccessful. Furthermore, despite the benefits of a robust indirect channel, our channel partners have direct contact
with our customers, which may foster independent relationships between them and may lead to a loss of certain services
agreements for us.

There can be no assurance that we will be successful in maintaining, expanding or developing relationships with channel
partners. If we are not successful, we may lose sales opportunities, customers or market share. Although the terms of individual
channel partner agreements may deviate from our standard program terms, our standard program agreements for resellers
generally provide for a term of one year with automatic renewals for successive one-year terms and generally may be
terminated by either party for convenience upon 30 days' notice. Our standard program agreements for distributors generally
may be terminated by either party for convenience upon 90 days' prior written notice. Certain of our contractual agreements
with our largest distributors and resellers, however, permit termination of the relationship by either party for convenience upon
prior notice of 180 days. In addition, our alliance partners (including RingCentral), distributors and resellers are permitted to
work with other vendors, including our competitors, and most of them do so. See Part I, Item 1, "Business-Alliances and
Partnerships" to this Annual Report on Form 10-K for more information on our global channel partner program and the
standard terms of our program agreements.

We rely on third-party contract manufacturers, component suppliers and partners (some of which are sole source and
limited source suppliers) and warehousing and distribution logistics providers. If these relationships are disrupted and we
are unable to obtain substitute manufacturers, suppliers or partners, on favorable terms or at all, our business, operating
results and financial condition may be harmed.

We have outsourced substantially all of our manufacturing operations to several contract manufacturers. Our contract
manufacturers produce the vast majority of our products in facilities located in southern China, with other products
manufactured in facilities located in Mexico, Taiwan, Germany, Ireland and the U.S. All manufacturing of our products is
performed in accordance with detailed specifications and product designs furnished or approved by us and is subject to rigorous
quality control standards. We periodically review our product manufacturing operations and consider changes we believe may
be necessary or appropriate. Although we closely manage the transition process when manufacturing changes are required, we

21

could experience disruption to our operations during any such transition. Any such disruption could negatively affect our
reputation and our operating results. We also purchase certain hardware components and license certain software components
and resell them separately or as part of our products under the Avaya brand. In some cases, certain components are available
only from a single source or from a limited source of suppliers. These sole source and limited source suppliers may stop selling
their components at commercially reasonable prices or at all. Interruptions, delays or shortages associated with these
components could cause significant disruption to our operations. We may not be able to make scheduled product deliveries to
our customers in a timely fashion. We could incur significant costs to redesign our products or to qualify alternative suppliers,
which would reduce our realized margins. We have also outsourced substantially all of our warehousing and distribution
logistics operations to several providers of such services on a global basis, and any delays or material changes in such services
could cause significant disruption to our operations. If any of our providers of outsourced services were to experience financial
difficulty or seek protection under bankruptcy laws it could also affect their ability to perform services for us.

In addition, we rely on third parties to provide certain services to us or to our customers, including hosting partners and
providers of other cloud-based services. If these third-party providers do not perform as expected, our customers may be
adversely affected, resulting in potential liability and negative exposure for us. If it is necessary to migrate these services to
other providers due to poor performance, cyber breaches or other security considerations, or other financial or operational
factors, it could result in service disruptions to our customers and significant time and expense to us, any of which could
adversely affect our business, operating results and financial condition.

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material
adverse impact on our business, operating results and financial condition.

The U.S. government has adopted a new approach to trade policy, including in some cases renegotiating and terminating certain
existing bilateral or multi-lateral trade agreements, such as the North American Free Trade Agreement ("NAFTA"). The U.S.
government has also initiated tariffs on certain foreign goods from a variety of countries and regions, most notably China, and
has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of
goods. In response, many of these foreign governments have imposed retaliatory tariffs on goods that their countries import
from the U.S. Changes in U.S. trade policy have and may continue to result in one or more foreign governments adopting
responsive trade policies that make it more difficult or costly for us to do business in or import our products from those
countries. This in turn could require us to increase prices to our customers, which may reduce demand, or, if we are unable to
increase prices, result in lowering our margin on products sold.

We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, tariffs, taxes or
other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the
terms of any renegotiated trade agreements and their impact on our business. The adoption and expansion of trade restrictions,
the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to
adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could
have a material adverse effect on our business, operating results and financial condition.

Contracting with government entities can be complex, expensive and time-consuming.

In fiscal 2020, the Company’s revenue from contracts including the U.S. federal government was approximately $230 million.
The procurement process for government entities is in many ways more challenging than contracting in the private sector. We
must comply with laws and regulations relating to the formation, administration, performance and pricing of contracts with
government entities, including U.S. federal, state and local governmental bodies. These laws and regulations may impose added
costs on our business or prolong or complicate our sales efforts, and failure to comply with these laws and regulations or other
applicable requirements could lead to claims for damages from our customers, penalties, termination of contracts and other
adverse consequences. Any such damages, penalties, disruptions or limitations in our ability to do business with government
entities could have a material adverse effect on our business, operating results and financial condition.

Government entities often require highly specialized contract terms that may differ from our standard arrangements.
Government entities often impose compliance requirements that are complicated, require preferential pricing or “most favored
nation” terms and conditions, or are otherwise time-consuming and expensive to satisfy. Compliance with these special
standards or satisfaction of such requirements could complicate our efforts to obtain business or increase the cost of doing so.
Even if we do meet these special standards or requirements, the increased costs associated with providing our solutions to
government customers could harm our margins.

Business communications solutions are complex, and design defects, errors, failures or "bugs" may be difficult to detect and
correct and could harm our reputation, result in significant costs to us and cause us to lose customers.

Business communications products are complex, integrating hardware, software and many elements of a customer’s existing
network and communications infrastructure. Despite testing conducted prior to the release of solutions to the market and quality
assurance programs, hardware may malfunction and software may contain "bugs" that are difficult to detect and fix. Any such

22

issues could interfere with the expected operation of a solution, which might negatively impact customer satisfaction, reduce
sales opportunities or affect gross margins.

Depending upon the size and scope of any such issue, remediation may have a material impact on our business. Our inability to
cure an application or product defect, should one occur, could result in the failure of an application or product line, the
temporary or permanent withdrawal from an application, product or market, damage to our reputation, an increase in inventory
costs, an increase in warranty claims, lawsuits by customers or customers’ or channel partners’ end users, or application or
product reengineering expenses. Our insurance may not cover or may be insufficient to cover claims that are successfully
asserted against us.

Intellectual Property and Information Security

We are dependent on our intellectual property. If we are not able to protect our proprietary rights or if those rights are
invalidated or circumvented, our business may be adversely affected.

Our business is primarily dependent on our technology and our ability to innovate in business communications and, as a result,
we are reliant on our intellectual property. We generally protect our intellectual property through patents, trademarks, trade
secrets, copyrights, confidentiality and nondisclosure agreements and other measures to the extent our budget permits. There
can be no assurance that patents will be issued from pending applications that we have filed or that our patents will be sufficient
to protect our key technology from misappropriation or falling into the public domain, nor can assurances be made that any of
our patents, patent applications, trademarks or our other intellectual property or proprietary rights will not be challenged,
invalidated or circumvented. In addition, our business is global and the level of protection of our proprietary technology varies
by country and may be particularly uncertain in countries that do not have well developed judicial systems or laws that
adequately protect intellectual property rights. Patent litigation and other challenges to our patents and other proprietary rights
are costly and unpredictable and may prevent us from marketing and selling a product in a particular geographic area. Financial
considerations also preclude us from seeking patent protection in every country where infringement litigation could arise and a
cost-benefit analysis may lead us to conclude that under certain circumstances enforcing our rights does not merit the expending
of efforts and capital. Our inability to predict our intellectual property requirements in all geographies and affordability
constraints also impact our intellectual property protection investment decisions. If we are unable to protect our proprietary
rights, we may be at a disadvantage to others who do not incur the substantial time and expense we incur to create our products.
Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. Moreover, it may be
difficult or practically impossible to detect theft, unauthorized use of our intellectual property or the production and sale of
counterfeit versions of our products and solutions. For example, we actively combat software piracy as we enforce our
intellectual property rights and we actively pursue counterfeiters and their distributors, but we nonetheless may lose revenue
due to illegal or unauthorized use of our software. While counterfeiters often aim their sales at customers who might not have
otherwise purchased our solutions due to lack of verifiability of origin and service, such counterfeit sales, to the extent they
replace otherwise legitimate sales, could adversely affect our operating results. If piracy activities continue at historical levels or
increase, they may further harm our business. Enforcement of our intellectual property rights also depends on our legal actions
being successful against these infringers, but these actions may not be successful, even when our rights have been infringed.

In addition, our business is global and the level of protection of our proprietary technology varies by country and may be
particularly uncertain in countries that do not have well developed judicial systems or laws that adequately protect intellectual
property rights. The level of protection afforded our intellectual property may also be particularly uncertain in countries that
require the transfer of technology as a condition to market access. Our partnerships with foreign entities sometimes require us to
transfer technology and/or certain intellectual property rights in countries that afford less protection of intellectual property
rights than other countries. While we believe such technology and intellectual property transfer requirements have not adversely
affected our business, such requirements may change over time and become detrimental to our ability to protect our technology
or intellectual property in certain foreign countries. Patent litigation and other challenges to our patents and other proprietary
rights are costly and unpredictable and may prevent us from marketing and selling a product in a particular geographic area.
Financial considerations also preclude us from seeking patent protection in every country where infringement litigation could
arise. Our inability to predict our intellectual property requirements in all geographies and affordability constraints also impact
our intellectual property protection investment decisions. If we are unable to protect our proprietary rights, we may be at a
disadvantage to others who do not incur the substantial time and expense we incur to create our products.

Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended
consequences and, therefore, could materially adversely affect our business, operating results and financial condition.

Some of our products contain software from open source code sources. The use of such open source code may subject us to
certain conditions, including the obligation to offer our products that use open source code to third parties for no cost. We
monitor our use of such open source code to avoid subjecting our products to conditions we do not intend. However, the use of
such open source code may ultimately subject some of our products to unintended conditions, which could require us to take
remedial action that may divert resources away from our development efforts and, therefore, could materially adversely affect

23

our business, operating results and financial condition.

We may be subject to litigation and infringement claims, which could cause us to incur significant expenses or prevent us
from selling our products or services.

From time to time, we receive notices and claims from third parties asserting that our proprietary or licensed products, systems
and software infringe their intellectual property rights. There can be no assurance that the number of these notices and claims
will not increase in the future or that we do not in fact infringe those intellectual property rights. Irrespective of the merits of
these claims, any resulting litigation could be costly and time consuming and could divert the attention of management and key
personnel from other business issues. The complexity of the technology involved and the uncertainty of intellectual property
litigation increase these risks. These matters may result in any number of outcomes for us, including entering into licensing
agreements, redesigning our products to avoid infringement, being enjoined from selling products or solutions that are found to
infringe intellectual property rights of others, paying damages if products are found to infringe and indemnifying customers
from infringement claims as part of our contractual obligations. Royalty or license agreements may be very costly and we may
be unable to obtain royalty or license agreements on terms acceptable to us or at all. Such agreements may cause operating
margins to decline.

In addition, some of our employees previously have been employed at other companies that provide similar products and
services. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade
secrets or other proprietary information of their former employers. These claims and other claims of patent or other intellectual
property infringement against us could materially adversely affect our business, operating results and financial condition.

We have made and will likely continue to make investments to license and/or acquire the use of third-party intellectual property
rights and technology as part of our strategy to manage this risk, but there can be no assurance that we will be successful or that
any costs relating to such activity will not be material. We may also be subject to additional notice, attribution and other
compliance requirements to the extent we incorporate open source software into our applications. In addition, third parties have
claimed, and may in the future claim, that a customer’s use of our products, systems or software infringes the third-party’s
intellectual property rights. Under certain circumstances, we may be required to indemnify our customers for some of the costs
and damages related to such an infringement claim. Any indemnification requirement could have a material adverse effect on
our business, operating results and financial condition. Additionally, any insurance that we have may not be sufficient to cover
all amounts related to such indemnification.

Failure to comply with laws and contractual obligations related to data privacy and protection could have a material adverse
effect on our business, operating results and financial condition.

We are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign governmental
agencies, including the European Union's ("EU") GDPR and California’s Consumer Privacy Act (“CCPA”). Data privacy and
protection is highly regulated and GDPR imposes new obligations on companies, including us, who process personal data of
data subjects who are in the EU, regardless of whether or not that processing takes place in the EU. These requirements
substantially increase potential liability for all such companies for failure to comply with data protection rules.

Privacy laws restrict our storage, use, processing, disclosure, transfer and protection of personal information, including credit
card data, provided to us by our customers as well as data we collect from our customers and employees. We strive to comply
with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. Our privacy
compliance program is based on our binding corporate rules which have been approved by EU regulatory authorities. Through
the application of these rules we endeavor to apply uniform data handling practices, based on GDPR standards, on a global
basis throughout all Avaya entities which process personal data, which entities have signed on to our binding corporate rules.
We have dedicated significant time, capital and other resources to obtain binding corporate rules and meet GDPR requirements,
as well as requirements from other laws such as CCPA. We expect that as privacy laws continue to evolve and become more
prevalent throughout the world, we will be required to dedicate additional resources to ensure compliance.

From time to time we have notified the Hessen authorities, our lead supervisory authority in the EU, of certain personal data
breaches and privacy issues. If the authorities determine that we have not complied with applicable laws and regulations, we
may be subject to fines, penalties and lawsuits, and our reputation may suffer. In particular, fines imposed on other companies
by various data privacy regulatory authorities from the EU for violations of the GDPR have been significant in amount.
Furthermore, we may be subject to increased scrutiny going forward and we may also be required to make modifications to our
data practices that could have an adverse impact on our business.

These data privacy risks are especially relevant and applicable to us as a technology company because we process vast amounts
of personal and non-personal data on behalf of our customers and we also host significant and increasing amounts of data in our
cloud solutions. We believe that regulation will continue to increase around the world with respect to the solicitation, collection,
processing, and/or use of personal, financial, and consumer information. In addition, the interpretation and application of
existing consumer and data protection laws and industry standards in the U.S., Europe and elsewhere is often uncertain and in

24

flux. The application of existing laws to cloud-based solutions is particularly uncertain and cloud-based solutions may be
subject to further regulation, the impact of which cannot be fully understood at this time. Moreover, it is possible that these laws
may be interpreted and applied in a manner that is inconsistent with our data and privacy practices. Complying with these
various laws and regulations may cause us to incur substantial costs or require us to change our business practices in a manner
adverse to our business.

We are also subject to the privacy and data protection-related obligations in our contracts with our customers, channel partners
and other third parties. Any failure, or perceived failure, by us to comply with federal, state, or international laws, including
laws and regulations regulating privacy, data or consumer protection, or to comply with our contractual obligations related to
privacy, could result in proceedings or actions against us by governmental entities, contractual parties or others, which could
result in significant liability to us as well as harm to our reputation. Additionally, third parties on which we rely enter into
contracts to protect and safeguard our customers' data. Should such parties violate these agreements or suffer a security breach,
we could be subject to proceedings or actions against us by governmental entities, contractual parties or others, which could
result in significant liability to us as well as harm to our reputation.

A breach of the security of our information systems, products or services or of the information systems of our third-party
providers could adversely affect our business, operating results and financial condition.

We rely on the security of our information systems and, in certain circumstances, those of our third-party providers, such as
channel partners, vendors, consultants and contract manufacturers, to protect our proprietary information and information of our
customers. In addition, the growth of bring your own device ("BYOD") programs has heightened the need for enhanced
security measures. IT security system failures, including a breach of our or our third-party providers’ data security, could
disrupt our ability to function in the normal course of business by potentially causing, among other things, delays in the
fulfillment or cancellation of customer orders, disruptions in the manufacture or shipment of products or delivery of services or
an unintentional disclosure of customer, employee or our information. Additionally, despite our security procedures or those of
our third-party providers, information systems and our products and services may be vulnerable to threats such as computer
hacking, cyber-terrorism or other unauthorized attempts by third parties to access, modify or delete our or our customers’
proprietary information. In recent years, these attacks and similar threats have become more sophisticated and numerous and we
expect that trend to continue.

We take cybersecurity seriously and devote significant resources and tools to protect our systems, products and data from
unwanted intrusions and to ensure we meet our contractual and regulatory obligations. However, these security efforts are
costly to implement and may not be successful. There can be no assurance that we will be able to prevent, detect and adequately
address or mitigate such cyber-attacks or security breaches. We investigate potential data breach issues identified through our
security procedures and terminate, mitigate and remediate such issues as appropriate. Past incidents have involved outside
actors and internal issues stemming from certain configuration and migration issues of our internal applications to other
platforms. Any such breach could have a material adverse effect on our operating results and our reputation as a provider of
business communications products and services and could cause irreparable damage to us or our systems regardless of whether
we or our third-party providers are able to adequately recover critical systems following a systems failure. In addition,
regulatory or legislative action related to cybersecurity, privacy and data protection worldwide, such as the European GDPR,
which went into effect in May 2018, may increase the costs to develop, implement or secure our products and services. We
expect cybersecurity regulations to continue to evolve and be costly to implement. Furthermore, we may need to increase or
change our cybersecurity systems and expenditures to support expansion of sales into new industry segments or new geographic
markets. If we violate or fail to comply with such regulatory or legislative requirements, we could be fined or otherwise
sanctioned and such fines or penalties could have a material adverse effect on our business and operations.

We rely on third parties to provide certain data hosting services to us or to our customers, and interruptions or delays in
those services could harm our business.

Our cloud-based solutions rely on uninterrupted connection to the Internet through data centers and networks. To provide such
service for our customers, we utilize data center hosting facilities located in the United States and Europe, as well as in our Asia
Pacific region and our Central America and Latin America region. We also use facilities provided by Google, Amazon and
Microsoft as we migrate to cloud solutions. We do not control the operation of these facilities, and they are vulnerable to
service interruptions or damage from floods, earthquakes, fires, power loss, telecommunications failures and similar events.
They may also be subject to acts of vandalism or terrorism, sabotage, similar misconduct and/or human error. Moreover, if any
of these data centers and networks cease operations, we would need to migrate our solutions and our customers to other
providers. The occurrence of these or other unanticipated problems at these facilities could result in lengthy interruptions in the
ability to use our solutions efficiently or at all, which could harm our business, operating results and financial condition.

25

Global Operations and Regulations

Since we operate internationally, operational, logistical, economic and/or political challenges in a specific country or region
could negatively affect our revenue, costs, expenses and financial condition or those of our channel partners and
distributors.

We do business in approximately 190 countries. We conduct significant sales and customer support operations and significant
amounts of our R&D activities in countries outside of the U.S., and we also depend on non-U.S. operations of our contract
manufacturers and our channel partners. For fiscal 2020, we derived 43% of our revenue from sales outside of the U.S., with the
most significant portions generated from Germany, the United Kingdom and Canada. In addition, we intend to continue to grow
our business internationally. The vast majority of our contract manufacturing also takes place outside the U.S., primarily in
southern China.

Accordingly, our results could be materially and adversely affected by a variety of uncontrollable and changing factors relating
to international business operations, including:

•

•

•

•

•

•

•

•

economic conditions and geopolitical developments, including trade sanctions, changes to significant trading
relationships such as the United Kingdom’s ongoing process of withdrawal from the EU, and the negotiation of new
or revised international trade arrangements;

political or social unrest, economic instability or corruption or sovereign debt risks in a specific country or region;

legal and regulatory constraints, such as international and local laws and regulations related to trade compliance,
anti-corruption, information security, data privacy and protection, labor and other requirements;

protectionist and local security legislation;

difficulty in enforcing intellectual property rights, such as protecting against the counterfeiting of our products;

less established legal and judicial systems necessary to enforce our rights;

relationships with employees and works councils, as well as difficulties in finding qualified employees, including
skilled design and technical employees, as companies expand their operations offshore;

unfavorable tax and currency regulations;

• military conflict, terrorist activities and health pandemics or similar issues;

•

•

•

future government shutdowns or uncertainties which could affect the portion of our revenues which comes from the
U.S. federal government sector;

natural disasters, such as earthquakes, hurricanes or floods, anywhere we and/or our channel partners and
distributors have business operations; and

other matters in any of the countries or regions in which we and our contract manufacturers and business partners
currently operate or intend to operate, including in the U.S.

Any or all of these factors could materially adversely affect our business, operating results or financial condition. In addition,
the various risks inherent in doing business in the U.S. generally also exist when doing business outside of the U.S., and they
may be exaggerated by the difficulty of doing business in numerous sovereign jurisdictions due to differences in culture, laws
and regulations. Furthermore, our prospective effective tax rate could be adversely affected by, among other things, changes in
the mix of earnings in countries with differing statutory tax rates, changes in the valuation of our deferred tax assets and
liabilities or changes in tax laws, regulations, accounting principles or interpretations thereof.

If we do not comply with certain telecommunications or other rules and regulations, we could be subject to enforcement
actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services.

Certain of our cloud-based communications and collaboration solutions are regulated in the U.S. by the Federal
Communications Commission and various state and local agencies, and across the globe by governments of various foreign
countries. Furthermore, we are subject to existing or potential regulations relating to privacy, protection of customer
information, disability access, porting of numbers, Universal Service and Telecommunications Relay Service Fund
contributions, emergency access, law enforcement intercept, and other requirements. In addition, government agencies in other
countries impose their own regulatory requirements on those solutions. If we do not comply with applicable federal, state, local
and foreign rules and regulations, we could be subject to enforcement actions, fines, loss of licenses and possible restrictions on
our ability to operate or offer certain of our solutions or requirements to modify certain solutions, which could have a material
adverse effect on our operating results and financial condition. Moreover, changes in telecommunications requirements, or

26

regulatory requirements in other industries in which we operate now or in the future, could have a material adverse effect on our
business, operating results and financial condition.

We may be adversely affected by environmental, health and safety laws, regulations, costs and other liabilities.

We are subject to a wide range of federal, state, local and international governmental requirements relating to the discharge of
substances into the environment, protection of the environment and worker health and safety. If we violate or fail to comply
with these requirements, we could be fined or otherwise sanctioned by regulators, lose customers and damage our reputation,
which could have an adverse effect on our business. The Federal Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), and comparable state statutes impose liability, without regard to fault or legality of the original
conduct, on classes of persons that are considered to have contributed to the release of a hazardous substance into the
environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substance was
released, and companies that disposed or arranged for disposal of hazardous substances at off-site locations such as landfills.
Under CERCLA, these persons may be subject to strict, joint and several liability for the costs of cleaning up the hazardous
substances that have been released into the environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the
hazardous substances released into the environment.

We currently own or formerly owned several properties or facilities that for many years were used for industrial activities,
including the manufacture of electronics equipment. These properties and the substances disposed or released on them may be
subject to CERCLA, the Resource Conservation and Recovery Act and analogous state or foreign laws. For example, we are
presently involved in remediation efforts at several currently or formerly owned sites related to historical site use which we do
not believe will have a material impact on our business or operations, although no assurance can be given that these remediation
efforts or remediation efforts we are required to undertake in the future will not have a material adverse effect on our business
or operations.

We are also subject to various local, federal and international laws and regulations regarding the materials content and electrical
design of our products that require us to be financially responsible for the collection, treatment, recycling and disposal of those
products. For example, the EU has adopted the Restriction on Hazardous Substances and Waste Electrical and Electronic
Equipment Directive, with similar laws and regulations being enacted in other regions. Since May 2014, the U.S. requires
companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo, or an
adjoining country. Additionally, requirements such as the EU Energy Labelling Directive, impose requirements relating to the
energy efficiency of our products. Our failure or the undetected failure of our supply chain to comply with existing or future
environmental, health and safety requirements could subject us to liabilities exceeding our reserves or adversely affect our
business, operating results or financial condition.

A growing number of climate change regulations and initiatives are either in force or pending at the local, federal and
international levels as part of a transition to a lower-carbon economy that is underway globally. With growing awareness of
climate change, the demand for lower emissions products and services is increasing. As we continue to shift our products and
services to the cloud, this creates an opportunity to serve customers' needs and requirements. The lower-carbon economy may
also entail extensive policy, legal, technology and market changes to address mitigation and adaptation requirements related to
climate change. Depending on the nature, speed and focus of these changes, transition risks may pose varying levels of financial
and reputational risk to our organization. Our operations and supply chain could face increased climate change-related
regulations, modifications to transportation to meet lower emission requirements, changes to types of materials used for
products and packaging to reduce emissions, increased utility costs to address cleaner energy technologies, increased costs
related to severe weather events, and emissions reductions associated with operations, business travel or products. These costs
and changes to operations could have a financial impact on our business and result in an adverse impact on our operating results
or reputation.

Risks Related to Our Financial Results, Finances and Capital Structure

Financial Performance

In addition to experiencing some seasonal trends, our quarterly and annual revenues and operating results have historically
fluctuated and the results of one period may not provide a reliable indicator of our future performance.

Our quarterly and annual revenues and operating results have historically fluctuated and are not necessarily indicative of results
to be expected in future periods. Fluctuations in our financial results from period to period are caused by many factors,
including, but not limited to, the size and timing of new logos, changes in foreign currency exchange rates, the mix of products
sold by us and general economic conditions. In addition, execution of sales opportunities sometimes traverses from the intended
fiscal quarter to the next.

27

We also experience some seasonal trends in the sale of our products that also may produce variations in quarterly results and
financial condition. Typically, our second fiscal quarter is our weakest and our fourth fiscal quarter is our strongest. Many of
the factors that create and affect seasonal trends are beyond our control.

In addition, the Company applied fresh start accounting upon its emergence from bankruptcy. As a result, assets and liabilities
were adjusted to fair value as of the Emergence Date. Accordingly, our financial condition and operating results after the
Emergence Date are not comparable to the financial condition and operating results reflected in our historical Consolidated
Financial Statements prior to the Emergence Date.

Shifts in the mix of sizes or types of organizations that purchase our solutions or changes in the components of our solutions
purchased by our customers could affect our gross margins and operating results.

Our gross margins and our operating results can vary depending on numerous factors related to the implementation and use of
our solutions, including the sizes and types of organizations that purchase our solutions, the mix of software and hardware they
purchase and the level of professional services and support they require. We provide our solutions to a broad range of
companies, from small businesses to large multinational enterprises and government organizations. Sales to larger enterprises
generally result in greater revenue but may take longer to negotiate and finalize than sales to small businesses. Conversely, sales
to small businesses may be faster to execute than sales to larger enterprises, but they may involve greater credit risk and fewer
opportunities to sell additional services. Moreover, an important element of our growth strategy is to continue to evolve from a
traditional telecommunications hardware company into a software and services company, focused on expanding our cloud- and
mobile-enabled contact center, unified communications and innovative next-generation workflow automation solutions. As we
increase the proportion of our revenue coming from software solutions as opposed to hardware solutions, we expect to see
improvement in our gross margins and operating results. Overall, if the mix of companies that purchase our solutions, or the
mix of solution components purchased by our customers, changes unfavorably, our revenues and gross margins could decrease
and our operating results could be harmed.

We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from
our subsidiaries to meet our obligations.

We have no direct operations and derive all of our operating cash flow from our subsidiaries. Because we conduct our
operations through our subsidiaries, we depend on those entities for dividends and other payments or distributions to meet our
obligations. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could limit or
impair their ability to pay dividends or other distributions to us.

We may not realize the benefits we expect from our cost-reduction initiatives.

From time to time we may initiate cost savings programs designed to streamline operations. As discussed in Part II, Item 7,
"Management’s Discussion and Analysis of Financial Condition and Results of Operations-Factors and Trends Affecting Our
Results of Operations," we have initiated such programs historically, and we will continue to evaluate similar opportunities to
the extent the business need arises. These types of cost-reduction activities are complex. Even if we carry out these strategies in
the manner we expect, we may not be able to achieve the efficiencies or savings we anticipate or on the timetables we
anticipate. Any expected efficiencies and benefits might be delayed or not realized, and, as a result, our operations and business
could be disrupted. Our ability to realize gross margin improvements and other efficiencies expected to result from these
initiatives is subject to many risks, including delays in the anticipated timing of activities, lack of sustainability in cost savings
over time, unexpected costs associated with operating our business, our success in reinvesting any savings arising from these
initiatives, time required to complete planned actions, absence of material issues associated with workforce reductions and
avoidance of unexpected disruptions in service. A failure to implement these types of initiatives or realize expected benefits
could have an adverse effect on our financial condition that could be material.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

At September 30, 2020, the Company had $2,556 million of intangible assets and $1,478 million of goodwill on its
Consolidated Balance Sheet. The intangible assets are principally composed of technology and patents, customer relationships,
and trademarks and trade names. Goodwill and intangible assets with indefinite lives are tested for impairment on an annual
basis and also when events or changes in circumstances indicate that impairment may have occurred. Intangible assets with
determinable lives, which were $2,223 million at September 30, 2020, are tested for impairment only when events or changes in
circumstances indicate that an impairment may have occurred. Determining whether an impairment exists can be difficult and
requires management to make significant estimates and judgments. During fiscal 2020 and 2019, the Company recorded
goodwill impairment charges of $624 million and $657 million, respectively. The fiscal 2020 goodwill impairment charge
resulted in the write-down of the full carrying value of the goodwill related to the Company's Products & Solutions segment
primarily due to a reduction in the Company's long-term forecast to reflect increased risk from higher market uncertainty and
the accelerated reduction of product sales related to the Company’s historical on-premises perpetual licenses. The fiscal 2019
goodwill impairment charge also related to the Company’s Products & Solutions segment and was primarily due to a sustained

28

decrease in the Company’s stock price and a reduction in the Company’s long-term forecast. To the extent that business
conditions deteriorate further, or if changes in key assumptions and estimates differ significantly from management's
expectations, it may be necessary to record additional impairment charges in the future. See Note 7, "Goodwill," and Note 8,
"Intangible Assets," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K
for additional information.

Levels of returns on pension and post-retirement benefit plan assets, changes in interest rates and other factors affecting the
amounts to be contributed to fund future pension and post-retirement benefit plan liabilities could adversely affect our cash
flows, operating results and financial condition in future periods.

We sponsor a number of defined benefit plans for employees in the United States, Canada, and various foreign locations.
Pension and other post-retirement plan costs and required contributions are based upon a number of actuarial assumptions,
including an expected long-term rate of return on pension plan assets, level of employer contributions, the expected life span of
pension plan beneficiaries and the discount rate used to determine the present value of future pension obligations. Any of these
assumptions could prove to be wrong, resulting in a shortfall of our pension and post-retirement benefit plan assets compared to
obligations under our pension and post-retirement benefit plans. Future pension funding requirements, and the timing of
funding payments, may also be subject to changes in legislation.

In addition, our major defined benefit pension plans in the U.S. are funded with trust assets invested in a globally diversified
portfolio of securities and other investments. These assets are subject to market fluctuations, will yield uncertain returns and
cause volatility in the net periodic benefit cost and future funding requirements of the plans. A decline in the market value of
the pension and post-retirement benefit plan assets below our projected return rates will increase the funding requirements
under our pension and post-retirement benefit plans if the actual asset returns do not recover these declines in value in the
foreseeable future. We are responsible for funding any shortfall of our pension and post-retirement benefit plans’ assets
compared to obligations under the pension and post-retirement benefit plans, and a significant increase in our pension liabilities
could have a material adverse effect on our cash flows, operating results and financial condition.

We are exposed to risks inherent in our defined benefit pension plans in Germany.
We operate several defined benefit plans in Germany (collectively, the "German Plans") and as of September 30, 2020, the total
projected benefit obligation for the German Plans of $527 million exceeded plan assets of $4 million, resulting in an aggregate
pension liability for the German Plans of $523 million. Under the German Plans, which were closed to new members in 2006,
retirees generally benefit from the receipt of a perpetual annuity at retirement, based on their years of service and ending salary.
The total projected benefit obligation is based on actuarial valuations, which themselves are based on assumptions and
estimates about the long-term operation of the plans, including mortality rates of members, the performance of financial
markets and interest rates. Our funding requirements for future years may increase from current levels depending on the net
liability position of these plans. In addition, if the actual experience of the plans differs from our assumptions, the net liability
could increase and additional contributions may be required. Changes to pension legislation in Germany may also adversely
affect our funding requirements. Increases in the net pension liability or increases in future cash contributions could have a
material adverse effect on our cash flows, operating results and financial condition.

Risks Related to Our Indebtedness

Our degree of leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to
react to changes in the economy or our industry, expose us to interest rate risk on our variable rate debt and prevent us from
meeting obligations on our indebtedness.

We have a significant amount of debt outstanding. As of September 30, 2020, we had $1,643 million of loans outstanding under
the Term Loan Credit Agreement, $41 million issued and outstanding letters of credit and guarantees under the ABL Credit
Agreement, $350 million of 2.25% convertible senior notes due June 15, 2023 (the "Convertible Notes") and $1,000 million of
6.125% senior first lien notes due September 15, 2028 (the “Senior Notes”) outstanding (all as defined in Part II, Item 8, Note
11, "Financing Arrangements" of this Annual Report on Form 10-K). In addition, as of September 30, 2020 we could have
borrowed an additional $153 million under our ABL Credit Agreement.

Our degree of leverage could have consequences, including:

• making it more difficult for us to make payments on our indebtedness;

•

•

•

increasing our vulnerability to general economic and industry conditions;

requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest
on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures,
research and development and future business opportunities;

exposing us to the risk of increased interest rates under Avaya Inc.’s credit facilities to the extent such facilities

29

have variable rates of interest;

limiting our ability to make strategic acquisitions and investments;

limiting our ability to refinance our indebtedness as it becomes due; and

limiting our ability to adjust quickly or at all to changing market conditions and placing us at a competitive
disadvantage compared to our competitors who are less highly leveraged.

•

•

•

Our ability to continue to fund our obligations and to reduce debt may be affected by general economic, financial market,
competitive, legislative and regulatory factors, among other things. An inability to fund our debt requirements or reduce debt
could have a material adverse effect on our business, operating results, cash flows and financial condition.

Despite our level of indebtedness, we and our subsidiaries may be able to incur additional indebtedness. This could further
exacerbate the risks associated with our degree of leverage.

We and our subsidiaries may be able to incur additional indebtedness in the future. Although our Term Loan and ABL Credit
Agreements and the indenture for our Senior Notes contain restrictions on the incurrence of additional indebtedness, these
restrictions are subject to a number of significant qualifications and exceptions, and any indebtedness incurred in compliance
with these restrictions could be substantial. In addition, the indenture for the Convertible Notes does not restrict us from
incurring additional debt. To the extent new debt is added to our and our subsidiaries’ currently anticipated debt levels, the
related risks that we and our subsidiaries face could intensify.

Our financing agreements contain restrictions that limit, in certain respects, our flexibility in operating our business.

Our financing agreements contain various covenants that limit our ability to engage in specific types of transactions. These
covenants limit our and our subsidiaries’ ability to:

•

•

incur or guarantee additional debt and issue or sell certain preferred stock;

pay dividends on, redeem or repurchase our capital stock;

• make certain acquisitions or investments;

•

•

•

incur or assume certain liens;

enter into transactions with affiliates; and

sell assets to, or merge or consolidate with, another company.

A breach of any of these covenants could result in a default under our debt instruments.

There is no assurance we will be able to repay or refinance all or any portion of our or our subsidiaries’ debt in the future. If we
were unable to repay or otherwise refinance these borrowings and loans when due, the applicable secured lenders could proceed
against the collateral granted to them to secure that indebtedness, which could force us into bankruptcy or liquidation. In the
event our lenders accelerate the repayment of our or our subsidiaries’ borrowings, we and our subsidiaries may not have
sufficient assets to repay that indebtedness.

We may not be able to generate sufficient cash to service all of our indebtedness and our other ongoing liquidity needs, and
we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations and to fund our planned capital expenditures,
acquisitions and other ongoing liquidity needs depends on our financial condition and operating performance, which are subject
to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. In
particular, we intend to increase our recurring revenue by shifting more of our business to a subscription-based model. If we
successfully increase our subscription revenues, we expect this will result in more of our cash receipts being deferred relative to
our historical perpetual license model as payments are spread over a pre-determined time period (e.g., annually) rather than
being received upfront, which may defer cash flows needed to service our debt. There can be no assurance that we will maintain
a level of cash flow from operating activities in an amount sufficient to permit us to pay the principal, premium, if any, and
interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we may
be forced to reduce or delay investments and capital expenditures, or to seek additional capital or restructure or refinance our
indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service
obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be
required to dispose of material assets or operations to meet our debt service and other obligations. Our credit facilities and the
indenture for our Senior Notes restrict the ability of Avaya Inc. and certain of its subsidiaries to dispose of assets and use the
proceeds from the disposition. Accordingly, we may not be able to consummate those dispositions or to obtain any proceeds on
terms acceptable to us or at all, and any such proceeds may not be adequate to meet any debt service obligations when due.

30

A ratings downgrade or other negative action by a ratings organization could adversely affect our cost of capital.

Credit rating agencies continually revise their ratings for companies they follow. The condition of the financial and credit
markets and prevailing interest rates have been, and will continue to be, subject to fluctuation. In addition, any adverse
developments in our business and operations could lead to a ratings downgrade for Avaya Holdings Corp., Avaya Inc. or any of
our rated debt securities. Any such fluctuation in our credit rating may impact our ability to access debt markets in the future or
increase our cost of future debt which could have a material adverse effect on our operating results and financial condition,
which in return may adversely affect the trading price of shares of our common stock.

Risks Related to Ownership of Our Common Stock, Preferred Stock and Convertible Notes

The price of our common stock and/or Convertible Notes may be volatile and fluctuate substantially.

Our common stock is listed on the New York Stock Exchange and the price for our common stock has historically been
volatile. The market price of our common stock, as well as our Convertible Notes (as they are convertible into our common
stock), may continue to be highly volatile and may fluctuate substantially due to the following factors (in addition to the other
risk factors described in this section):

•

•

•

•
•

•

•

•

•

•

•

•

•

•

general economic conditions;

political dynamics in the countries we operate in;

fluctuations in our operating results;

variances in our financial performance from the expectations of equity and/or debt research analysts;
conditions and trends in the markets we serve;

announcements of significant new services or products by us or our competitors;

additions of or changes to key employees;

changes in market valuations or earnings of our competitors;

trading volumes of our common stock and/or Convertible Notes;

future sales of our equity securities and/or future issuances of indebtedness;

changes in the estimation of the future sizes and growth rates of our markets;

legislation or regulatory policies, practices or actions;

hedging or arbitrage trading activity by third parties, including by the counterparties to the note hedge and warrant
transactions that we entered into in connection with the issuance of the Convertible Notes; and

dilution that may occur upon any conversion of shares of our Series A Preferred Stock or the Convertible Notes or
the exercise of the warrants we issued in connection with the issuance of the Convertible Notes.

In addition, the stock markets in general have experienced extreme price and volume fluctuations that have at times been
unrelated or disproportionate to the operating performance of the particular companies affected. These market and industry
factors may materially harm the market price of our common stock and/or Convertible Notes irrespective of our operating
performance.

We currently do not intend to pay dividends on our common stock.

We do not anticipate paying any cash dividends on shares of our common stock for the foreseeable future. Any determination to
pay dividends in the future will be at the discretion of our board of directors and will depend on operating results, financial
condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems
relevant.

The issuance of shares of our Series A Convertible Preferred Stock dilutes the relative voting power and ownership of
holders of our common stock and may adversely affect the market price of our common stock.

Pursuant to an Investment Agreement, dated as of October 3, 2019, by and between us and RingCentral, we sold 125,000 shares
of our newly designated Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) to
RingCentral on October 31, 2019 (the “Closing”).

The shares sold to RingCentral at the Closing represent approximately 9% of our outstanding common stock on an as-converted
basis as of September 30, 2020. The Series A Preferred Stock is convertible at the option of the holder at any time into shares of
common stock at an initial conversion price of $16.00 per share, subject to adjustment as set forth in the Certificate of
Designations which details the terms and conditions of the Series A Preferred Stock.

The holders of our Series A Preferred Stock are entitled to vote, on an as-converted basis, together with holders of our common
stock on all matters submitted to a vote of the holders of our common stock. In any such vote, RingCentral's aggregate voting
power of the Series A Preferred Stock and other shares of our common stock which may be issued to them under that certain

31

Framework Agreement, dated as of October 3, 2019, by and between Avaya Inc. and RingCentral (the "Framework
Agreement"), will be limited, prior to our receipt of an approval by our stockholders as required under New York Stock
Exchange Listed Company Manual Rule 312.03 (“Stockholder Approval”), to the voting power equivalent to no more than
19.9% of our outstanding common stock. If Stockholder Approval is obtained, this limitation will no longer apply.
Notwithstanding that limit, the issuance of the Series A Preferred Stock to RingCentral effectively reduces the relative voting
power of the holders of our common stock. The conversion of the Series A Preferred Stock into common stock would dilute the
ownership interest of existing holders of our common stock.

For a period of eighteen months following issuance of Series A Preferred Stock, the sale or transfer of the Series A Preferred
Stock and the common stock issuable upon conversion thereof is subject to certain lock-up provisions that, subject to
exceptions, prohibit sale or transfer. Following expiration of RingCentral’s eighteen-month lock-up period, any sales in the
public market of the common stock issuable upon conversion of the Series A Preferred Stock could adversely affect prevailing
market prices of our common stock. We granted RingCentral customary registration rights in respect of any shares of common
stock issued upon conversion of the Series A Preferred Stock and have filed a registration statement permitting the resale by
RingCentral of the common stock underlying the Series A Preferred Stock in compliance with this obligation. As a result,
subject to certain exceptions, RingCentral will be able to freely sell common stock upon expiration of the lock-up. Sales by
RingCentral of a substantial number of shares of our common stock in the public market, or the perception that such sales might
occur, could have a material adverse effect on the price of our common stock.

Our Series A Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of
our common stockholders, which could adversely affect our liquidity and financial condition and result in the interests of
RingCentral differing from those of our common stockholders.

As a holder of our Series A Preferred Stock, RingCentral is entitled to:

•

•

•

receive dividends, in preference and priority to holders of our common stock or other series of Company stock, which
will accrue on a daily basis at the rate of 3% per annum of the stated value of the Series A Preferred Stock. The stated
value of the Series A Preferred Stock is initially $1,000 per share and it will be increased by the sum of any dividends
on such shares not paid in cash. These dividends are cumulative, compound quarterly and are paid quarterly in arrears.

participate in any dividends we pay on our common stock, equal to the dividend which holders would have received if
their Series A Preferred Stock had been converted into common stock on the date such common stock dividend was
determined.

receive, in the event our Company is liquidated or dissolved, before any distribution is made to holders of our common
stock, an amount equal to the liquidation preference (which equals the stated value referenced above plus any accrued
and unpaid dividends) for each share of Series A Preferred Stock held.

RingCentral also has certain redemption rights or put rights to require us to repurchase all or any portion of the Series A
Preferred Stock after the termination of the Framework Agreement or upon the occurrence of certain events.

These dividend and share repurchase obligations could impact our liquidity and reduce the amount of cash flows available for
working capital, capital expenditures, growth opportunities, acquisitions and other general corporate purposes and could limit
our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial
condition.

As a holder of our Series A Preferred Stock, RingCentral has certain consent rights over charter amendments and issuances
of senior equity and the ability to designate a member of our Board of Directors.

The transaction documents entered into in connection with the sale of the Series A Preferred Stock to RingCentral grant to
RingCentral customary consent rights with respect to certain actions by us, including:

•

•

amending our organizational documents in a manner that would have an adverse effect on the Series A Preferred
Stock; and

issuing securities that are senior to, or equal in priority with, the Series A Preferred Stock.

In addition, pursuant to an Investor Rights Agreement, until such time when RingCentral and its affiliates hold or beneficially
own less than 4,759,339 shares of our common stock (on an as-converted basis), RingCentral has the right to nominate one
person for election to our Board of Directors and our Board of Directors will recommend that our stockholders vote in favor of
such nominee.

The director designated by RingCentral is entitled to attend meetings of our Board’s Audit, Compensation, and Nominating and
Governance Committees as a non-voting observer, or such director may choose to serve on the Audit Committee and
Nominating and Corporate Governance Committees of our Board, subject to applicable law and stock exchange rules. Such
director is also entitled to be an observer to the Compensation Committee of our Board.

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To the extent that we seek to raise capital in the form of senior preferred stock, for instance because it is the most efficient or
only form of capital available to us, or we need to amend our organizational documents for whatever reason and RingCentral
does not provide its consent to any such issuance or amendment, it could have a material adverse effect on our business and/or
liquidity.

RingCentral has certain redemption or put rights to require us to repurchase all or any portion of the Series A Preferred
Stock for cash. We may not be able to raise the funds necessary to finance such a required repurchase.

RingCentral has certain redemption or put rights to require us, to repurchase all or any portion of the Series A Preferred Stock
for cash. RingCentral can exercise such redemption rights, upon at least 21 days’ notice, after the termination of the Framework
Agreement or upon the occurrence of certain events. If and to the extent this redemption right is exercised, we would have to
purchase each share of Series A Preferred Stock at the per share price equal to the stated value of the Series A Preferred Stock,
which is initially $1,000 per share and which will be increased by the sum of any dividends on such shares, plus all accrued but
unpaid dividends.

It is possible that we would not have sufficient funds to make any required repurchase of Series A Preferred Stock. Moreover,
we may not be able to arrange financing, to pay the repurchase price.

The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and
operating results and/or the market for our common stock.

In the event the conditional conversion feature of our Convertible Notes is triggered, holders of Convertible Notes will be
entitled to convert the Convertible Notes at any time during specified periods at their option. If one or more holders elect to
convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common
stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our
conversion obligation through the payment of cash, which could adversely affect our liquidity. If we elect to satisfy this
obligation by delivering common stock it would have a dilutive effect on our other stockholders. In addition, even if holders do
not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion
of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a
material reduction of our net working capital.

The convertible note hedge and warrant transactions may affect the value of the Convertible Notes and our common stock.

In connection with the pricing of the Convertible Notes, we entered into a convertible note hedge ("Bond Hedge") transaction
with each of Barclays Bank PLC, Credit Suisse Capital LLC and JPMorgan Chase Bank, National Association (the "Call
Spread Counterparties"). The Bond Hedge transactions reduced the potential dilution upon conversion of the Convertible Notes.
We also entered into a warrant ("Call Spread Warrant") transaction with each of the Call Spread Counterparties. The Call
Spread Warrant transactions could separately have a dilutive effect on our earnings per share to the extent that the market price
per share of our common stock exceeds the applicable strike price of the Call Spread Warrants.

Each of the Call Spread Counterparties (or an affiliate) may modify its initial hedge position by entering into or unwinding
various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours
in secondary market transactions following the pricing of the Convertible Notes and prior to the maturity of the Convertible
Notes (and is likely to do so during any observation period related to a conversion of the Convertible Notes). This activity could
also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes, which could
affect the ability to convert the Convertible Notes and, to the extent the activity occurs during any observation period related to
a conversion of the Convertible Notes, it could affect the number of shares and value of the consideration that holders of the
Convertible Notes will receive upon conversion of the Convertible Notes.

Significant exercises of equity awards or warrants or conversion of preferred stock or convertible debt could adversely affect
the market price of the Company’s common stock.

As of September 30, 2020, we had 83,278,383 shares of common stock issued and outstanding. The total number of shares of
our common stock issued and outstanding does not include 5,078,773 shares and 5,645,200 shares that may be issued upon the
exercise or vesting of equity awards and warrants issued upon emergence from bankruptcy, respectively. In addition, we have
the ability to issue an additional 14,407,473 equity awards tied to our common stock under our currently authorized equity
incentive plans. Furthermore, the maximum number of shares of common stock issuable upon conversion of our Convertible
Notes is 16,393,440 and our Series A Preferred Stock issued to RingCentral is convertible into 8,029,990 shares of common
stock as of September 30, 2020. The exercise of equity awards and warrants and the conversion of our convertible debt
instruments and preferred stock could adversely affect the price of the Company’s common stock, will reduce the percentage of
common stock held by the Company’s current stockholders and may cause its current stockholders to suffer significant dilution,
which may adversely affect the market.

33

Our amended and restated certificate of incorporation and our amended and restated bylaws may impede or discourage a
takeover, which could reduce the market price of our common stock and the value of the preferred stock and the Convertible
Notes.

Certain provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may delay or
prevent a third party from acquiring control of us, even if a change in control would be beneficial to our existing stockholders.
Our governing documents include provisions that:

•

•

•

authorize our board of directors to create and issue, without stockholder approval, up to 55,000,000 shares of
undesignated preferred stock, which could be used to dilute the ownership of a hostile acquirer;

grant the board of directors the exclusive right to fill a vacancy on the board of directors, whether such vacancy is due
to an increase in the number of directors or death, resignation or removal of a director, which prevents stockholders
from being able to fill such vacancies on the board of directors; and

require stockholders to follow certain advance notice procedures to bring a proposal before an annual meeting,
including proposing nominees for election as directors, which may discourage a potential acquirer from soliciting
proxies to elect the acquirer’s own director or slate of directors.

These provisions could impede a merger, takeover or other business combination involving us or discourage a potential acquirer
from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our
common stock and the value of our preferred stock and Convertible Notes. In addition, our amended and restated certificate of
incorporation requires, to the fullest extent permitted by law, that derivative actions brought in the name of the Company,
actions against our directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only
in the Court of Chancery in the State of Delaware.

Our amended and restated certificate of incorporation includes a forum selection clause, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our amended and restated certificate of incorporation requires that, unless we consent in writing to the selection of an
alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative
action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by
any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action
asserting a claim arising pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal
affairs doctrine.

This exclusive forum provision will not apply to claims under the Securities Exchange Act of 1934, but will apply to other state
and federal law claims including actions arising under the Securities Act of 1933 (although our stockholders will not be deemed
to have waived our compliance with the federal securities laws and the rules and regulations thereunder). Section 22 of the
Securities Act of 1933, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any
duty or liability created by the Securities Act of 1933 or the rules and regulations thereunder. Accordingly, there is uncertainty
as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the
Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is
deemed to have notice of and consented to the foregoing provisions. This forum selection provision in our Amended and
Restated Certificate of Incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with
us. It is also possible that, notwithstanding the forum selection clause included in our certificate of incorporation, a court could
rule that such a provision is inapplicable or unenforceable.

General Risk Factors

Our ability to retain and attract key personnel is critical to the success of our business and execution of our growth strategy.

The success of our business depends on the skill, experience and dedication of our employee base. If we are unable to retain and
recruit sufficiently experienced and capable employees, including those who can help us increase revenues generated from our
cloud-based solutions and services, our business and financial results may suffer. Experienced and capable employees in the
technology industry remain in high demand, and there is continual competition for their talents. If executives, managers or other
key personnel resign, retire or are terminated, or their service is otherwise interrupted, we may not be able to replace them in a
timely manner and we could experience significant declines in productivity and/or errors due to insufficient staffing or
managerial oversight. Moreover, turnover of senior management and other key personnel can adversely impact, among other
things, our operating results, our customer relationships and lead us to incur significant expenses related to executive transition
costs that may impact our operating results. In addition, our ability to adequately staff our R&D efforts in the U.S. may be
inhibited by changes to U.S. immigration policies that restrain the flow of professional and technical talent. While we strive to

34

maintain our competitiveness in the marketplace, there can be no assurance that we will be able to successfully retain and attract
the employees that we need to achieve our business objectives.

Business interruptions, whether due to catastrophic disasters or other events, could adversely affect our operations.

Our operations and those of our contract manufacturers and outsourced service providers are vulnerable to interruption by fire,
earthquake, hurricane, flood or other natural disasters, power loss, computer viruses, computer systems failure,
telecommunications failure, quarantines, national catastrophe, terrorist activities, war and other events beyond our control. For
instance, we have operations in the Silicon Valley area of California near known earthquake fault zones, which are vulnerable
to damage from earthquakes. Our disaster recovery plans may not be sufficient to address these interruptions. If any disaster
were to occur, our ability and the ability of our contract manufacturers and outsourced service providers to operate could be
seriously impaired and we could experience material harm to our business, operating results and financial condition. Because
our ability to attract and retain customers depends on our ability to provide customers with highly reliable service, even minor
interruptions in our operations could harm our reputation as a reliable solutions provider. In addition, the coverage or limits of
our business interruption insurance may not be sufficient to compensate for any losses or damages that may occur.

The United Kingdom’s withdrawal from the EU may adversely impact our operations in the United Kingdom and elsewhere.

In June 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the EU, commonly referred to
as "Brexit". The political and economic instability created by the Brexit vote has caused and may continue to cause significant
volatility in global financial markets and the value of the Pound Sterling currency and other currencies, including the Euro.
Depending on the terms reached regarding the United Kingdom’s exit from the EU, it is possible that there may be adverse
practical and/or operational implications on our business.

Currently, the most immediate impact may be to the relevant regulatory regimes under which our United Kingdom subsidiaries
operate, including the offering of communications services, as well as data privacy. Since the vote to withdraw from the EU,
negotiations and arrangements between the United Kingdom, the EU and other countries outside of the EU have been, and will
continue to be, complex and time consuming. The potential withdrawal could adversely impact our United Kingdom
subsidiaries and add operational complexities that did not previously exist.

The United Kingdom formally left the EU on January 31, 2020 and immediately entered into an 11-month transition period
during which all EU rules and trading agreements remain as they were. Discussions between the EU and the United Kingdom
on securing a trade deal are ongoing with a December 2020 deadline. The impact on regulatory regimes remains uncertain if a
trade deal is not reached. At this time, we cannot predict the impact of the EU and the United Kingdom failing to secure a trade
deal may have on our business generally and our United Kingdom subsidiaries more specifically, and no assurance can be given
that our operating results, financial condition and prospects would not be adversely impacted.

A violation of the FCPA may adversely affect the Company's business and operations.

As a U.S. corporation, we are subject to the regulations imposed by the Foreign Corrupt Practices Act (the "FCPA"), which
generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose
of obtaining or maintaining business. We have adopted stringent procedures to enforce compliance with the FCPA.
Nevertheless, we do business and may do additional business in the future in countries and regions where strict compliance with
anti-bribery laws may not be customary and we may be held liable for actions taken by our strategic or local partners even
though these partners may not be subject to the FCPA. Our personnel and intermediaries, including our local operators and
strategic partners, may face, directly or indirectly, corrupt demands by government officials, political parties and officials, tribal
or insurgent organizations, or private entities in the countries in which we operate or may operate in the future. As a result, we
face the risk that an unauthorized payment or offer of payment could be made by one of our employees or intermediaries, even
if such parties are not always subject to our control or are not themselves subject to the FCPA or other similar laws to which we
may be subject. Any allegation or determination that we have violated the FCPA could have a material adverse effect on our
business, financial position, results of operations and cash flows.

We are exposed to the credit risk of some of our clients and customers, which may harm our operating results and financial
condition.

Most of our sales in the United States have standard payment terms of 30 days and, because of local customs or conditions,
longer in some markets outside the United States. We believe customer financing is a competitive factor in obtaining business,
particularly in serving customers involved in significant infrastructure projects. Our financing arrangements may include not
only financing the acquisition of our solutions and services but also providing additional funds for other costs associated with
installation and integration of our solutions and services.

We have a thorough credit process for extending credit limits to our customers, which considers the financial profile of our end
user customers in addition to that of the direct customer, distributor or channel partner. We evaluate numerous factors in
extending credit, which may include credit ratings, financial performance and discussions with customers. Notwithstanding

35

that, our exposure to the credit risks relating to our financing activities described above may increase if our customers are
adversely affected by periods of economic uncertainty or a global economic downturn. For instance, due to the impact of the
COVID-19 pandemic, certain clients and customers have had and may continue to have difficulty meeting their payment
obligations to us, resulting in late or non-payment of amounts owed. Although these losses have not been material to date,
future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial
condition.

The Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation or
exposure to additional tax liabilities, which could have a material and adverse impact on the Company’s operating results,
cash flows and financial condition.

The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, where a number of the Company’s subsidiaries
are organized or the Company's solutions and devices are sold. Due to economic and political conditions, tax rates in various
jurisdictions including the U.S. may be subject to change. The Company’s future effective tax rates could be affected by
changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and
liabilities and changes in tax laws or their interpretation.

U.S. tax reform legislation enacted in December 2017 known colloquially as the "Tax Cuts and Jobs Act," among other things,
makes significant changes to the rules applicable to the taxation of corporations, such as changing the corporate tax rate to a flat
21% rate, modifying the rules regarding limitations on certain deductions for executive compensation, introducing a capital
investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules
regarding the usability of certain net operating losses, implementing a minimum tax on the "global intangible low-taxed
income" of a "United States shareholder" of a "controlled foreign corporation," modifying certain rules applicable to U.S.
shareholders of controlled foreign corporations, imposing a deemed repatriation tax on certain earnings and adding certain anti-
base erosion rules. It is possible that any amendment to these new rules, or clarification as to the application thereof, may have a
material and adverse impact on our operating results, cash flows and financial condition.

Tax examinations and audits could have a material and adverse impact on the Company’s cash flows and financial
condition.

The Company is subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service and
other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting
from such examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the outcome of
any such examinations.

If the Company’s effective tax rates were to increase, or if the ultimate determination of the Company’s taxes owed were for an
amount in excess of amounts previously accrued, the Company’s operating results, cash flows and financial condition could be
materially and adversely affected.

Fluctuations in foreign currency exchange rates and interest rates could negatively impact our operating results, financial
condition and cash flows.

We are a global company with significant international operations and we transact business in many currencies. As a result of
our foreign operations, we are exposed to adverse movements in foreign currency exchange rates. The majority of our revenues
and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations related
to certain revenues and expenses denominated in foreign currencies. Our primary currency exposures relate to net operating
expenses denominated in Euro, Indian Rupee and Mexican Peso. These exposures may change over time as business practices
evolve and the geographic mix of our business changes. In addition, a portion of our borrowings bears interest at prevailing
interest rates based upon the LIBOR Rate plus an applicable margin. Therefore, we are subject to risk from changes in interest
rates on the variable component of the rate. From time to time we use derivative instruments to hedge foreign currency risks
associated with certain monetary assets and liabilities, primarily accounts receivable, accounts payable and certain
intercompany obligations, as well as to hedge risks associated with changes in interest rates. The measures we have taken to
help mitigate these risks are discussed in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this
Annual Report on Form 10-K. However, any attempts to hedge against foreign currency exchange rate and/or interest rate
fluctuation risk may be unsuccessful and result in an adverse impact to our operating results, financial condition and cash flows.

If we fail to maintain proper and effective internal control over financial reporting, our operating results and our ability to
operate our business could be harmed.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain internal control over financial reporting
and we are also required to establish disclosure controls and procedures under applicable SEC rules. An effective internal
control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts
to prevent and detect financial reporting errors and fraud. Management is required to provide an annual assessment on the
effectiveness of our internal control over financial reporting and our independent registered public accounting firm is also

36

required to attest to the effectiveness of our internal control over financial reporting. Our and our auditor’s testing may reveal
significant deficiencies in our internal control over financial reporting that are deemed to be material weaknesses and render our
internal control over financial reporting ineffective. In the past, these assessments and similar reviews have led to the discovery
of material weaknesses, all of which have been remediated. However, no assurance can be given that we will not discover
material weaknesses in the future. We have incurred and we expect to continue to incur substantial accounting and auditing
expense and expend significant management time in complying with the requirements of Section 404.

While an effective internal control environment is necessary to enable us to produce reliable financial reports and is an
important component of our efforts to prevent and detect financial reporting errors and fraud, disclosure controls and internal
control over financial reporting are generally not capable of preventing or detecting all financial reporting errors and all fraud.
A control system, no matter how well-designed and operated, is designed to reduce rather than eliminate the risk of material
misstatements in our financial statements. There are inherent limitations on the effectiveness of internal controls, including
collusion, management override and failure in human judgment. A control system can provide only reasonable, not absolute,
assurance of achieving the desired control objectives and the design of a control system must reflect the fact that resource
constraints exist.

If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm
identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses:

•

•

•

•

we could fail to meet our financial reporting obligations;

our reputation may be adversely affected and our business and operating results could be harmed;

the market price of our stock could decline; and

we could be subject to litigation and/or investigations or sanctions by the Securities and Exchange Commission (the
"SEC"), the New York Stock Exchange or other regulatory authorities.

An active trading market for our common stock may not be sustained.

Although our common stock is currently quoted on the New York Stock Exchange, an active trading market for our common
stock may not be sustained. If the market is not sustained, it may be difficult for shareholders to sell shares of our common
stock at a price that is attractive or at all. In addition, an inactive market may impair our ability to raise capital by selling shares
and may impair our ability to acquire other companies by using our shares as consideration, which, in turn, could materially
adversely affect our business.

If securities or industry analysts discontinue publishing research or reports about our business, or publish negative reports
about our business, our share price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish
about us, our business, our market and our competitors. We do not have any control over these analysts. If one or more of the
analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one
or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the
financial markets, which could cause our share price or trading volume to decline.

37

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

As of September 30, 2020, we had 126 leased facilities located in 58 countries. These included 9 primary research and
development facilities located in Canada, Czech Republic, India, Ireland, Israel, Italy and the U.S. Our real property portfolio
consists of aggregate floor space of 2.1 million square feet, substantially all of which is leased. Our lease terms range from
monthly leases to 10 years. We believe that all of our facilities are in good condition and are well maintained. Our facilities are
used for the current operations of both of our operating segments. For additional information regarding obligations under
operating leases, see Note 5, "Leases," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report on Form 10-K.

Item 3.

Legal Proceedings

The information concerning legal proceedings set forth under Note 22, "Commitments and Contingencies," to our Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, is incorporated by reference in response
to this item.

Item 4.

Mine Safety Disclosures

Not applicable.

38

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Market Information

The common stock of Avaya Holdings Corp. are listed on the New York Stock Exchange ("NYSE") and began trading on the
NYSE on January 17, 2018, under the symbol "AVYA."

Number of Holders of Common Stock

The number of record holders of the common stock as of October 31, 2020 was 153. That number does not include the
beneficial owners of shares held in "street" name or held through participants in depositories, such as The Depository Trust
Company.

Dividends

No dividends were paid by Avaya Holdings Corp. on its common stock over the past three fiscal years and the Company does
not anticipate paying cash dividends on its common stock in the foreseeable future. Holders of the Company's Series A
Preferred Stock are entitled to receive dividends at the rate of 3% per annum of the stated value of the Series A Preferred Stock.
The Company has the option of paying such dividends in cash or by increasing the stated value of the Series A Preferred Stock.
Since the issuance of the Series A Preferred Stock in October 2019, the Company has increased the stated value of the Series A
Preferred Stock for dividends accrued and does not expect to pay dividends on the Series A Preferred Stock in cash for the
foreseeable future.

Purchases of Equity Securities by the Issuer

The following table provides information with respect to purchases by the Company of shares of common stock during the
three months ended September 30, 2020:

Period

July 1 - 31, 2020

August 1 - 31, 2020

September 1 - 30, 2020

Total

Total Number of
Shares (or Units)
Purchased(1)

Average Price
Paid per Share (or
Unit)

71,985

46,958

$

$

— $

118,943

12.5598

16.4200

—

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)(3)

— $

— $

— $

—

185,000,003

185,000,003

185,000,003

(1) All repurchases included in the column for the periods indicated represent 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.

(3) On October 1, 2019, the Company's Board of Directors approved a share repurchase program, authorizing the Company to

repurchase the Company’s common stock for an aggregate expenditure of up to $500 million. The repurchases may be made
from time to time in the open market, through block trades or in privately negotiated transactions.

Recent Sales of Unregistered Securities

None.

39

Stock Performance Graph

The following graph compares the cumulative total return on our common stock for the period from December 19, 2017, the
date the common stock began trading, through September 30, 2020, with the total return over the same period on the Russell
2000 Index and the NASDAQ Computer Index. The graph assumes that $100 was invested on December 19, 2017 in the
Company's common stock and in each of the indices and assumes reinvestment of dividends, if any. The graph is based on
historical data and is not necessarily indicative of future price performance.

Comparison of Total Return

e
u
l
a
V
x
e
d
n
I

$200

$180

$160

$140

$120

$100

$80

$60

$40

1 2/1 9/1 7

1 2/2 9/1 7

0 3/2 9/1 8

0 6/2 9/1 8

0 9/2 8/1 8

1 2/3 1/1 8

0 3/2 9/1 9

0 6/2 8/1 9

0 9/3 0/1 9

1 2/3 1/1 9

0 3/3 1/2 0

0 6/3 0/2 0

0 9/3 0/2 0

Avaya Holdings Corp.

Russell 2000 Index

NASDAQ Computer Index

12/19/17 12/29/17 03/29/18 06/29/18 09/28/18 12/31/18 03/29/19 06/28/19 09/30/19 12/31/19 03/31/20 06/30/20 09/30/20

Avaya Holdings Corp.

$ 100.00 $ 106.69 $ 136.17 $ 122.07 $ 134.59 $ 88.51 $ 102.31 $ 72.40 $ 62.19 $ 82.07 $ 49.18 $ 75.14 $ 92.41

Russell 2000 Index

$ 100.00 $ 99.92 $ 99.52 $ 106.92 $ 110.40 $ 87.75 $ 100.19 $ 101.94 $ 99.13 $ 108.57 $ 75.03 $ 93.79 $ 98.11

NASDAQ Computer Index

$ 100.00 $ 98.21 $ 100.68 $ 107.76 $ 116.13 $ 94.59 $ 112.28 $ 116.62 $ 121.79 $ 142.21 $ 125.93 $ 167.07 $ 187.82

This Performance Graph will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. In
addition, the Performance Graph will not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to
Regulation 14A or 14C, other than as provided in Regulation S-K, or to the liabilities of section 18 of the Securities Exchange
Act of 1934, except to the extent that the Company specifically requests that such information be treated as soliciting material
or specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act.

40

Item 6.

Selected Financial Data

The selected Consolidated Statements of Operations data for fiscal 2020 and 2019 (Successor), the period from December 16,
2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor)
and the selected Consolidated Balance Sheets data as of September 30, 2020 and 2019 (Successor), are derived from our
audited Consolidated Financial Statements included in this Form 10-K. The selected Consolidated Statements of Operations
data for fiscal 2017 and 2016, and the selected Consolidated Balance Sheets data as of September 30, 2018, 2017 and 2016, are
derived from our audited Consolidated Financial Statements that are not included in this Form 10-K. The information set forth
below is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7,
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related notes included in Part II, Item 8, "Consolidated Financial Statements and Supplementary Data" in this
Annual Report on Form 10-K.

Statement of Operations Data:
(In millions, except per share amounts)
Revenue

Net (loss) income

(Loss) earnings per share:

Basic

Diluted

Successor

Predecessor

Fiscal years ended
September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

Fiscal years ended
September 30,

2017

2016

2,873

(680)

2,887

$

(671)

2,247

$

287

604

$

3,272

$ 3,702

2,977

(182)

(730)

$

$

(7.45) $

(6.06) $

(7.45) $

(6.06) $

2.61

2.58

$

$

5.19

5.19

$

$

(0.43) $

(1.54)

(0.43) $

(1.54)

Balance Sheet Data:

(In millions)

Successor

As of September 30,

2020

2019

2018

Predecessor

As of September 30,

2017

2016

Cash and cash equivalents

$

727

$

752

$

700

$

Total assets
Total debt (including current and long-term
portion)

Liabilities subject to compromise

Finance leases

Convertible series A preferred stock

Total stockholders' equity (deficit)

6,231

6,950

2,886
—

17

128

236

3,119
—

19
—

1,300

7,679

3,126
—

31
—

2,051

876

$

336

5,898

5,821

725

7,705

26
—

6,018

—

56
—

(5,013)

(5,023)

Other Financial Data:

(In millions)
Cash provided by (used for) operating
activities
EBITDA(a)
Adjusted EBITDA(a)

Successor

Predecessor

Fiscal years ended
September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

Fiscal years ended
September 30,

2017

2016

$

147

$

241

$

25

710

(3)

706

202

289

611

$

(414) $

3,479

135

$

301

370

866

113

125

940

(a) Each of EBITDA and Adjusted EBITDA are non-GAAP financial measures. See "Management’s Discussion and Analysis of Financial
Condition and Results of Operations-EBITDA and Adjusted EBITDA" for a definition and explanation of EBITDA and Adjusted
EBITDA and reconciliation of net (loss) income to EBITDA and Adjusted EBITDA.

The following are significant items affecting the comparability of the selected consolidated financial data for the periods
presented:

•

On December 15, 2017, the Company emerged from bankruptcy and applied fresh start accounting, which required the
allocation of its reorganization value to its individual assets based on their estimated fair values. As a result of the
application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, our
Consolidated Financial Statements after December 15, 2017 are not comparable with our Consolidated Financial

41

Statements as of or prior to that date. See Note 24, "Fresh Start Accounting," to our Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on Form 10-K for a more detailed discussion.

The Company adopted ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" and its related
amendments (collectively "ASC 606"), on October 1, 2018 using the modified retrospective transition method. As a
result, the reported results for fiscal 2020 and 2019 reflect the application of ASC 606, while the reported results for
prior fiscal years are not adjusted and continue to be reported under prior guidance ("ASC 605").

The Company adopted ASU No. 2016-02, "Leases (Topic 842)", on October 1, 2019 using the modified retrospective
transition method as of the beginning of the period of adoption. As a result, the Consolidated Balance Sheet as of
September 30, 2020 reflects the application of ASC 842, while the Consolidated Balance Sheets for prior fiscal years
are not adjusted and continue to be reported under ASC 840. The adoption of ASC 842 resulted in the recognition of
$190 million of operating lease right-of-use assets and $194 million of operating lease liabilities on October 1, 2019.

In fiscal 2020 and 2019 (Successor), and fiscal 2017 and 2016 (Predecessor), the Company recorded pre-tax
impairment charges of $624 million, $659 million, $117 million and $542 million, respectively, related to goodwill
and indefinite-lived intangible assets. See Note 7, "Goodwill, net" and Note 8, "Intangible Assets, net," to our
Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional
information.

During the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 (Predecessor), the
Company recorded pre-tax reorganization, net credits (costs) of $3,416 million and $(98) million, respectively. The
period from October 1, 2017 through December 15, 2017 (Predecessor) primarily consists of the net gain from the
consummation of the Plan of Reorganization and the related settlement of liabilities. The period from October 1, 2017
through December 15, 2017 (Predecessor) and fiscal 2017 (Predecessor) also include 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.

The Company acquired Spoken on March 9, 2018. Spoken has been included in the Company's results of operations
since the acquisition date. See Note 6, "Business Combinations and Strategic Partnerships and Investments," to our
Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a more detailed
discussion.

The Company sold its Networking business on July 14, 2017 which resulted in a pre-tax gain of $2 million in fiscal
2017 (Predecessor). See Note 23, "Emergence from Voluntary Reorganization under Chapter 11 Proceedings," to our
Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional
information.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law, which lowered the U.S. federal
corporate tax rate from 35% to 21% effective January 1, 2018. During the period from December 16, 2017 through
September 30, 2018, the Company recorded an income tax benefit of $245 million to adjust deferred tax balances to
reflect the new rates. See Note 14, "Income Taxes," to our Consolidated Financial Statements included in Part II, Item
8 of this Annual Report on Form 10-K for additional information.

Restructuring charges, net were $30 million, $22 million, $81 million, $14 million, $30 million and $105 million on a
pre-tax basis for fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30, 2018
(Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2018, 2017 and
2016 (Predecessor), respectively. See Note 10, "Business Restructuring Reserves and Programs," to our Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

In fiscal 2017 (Predecessor), the Company recorded non-cash interest expense of $61 million related to the accelerated
amortization of debt issuance costs and accretion of debt discount related to the Company’s Bankruptcy Filing. In
addition, effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt
classified as Liabilities subject to compromise. Contractual interest expense represented 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 (Predecessor) and the period from January 19, 2017 through September 30, 2017
(Predecessor), contractual interest expense of $94 million and $316 million was not recorded as interest expense, as it
was not an allowed claim under the Bankruptcy Filing.

As of September 30, 2017 (Predecessor), Liabilities subject to compromise included $5,832 million of Predecessor
debt and $12 million of Predecessor capital lease obligations.

•

•

•

•

•

•

•

•

•

•

42

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This "Management’s Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction
with the Consolidated Financial Statements and related notes thereto included in Part II, Item 8 of this Annual Report on Form
10-K. The matters discussed in this "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.
Forward-looking statements involve significant risks and uncertainties. See the "Cautionary Note Regarding Forward-looking
Statements" above and Part 1, Item 1A, "Risk Factors" in this Annual Report on Form 10-K for additional information
regarding forward-looking statements and the factors that could cause actual results to differ materially from those anticipated
in the forward-looking statements.

Overview

Avaya is a global leader in digital communications products, solutions and services for businesses of all sizes delivering most of
its technology through software and services. We enable organizations around the globe to succeed by creating
intelligent communications experiences for our clients, their employees and their customers. Avaya builds open, converged and
innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premise 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.

During fiscal 2020, the Company shifted its entire comprehensive portfolio of capabilities to Avaya OneCloud, which offers
significant capabilities across contact center, unified communications and collaboration, and communications platform as a
service. Avaya OneCloud provides the full spectrum of cloud and on-premise deployment options. This enables organizations
to deploy the Company’s solutions in the way that best serves their business requirements and complements their existing
investments, while moving with the speed and agility they require.

The Company also offers one of the broadest portfolios of business devices in the industry, including handsets, video
conferencing units and headsets to meet the needs of every type of worker across a customer’s organization and help them get
the most out of their communications investments. Avaya IP-enabled handsets, multimedia devices and conferencing systems
enhance collaboration and productivity, and position organizations to incorporate future technological advancements.

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.

The Company's unified communications and collaboration ("UCC") solutions enable organizations to reimagine collaborative
work environments and help companies increase employee productivity, improve customer service and reduce costs. With
Avaya's UCC solutions, organizations can provide their workers with a single app for all-channel calling, messaging, meetings
and team collaboration with the same ease of use they receive from consumer apps. Avaya embeds communications directly
into the apps, browsers and devices employees use every day giving them a more natural, efficient and flexible way to connect,
engage, respond and share - where and how they want. During fiscal 2020, the Company expanded its UCC portfolio to include
cloud-based solutions.

The Company's industry-leading digital contact center ("CC") solutions enable the Company's clients 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 third-party
integration that can improve customer service and help companies compete more effectively. Like the UCC business, the
Company is evolving CC solutions for cloud deployment and, in fiscal 2020, the Company expanded its CC portfolio to include
cloud-based solutions.

Avaya also focuses on ensuring an outstanding experience for mobile callers by integrating transformative technologies,
including Artificial Intelligence, mobility, big data analytics and cybersecurity into our CC 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, as a result, their customer loyalty grows.

Services

Services consists of a portfolio of offerings to help customers achieve better business outcomes, including global support
services, enterprise cloud and managed services and professional services. We also classify customers who upgrade and acquire
new technology through the Company's subscription offerings as part of our Services segment.

43

The Company's global support services provide offerings that help businesses protect their technology investments and address
the risk of system outages. We help our customers gain a competitive edge through proactive problem prevention, rapid
resolution and continual solution optimization. Most of our global support services revenue is recurring in nature.

Enterprise cloud and managed services enable customers to take advantage of our technology via the cloud, on-premise, or a
hybrid of both, depending on the solution and the needs of the customer. Most of our enterprise cloud and managed services
revenue is recurring in nature and based on multi-year services contracts.

The Company's professional services enable our customers to take full advantage of their IT and communications solution
investments to drive measurable business results. Our experienced consultants and engineers partner with customers along each
step of the solution lifecycle to deliver services that add value and drive business transformation. Most of our professional
services revenue is one-time in nature.

Together, these comprehensive services enable clients to leverage communications technology to help them maximize their
business results. Our global team of professionals delivers 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 customers transition at their desired pace to next generation communications technology
solutions, either via the cloud, on-premise, or a hybrid of both. Customers can choose the levels of support for their
communications solutions best suited for their needs, which may include deployment, training, monitoring, solution
management optimization, and more. Our systems and service team's performance monitoring can quickly identify and address
issues before they arise. Remote diagnostics and resolutions focus on fixing existing problems and avoiding potential issues in
order to help our customers save time and reduce the risk of an outage.

Factors and Trends Affecting Our Results of Operations

There are a number of trends and uncertainties affecting our business. Most importantly, we are dependent on general economic
conditions, the willingness of our customers to invest in technology and the manner in which they procure such technologies
and services.

Industry Trends

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 and
include revenue from sales of its software, global support services, enterprise cloud and managed services and other cloud
offerings.

Novel Coronavirus Disease ("COVID-19") Pandemic

Instability in the geopolitical environment of our customers, instability in the global credit markets and other disruptions, such
as the COVID-19 pandemic, has put pressure on the global economy causing uncertainties. The COVID-19 pandemic, and the
responses of governments worldwide to COVID-19, are having a negative impact on regional, national and global economies,
are disrupting supply chains and reducing international trade and business activity. The ultimate impact of the COVID-19
pandemic on our business, financial performance and liquidity, including our ability to execute our near-term and long-term
business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and
severity of the pandemic, as well as the severity of resurgences of the virus and related government responses, all of which are
uncertain and cannot be predicted. Although the COVID-19 pandemic did not have a material impact on the Company's
revenue and gross margin during fiscal 2020, the Company did recognize a significant goodwill impairment charge during
fiscal 2020 as a result of the COVID-19 pandemic, as described in more detail in the Financial Results Summary below. If the
pandemic continues to have a significant adverse effect on regional, national and global economies, we may be required to
recognize additional impairments in the future. The ultimate impact the COVID-19 pandemic will have on the Company's

44

future operating results, financial position and cash flows, as well as the demand for the Company's products and services, is
uncertain and unpredictable and, as a result, current results and financial condition discussed herein may not be indicative of
future operating results, financial condition and related trends. For further discussion of the uncertainties and business risks
associated with the COVID-19 pandemic, refer to Part I, Item 1A "Risk Factors" to this Annual Report on Form 10-K.

The health and safety of our employees has been our highest priority throughout the COVID-19 pandemic, and we have
implemented several preventative and protective measures, including requiring, to the extent possible, all employees to work
remotely, and cancelling conventions and conferences where social distancing would not be possible. We have also
implemented business continuity plans and have continued to support our clients primarily by providing our services remotely
instead of onsite.

While the pandemic and related effect on the global economy have not materially impacted the Company or its financial
condition, the Company has implemented cost containment and cash management initiatives to mitigate any potential impact of
the COVID-19 pandemic on its business and liquidity and will continue to evaluate its financial position in light of future
developments.

We believe that the current macroeconomic environment has accelerated a developing trend in the way people work, with more
employees working remotely, and believe this could increase demand for certain products and services of the Company.

The Company has maintained its focus on profitability levels and investing in future results and has implemented programs
designed to streamline its operations, generate cost savings and eliminate overlapping processes and resources. The Company
continues to evaluate opportunities to streamline its operations and identify cost savings globally in addition to those
implemented in response to the COVID-19 pandemic and may take additional restructuring actions in the future. The costs of
those actions could be material.

Financial Results Summary

Fiscal year ended September 30, 2020 Results Compared with Fiscal year ended September 30, 2019

The section below provides a comparative discussion of our consolidated results of operations between fiscal 2020 and 2019.
See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report
on Form 10-K for the fiscal year ended September 30, 2019 filed on November 29, 2019 for comparative discussion of our
consolidated results of operations between fiscal 2019 and 2018 (combined).

45

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

(In millions)

REVENUE

Products

Services

COSTS

Products:

Costs

Amortization of technology intangible assets

Services

GROSS PROFIT

OPERATING EXPENSES

Selling, general and administrative
Research and development

Amortization of intangible assets

Impairment charges

Restructuring charges, net

OPERATING LOSS

Interest expense

Other income, net

LOSS BEFORE INCOME TAXES

Provision for income taxes

NET LOSS

Fiscal years ended September 30,

2020

2019

$

1,073

$

1,800

2,873

405

174

714

1,293

1,580

1,013
207

161

624

30

1,222

1,665

2,887

442

174

696

1,312

1,575

1,001
204

162

659

22

2,035

2,048

(455)

(226)

63

(618)

(62)

$

(680) $

(473)

(237)

41

(669)

(2)

(671)

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 loss for the periods indicated:

(In millions)

REVENUE

Products

Services

COSTS

Products

Services

GROSS PROFIT

OPERATING EXPENSES

Selling, general and administrative

Research and development

Fiscal years ended September 30,

2020

2019

$

(1) $

(5)

(6)

—

1

1

(7)

2

(1)

1

(6)

(15)

(21)

5

11

16

(37)

1

(4)

(3)

(40)

OPERATING LOSS

$

(6) $

46

Revenue

Revenue for fiscal 2020 was $2,873 million compared to $2,887 million for fiscal 2019. The decrease was primarily driven by
lower demand for the Company's on-premise solutions, partially offset by revenue from the Company's new subscription
offerings and revenue from the fulfillment of certain obligations related to a new government contract.

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

(In millions)

Products & Solutions

Services

Unallocated amounts

Total revenue

(1) Not meaningful

Percentage of Total Revenue

Fiscal years ended September 30,

Fiscal years ended September 30,

2020

2019

2020

2019

Yr. to Yr.
Percentage
Change, net
of Foreign
Currency
Impact

Yr. to Yr.
Percentage
Change

$

$

1,074 $

1,805

(6)

1,228

1,680

(21)

37 %

63 %

— %

43 %

58 %

(1)%

(13)%

(12)%

7 %
(1)

8 %
(1)

2,873 $

2,887

100 %

100 %

— %

— %

Products & Solutions revenue for fiscal 2020 was $1,074 million compared to $1,228 million for fiscal 2019. The decrease was
primarily attributable to lower demand for the Company's on-premise solutions, partially offset by revenue from the fulfillment
of certain obligations related to a new government contract and higher demand for remote agent licenses for the Company's
contact center solutions as a result of the COVID-19 pandemic.

Services revenue for fiscal 2020 was $1,805 million compared to $1,680 million for fiscal 2019. The increase was primarily
driven by revenue from the Company's new subscription offerings and revenue from the fulfillment of certain obligations
related to a new government contract, partially offset by the planned declines in hardware maintenance and software support
services which continue to face headwinds driven by lower new product sales over the past several years.

Unallocated amounts for fiscal 2020 and 2019 represent the fair value adjustment to deferred revenue recognized upon
emergence from bankruptcy which is excluded from segment revenue.

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

(In millions)

U.S.

International:

Percentage of Total Revenue

Fiscal years ended September 30,

Fiscal years ended September 30,

2020

2019

2020

2019

Yr. to Yr.
Percentage
Change, net
of Foreign
Currency
Impact

Yr. to Yr.
Percentage
Change

$

1,640 $

1,553

57 %

54 %

6 %

6 %

Europe, Middle East and Africa
Asia Pacific
Americas International - Canada and Latin
America

Total International

Total revenue

714
296

223

1,233

$

2,873 $

753
327

254

1,334

2,887

25 %
10 %

8 %

43 %

100 %

26 %
11 %

9 %

46 %

100 %

(5)%
(9)%

(12)%

(8)%

— %

(5)%
(9)%

(10)%

(7)%

— %

Revenue in the U.S. for fiscal 2020 was $1,640 million compared to $1,553 million for fiscal 2019. Revenue from the
Company's new subscription offerings; revenue from the fulfillment of certain obligations related to a new government
contract; and higher demand for remote agent licenses for the Company's contact center solutions as a result of the COVID-19
pandemic were partially offset by lower demand for the Company's on-premise solutions and lower professional services
revenue. Revenue in Europe, Middle East and Africa ("EMEA") for fiscal 2020 was $714 million compared to $753 million for
fiscal 2019. The decrease in EMEA revenue was primarily attributable to lower demand for the Company's on-premise
solutions, partially offset by higher professional services revenue. Revenue in Asia Pacific ("APAC") for fiscal 2020 was
$296 million compared to $327 million for fiscal 2019. The decrease in APAC revenue was primarily attributable to lower
demand for the Company's on-premise solutions. Revenue in Americas International for fiscal 2020 was $223 million compared
to $254 million for fiscal 2019. The decrease in Americas International was primarily attributable to lower demand for the
Company's on-premise solutions and the unfavorable impact of foreign currency exchange rates.

47

Gross Profit

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

(In millions)

Products & Solutions

Services

Unallocated amounts

Total
(1) Not meaningful

Fiscal years ended September 30,

Fiscal years ended September 30,

2020

2019

2020

2019

Amount

Percent

Gross Margin

Change

$

$

669 $

1,092

(181)

791

996

(212)

62.3 %

60.5 %

64.4 % $

(122)

59.3 %

(1)

(1)

1,580 $

1,575

55.0 %

54.6 % $

96

31

5

(15)%

10 %

(1)

— %

Gross profit for fiscal 2020 was $1,580 million compared to $1,575 million for fiscal 2019. The increase was primarily driven
by revenue growth from the Company's new subscription offerings, partially offset by lower demand for the Company's on-
premise UCC solutions.

Products & Solutions gross profit for fiscal 2020 was $669 million compared to $791 million for fiscal 2019. Products &
Solutions gross margin decreased from 64.4% to 62.3% in fiscal 2020 mainly driven by less favorable product mix.

Services gross profit for fiscal 2020 was $1,092 million compared to $996 million for fiscal 2019. Services gross margin
increased from 59.3% to 60.5% in fiscal 2020 mainly due to the favorable impact of revenue from the Company's new
subscription offerings.

Unallocated amounts for fiscal 2020 and 2019 include the amortization of technology intangibles; fair value adjustments
recognized upon emergence from bankruptcy and excluded from segment gross profit; and costs that are not core to the
measurement of segment performance, but rather are controlled at the corporate level.

Operating Expenses

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

(In millions)
Selling, general and administrative
Research and development
Amortization of intangible assets
Impairment charges
Restructuring charges, net
Total operating expenses

Percentage of Total Revenue

Change

Fiscal years ended September 30,

Fiscal years ended September 30,

2020

2019

2020

$

$

1,013 $
207
161
624
30
2,035 $

1,001
204
162
659
22
2,048

35.3 %
7.2 %
5.6 %
21.7 %
1.0 %
70.8 %

2019
34.7 % $
7.1 %
5.5 %
22.8 %
0.8 %
70.9 % $

Amount

Percent

12
3
(1)
(35)
8
(13)

1 %
1 %
(1)%
(5)
36 %
(1)%

Selling, general and administrative expenses for fiscal 2020 were $1,013 million compared to $1,001 million for fiscal 2019.
The increase was primarily attributable to higher incentive compensation; higher advisory fees associated with executing the
strategic partnership with RingCentral; and higher channel compensation mainly driven by higher subscription revenue. The
increases were partially offset by lower travel costs as a result of the COVID-19 pandemic; lower consulting costs; the
favorable impact of foreign currency exchange rates and lower headcount-related costs.

Research and development expenses for fiscal 2020 were $207 million compared to $204 million for fiscal 2019. The increase
was primarily attributable to higher incentive compensation.

Amortization of intangible assets for fiscal 2020 was $161 million compared to $162 million for fiscal 2019.

Impairment charges for fiscal 2020 were $624 million. During fiscal 2020, the Company performed an interim impairment test
of its goodwill and indefinite-lived intangible assets due to (i) the impact of the COVID-19 pandemic on the macroeconomic
environment which led to revisions to the Company's long-term forecast during the second quarter of fiscal 2020 and (ii) the
sustained decrease in the Company's stock price since the advent of the pandemic which was caused by the resulting volatility
in the financial markets. The results of the Company's interim goodwill impairment test as of March 31, 2020 indicated that the
estimated fair value of the Company's Services reporting unit exceeded its carrying amount. The carrying amount of the
Company's Products & Solutions reporting unit exceeded its estimated fair value primarily due to a reduction in the Company's

48

long-term forecast to reflect increased risk from higher market uncertainty and the accelerated reduction of product sales related
to the Company's historical on-premise perpetual licenses. The Company anticipates a continued shift and acceleration of
customers upgrading and acquiring new technology innovation through the utilization of the Company's subscription offering,
which is included in the Services reporting unit. As a result, the Company recorded a goodwill impairment charge of $624
million to write down the full carrying amount of the Products & Solutions goodwill. The results of the indefinite-lived
intangible asset impairment test as of March 31, 2020 indicated that no impairment existed. The Company also performed its
annual impairment test for goodwill and indefinite-lived intangible assets as of July 1, 2020 and determined no impairment
existed. The Company determined that no events occurred or circumstances changed during the three months ended September
30, 2020 that would indicate that it is more likely than not that its goodwill or indefinite-lived intangible asset was impaired.
The Company's long-term forecast includes significant estimates and assumptions, including management's estimate of the
potential impact of the COVID-19 pandemic on the Company's operating results. Due to the uncertainty surrounding the impact
of the COVID-19 pandemic on the macroeconomic environment and, more specifically, the Company's future operating results,
it is reasonably possible that the pandemic could have a more adverse impact than what is currently contemplated by the
Company's long-term forecast. To the extent that business conditions deteriorate or if changes in key assumptions and estimates
differ significantly from management's expectations, it may be necessary to record additional impairment charges in the future.

Impairment charges for fiscal 2019 were $659 million. During fiscal 2019, the Company performed an interim impairment test
of its goodwill and indefinite-lived intangible assets due to a sustained decrease in the Company’s stock price and lower than
planned financial results which led to revisions to the Company's long-term forecast during the third quarter. The results of the
Company’s interim goodwill impairment test as of June 30, 2019 indicated that the carrying amount of the Company’s Contact
Center (“CC”) reporting unit, which was subsequently aggregated into the Products & Solutions reporting unit on October 1,
2019, exceeded its estimated fair value primarily due to a reduction in the Company's long-term forecast. As a result, the
Company recorded a goodwill impairment charge of $657 million, representing the amount by which the carrying amount of
the CC reporting unit exceeded its fair value. During fiscal 2019, the Company also elected to abandon an in-process research
and development project that no longer aligned with the Company's technology roadmap. As a result, the Company recorded an
impairment charge of $2 million to write down the full carrying amount of the acquired in-process research and development
project.

Restructuring charges, net, for fiscal 2020 were $30 million compared to $22 million for fiscal 2019. Restructuring charges
during fiscal 2020 consisted of $24 million for facility exit costs primarily in the U.S. and $6 million for employee severance
actions in EMEA. Restructuring charges during fiscal 2019 included employee separation costs of $19 million primarily
associated with employee severance actions in the U.S., EMEA and Canada and lease obligations of $3 million primarily in the
U.S.

Operating loss

Operating loss for fiscal 2020 was $455 million compared to $473 million for fiscal 2019. Our operating results for fiscal 2020
as compared to fiscal 2019 reflect, among other things, the following items which are described in more detail above:

•

•

•

•

higher gross profit for fiscal 2020; and

lower impairment charges during fiscal 2020; offset by

higher selling, general and administrative expenses in fiscal 2020; and

higher restructuring charges for fiscal 2020

Interest Expense

Interest expense for fiscal 2020 was $226 million compared to $237 million for fiscal 2019. The decrease was mainly driven by
lower average principal amounts outstanding during fiscal 2020 and lower average interest rates, partially offset by $9 million
of new debt issuance costs and underwriting discounts related to the Company's fiscal 2020 debt transactions described in the
"Liquidity and Capital Resources" section below and a $7 million partial write-off of the original underwriting discount on the
Term Loan Credit Agreement due to the prepayments.

Other Income, Net

Other income, net for fiscal 2020 was $63 million as compared to $41 million for fiscal 2019. Other income, net for fiscal 2020
consisted of gains of $59 million from the sale of shares of RingCentral common stock, which were received by the Company
upon entry into the strategic partnership in October 2019; other pension and post-retirement benefit credits of $22 million;
interest income of $6 million; and sublease income of $5 million, partially offset by net foreign currency losses of $16 million;
an impairment of an investment in debt securities of $10 million, as a result of the decline in the macroeconomic environment
due to the COVID-19 pandemic and a decline in the expected operating results and cash flows for the investment company; and
an increase in the fair value of the Emergence Date Warrants of $3 million. Other income, net for fiscal 2019 consisted of a
decrease in the fair value of the Emergence Date Warrants of $29 million; interest income of $14 million; and other pension and

49

post-retirement benefit credits of $7 million, partially offset by net foreign currency losses of $8 million and other, net of $1
million.

Provision for Income Taxes

The provision for income taxes was $62 million for fiscal 2020 compared to $2 million for fiscal 2019.

The Company's effective income tax rate for fiscal 2020 differed from the U.S. federal tax rate primarily due to: (1) income and
losses taxed at different foreign tax rates, (2) deferred taxes (including losses) generated for which no benefit was recorded
because it is more likely than not that the tax benefits would not be realized, (3) U.S. state and local income taxes, (4) the
impact of the Tax Cuts and Jobs Act (the "Act") and associated regulations, (5) the goodwill impairment charges recorded in
fiscal 2020, and (6) foreign tax credits.

The Company’s effective income tax rate for fiscal 2019 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"), (7) the goodwill impairment charges recorded in fiscal 2019, (8) current period elections
taken in submitted tax filings, and (9) foreign tax credits.

Net Loss

Net loss was $680 million for fiscal 2020 compared to $671 million for fiscal 2019 as a result of the items discussed above.

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, as well as our current estimates of the impact that the
COVID-19 pandemic will have on our business and cash flow, 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:

(In millions)
Net cash provided by (used for):

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes on cash, cash equivalents, and
restricted cash

Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period

Operating Activities

Fiscal years ended September 30,

2020

2019

$

$

$

147

314

(489)

3
(25)
756
731

$

241

(124)

(61)

(4)

52

704

756

Cash provided by operating activities for fiscal 2020 and 2019 was $147 million and $241 million, respectively. The decrease
was primarily due to higher advisory fees associated with executing the strategic partnership with RingCentral; higher income
tax payments; third-party debt modification fees associated with the fiscal 2020 debt transactions described below; and the
timing of vendor and customer payments, partially offset by lower contributions to the Company's pension and post-retirement
benefit plans; lower severance payments under the Company's restructuring programs; and lower interest payments.

Investing Activities

Cash provided by investing activities for fiscal 2020 was $314 million compared to cash used for investing activities of $124
million for fiscal 2019. The change was primarily due to proceeds received from the sale of shares of RingCentral common
stock during fiscal 2020, which were received by the Company upon entry into the strategic partnership in October 2019, and
lower capital expenditures for facility improvements and IT-related projects.

50

Financing Activities

Cash used for financing activities for fiscal 2020 and 2019 was $489 million and $61 million, respectively.

Cash used for financing activities for fiscal 2020 included:

•

•

•

•

•

•

•

•

•

•

repayment of the Term Loan Credit Agreement of $1,643 million as part of the refinancing described below less
proceeds received in the refinancing of $1,627 million;

principal prepayments under the Term Loan Credit Agreement of $1,231 million, consisting of a repayment of $250
million in November 2019 and $981 million in September 2020 with proceeds from the senior notes issuance
discussed below;

repurchases of shares of common stock under the Company's share repurchase program of $330 million;

debt issuance costs of $14 million related to the Company's new senior notes which are described below;

repayments in connection with financing leases of $10 million;

payment of acquisition-related contingent consideration of $5 million; and

other financing activities, net of $7 million; partially offset by

proceeds from the issuance of the Company's new senior notes of $1,000 million described below;

proceeds from the issuance of Series A Preferred Stock to RingCentral upon entry into the strategic partnership in
October 2019, net of issuance costs, of $121 million; and

proceeds from the Company's Employee Stock Purchase Plan of $3 million.

Cash used for financing activities for fiscal 2019 included:

•

•

•

•

scheduled debt repayments under the Term Loan Credit Agreement of $29 million;

repayments in connection with financing leases of $14 million;

payment of acquisition-related contingent consideration of $9 million; and

other financing activities, net of $9 million.

Senior Notes Issuance

On September 25, 2020, the Company issued $1,000 million in aggregate principal amount of its Senior 6.125% First Lien
Notes (the “Senior Notes”). The Senior Notes were issued under an indenture, among the Company, the Company's subsidiaries
that guaranteed the Senior Notes on the issuance date and Wilmington Trust, National Association, as trustee and notes
collateral agent. The Senior Notes mature on September 15, 2028. The Company used the net proceeds from the issuance of the
Senior Notes after debt issuance costs to prepay $981 million in principal amount of certain first lien term loans under its Term
Loan Credit Agreement.

Term Loan Credit Agreement Refinancing

On September 25, 2020, the Company amended the Term Loan Credit Agreement, pursuant to which the maturity of $800
million in principal amount of the first lien term loans outstanding under the Term Loan Credit Agreement was extended from
December 2024 to December 2027. The amendment also made certain other changes to the Term Loan Credit Agreement,
including with respect to the change of control provisions.

ABL Credit Agreement Refinancing

On September 25, 2020, the Company also amended its ABL Credit Agreement to, among other things, extend its maturity to
September 25, 2025, subject to customary adjustments to the extent certain of the Company's indebtedness matures prior to
such date. The total commitments under the ABL Credit Agreement were also reduced from $300 million to $200 million,
subject to borrowing base availability.

As of September 30, 2020, the Company was in compliance with all covenants and other requirements under its debt
agreements.

See Note 11, "Financing Arrangements," and Note 12, "Derivative Instruments and Hedging Activities," to our Consolidated
Financial Statements for further details about our financing arrangements and hedging activities, including summaries of the
material provisions of the Company's Term Loan Credit Agreement, ABL Credit Agreement, Senior Notes, Convertible Notes
and interest rate swap agreements.

51

Contractual Obligations and Sources of Liquidity

Contractual Obligations

The following table summarizes the Company's contractual obligations as of September 30, 2020:

(In millions)
Total debt(1)
Interest payments due on debt(2)

Purchase obligations with contract manufacturers and
product suppliers(3)
Other purchase obligations(4)

Operating lease obligations(5)

Finance lease obligations (6)

Pension benefit obligations(7)

Total

(1) Represents principal payments only.

Payments due by period

Total

Less than
1 year

1-3
years

3-5
years

$

2,993

$

— $

1,169

87
525

204

18

604

190

87
444

58

9

53

$

5,600

$

841

$

$

350

385

—
54

85

7

107

988

More than
5 years

$

1,800

282

—
—

22

—

348

843

312

—
27

39

2

96

$

1,319

$

2,452

(2) The interest payments due on debt give effect to the impact of the Company's interest rate swap agreements. The interest payments for the unhedged

portion of the Company's Term Loan Credit Agreement were calculated by applying an applicable margin to a projected LIBOR rate. The interest
payments for the Company's 6.125% senior notes and its 2.25% convertible senior notes were based on their contractual coupon rates. An estimated
unused facility fee was calculated for the ABL Credit Agreement using the contract rate.

(3) During the normal course of business, in order to manage manufacturing lead times and to help assure adequate component supply, the Company enters

into agreements with contract manufacturers and product suppliers that allow them to produce and procure inventory based upon forecasted requirements.
If the Company does not meet the specified minimum purchase commitments under these agreements, it could be required to purchase the inventory.

(4) Other purchase obligations represent an estimate of contractual obligations in the ordinary course of business, other than commitments with contract
manufacturers and product suppliers, for which the Company had not received the goods or services as of September 30, 2020. Although contractual
obligations are considered enforceable and legally binding, the terms generally allow the Company to cancel, reschedule and adjust its requirements based
on the Company's business needs prior to the delivery of goods or performance of services.

(5) Operating lease obligations represent the undiscounted future minimum lease payments for the Company's operating leases.

(6) Finance lease obligations represent the undiscounted future minimum lease payments for the Company's finance leases.

(7) The Company sponsors non-contributory defined pension and post-retirement plans covering certain employees and retirees. The Company's general

funding policy with respect to 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. Most post-retirement medical benefits are not pre-funded. Consequently, the Company
makes payments as these retiree medical benefits are disbursed. The amounts presented represent estimated minimum funding requirements for the
Company's defined pension plans through fiscal 2030 and estimated payments for medical benefits under the Company's post-retirement plans.

As of September 30, 2020, the Company's unrecognized tax benefits ("UTBs") associated with uncertain tax positions were
$140 million and interest and penalties related to these amounts were an additional $25 million. The UTBs and related interest
and penalties are not reflected in the table above due to the uncertainty of the timing of payments.

Future Cash Requirements

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

Specifically, we expect our primary cash requirements for fiscal 2021 to be as follows:

•

•

•

Debt service—We expect to make payments of approximately $190 million during fiscal 2021 in interest associated
with the Term Loan Credit Agreement, Senior Notes and Convertible Notes, and interest and fees associated with our
ABL Credit Agreement. In the ordinary course of business, we may from time to time borrow and repay amounts
under our ABL Credit Agreement.

Capital expenditures—We expect to spend approximately $95 million to $105 million for capital expenditures during
fiscal 2021.

Benefit obligations—We estimate we will make payments under our pension and post-retirement benefit obligations of
approximately $53 million during fiscal 2021. These payments include $18 million to satisfy the minimum statutory
funding requirements of our U.S. qualified pension plans; $24 million for our non-U.S. benefit plans, which are
predominantly not pre-funded; and $11 million for salaried and represented retiree post-retirement benefits. See
discussion in Note 15, "Benefit Obligations," to our Consolidated Financial Statements for further details.

52

•

Restructuring payments—We expect to make payments of approximately $25 million to $30 million during fiscal
2021 for employee separation costs and lease termination obligations associated with restructuring actions. The
Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.

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 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.

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 our Term Loans, Senior Notes and Convertible Notes) through cash purchases and/or
exchanges, in open market purchases, privately negotiated transactions, tender offers, redemptions 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 September 30, 2020 and 2019, our cash and cash equivalent balances held outside the U.S. were $227 million and $176
million, respectively. As of September 30, 2020, the Company’s cash and cash equivalents held outside the U.S. are not
expected to be needed to be repatriated to fund the Company’s operations in the U.S. based on our expected future sources of
liquidity.

Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At September 30,
2020, the Company had issued and outstanding letters of credit and guarantees of $41 million under the ABL Credit Agreement
and had no borrowings outstanding under the ABL Credit Agreement. The aggregate additional principal amount that may be
borrowed under the ABL Credit Agreement, based on the borrowing base less $41 million of outstanding letters of credit and
guarantees, was $153 million at September 30, 2020.

We believe that our existing cash and cash equivalents of $727 million as of September 30, 2020, expected future cash provided
by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash
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. We also believe that our financial resources, along with appropriate management of discretionary expenses,
will allow us to manage the anticipated impact of COVID-19 on our business operations, and specifically our liquidity, for the
foreseeable future. However, the challenges posed by COVID-19 on our business constantly and rapidly evolve and could result
in the need for additional liquidity. Consequently, we will continue to evaluate our financial position in light of future
developments.

Off-Balance Sheet Arrangements

See discussion in Note 22, "Commitments and Contingencies," to our Consolidated Financial Statements for further details.

Debt Ratings

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.

As of September 30, 2020, 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 "B2"

applicable to the Senior Notes and the Term Loan Credit Agreement;

•

•

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

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

EBITDA and Adjusted EBITDA

We present below the Company's EBITDA and Adjusted EBITDA, each of which is a non-GAAP Measure.

53

EBITDA is defined as net 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 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 that still affect our net income. In
particular, our formulation of Adjusted EBITDA adjusts for certain amounts that are included in calculating net loss as set forth
in the following table including, but not limited to, restructuring charges, impairment charges, 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.

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

(In millions)

Net loss

Interest expense

Interest income

Provision for income taxes

Depreciation and amortization

EBITDA

Impact of fresh start accounting adjustments

Restructuring charges

Advisory fees

Acquisition-related costs

Share-based compensation

Impairment charges

Change in fair value of Emergence Date Warrants

Loss on foreign currency transactions

Gain on investments in equity and debt securities, net

Adjusted EBITDA

Fiscal years ended September 30,

2020

2019

$

(680) $

226

(6)

62

423

25

1

20

40

—

30

624

3

16
(49)

710

$

(a)

(b)

(c)

(d)

$

(671)

237

(14)

2

443

(3)

5

22

11

9

25

659

(29)

8
(1)

706

(a) The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy.
(b) Restructuring charges represent employee separation costs and facility exit costs (excluding the impact of accelerated

depreciation expense) related to the Company's restructuring programs, net of sublease income.

(c) Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the

Company's capital structure.

(d) Realized and unrealized gains on investments in equity securities, net of impairment of investments in debt securities.

54

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires the Company's management
to make judgments, assumptions and estimates 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.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the
circumstances. Actual results may differ from these estimates and such differences may be material. Note 2, "Summary of
Significant Accounting Policies," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on
Form 10-K describes the significant accounting policies and methods used in the preparation of the Company's Consolidated
Financial Statements. The accounting policies and estimates below have been identified by the Company's management as
those that are most critical to our financial statements as they require management to make significant judgments and estimates
about inherently uncertain matters.

Revenue Recognition

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. The Company’s critical revenue recognition estimate is the variable consideration included in the
total transaction price for a customer contract.

The total transaction price for each customer contract represents the total consideration specified in the contract, including
variable consideration such as sales incentives and other discounts. Judgment is required in estimating variable consideration,
which typically reduces the total transaction price due to the nature of the elements to which variable consideration relates. The
Company’s variable consideration estimates mainly consist of reserves for contractual stock rotation rights to channel partners
to support the management of inventory; future credits and sales incentives to distributors and other channel partners based on
our contractual arrangements; and reserves for estimated sales returns based on a customer’s right of return. Estimates of
variable consideration reflect the Company’s historical experience, current contractual requirements, specific known market
events and trends, industry data and forecasted customer buying patterns. When estimating returns, the Company considers
customary inventory levels held by third-party distributors. The Company’s variable consideration estimates are recorded as a
reduction of revenue at the time of sale and 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.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized but are subject to annual testing for impairment each July 1st,
or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of goodwill or
an indefinite-lived intangible asset below its carrying amount. The Company's goodwill was primarily recorded upon
emergence from bankruptcy as a result of applying fresh start accounting.

Goodwill is tested for impairment at the reporting unit level. The impairment test for goodwill consists of a comparison of the
fair value of a reporting unit with its carrying value, including the goodwill allocated to that reporting unit. If the carrying value
of a reporting unit exceeds its fair value, the Company will recognize an impairment loss equal to the amount of the excess,
limited to the amount of goodwill allocated to that reporting unit. Application of the impairment test requires estimates and
judgement when determining the fair value of each reporting unit. In performing the goodwill impairment test, the Company
estimates the fair value of each reporting unit using a weighting of fair values derived from an income approach and a market
approach.

Under the income approach, the fair value of a reporting unit is estimated using a discounted cash flows model. Future cash
flows are based on forward-looking information regarding revenue and costs for each reporting unit and are discounted using an
appropriate discount rate. The discounted cash flows model relies on assumptions regarding revenue growth rates, projected
gross profit, working capital needs, selling, general and administrative expenses, research and development expenses, business
restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates. The discount rates the
Company uses represent the estimated weighted average cost of capital, which reflects the overall level of inherent risk
involved in its reporting unit operations and the rate of return an outside investor would expect to earn. To estimate cash flows
beyond the final year of its model, the Company uses a terminal value approach. Under this approach, the Company applies a
perpetuity growth assumption to determine the terminal value. The Company incorporates the present value of the resulting
terminal value into its estimate of fair value. Forecasted cash flows for each reporting unit consider current economic conditions
and trends, estimated future operating results, the Company's view of growth rates and anticipated future economic conditions.
Revenue growth rates inherent in the forecasts are based on input from internal and external market intelligence research
sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and
product evolution. Macroeconomic factors such as changes in economies, product evolution, industry consolidation and other
changes beyond the Company's control could have a positive or negative impact on achieving its targets.

55

The market approach estimates the fair value of a reporting unit by applying multiples of operating performance measures to the
reporting unit's operating performance (the "Guideline Public Company Method"). These multiples are derived from
comparable publicly-traded companies with similar investment characteristics to the reporting unit. The key estimates and
assumptions that are used to determine the fair value under the market approach include current and projected 12-month
operating performance results, as applicable, and the selection of the relevant multiples that are applied.

Changes in these estimates and assumptions could materially affect the determination of fair value and the goodwill impairment
test result for each reporting unit.

During the second quarter of fiscal 2020, the Company concluded that a triggering event occurred for both of its reporting units
due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's
long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since
the advent of the pandemic which was caused by the resulting volatility in the financial markets. As a result, the Company
performed an interim quantitative goodwill impairment test as of March 31, 2020 to compare the fair values of its reporting
units to their respective carrying amounts, including the goodwill allocated to each reporting unit. The results of the Company's
interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company's Services
reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit
exceeded its estimated fair value primarily due to a reduction in the Company's long-term forecast to reflect increased risk from
higher market uncertainty and the accelerated reduction of product sales related to the Company's historical on-premises
perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new
technology innovation through the utilization of the Company's subscription offering, which is included in the Services
reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying
amount of the Products & Solutions goodwill in the Impairment charges line item in the Consolidated Statements of Operations.

The Company performed its annual goodwill impairment test as of July 1, 2020. As permitted under FASB ASC Topic 350,
"Intangibles-Goodwill and Other" ("ASC 350"), the Company performed a qualitative goodwill impairment assessment to
determine whether it was more likely than not that the fair value of its Services reporting unit was less than its carrying amount,
including goodwill. After assessing all relevant qualitative factors, the Company determined that it was more likely than not
that the fair value of the reporting unit exceeded its carrying amount and a quantitative goodwill impairment test was not
necessary.

The impairment test of the Company’s indefinite-lived intangible asset, the Avaya Trade Name, consists of a comparison of the
estimated fair value of the asset with its carrying value. The fair value of the Avaya Trade Name is estimated using the relief-
from-royalty model, a form of the income approach. Under this methodology, the fair value of the trade name is estimated by
applying a royalty rate to forecasted net revenues which is then discounted using a risk-adjusted rate of return on capital.
Revenue growth rates inherent in the forecast are based on input from internal and external market intelligence research sources
that compare factors such as growth in global economies, regional trends in the telecommunications industry and product
evolution. The royalty rate is determined using a set of observed market royalty rates.

As a result of the triggering event described above, the Company also performed an interim quantitative impairment test for its
indefinite-lived intangible asset, the Avaya Trade Name, as of March 31, 2020, which indicated no impairment existed. As of
July 1, 2020, the Company performed its annual impairment test of the Avaya Trade Name and determined that its estimated
fair value exceeded its carrying amount by 14% and no impairment existed. An increase in the discount rate of 120 basis points
or a decrease in the long-term revenue growth rate of 340 basis points would have resulted in an estimated fair value of the
trade name below its carrying value.

The Company's long-term forecast includes significant estimates and assumptions, including management's estimate of the
potential impact of the COVID-19 pandemic on the Company's operating results. Due to the uncertainty surrounding the impact
of the COVID-19 pandemic on the macroeconomic environment and, more specifically, on the Company's future operating
results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently contemplated by the
Company's long-term forecast.

The Company determined that no events occurred or circumstances changed during the three months ended September 30, 2020
that would indicate that it is more likely than not that its goodwill or indefinite-lived intangible asset were impaired. To the
extent that business conditions deteriorate or if changes in key assumptions and estimates differ significantly from
management's expectations, it may be necessary to record additional impairment charges in the future.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are

56

expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
Consolidated Statements of Operations in the period that includes the enactment date. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

Additionally, the accounting for income taxes requires the Company to evaluate and make an assertion as to whether
undistributed foreign earnings will be indefinitely reinvested or repatriated.

FASB ASC subtopic 740-10, "Income Taxes-Overall" ("ASC 740-10") prescribes a comprehensive model for the financial
statement recognition, measurement, classification and disclosure of uncertain tax positions. ASC 740-10 contains a two-step
approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on
audit based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon settlement.

Significant judgment is required in evaluating uncertain tax positions and determining the provision for income taxes. Although
the Company believes its reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not
be different from that which is reflected in the historical income tax provision and accruals. The Company adjusts its estimated
liability for uncertain tax positions periodically due to new information discovered from ongoing examinations by, and
settlements with, various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company’s
policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense.

As part of the Company’s accounting for business combinations, some of the purchase price is allocated to goodwill and
intangible assets. Impairment expenses associated with goodwill are generally not tax deductible and will result in an increased
effective income tax rate in the fiscal period any impairment is recorded. The income tax benefit from future releases of the
acquisition date valuation allowances or income tax contingencies, if any, are reflected in the income tax provision in the
Consolidated Statements of Operations, rather than as an adjustment to the purchase price allocation.

Pension and Post-retirement 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.

The Company’s pension and post-retirement benefit costs are developed from actuarial valuations. Inherent in these valuations
are key assumptions, including the discount rate, expected long-term rate of return on plan assets, rate of compensation increase
and healthcare cost trend rate. Material changes in pension and post-retirement benefit costs may occur in the future due to
changes in these assumptions, in the number of plan participants, in the level of benefits provided, in asset levels and in
legislation.

The discount rate is subject to change each year, consistent with changes in rates of return on high-quality fixed-income
investments currently available and expected to be available during the expected benefit payment period. The Company selects
the assumed discount rate for its U.S. pension and post-retirement benefit plans by applying the rates from the Aon AA Above
Median and Aon AA Only Bond Universe yield curves to the expected benefit payment streams and develops a rate at which it
is believed the benefit obligations could be effectively settled. The Company follows a similar process for its non-U.S. pension
plans by applying the Aon Euro AA corporate bond yield curve for the plans based in Europe and relevant country-specific
bond indices for other locations.

The market-related value of the Company’s plan assets as of the measurement date is developed using a five-year smoothing
technique. First, a preliminary market-related value is calculated by adjusting the market-related value at the beginning of the
year for payments to and from plan assets and the expected return on assets during the year. The expected return on assets
represents the expected long-term rate of return on plan assets adjusted up to plus or minus 2% based on the actual ten-year
average rate of return on plan assets. A final market-related value is determined as the preliminary market-related value, plus
20% of the difference between the actual return and expected return for each of the past five years.

Salary growth and healthcare cost trend assumptions are based on the Company's historical experience and future outlook.

While the Company believes that the assumptions used in these calculations are reasonable, differences in actual experience or
changes in assumptions could materially affect the expense and liabilities related to the Company's defined benefit plans. For
the U.S. pension; non-U.S. pension; and post-retirement plans combined, a hypothetical 25 basis point increase or decrease in
the discount rate would affect expense for fiscal 2020 by $3 million or $2 million, respectively. A hypothetical 25 basis point
increase or decrease in the discount rate would change the projected benefit obligation as of September 30, 2020 by $(61)
million or $64 million, respectively. A hypothetical 25 basis point change in the expected long-term rate of return would affect
expense for fiscal 2020 by approximately $3 million.

57

Item 7A.

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. As of September 30, 2020, the Company had $1,643
million of variable rate loans outstanding and maintained interest rate swap agreements, which mature on December 15, 2022,
to pay a fixed rate of 2.935% on $1,543 million of the variable rate loans outstanding (the "Swap Agreements"). On an annual
basis, a hypothetical one percent change in interest rates for the $100 million of unhedged variable rate debt as of September 30,
2020 would have affected interest expense by approximately $1 million.

On July 1, 2020, the Company entered into additional interest rate swap agreements, to fix a portion of the variable interest due
on its Term Loan Credit Agreement (the "New Swap Agreements") from December 15, 2022 (the maturity date of the Swap
Agreements) through December 15, 2024. Under the terms of the New Swap Agreements, the Company will pay a fixed rate of
0.7047% and receive a variable rate of interest based on one-month LIBOR. The New Swap Agreements have a total notional
amount of $1,400 million.

It is management’s intention that the net notional amount of interest rate swap agreements be less than the variable rate loans
outstanding during the life of the derivatives. For fiscal 2020, fiscal 2019 and the period from December 16, 2017 through
September 30, 2018, the Company recognized a loss on its interest rate swap agreements of $35 million, $10 million and $6
million, respectively, which is reflected in Interest expense in the Consolidated Statements of Operations. At September 30,
2020, the Company maintained a $91 million deferred loss on its interest rate swap agreements designated as highly effective
cash flow hedges within Accumulated other comprehensive loss in the Consolidated Balance Sheets.

See Note 12, “Derivative Instruments and Hedging Activities," to our Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K for additional information related to the Company's interest rate swap agreements.

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, Singapore Dollars and
United Arab Emirates Dirham.

Non-U.S. denominated revenue was $638 million for fiscal 2020. We estimate a 10% change in the value of the U.S. dollar
relative to all foreign currencies would have affected our revenue for fiscal 2020 by $64 million.

The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with
certain monetary assets and liabilities including receivables, payables and certain intercompany balances. These foreign
currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these
contracts are recorded as a component of Other income (expense), net to offset the change in the value of the underlying assets
and liabilities. As of September 30, 2020, the Company maintained open foreign exchange contracts with a total notional value
of $375 million, primarily hedging the British Pound Sterling, Euro, Chinese Renminbi and Indian Rupee. At September 30,
2020, the fair value of the open foreign exchange contracts was a net unrealized loss of $1 million, with $2 million recorded in
Other current liabilities and $1 million recorded in Other current assets in the Consolidated Balance Sheets. In fiscal 2020 and
2019, the Company's loss on foreign exchange contracts was $1 million and $5 million, respectively, and was recorded within
Other income (expense) on the Consolidated Statements of Operations.

58

Item 8.

Financial Statements and Supplementary Data

Avaya Holdings Corp.
Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Page

60
63
64
65
66
67
68
69

59

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Avaya Holdings Corp.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Avaya Holdings Corp. and its subsidiaries (Successor) (the
“Company”) as of September 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive (loss)
income, changes in stockholders' equity (deficit) and cash flows for the years ended September 30, 2020 and 2019, and the
period from December 16, 2017 through September 30, 2018, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for the years
ended September 30, 2020 and 2019, and the period from December 16, 2017 through September 30, 2018 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.

Basis of Accounting

As discussed in Note 1 to the consolidated financial statements, the United States Bankruptcy Court for the Southern District of
New York confirmed the Company's Second Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and Its Debtor
Affiliates (the "plan") on November 28, 2017. Confirmation of the plan resulted in the discharge of certain claims against the
Company that arose before January 19, 2017 and terminates all rights and interests of equity security holders as provided for in
the plan. The plan was substantially consummated on December 15, 2017 and the Company emerged from bankruptcy. In
connection with its emergence from bankruptcy, the Company adopted fresh start accounting as of December 15, 2017.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases as of October 1, 2019 and the manner in which it accounts for revenues from contracts with customers as of October 1,
2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

60

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Interim Impairment Assessment - Products & Solutions and Services Reporting Units

As described in Notes 2 and 7 to the consolidated financial statements, the Company’s total goodwill, net balance was $1,478
million as of September 30, 2020, and the goodwill associated with the Products & Solutions and Services reporting units was
$0 and $1,478 million, respectively. Goodwill is not amortized but is subject to periodic testing for impairment at the reporting
unit level. The Company’s reporting units are subject to impairment testing annually, on July 1st, 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 value.
During the second quarter of fiscal 2020, the Company concluded that a triggering event occurred for both of its reporting units
due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's
long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since
the advent of the pandemic which was caused by the resulting volatility in the financial markets. The impairment test for
goodwill consists of a comparison of the fair value of a reporting unit with its carrying value, including the goodwill allocated
to that reporting unit. If the carrying value of a reporting unit exceeds its fair value, the Company will recognize an impairment
loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit. As a result of the
triggering event, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying amount
of the Products & Solutions goodwill. The estimated fair value of the Services reporting unit exceeded its carrying amount.
Management estimates the fair value of each reporting unit using a weighting of fair values derived from an income approach
and a market approach. Under the income approach, the fair value of a reporting unit is estimated using a discounted cash flows
model, which relies on assumptions regarding revenue growth rates, projected gross profit, working capital needs, selling,
general and administrative expenses, research and development expenses, business restructuring costs, capital expenditures,
income tax rates, discount rates and terminal growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill interim impairment
assessment of the Products & Solutions and Services reporting units is a critical audit matter are (i) the significant judgment by
management when developing the fair value measurement of the reporting units derived from the income approach; (ii)
significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant
assumptions related to revenue growth rates, projected gross profit, selling, general, and administrative expenses, discount rates
and the terminal growth rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s goodwill impairment assessment, including controls over the valuation of the Company’s Products & Solutions
and Services reporting units. These procedures also included, among others (i) testing management’s process for developing the
fair value estimates; (ii) evaluating the appropriateness of the discounted cash flows model; (iii) testing the completeness and
accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by
management related to the revenue growth rates, projected gross profit, selling, general, and administrative expenses, discount
rates and the terminal growth rate. Evaluating management’s assumptions related to the revenue growth rates, projected gross
profit, and selling, general, and administrative expenses involved evaluating whether the assumptions used by management
were reasonable considering (i) the current and past performance of the reporting units; (ii) the consistency with external market

61

and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash
flows model and the discount rates and terminal growth rate assumptions.

Indefinite-Lived Intangible Asset Interim Impairment Assessment - Trade Name

As described in Notes 2 and 8 to the consolidated financial statements, the Company’s total trade name indefinite-lived
intangible asset, net balance was $333 million as of September 30, 2020. Intangible assets determined to have indefinite useful
lives are not amortized but are tested for impairment annually, on July 1st, or more frequently if events occur or circumstances
change that indicate an asset may be impaired. As a result of the triggering event described above, management performed an
interim quantitative impairment test for its trade name indefinite-lived intangible asset as of March 31, 2020, which indicated
no impairment existed. The impairment test for the trade name indefinite-lived intangible asset consists of a comparison of the
estimated fair value of the asset with its carrying value. If the carrying value of the trade name indefinite-lived intangible asset
exceeds its estimated fair value, the Company recognizes an impairment loss equal to the amount of the excess. Management
estimates the fair value of the trade name indefinite-lived intangible asset using the relief-from-royalty model, a form of the
income approach. Under this methodology, the fair value of the trade name is estimated by applying a royalty rate to forecasted
net revenues which is then discounted using a risk-adjusted rate of return on capital. Revenue growth rates inherent in the
forecast are based on input from internal and external market intelligence research sources that compare factors such as growth
in global economies, regional trends in the telecommunications industry and product evolution. The royalty rate is determined
using a set of observed market royalty rates.

The principal considerations for our determination that performing procedures relating to the trade name indefinite-lived
intangible asset interim impairment assessment is a critical audit matter are (i) the significant judgment by management when
developing the fair value measurement of the trade name; (ii) significant auditor judgment, subjectivity, and effort in
performing procedures and evaluating management’s significant assumptions related to the royalty rate and the risk-adjusted
rate of return on capital; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s trade name indefinite-lived intangible asset impairment assessment, including controls over the valuation of the
Company’s trade name. These procedures also included, among others (i) testing management’s process for developing the fair
value estimate of the Company’s trade name indefinite-lived intangible asset; (ii) evaluating the appropriateness of the relief-
from-royalty model; and (iii) evaluating the reasonableness of the significant assumptions used by management related to
royalty rate and the risk-adjusted rate of return on capital. Professionals with specialized skill and knowledge were used to
assist in the evaluation of the Company’s relief-from-royalty model and the royalty rate and risk-adjusted rate of return on
capital assumptions.

/s/ PricewaterhouseCoopers LLP
San Jose, California
November 25, 2020

We have served as the Company’s auditor since 2000.

62

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Avaya Holdings Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive (loss) income, changes in
stockholders’ equity (deficit) and cash flows of Avaya Holdings Corp. and its subsidiaries (Predecessor) (the “Company”) for
the period from October 1, 2017 through December 15, 2017, including the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the results of operations and cash flows of the Company for the period from October 1, 2017 through December 15,
2017 in conformity with accounting principles generally accepted in the United States of America.

Basis of Accounting

As discussed in Note 1 to the consolidated financial statements, the Company filed a petition on January 19, 2017 with the
United States Bankruptcy Court for the Southern District of New York for reorganization under the provisions of Chapter 11 of
the Bankruptcy Code. The Company’s Second Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and Its Debtor
Affiliates was substantially consummated on December 15, 2017 and the Company emerged from bankruptcy. In connection
with its emergence from bankruptcy, the Company adopted fresh start accounting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on
a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
San Jose, California
December 21, 2018

We have served as the Company's auditor since 2000.

63

Avaya Holdings Corp.
Consolidated Statements of Operations
(In millions, except per share amounts)

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor
Period from
October 1, 2017
through
December 15, 2017

$

1,073 $

1,222

$

989

$

REVENUE

Products

Services

COSTS

Products:

Costs

Amortization of technology intangible assets

Services

GROSS PROFIT

OPERATING EXPENSES

Selling, general and administrative

Research and development

Amortization of intangible assets

Impairment charges

Restructuring charges, net

OPERATING (LOSS) INCOME

Interest expense

Other income (expense), net

Reorganization items, net

(LOSS) INCOME BEFORE INCOME TAXES

(Provision for) benefit from income taxes

NET (LOSS) INCOME

(LOSS) EARNINGS PER SHARE

Basic

Diluted

Weighted average shares outstanding

Basic

Diluted

$

$

$

1,800

2,873

405

174

714
1,293

1,580

1,013

207

161

624

30

2,035

(455)

(226)

63

—

(618)

(62)

1,665

2,887

442

174

696
1,312

1,575

1,001

204

162

659

22

2,048

(473)

(237)

41

—

(669)

(2)

(680) $

(671) $

(7.45) $

(7.45) $

(6.06) $

(6.06) $

92.2

92.2

110.8

110.8

1,258

2,247

372

135

597
1,104

1,143

888

172

127

—

81

1,268

(125)

(169)

35

—

(259)

546

287

2.61

2.58

109.9

111.1

$

$

$

253

351

604

84

3

155
242

362

264

38

10

—

14

326

36

(14)

(2)

3,416

3,436

(459)

2,977

5.19

5.19

497.3

497.3

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

64

Avaya Holdings Corp.
Consolidated Statements of Comprehensive (Loss) Income
(In millions)

Net (loss) income

Other comprehensive (loss) income:

Pension, post-retirement and postemployment

benefit-related items, net of income taxes of $29
for fiscal 2019; $(19) for the period from December
16, 2017 through September 30, 2018; and $(58)
for the period from October 1, 2017 through
December 15, 2017

Cumulative translation adjustment

Change in interest rate swaps, net of income taxes of
$3 for fiscal 2020; $19 for fiscal 2019 and $1 for
the period from December 16, 2017 through
September 30, 2018

Other comprehensive (loss) income

Elimination of Predecessor Company accumulated
other comprehensive loss
Total comprehensive (loss) income

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

(680) $

(671) $

287

$

2,977

(2)

(39)

(31)
(72)

—

(157)

24

(58)
(191)

—

$

(752) $

(862) $

51

(31)

(2)
18

—

305

$

655

3

—
658

790

4,425

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

65

Avaya Holdings Corp.
Consolidated Balance Sheets
(In millions, except per share and share amounts)

As of September 30,

2020

2019

ASSETS
Current assets:

Cash and cash equivalents
Accounts receivable, net
Inventory
Contract assets
Contract costs
Other current assets
TOTAL CURRENT ASSETS

Property, plant and equipment, net
Deferred income taxes, net
Intangible assets, net
Goodwill, net
Operating lease right-of-use assets
Other assets

TOTAL ASSETS
LIABILITIES
Current liabilities:

Debt maturing within one year
Accounts payable
Payroll and benefit obligations
Contract liabilities
Operating lease liabilities
Business restructuring reserves
Other current liabilities
TOTAL CURRENT LIABILITIES
Non-current liabilities:

Long-term debt, net of current portion
Pension obligations
Other post-retirement obligations
Deferred income taxes, net
Contract liabilities
Operating lease liabilities
Business restructuring reserves
Other liabilities

TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
Commitments and contingencies (Note 22)

Preferred stock, $0.01 par value; 55,000,000 shares authorized at September 30, 2020 and 2019

Convertible series A preferred stock; 125,000 shares issued and outstanding at September 30,
2020 and no shares issued and outstanding at September 30, 2019

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value; 550,000,000 shares authorized; 83,278,383 shares issued and
outstanding at September 30, 2020; and 111,046,085 shares issued and 111,033,405 shares
outstanding at September 30, 2019
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss

TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

$

$

$

727
275
54
296
115
112
1,579
268
31
2,556
1,478
160
159
6,231

$

$

— $

242
198
446
49
21
181
1,137

2,886
749
215
38
373
129
28
312
4,730
5,867

752
314
63
187
114
115
1,545
255
35
2,891
2,103
—
121
6,950

29
291
116
472
—
33
158
1,099

3,090
759
200
72
78
—
36
316
4,551
5,650

128

—

1
1,449
(969)
(245)
236
6,231

$

1
1,761
(289)
(173)
1,300
6,950

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

66

Avaya Holdings Corp.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
(In millions)

Balance as of September 30, 2017 (Predecessor)

494.8

$

— $

2,389

$

(5,954) $

(1,448) $

(5,013)

Common Stock

Shares Par Value

Additional
Paid-In
Capital

(Accumulated
Deficit)
Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

Total
Stockholders'
Equity
(Deficit)

Share-based compensation expense
Accrued dividends on Series A preferred stock
Accrued dividends on Series B preferred stock
Reclassifications to equity awards on redeemable shares
Net loss
Other comprehensive income

Balance as of December 15, 2017 (Predecessor)

Cancellation of Predecessor equity

Balance as of December 15, 2017 (Predecessor)

Issuance of Successor common stock

Common stock issued for Predecessor debt
Common stock issued for Pension Benefit Guaranty
Corporation

Balance as of December 15, 2017 (Predecessor)

Balance as of December 16, 2017 (Successor)

Issuance of common stock under the equity incentive plan
Shares repurchased and retired for tax withholding on
vesting of restricted stock units
Equity component of convertible notes, net of issuance
costs and income taxes
Purchase of convertible note bond hedge, net of income
taxes

Issuance of call spread warrants
Share-based compensation expense
Net income
Other comprehensive income

3
(2)
(4)
1

494.8
(494.8)

$

— $

— $
—

— $

2,387
(2,387)

$

— $

103.9

6.1
110.0

110.0

0.2

$

$

1

—
1

1

$

$

1,575

92
1,667

1,667

$

$

—

(2)

67

(64)

58
19

2,977

(2,977) $
2,977

— $

— $

— $

287

Balance as of September 30, 2018 (Successor)

110.2

$

1

$

1,745

$

287

$

Issuance of common stock under the equity incentive plan
Shares repurchased and retired for tax withholding on
vesting of restricted stock units

1.3

(0.5)

Share-based compensation expense
Adjustment for adoption of new accounting standard
(Note 2)
Net loss
Other comprehensive loss

—

(9)

25

95
(671)

Balance as of September 30, 2019 (Successor)

111.0

$

1

$

1,761

$

(289) $

Issuance of common stock under the equity incentive
plan

Issuance of common stock under the employee stock
purchase plan
Shares repurchased and retired for tax withholding on
vesting of restricted stock units
Shares repurchased and retired under share repurchase
program
Share-based compensation expense
Accretion of preferred stock to redemption value
Preferred stock dividends accrued
Net loss
Other comprehensive loss

1.5

0.2

(0.5)

(28.9)

2

(7)

(330)
30
(4)
(3)

(680)

Balance as of September 30, 2020 (Successor)

83.3

$

1

$

1,449

$

(969) $

3
(2)
(4)
1
2,977
658

(1,380)
1,380

—

1,576

92
1,668

658

(790) $
790

— $

— $

— $

1,668

—

(2)

67

(64)

58
19
287
18

$

2,051

18

18

—

(9)

25

95
(671)
(191)

1,300

—

2

(7)

(330)
30
(4)
(3)
(680)
(72)
236

(191)

(173) $

(72)

(245) $

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

67

Avaya Holdings Corp.
Consolidated Statements of Cash Flows
(In millions)

OPERATING ACTIVITIES:

Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by (used for)
operating activities:

Depreciation and amortization
Share-based compensation
Amortization of debt discount and issuance costs
Loss on extinguishment of debt
Deferred income taxes, net
Impairment charges
Change in fair value of emergence date warrants
Unrealized loss (gain) on foreign currency transactions
Impairment of debt securities
Realized gain on sale of equity securities
Other non-cash (credits) charges, net
Reorganization items:

Net gain on settlement of Liabilities subject to compromise
Payment to PBGC
Payment to pension trust
Payment of unsecured claims
Fresh start adjustments, net
Non-cash and financing related reorganization items, net

Changes in operating assets and liabilities:

Accounts receivable
Inventory
Operating lease right-of-use assets and liabilities
Contract assets
Contract costs
Accounts payable
Payroll and benefit obligations
Business restructuring reserves
Contract liabilities
Other assets and liabilities

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
INVESTING ACTIVITIES:

Capital expenditures
Proceeds from sale of marketable securities
Acquisition of businesses, net of cash acquired
Investment in debt securities
Proceeds from sale-leaseback transactions
Other investing activities, net

NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
FINANCING ACTIVITIES:

Shares repurchased under share repurchase program
Proceeds from issuance of Series A Preferred Stock, net of issuance costs of $4
Proceeds from Term Loan Credit Agreement
Repayment of Term Loan Credit Agreement due to refinancing
Proceeds from Term Loan Credit Agreement due to refinancing
Repayment of long-term debt, including adequate protection payments
Proceeds from issuance of senior notes
Repayment of debtor-in-possession financing
Repayment of first lien debt
Proceeds from issuance of convertible notes
Proceeds from issuance of call spread warrants
Purchase of convertible note bond hedge
Debt issuance costs
Payment of acquisition-related contingent consideration
Principal payments for financing leases
Proceeds from Employee Stock Purchase Plan
Other financing activities, net

NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor

Period from
October 1, 2017
through
December 15, 2017

$

(680) $

(671)

$

287

$

2,977

423
30
23
7
(29)
624
3
24
10
(59)
(9)

—
—
—
—
—
—

37
8
13
(166)
5
(48)
46
(19)
(71)
(25)
147

(98)
412
—
—
—
—
314

(330)
121
—
(1,643)
1,627
(1,231)
1,000
—
—
—
—
—
(14)
(5)
(10)
3
(7)
(489)
3

443
25
22
—
(54)
659
(29)
9
—
—
7

—
—
—
—
—
—

58
(7)
—
(122)
(13)
24
(73)
(25)
35
(47)
241

(113)
—
—
(10)
—
(1)
(124)

—
—
—
—
—
(29)
—
—
—
—
—
—
—
(9)
(14)
—
(9)
(61)
(4)

384
19
8
—
(588)
—
17
(36)
—
—
3

—
—
—
—
—
—

13
36
—
—
—
(16)
(71)
29
160
(43)
202

(61)
—
(157)
—
17
2
(199)

—
—
—
(2,918)
2,911
(22)
—
—
—
350
58
(84)
(10)
—
(10)
—
(2)
273
(7)

(25)
756
731

$

52
704
756

$

$

269
435
704

$

31
—
—
—
455
—
—
—
—
—
—

(1,778)
(340)
(49)
(58)
(1,697)
26

40
—
—
—
—
(40)
16
(7)
28
(18)
(414)

(13)
—
—
—
—
—
(13)

—
—
2,896
—
—
(111)
—
(725)
(2,061)
—
—
—
(97)
—
(4)
—
—
(102)
(2)

(531)
966
435

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

68

Avaya Holdings Corp.
Notes to Consolidated Financial Statements

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
delivering most of its technology through software and services. Avaya builds open, converged and innovative solutions to
enhance and simplify communications and collaboration in the cloud, on-premise 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. The Company manages its business operations in two segments, Products &
Solutions and Services. The Company sells directly to customers 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 direct wholly-owned subsidiary
Avaya Inc. and its subsidiaries. The accompanying Consolidated Financial Statements 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").

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 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 of
Reorganization resulted in the discharge of certain claims against the Company that arose before the Petition Date and
terminated all rights and interests of the pre-filing equity security holders as provided for in the Plan of Reorganization and as
further discussed in Note 23, "Emergence from Voluntary Reorganization under Chapter 11 Proceedings." 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 Consolidated Financial Statements after the Emergence Date
are not comparable with the Consolidated Financial Statements on or before that date. See Note 24, "Fresh Start Accounting,"
for additional information. References to "Successor" or "Successor Company" refer 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.

During the second quarter of fiscal 2020, the World Health Organization characterized a novel strain of coronavirus
("COVID-19") as a pandemic. The spread of COVID-19 around the globe and the actions required to mitigate its impact have
created substantial disruption to the global economy. The duration of the pandemic and the long-term impacts on the global
economy are uncertain. Although the COVID-19 pandemic did not have a material impact on the Company’s revenue and gross
margin during fiscal 2020, the Company did recognize a significant goodwill impairment charge during fiscal 2020 as a result
of the COVID-19 pandemic. See Note 7, “Goodwill, net” for additional information regarding the goodwill impairment charge
recorded during fiscal 2020.

The accompanying Consolidated Financial Statements of the Company have been prepared assuming 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. While we believe existing cash and cash equivalents of $727 million as of September 30, 2020,
future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to

69

meet our future cash requirements for at least the next twelve months from the filing of this Annual Report on Form 10-K, our
ability to meet our future cash requirements will depend on the Company's ability to generate cash in the future, which is
subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company's
control.

2. Summary of Significant Accounting Policies

Accounting Policy Changes

The Company emerged from bankruptcy on December 15, 2017 and qualified for fresh start accounting. Fresh start accounting
allows a company to set new accounting policies for the successor company independent of those followed by the predecessor
company. As such, the Successor Company adopted certain accounting policy changes, which have been detailed in the "Share-
based Compensation" and "Foreign Currency Translation" accounting policies below.

Use of Estimates

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. 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 could differ from these
estimates. The spread of COVID-19 and the actions required to mitigate its impact have created substantial disruption to the
global economy. The duration of the pandemic and the long-term impacts on the global economy are uncertain. The pandemic
may affect management's estimates and assumptions, in particular those that require a projection of our financial results, our
cash flows or broader economic conditions, such as the collectability of accounts receivable, sales returns and allowances, the
use and recoverability of inventory, the realization of deferred tax assets, annual effective tax rate, the fair value of equity
compensation, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including
goodwill (see Note 7, "Goodwill, net"), business restructuring reserves, and fair value measurements (see Note 13, "Fair Value
Measurements"). The Company also uses estimates to assess pension and post-retirement benefit costs, the fair value of assets
and liabilities in connection with fresh start accounting and those acquired in business combinations, and the amount of
exposure from potential loss contingencies, among others.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Avaya Holdings Corp. and its subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform
to the current year's presentation.

Revenue Recognition

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.

On October 1, 2018, the Company adopted Accounting Standards Update ("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 Company adopted ASC 606 using the modified retrospective transition method applied to all open contracts
with customers that were not completed as of September 30, 2018. On October 1, 2018, the Company recorded a net increase to
the opening Retained earnings balance of $95 million, net of tax, due to the cumulative impact of adopting ASC 606. 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 under prior guidance (“ASC 605”).

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. The Company accrues a provision for estimated sales returns and other allowances, including promotional marketing
programs and other incentives, as a reduction of revenue at the time of sale. When estimating returns, the Company considers
customary inventory levels held by third-party distributors. 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.

70

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 are 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
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. 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 the Company does
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.

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.

71

Software

The Company’s software licenses provide users with access to capabilities such as voice, video, conferencing, messaging and
collaboration. The Company’s 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 is not 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.

The Company also sells its software under its subscription-based offerings which mainly consist of term software license
arrangements and software as a service ("SaaS") arrangements. Term software licenses include multiple performance
obligations where the term licenses are recognized at the point-in-time of transfer of control of the software, with the associated
software maintenance revenue recognized ratably over the contract term as the customer consumes the services. SaaS
arrangements do not include the right for the customer to take possession of the software during the contractual term of the
arrangement, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized
ratably over the contract term as the customer consumes the services. Subscription-based offerings typically have terms that
range from one to five years.

ACO

Avaya Cloud Office by RingCentral or “ACO”, was introduced by the Company to accelerate the Company's transition to the
cloud. Through this partnership, ACO combines RingCentral's UCaaS platform with Avaya technology, services and migration
capabilities to create a differentiated UCaaS offering. These services are accounted for as two distinct performance obligations,
one being a licensing component that is generally recognized at the point-in-time the software is made available to the
customer, and the second being associated support services which represents a stand-ready obligation whereby the revenues are
generally recognized ratably over the contract term. The Company’s ACO solution is provided through both direct and indirect
channels. Contracts typically have terms that range from one to five years.

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 three years for more
complex engagements. Prior to the adoption of ASC 606, revenue for professional services was recognized upon completion
and acceptance of the project and when such arrangements included products, product revenue was also recognized upon
completion and acceptance of the project.

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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 its technology via the cloud, or as a hybrid with its on-
premise solutions. The software that enables the core communications functionality is offered both as a sale of perpetual or time
based licenses or through a SaaS arrangement. 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 often include multiple performance obligations. Each performance obligation can itself
include a series of distinct promises that are satisfied over time. Total consideration for a project is allocated to each
performance obligation, with revenue recognized ratably over the period during which the services are performed as customers
simultaneously consume and receive benefits. Variable consideration from incremental usage above a 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.

Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less at the date of purchase are classified as cash
equivalents.

Concentrations of Risk

The Company’s cash and cash equivalents are maintained with several financial institutions. Deposits held at banks may exceed
the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are
maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to
mitigate such risks by spreading its risk across multiple counterparties and monitoring the risk profiles of these counterparties.

The Company, from time to time, may enter into derivative financial instruments with high credit quality financial institutions
to manage foreign exchange rate and interest rate risk and is exposed to losses in the event of non-performance by the
counterparties to these contracts. To date, no counterparty has failed to meet its obligations to the Company.

The Company relies on a limited number of contract manufacturers and suppliers to provide manufacturing services for its
products. The inability of a contract manufacturer or supplier to fulfill supply requirements of the Company could materially
impact future operating results.

The Company's largest distributor is also its largest customer and represented 8% of the Company's total annual consolidated
revenue for fiscal 2020.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. Accounts
receivable are recorded net of reserves for sales returns and allowances and provisions for doubtful accounts. The Company
performs ongoing credit evaluations of its customers and generally does not require collateral from its customers. The
allowances are based on analyses of historical trends, aging of accounts receivable balances and the creditworthiness of
customers as determined by credit checks, analyses and payment history. At September 30, 2020 and 2019, one distributor
accounted for approximately 9% and 12% of accounts receivable.

Inventory

Inventory includes goods awaiting sale (finished goods) and goods to be used in connection with providing maintenance
services. Inventory is stated at the lower of cost or net realizable value, determined on a first-in, first-out method. Reserves to
reduce the inventory cost to net realizable value are based on current inventory levels, assumptions about future demand and
product life cycles for the various inventory types.

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The Company has outsourced the manufacturing of substantially all of its products and may be obligated to purchase certain
excess inventory levels from its outsourced manufacturers if actual sales of product are lower than forecast, in which case
additional inventory provisions may need to be recorded in the future.

Contract Assets

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.

Contract Costs

The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract in advance of revenue
recognition, such as sales commissions, business partner incentives and certain labor, third party service and related product
costs. These costs are recognized as an asset if the Company expects to recover them. 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. 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.

Research and Development Costs

Research and development costs are charged to expense as incurred. The costs incurred for the development of communications
software that will be sold, leased or otherwise marketed, however, are capitalized when technological feasibility has been
established in accordance with FASB ASC Topic 985, "Software" ("ASC 985"). The Company has continued to leverage agile
development methodologies, which are characterized by a more dynamic development process with more frequent revisions to
a product releases' features and functions as the software is being developed with technological feasibility being met shortly
before the product revision is made generally available. As such, no amounts were capitalized for internally developed software
costs in the Company's Consolidated Financial Statements during fiscal 2020 and 2019 (Successor), the period from December
16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017
(Predecessor).

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is determined using the straight-
line method over the estimated useful lives of the assets. Estimated lives range from 2 to 10 years for machinery and equipment
and the remaining lease term for equipment acquired under a financing lease. Improvements that extend the useful life of assets
are capitalized and maintenance and repairs are charged to expense as incurred. Capitalized improvements to facilities subject
to operating leases are depreciated over the lesser of the estimated useful life of the asset or the duration of the lease. Upon
retirement or disposal of assets, the cost and related accumulated depreciation are removed from the Consolidated Balance
Sheets and any gain or loss is reflected in the Consolidated Statements of Operations.

The Company capitalizes costs associated with software developed or obtained for internal use when the preliminary project
stage is completed and it is determined that the software will provide enhanced capabilities. Internal use software is amortized
on a straight-line basis generally over 5 to 7 years. Costs capitalized include payroll and related benefits, third party
development fees and acquired software and licenses. General and administrative costs, overhead, maintenance and training,
and the cost of the software that does not add functionality to existing systems, are expensed as incurred. The Company had
unamortized internal use software costs included in Property, Plant and Equipment, net in the Consolidated Balance Sheets of
$91 million and $83 million as of September 30, 2020 and 2019, respectively. Depreciation expense related to internal use
software recognized in the Consolidated Statements of Operations for fiscal 2020 and 2019 (Successor), the period from
December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017
(Predecessor) was $27 million, $39 million, $31 million and $5 million, respectively.

Acquisition Accounting

The Company accounts for business combinations using the acquisition method, which requires an allocation of the purchase
price of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of
acquisition. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired.

Goodwill

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with FASB ASC Topic 350,
"Intangibles-Goodwill and Other" ("ASC 350") at the reporting unit level. The Company's reporting units are subject to
impairment testing annually, on July 1st, or more frequently if events occur or circumstances change that would more likely than

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not reduce the fair value of a reporting unit below its carrying amount. The Company's goodwill was primarily recorded upon
emergence from bankruptcy as a result of applying fresh start accounting.

ASC 350 provides the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, including goodwill. The Company has the unconditional option to bypass the
qualitative assessment for any reporting unit in any period and proceed directly to performing a quantitative goodwill
impairment test. If the assessment of all relevant qualitative factors indicates that it is more likely than not that the fair value of
a reporting unit is less than its carrying amount, a quantitative goodwill impairment test is not necessary. If the assessment of all
relevant qualitative factors indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, the Company will perform a quantitative goodwill impairment test. The quantitative impairment test for goodwill
consists of a comparison of the fair value of a reporting unit with its carrying value, including the goodwill allocated to that
reporting unit. If the carrying value of a reporting unit exceeds its fair value, the Company will recognize an impairment loss
equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit. Application of the
impairment test requires judgement, including the identification of reporting units, assignment of assets and liabilities to
reporting units and the determination of fair value of each reporting unit. In performing the quantitative goodwill impairment
test, the Company estimates the fair value of each reporting unit using a weighting of fair values derived from an income
approach and a market approach.

Under the income approach, the fair value of a reporting unit is estimated using a discounted cash flows model. Future cash
flows are based on forward-looking information regarding revenue and costs for each reporting unit and are discounted using an
appropriate discount rate. The discounted cash flows model relies on assumptions regarding revenue growth rates, projected
gross profit, working capital needs, selling, general and administrative expenses, research and development expenses, business
restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates. The discount rates the
Company uses represent the estimated weighted average cost of capital, which reflects the overall level of inherent risk
involved in its reporting unit operations and the rate of return an outside investor would expect to earn. To estimate cash flows
beyond the final year of its model, the Company uses a terminal value approach. Under this approach, the Company applies a
perpetuity growth assumption to determine the terminal value. The Company incorporates the present value of the resulting
terminal value into its estimate of fair value. Forecasted cash flows for each reporting unit consider current economic conditions
and trends, estimated future operating results, the Company's view of growth rates and anticipated future economic conditions.
Revenue growth rates inherent in the forecasts are based on input from internal and external market intelligence research
sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and
product evolution. Macroeconomic factors such as changes in economies, product evolution, industry consolidation and other
changes beyond the Company's control could have a positive or negative impact on achieving its targets.

The market approach estimates the fair value of a reporting unit by applying multiples of operating performance measures to the
reporting unit's operating performance (the "Guideline Public Company Method"). These multiples are derived from
comparable publicly-traded companies with similar investment characteristics to the reporting unit. The key estimates and
assumptions that are used to determine the fair value under the market approach include current and projected 12-month
operating performance results, as applicable, and the selection of the relevant multiples that are applied.

Intangible and Long-lived 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, which range from 1 to
19 years.

Long-lived assets, including 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 in accordance with FASB ASC Topic
360, "Property, Plant, and Equipment." Intangible assets determined to have indefinite useful lives are not amortized but are
tested for impairment annually, on July 1st, or more frequently if events occur or circumstances change that indicate an asset
may be impaired.

The recoverability test of finite-lived assets is based on forecasts of undiscounted cash flows for each asset group. The
impairment test of the Company’s indefinite-lived intangible asset, the Avaya Trade Name consists of a comparison of the
estimated fair value of the asset with its carrying value. If the carrying value of the Avaya Trade Name exceeds its estimated
fair value, the Company will recognize an impairment loss equal to the amount of the excess. The fair value of the Avaya Trade
Name is estimated using the relief-from-royalty model, a form of the income approach. Under this methodology, the fair value
of the trade name is estimated by applying a royalty rate to forecasted net revenues which is then discounted using a risk-
adjusted rate of return on capital. Revenue growth rates inherent in the forecast are based on input from internal and external
market intelligence research sources that compare factors such as growth in global economies, regional trends in the
telecommunications industry and product evolution. The royalty rate is determined using a set of observed market royalty rates.

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The estimated useful lives of intangible and long-lived assets are based on many factors including assumptions regarding the
effects of obsolescence, demand, competition and other economic factors, expectations regarding the future use of the asset, and
the Company's historical experience with similar assets. The assumptions used to determine the estimated useful lives could
change due to numerous factors including product demand, market conditions, technological developments, economic
conditions and competition.

Amortizable technology and patents have useful lives that range between 1 and 10 years with a weighted average remaining
useful life of 3.1 years. Customer relationships have useful lives that range between 1 and 19 years with a weighted average
remaining useful life of 11.9 years. Amortizable product trade names have useful lives of 10 years with a weighted average
remaining useful life of 7.2 years. The Avaya Trade Name is expected to generate cash flows indefinitely and, consequently,
this asset is classified as an indefinite-lived intangible and is therefore not amortized.

Derivative Financial Instruments

All derivatives are recognized as assets or liabilities and measured at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated
as highly effective cash flow hedges under FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"), the change in fair
value of the derivative is initially recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets and is
subsequently recognized in earnings when the hedged exposure impacts earnings. For derivative instruments that are not
designated as highly effective hedges, gains or losses from changes in fair values are recognized in earnings. The Company
does not enter into derivatives for trading or speculative purposes.

Leases

On October 1, 2019, the Company adopted ASU No. 2016-02, "Leases (Topic 842)." This standard, along with other guidance
subsequently issued by the FASB (collectively "ASC 842"), superseded all lease accounting guidance and requires lessees to
recognize lease assets and liabilities for all leases with initial lease terms of more than 12 months. The Company adopted ASC
842 using the modified retrospective transition method as of the beginning of the period of adoption. Therefore, on October 1,
2019, the Company recognized and measured leases without revising the historical comparative period information or
disclosures. See Note 3, “Recent Accounting Pronouncements” for additional information related to the adoption of ASC 842.

The Company enters into various arrangements for office, warehouse and data center facilities, network equipment and
vehicles. In accordance with ASC 842, the Company assesses whether an arrangement contains a lease at contract inception.
When an arrangement contains a lease, the Company records a right-of-use asset and lease liability. Right-of-use assets
represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's
obligation to make payments for the right to use the asset.

Right-of-use assets and lease liabilities are recognized at the lease commencement date at the present value of future payments
over the lease term. The Company adopted the practical expedient permitting the non-lease components of an arrangement to be
included in the right-of-use asset to which they relate. The present value of future payments is discounted using the rate implicit
in the lease, when available. However, as most of the Company's leases do not provide an implicit interest rate, the present
value is calculated using the Company's incremental borrowing rate, which represents the interest rate the Company would
expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Options to extend
or terminate a lease are included in the calculation of the lease term to the extent that the option is reasonably certain of
exercise. For the majority of the Company's leases, the Company has concluded that it is not reasonably certain it would
exercise such options, therefore the lease term is generally the non-cancelable period stated within the lease. The Company has
elected to not record a right-of-use asset and lease liability for short term leases with an initial lease term of 12 months or less.

Restructuring Programs

A business restructuring is defined as an exit or disposal activity that includes, but is not limited to, a program that is planned
and controlled by management and materially changes either the scope of a business or the manner in which that business is
conducted. The Company's business restructuring charges include (i) one-time termination benefits related to employee
separations, (ii) contract termination costs and (iii) other related costs associated with exit or disposal activities including, but
not limited to, costs for consolidating or closing facilities and relocating employees.

The Company accounts for non-facility related exit or disposal activities in accordance with FASB ASC Topic 420, "Exit or
Disposal Cost Obligations" ("ASC 420"). A liability is recognized and measured at its fair value for one-time termination
benefits once the plan of termination meets all of the following criteria: (i) management commits to a plan of termination, (ii)
the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the
expected completion date, (iii) the plan establishes the terms of the benefit arrangement and (iv) it is unlikely that significant
changes to the plan will be made or the plan will be withdrawn. Contract termination costs include costs to terminate a contract
or costs that will continue to be incurred under the contract without benefit to the Company. A liability is recognized and

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measured at its fair value when the Company either terminates the contract or ceases using the rights conveyed by the contract.
A liability is recognized and measured at its fair value for other related costs in the period in which the liability is incurred.

As of October 1, 2019, the Company accounts for facility-related exit or disposal activities in accordance with ASC 842 and no
longer records facility-related restructuring charges within the Business restructuring reserve on the Consolidated Balance
Sheets. The adoption of ASC 842 resulted in a one-time reclassification of $5 million for certain facility-related lease
obligations from the Business restructuring reserve to Operating lease right-of-use assets. Facility exit costs primarily include
lease obligation charges for exited facilities, including the impact of accelerated lease expense for right-of-use assets and
accelerated depreciation expense for leasehold improvements with reductions in their estimated useful lives due to exited
facilities. The Company’s accounting for such charges is dependent on whether it has the ability and intent to sublease an exited
facility. In circumstances in which the Company has the ability and intent to sublease an exited facility, the Company performs
an impairment test of the asset group by comparing its fair value to its carrying value on the earlier of the sublease inception
date or cease use date. To the extent the carrying value of the asset group is greater than its fair value, an impairment charge is
recorded within the Restructuring charges line item in the Company's Consolidated Statements of Operations. If the Company
does not have the ability and intent to sublease an exited facility, the Company adjusts the estimated useful life of the facility
related assets to end on the cease use date and recognizes accelerated depreciation and amortization within the Restructuring
charges line item in the Consolidated Statements of Operations. The amortization of right-of-use assets for exited facilities is
recorded within Restructuring charges after the cease use date. Sublease income is recorded within Other income, net in the
Consolidated Statements of Operations.

Pension and Post-retirement 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.

These pension and other post-retirement benefits are accounted for in accordance with FASB ASC Topic 715, "Compensation
—Retirement Benefits" ("ASC 715"). ASC 715 requires that plan assets and obligations be measured as of the reporting date
and the over-funded, under-funded or unfunded status of plans be recognized as of the reporting date as an asset or liability in
the Consolidated Balance Sheets. In addition, ASC 715 requires costs and related obligations and assets arising from pensions
and other post-retirement benefit plans to be accounted for based on actuarially determined estimates.

The Company’s pension and post-retirement benefit costs are developed from actuarial valuations. Inherent in these valuations
are key assumptions, including the discount rate and expected long-term rate of return on plan assets. Material changes in
pension and post-retirement benefit costs may occur in the future due to changes in these assumptions, in the number of plan
participants, in the level of benefits provided, in asset levels and in legislation.

The market-related value of the Company’s plan assets as of the measurement date is developed using a five-year smoothing
technique. First, a preliminary market-related value is calculated by adjusting the market-related value at the beginning of the
year for payments to and from plan assets and the expected return on assets during the year. The expected return on assets
represents the expected long-term rate of return on plan assets adjusted up to plus or minus 2% based on the actual ten-year
average rate of return on plan assets. A final market-related value is determined as the preliminary market-related value, plus
20% of the difference between the actual return and expected return for each of the past five years.

The plans use different factors based on plan provisions and participant census data, including years of service, eligible
compensation and age, to determine the benefit amount for eligible participants. The Company funds its U.S. pension plans in
compliance with applicable laws.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were $42 million, $39 million, $27 million and $9
million for fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30, 2018 (Successor) and
the period from October 1, 2017 through December 15, 2017 (Predecessor), respectively.

Share-based Compensation

The Company accounts for share-based compensation in accordance with FASB Topic ASC 718, "Compensation-Stock
Compensation," which requires the measurement and recognition of compensation expense for all share-based payment awards
made to employees and non-employee directors including stock options, restricted stock, restricted stock units, 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. Upon emergence from bankruptcy, the Company changed its accounting policy related to determining the fair
value of certain equity awards. Prior to the Emergence Date, the Predecessor Company used the Cox-Ross-Rubenstein ("CRR")
binomial option pricing model to determine the grant date fair values of stock options and its Preferred Series A and B Stock

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warrants. Forfeitures were an input assumption in the valuation model. Subsequent to the Emergence Date, the Successor
Company uses the Black-Scholes-Merton option pricing model ("Black-Scholes") to calculate the fair value of stock options
and warrants to purchase common stock. In addition to the change in option pricing models, the Successor Company accounts
for forfeitures as incurred.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
Consolidated Statements of Operations in the period that includes the enactment date. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Additionally,
the accounting for income taxes requires the Company to evaluate and make an assertion as to whether undistributed foreign
earnings will be indefinitely reinvested or repatriated.

FASB ASC Subtopic 740-10, "Income Taxes—Overall" ("ASC 740-10") prescribes a comprehensive model for the financial
statement recognition, measurement, classification, and disclosure of uncertain tax positions. ASC 740-10 contains a two-step
approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on
audit, based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon settlement.

Significant judgment is required in evaluating uncertain tax positions and determining the provision for income taxes. Although
the Company believes its reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not
be different from that which is reflected in the historical income tax provision and accruals. The Company adjusts its estimated
liability for uncertain tax positions periodically due to new information discovered from ongoing examinations by, and
settlements with, various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company's
policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense.

As part of the Company's accounting for business combinations, some of the purchase price is allocated to goodwill and
intangible assets. Impairment expenses associated with goodwill are generally not tax deductible and will result in an increased
effective income tax rate in the fiscal period any impairment is recorded. The income tax benefit from future releases of the
acquisition date valuation allowances or income tax contingencies, if any, are reflected in the income tax provision in the
Consolidated Statements of Operations, rather than as an adjustment to the purchase price allocation.

(Loss) Earnings Per Share

The Company uses the two-class method to calculate basic and diluted (loss) earnings per share as its Series A Preferred Stock
are participating securities. Under the two-class method, undistributed earnings are allocated to common stock and participating
securities according to their respective participating rights in undistributed earnings, as if all the earnings for the period had
been distributed. Basic (loss) earnings per common share is computed by dividing the net (loss) income attributable to common
stockholders by the weighted average number of common shares outstanding during the period. Net (loss) income attributable
to common stockholders is reduced for preferred stock dividends earned and accretion recognized during the period. No
allocation of undistributed earnings to preferred shares is performed for periods with net losses as such securities do not have a
contractual obligation to share in the losses of the Company. Diluted (loss) earnings per share is computed by dividing the net
(loss) income attributable to common stockholders by the weighted average number of common shares outstanding plus
potentially dilutive common shares.

Deferred Financing Costs

Deferred financing costs are amortized using the effective interest method as interest expense over the contractual lives of the
related credit facilities. Deferred financing costs related to a debt liability are presented on the Consolidated Balance Sheets as a
reduction of the carrying amount of that debt liability and deferred financing costs related to revolving credit facilities are
included within other assets.

Foreign Currency Translation

Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where the local currency is the
functional currency, are translated from foreign currencies into U.S. dollars at period-end exchange rates.

Upon emergence from bankruptcy, the Company changed its accounting policy related to translating the income and expense of
non-U.S. dollar functional currency subsidiaries into U.S. dollars. Prior to the Emergence Date, the Predecessor Company
translated the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars at the spot rate for the

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transaction. Subsequent to the Emergence Date, the Successor Company translates the income and expense of non-U.S. dollar
functional currency subsidiaries into U.S. dollars using an average rate for the period.

Translation gains or losses related to net assets located outside the U.S. are shown as a component of Accumulated other
comprehensive (loss) in the Consolidated Balance Sheets. Gains and losses resulting from foreign currency transactions, which
are denominated in currencies other than the functional currency, are included in Other income (expense), net in the
Consolidated Statements of Operations.

3. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. The Company adopted this standard as of October 1, 2019. The adoption of this standard did not have a material impact on
the Company's Consolidated Financial Statements.

In February 2016, the FASB issued ASC 842, which superseded all lease accounting guidance and requires lessees to recognize
lease assets and liabilities for all leases with initial lease terms of more than 12 months. The standard makes similar changes to
lessor accounting and aligns key aspects of the lessor accounting model with the GAAP revenue recognition standard. The
Company adopted ASC 842 on October 1, 2019 using the modified retrospective transition method as of the beginning of the
period of adoption. Therefore, on October 1, 2019, the Company recognized and measured leases without revising the historical
comparative period information or disclosures. The modified retrospective transition method included optional practical
expedients which lessened the burden of implementing ASC 842 by not requiring a reassessment of certain conclusions reached
under the previous lease accounting guidance. The Company elected to apply the package of practical expedients to forego a
reassessment of (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or
existing leases; and (3) the initial direct costs for an existing lease. In addition, the Company elected the land easement practical
expedient permitting it to not reassess whether an existing or expired land easement is a lease or contains a lease. The Company
also adopted the practical expedient permitting the non-lease components of an arrangement to be included in the right-of-use
asset to which they relate. The Company did not elect the practical expedient allowing the use-of-hindsight which would require
the Company to reassess the lease term of existing leases based on all facts and circumstances through the effective date.

The adoption of ASC 842 had a material impact to the Company's Consolidated Balance Sheet mainly due to the recognition of
$190 million of operating lease right-of-use assets and $194 million of operating lease liabilities. The adoption of ASC 842 also
resulted in the one-time reclassification of certain prepaid and deferred rent and facility-related business restructuring liabilities
to operating lease right-of-use assets.

The impact of the adoption of ASC 842 on the September 30, 2019 Consolidated Balance Sheet was as follows:

(In millions)
ASSETS

Other current assets
Intangible assets, net
Operating lease right-of-use assets

LIABILITIES
Current liabilities:

Operating lease liabilities
Business restructuring reserve

Non-current liabilities:

Operating lease liabilities
Business restructuring reserve
Other liabilities

September 30, 2019

As Reported

Adjustments

Upon Adoption of
ASC 842

$

$

115
2,891
—

(2) $
(2)
190

113
2,889
190

—
33

—
36
316

51
(4)

143
(1)
(3)

51
29

143
35
313

79

Recent Standards Not Yet Effective

In August 2020, the FASB issued ASU No. 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity." This standard simplifies the accounting for convertible instruments and the application of
the derivatives scope exception for contracts in an entity's own equity. The standard also amends the accounting for convertible
instruments in the diluted earnings per share calculation and requires enhanced disclosures of convertible instruments and
contracts in an entity's own equity. This standard is effective for the Company in the first quarter of fiscal 2023 with early
adoption permitted in the first quarter of fiscal 2022. The adoption may be applied on a modified or fully retrospective basis.
An entity may also irrevocably elect the fair value option in accordance with Accounting Standards Codification ("ASC") 825
for any financial instrument that is a convertible security upon adoption of this standard. The Company is currently assessing
the impact the new guidance will have on its Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes". This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in
ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying
and amending existing guidance. This standard is effective for the Company beginning in the first quarter of fiscal 2022, with
early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or
prospective basis. The Company intends to early adopt this standard in the first quarter of fiscal 2021 and does not expect the
adoption of the standard to have a material impact on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 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 the first quarter of fiscal 2021, with early adoption permitted. The
amendments in this standard may be applied on a retrospective or prospective basis. The Company intends to adopt the standard
on a prospective basis in the first quarter of fiscal 2021. The prospective impact of the new guidance on the Company’s
Consolidated Financial Statements will be dependent on the nature of future transactions within its scope.

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 2021, with early adoption permitted. The
amendments in the standard need to be applied on a retrospective basis. The Company does not expect the adoption of the
standard to result in material changes to its benefit plan 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 2021. Certain disclosures in the standard need to be applied
on a retrospective basis and others on a prospective basis. The Company does not expect the adoption of the standard to result
in material changes to its fair value disclosures.

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 and contract assets,
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 modified retrospective basis. The Company does not expect the adoption of the standard to have a material
impact on its Consolidated Financial Statements.

80

4. Revenue Recognition

Disaggregation of Revenue

The following tables provide the Company's disaggregated revenue for fiscal 2020 and 2019:

(In millions)
Revenue:

Products & Solutions
Services
Unallocated Amounts

Fiscal years ended September 30,

2020

2019

$

$

1,074 $
1,805
(6)
2,873 $

1,228
1,680
(21)
2,887

(In millions)
Revenue:
U.S.
International:
Europe, Middle East and Africa
Asia Pacific
Americas International - Canada and Latin America
Total International

Total revenue

(In millions)
Revenue:
U.S.
International:

Europe, Middle East and Africa
Asia Pacific
Americas International - Canada and Latin America

Total International

Total revenue

Fiscal year ended September 30, 2020

Products &
Solutions

Services

Unallocated

Total

$

546

$

1,097

$

(3) $

1,640

327
122
79
528
1,074

$

389
175
144
708
1,805

$

$

(2)
(1)
—
(3)
(6) $

714
296
223
1,233
2,873

Fiscal year ended September 30, 2019

Products &
Solutions

Services

Unallocated

Total

$

585

$

981

$

(13) $

1,553

381
155
107
643
1,228

$

375
175
149
699
1,680

$

$

(3)
(3)
(2)
(8)
(21) $

753
327
254
1,334
2,887

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

The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of
September 30, 2020 was $2.4 billion, of which 57% and 26% is expected to be recognized within 12 months and 13-24 months,
respectively, with the remaining balance expected to be 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.

81

Contract Balances

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

(In millions)
Accounts receivable, net

Contract assets:

Current
Non-current (Other assets)

Cost of obtaining a contract:
Current (Contract costs)
Non-current (Other assets)

Cost to fulfill a contract:

Current (Contract costs)

Contract liabilities:

Current
Non-current

As of September 30,

2020

2019

Increase (Decrease)

275

$

314

$

(39)

296
71
367

92
40
132

$

$

$

$

187
16
203

89
45
134

$

$

$

$

23

$

25

$

446
373
819

$

$

472
78
550

$

$

109
55
164

3
(5)
(2)

(2)

(26)
295
269

$

$

$

$

$

$

$

$

The increase in Contract assets was mainly driven by growth in the Company's subscription offerings. The increase in Contract
liabilities was mainly driven by consideration received in connection with the strategic partnership with RingCentral, Inc.
("RingCentral") as discussed in Note 6, "Business Combinations and Strategic Partnerships and Investments." The Company
did not record any asset impairment charges related to contract assets during fiscal 2020 and 2019.

During fiscal 2020 and 2019, the Company recognized revenue of $546 million and $537 million that had been previously
recorded as a Contract liability as of October 1, 2019 and 2018, respectively. As a result of contract modifications during fiscal
2020, the Company recorded adjustments to reduce revenue by $1 million for performance obligations that were satisfied in
prior periods. During fiscal 2019, no adjustments were recorded to revenue related to performance obligations that were
satisfied in prior periods.

Contract Costs

During fiscal 2020, the Company recognized $156 million for amortization of costs to obtain customer contracts, of which $152
million was included in Selling, general and administrative expense and the remaining $4 million was a reduction to Revenue.
During fiscal 2019, the Company recognized $103 million for amortization of costs to obtain customer contracts, of which $100
million was included in Selling, general and administrative expense and the remaining $3 million was a reduction to Revenue.

During fiscal 2020, the Company recognized $52 million of contract fulfillment costs, of which $48 million was included
within Costs and the remaining $4 million was a reduction to Revenue. During fiscal 2019, the Company recognized $50
million of contract fulfillment costs within Costs.

82

5. Leases

The following table details the components of net lease expense for fiscal 2020:

(In millions)
Operating lease cost (1)
Short-term lease cost (1)
Variable lease cost (1)(2)
Finance lease amortization of right-of-use assets (1)
Sublease income (3)
Total lease cost
(1) Allocated between Cost of products and services, and Operating expenses.
(2)

Fiscal year ended
September 30, 2020

67

5

17

4

(5)

88

$

$

Includes real estate taxes and other charges for non-lease services payable to lessors and recognized in the period incurred.

(3)

Included in Other income, net.

The Company's right-of-use assets and lease liabilities for financing leases are included in the Consolidated Balance Sheet as
follows:

(In millions)

ASSETS

Property, plant and equipment, net

LIABILITIES

Other current liabilities

Other liabilities

September 30, 2020

$

12

8

9

The following table presents the Company's annual maturity of lease payments, weighted average remaining lease term and
weighted average interest rate for operating and financing leases as of September 30, 2020:

(In millions)

2021

2022

2023

2024

2025

2026 and thereafter

Total lease payments

Less: imputed interest

Total lease liability

Weighted average remaining lease term

Weighted average interest rate

Operating Leases

Financing Leases

58

49

36

25

14

22

204
(26)

178

$

$

9

4

3

2

—

—

18
(1)

17

4.5 years

6.1 %

2.7 years

5.4 %

83

The following table presents the Company's future minimum lease payments under non-cancelable leases as of September 30,
2019, which was prior to the adoption of ASC 842:

In millions

2020

2021

2022

2023

2024

2025 and thereafter

Total lease payments

Less: imputed interest

Total lease liability

Operating Leases

Capital Leases

$

$

51

39

33

22

17

29

191

$

$

12

6

2

—

—

—

20

(1)

19

The capital lease obligation as of September 30, 2019 included $11 million and $8 million within Other current liabilities and
Other liabilities, respectively.

The Company outsources certain delivery services associated with its enterprise cloud and managed services, which included
the sale of specified assets owned by the Company that were leased-back by the Company and are accounted for as a finance
lease. As of September 30, 2020 and September 30, 2019, finance lease obligations associated with these sale leaseback
agreements were $5 million and $13 million, respectively.

6. Business Combinations and Strategic Partnerships and Investments

Business Combination

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 was 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 had 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 was remeasured to fair value at each subsequent reporting period. The Earn-out Bonuses, which were intended to
incentivize continuing employees to assist in achieving the Earn-outs, were excluded from the acquisition consideration and
were recognized as compensation expense in the Company's Consolidated Financial Statements ratably over the estimated
Earn-out periods. During fiscal 2020 and 2019, the Company paid $5 million and $11 million for Earn-outs, respectively.
During both fiscal 2020 and 2019, the Company also paid $2 million for Earn-out Bonuses. As of September 30, 2020, all
potential Earn-outs and Earn-out Bonuses were fully settled.

In connection with this acquisition, the Company recorded goodwill of $117 million, which was assigned to the Products &
Solutions segment, identifiable intangible assets with a fair value of $64 million and other net liabilities of $9 million. The
goodwill recognized was attributable primarily to the potential that the Spoken technology, cloud platform and assembled
workforce would accelerate the Company's growth in cloud-based solutions. 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 fiscal 2019, $3 million of the acquired IPR&D activities were completed and are being amortized over a weighted
average useful life of 4.2 years and $2 million were abandoned and written off (see Note 8, "Intangible Assets, net").

During the period from December 16, 2017 through September 30, 2018, the Company recorded $3 million of acquisition-
related costs, which included investment banking, legal and other third-party costs, and $7 million of compensation expense
resulting from the accelerated vesting of certain unvested Spoken stock option awards because post-combination service
requirements were eliminated. The acquisition-related costs and the compensation expense were recorded in Selling, general
and administrative expense in the Consolidated Statements of Operations.

84

Strategic Partnership

On October 3, 2019, the Company entered into certain agreements that establish the framework for the Company's strategic
partnership with RingCentral, a leading provider of global enterprise cloud communications, collaboration and contact center
("CC") solutions, to accelerate the Company's transition to the cloud. Through this partnership, the Company introduced Avaya
Cloud Office by RingCentral ("Avaya Cloud Office" or "ACO"), a new global unified communications as a service ("UCaaS")
solution. Avaya Cloud Office expands the Company's portfolio to offer a full suite of Unified Communications and
Collaboration ("UCC"), CC, UCaaS and contact center as a service solutions to its global customer base. ACO combines
RingCentral's leading UCaaS platform with Avaya technology, services and migration capabilities to create a highly
differentiated UCaaS offering. The transaction closed on October 31, 2019 and ACO was launched on March 31, 2020.

As part of the strategic partnership, the Company and RingCentral also entered into an agreement governing the terms of the
commercial arrangement between the parties (the "Framework Agreement"). Under the Framework Agreement, the parties
entered into a Super Master Agent Agreement, pursuant to which Avaya acts as an agent to Avaya's channel partners with
respect to the sale of ACO and make direct sales of ACO. RingCentral pays a fee to Avaya, including for the benefit of its
channel partners, for each such sale. In addition, for each unit of ACO sold during the term of the Framework Agreement,
RingCentral pays Avaya certain fees. Among other things, the Framework Agreement requires Avaya to (subject to certain
exceptions) market and sell ACO as its exclusive UCaaS solution (as defined in the Framework Agreement). The Framework
Agreement has a multiyear term and can be terminated early by either party in the event (i) the other party fails to cure a
material breach or (ii) the other party undergoes a change in control.

In accordance with the Framework Agreement, RingCentral paid Avaya $375 million, predominantly for future fees, as well as
for certain licensing rights. The $375 million payment consisted of $361 million in shares of RingCentral common stock and
$14 million in cash. During fiscal 2020, the Company sold all of its shares of RingCentral common stock and recognized a gain
of $59 million within Other income (expense), net in the Consolidated Statements of Operations.

In connection with the strategic partnership, the Company and RingCentral entered into an investment agreement, whereby
RingCentral purchased 125,000 shares of the Company's Series A 3% Convertible Preferred Stock, par value $0.01 per share
(the "Series A Preferred Stock"), for an aggregate purchase price of $125 million. See Note 17, "Capital Stock" for additional
information on the Series A Preferred Stock.

Strategic Investment

On May 20, 2019, the Company made a $10 million investment in a UCaaS provider delivering public sector Federal Risk and
Authorization Management Program ("FedRAMP") security requirements (the “Investee”) through the acquisition of a 3-year
convertible note (“Promissory Note”). The Investee offers hosted, cloud-based Voice over Internet Protocol infrastructure
services and a FedRAMP authorized hosting platform.

The Promissory Note has a principal amount of $10 million, bears interest at a rate of 8% per annum and has a maturity date of
May 20, 2022. Under the terms of the Promissory Note, the Company may, at its sole discretion, convert its interest in the
Promissory Note into newly issued Class D units of the Investee representing no less than 27.3% of the Investee's fully diluted
capitalization at the time of the conversion. On or after the Promissory Note’s maturity date, the Company will have the option,
at its sole discretion, to demand payment from the Investee for the unpaid principal and accrued interest on the Promissory
Note. In conjunction with the purchase of the Promissory Note, the Company entered into a separate agreement with the
Investee and its equity holders which provides the Company with an option to purchase from such equity holders any or all of
the outstanding LLC units of the Investee for prices specified in the relevant agreement. The option is exercisable upon the
earlier of December 31, 2021 or the Investee reaching specified milestones. The option does not currently convey power to the
Company as it is not currently exercisable and requires significant economic outlay.

The Promissory Note was classified as an available-for-sale security as of September 30, 2019 with a carrying value and fair
value of $10 million and was recorded within Other Assets in the Consolidated Balance Sheets. Although the Company
maintains a variable interest in the Investee, it is not the primary beneficiary as it does not direct the activities that most
significantly impact the economic performance of the Investee through the rights maintained with the Promissory Note or
separate agreement.

During fiscal 2020, the Company recorded an other-than-temporary impairment charge for a $10 million credit loss on its
Promissory Note mainly driven by a decline in the macroeconomic environment due to the COVID-19 pandemic and a decline
in the expected operating results and cash flows of the Investee. The impairment charge is included in Other income (expense),
net. As a result of the impairment charge, the Company no longer maintains any risk of loss as a result of its involvement with
the Investee since its risk of loss was limited to the initial investment in the Promissory Note.

7. Goodwill, net

The changes in the carrying amount of goodwill by segment for the periods indicated were as follows:

85

(In millions)

Balance as of September 30, 2018 (Successor)

Cost
Accumulated impairment charges

Impairment charges

Foreign currency fluctuations

Other

Balance as of September 30, 2019 (Successor)

Cost

Accumulated impairment charges

Impairment charges

Foreign currency fluctuations

Other

Balance as of September 30, 2020 (Successor)

Cost

Accumulated impairment charges

Fiscal 2020 (Successor)

Products &
Solutions

Services

Total

$

$

1,283
—

1,283

$

1,481
—

1,481

657

(1)

—

1,282

(657)

625

(624)

(1)

—

1,281

(1,281)

—

(1)

(2)

1,478

—

1,478

—

1

(1)

1,478

—

$

— $

1,478

$

2,764
—

2,764

657

(2)

(2)

2,760

(657)

2,103

(624)

—

(1)

2,759

(1,281)

1,478

During the first quarter of fiscal 2020, the Company changed its reporting units to align with changes in its organizational
structure, mainly resulting from the previously disclosed strategic review process which concluded in October 2019. As a result,
on October 1, 2019, the Company consolidated its UCC and CC reporting units into a Products & Solutions reporting unit and
consolidated its Global Support Services ("GSS"), Avaya Professional Services ("APS") and Enterprise Cloud and Managed
Services ("ECMS") reporting units into a Services reporting unit. As a result of these changes, the Company's reporting units
are the same as its operating segments which are described in Note 19, "Operating Segments." Due to the consolidation of
reporting units, the Company performed an interim goodwill impairment assessment immediately before and after the
consolidation on October 1, 2019 by estimating and comparing the fair value of each reporting unit to its carrying value. The
Company determined that the carrying amounts of each of the Company's reporting units did not exceed their estimated fair
values and therefore no impairment existed as of October 1, 2019.

During the second quarter of fiscal 2020, the Company concluded that a triggering event occurred for both of its reporting units
due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's
long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since
the advent of the pandemic which was caused by the resulting volatility in the financial markets. As a result, the Company
performed an interim quantitative goodwill impairment test as of March 31, 2020 to compare the fair values of its reporting
units to their respective carrying amounts, including the goodwill allocated to each reporting unit. The results of the Company's
interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company's Services
reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit
exceeded its estimated fair value primarily due to a reduction in the Company's long-term forecast to reflect increased risk from
higher market uncertainty and the accelerated reduction of product sales related to the Company's historical on-premise
perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new
technology innovation through the utilization of the Company's subscription offering, which is included in the Services
reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million in fiscal 2020 to write down
the full carrying amount of the Products & Solutions goodwill in the Impairment charges line item in the Consolidated
Statements of Operations.

The Company performed its annual goodwill impairment test as of July 1, 2020. As permitted under ASC 350, the Company
performed a qualitative goodwill impairment assessment to determine whether it was more likely than not that the fair value of
its Services reporting unit was less than its carrying amount, including goodwill. After assessing all relevant qualitative factors,

86

the Company determined that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount
and a quantitative goodwill impairment test was not necessary.

The Company's long-term forecast includes significant estimates and assumptions, including management's estimate of the
potential impact of the COVID-19 pandemic on the Company's operating results. Due to the uncertainty surrounding the impact
of the COVID-19 pandemic on the macroeconomic environment and, more specifically, on the Company's future operating
results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently contemplated by the
Company's long-term forecast.

The Company determined that no events occurred or circumstances changed during the three months ended September 30, 2020
that would indicate that it is more likely than not that its goodwill was impaired. To the extent that business conditions
deteriorate or if changes in key assumptions and estimates differ significantly from management's expectations, it may be
necessary to record additional impairment charges in the future.

Fiscal 2019 (Successor)

During the third quarter of fiscal 2019, the Company concluded that triggering events occurred for all of its reporting units due
to a sustained decrease in the Company's stock price and lower than planned financial results which led to revisions to the
Company's long-term forecast during the third quarter of fiscal 2019. As a result, the Company performed an interim
quantitative goodwill impairment test as of June 30, 2019 to compare the fair values of its reporting units to their respective
carrying values, including the goodwill allocated to each reporting unit. The results of the Company’s interim goodwill
impairment test as of June 30, 2019 indicated that the estimated fair values of the Company’s UCC, GSS, APS and ECMS
reporting units were greater than their carrying amounts, however, the carrying amount of the Company’s CC reporting unit
within the Products & Solutions segment exceeded its estimated fair value primarily due to a reduction in the Company's long-
term forecast. As a result, the Company recorded a goodwill impairment charge of $657 million in fiscal 2019 in the
Impairment charges line item in the Consolidated Statements of Operations representing the amount by which the carrying
value of the CC reporting unit exceeded its fair value.

The Company performed its annual goodwill impairment test on July 1, 2019 and determined that the carrying amounts of each
of the Company's reporting units did not exceed their estimated fair values and therefore no impairment existed.

The Period from December 16, 2017 through September 30, 2018 (Successor) and the Period from October 1, 2017 through
December 15, 2017 (Predecessor)

The Company performed its annual goodwill impairment test on July 1, 2018 and determined that the carrying amounts of each
of the Company's reporting units did not exceed their estimated fair values and therefore no impairment existed.

8. Intangible Assets, net

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

87

(In millions)
Balance as of September 30, 2020

Finite-lived intangible assets:

Cost
Accumulated amortization
Finite-lived intangible assets, net

Indefinite-lived intangible assets:

Cost
Accumulated impairment

Indefinite-lived intangible assets, net

Intangible assets, net

Balance as of September 30, 2019

Finite-lived intangible assets:

Cost
Accumulated amortization
Finite-lived intangible assets, net
Indefinite-lived intangible assets:

Cost
Accumulated impairment

Indefinite-lived intangible assets, net

Intangible assets, net

$

$

$

$

$
$

Technology
and Patents

Customer
Relationships
and Other
Intangibles

Trademarks
and Trade
Names

Total

$

961
(482)
479

$

2,153
(433)
1,720

$

42
(18)
24

—
—
—
479

960
(308)
652

$

$

$

2
(2)
— $
$

652

—
—
—
1,720

2,154
(279)
1,875

$

$

— $
—
— $
$

1,875

333
—
333
357

42
(11)
31

333
—
333
364

$
$

$

$

$
$

3,156
(933)
2,223

333
—
333
2,556

3,156
(598)
2,558

335
(2)
333
2,891

Amortization expense for fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30, 2018
(Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) was $335 million, $336 million,
$262 million and $13 million, respectively.

Future amortization expense of intangible assets as of September 30, 2020 for the fiscal years ending September 30, is as
follows:

(In millions)

2021

2022

2023
2024

2025 and thereafter
Total

Fiscal 2020 (Successor)

$

$

331

304

287
185

1,116

2,223

As a result of the triggering event described in Note 7, "Goodwill, net," the Company performed a recoverability test on all of
its finite-lived asset groups and indefinite-lived intangible assets as of March 31, 2020 before proceeding to the goodwill
impairment review. As of March 31, 2020, the Company's interim quantitative impairment test for the finite-lived asset groups
and indefinite-lived intangible asset, the Avaya Trade Name, indicated no impairment existed.

As of July 1, 2020, the Company performed its annual impairment test of the Avaya Trade Name and determined that its
estimated fair value exceeded its carrying amount and no impairment existed.

The Company determined that no events occurred or circumstances changed during the three months ended September 30, 2020
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 were impaired. To the extent that business conditions deteriorate or if changes in key
assumptions and estimates differ significantly from management's expectations, it may be necessary to record impairment
charges in the future.

88

Fiscal 2019 (Successor)

During fiscal 2019, the Company elected to abandon an in-process research and development project that no longer aligned
with the Company's technology roadmap. As a result, the Company recorded an impairment charge of $2 million to write down
the full carrying amount of the project within the Impairment charges line item in the Consolidated Statements of Operations.

As a result of the triggering events described in Note 7, "Goodwill, net," the Company performed a recoverability test on all of
its finite-lived asset groups as of June 30, 2019 before proceeding to the goodwill impairment review and concluded that no
impairment charge was necessary. The Company also performed an interim quantitative impairment test for the Avaya Trade
Name as of June 30, 2019 and determined that its estimated fair value exceeded its carrying value and no impairment existed.

At July 1, 2019, the Company performed its annual impairment test of the Avaya Trade Name and determined that its estimated
fair value exceeded its carrying amount and no impairment existed.

The Period from December 16, 2017 through September 30, 2018 (Successor) and the Period from October 1, 2017 through
December 15, 2017 (Predecessor)

At July 1, 2018, the Company performed its annual impairment test of indefinite-lived intangible assets. The Company
determined that the respective carrying amounts of the indefinite-lived intangible assets did not exceed their estimated fair
values and therefore no impairment existed.

9. Supplementary Financial Information

Consolidated Statements of Operations Information

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

(In millions)
DEPRECIATION AND AMORTIZATION

Amortization of intangible assets (included in
Costs and Operating expenses)

Depreciation and amortization of property, plant
and equipment and internal use software (included
in Costs and Operating expenses)
Total depreciation and amortization

OTHER INCOME (EXPENSE), NET

Interest income

Foreign currency (losses) gains, net
Gain on investments in equity and debt securities,
net
Other pension and post-retirement benefit credits
(costs), net

Change in fair value of Emergence Date Warrants

Sublease income

Income from transition services agreement, net

Other, net

Total other income (expense), net

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$

$

$

335

$

336

$

262

$

88
423

$

107
443

$

6

$

(16)

14

$

(8)

49

22

(3)

5

—

—
63

—

7

29

—

—

$

(1)
41

$

122
384

5

28

—

13

(17)

—

5

1
35

$

$

$

13

18
31

2

—

—

(8)

—

—

3

1
(2)

The gain on investments in equity and debt securities, net for fiscal 2020 includes a gain on shares of RingCentral common
stock of $59 million and is partially offset by a $10 million impairment of debt securities owned by the Company, which is
further described in Note 6, "Business Combinations and Strategic Partnerships and Investments."

The Foreign currency gains, net for the period from December 16, 2017 through September 30, 2018 was principally due to the
strengthening of the U.S. dollar compared to certain foreign exchange rates on U.S. dollar denominated receivables maintained
in non-U.S. locations, mainly Argentina, India and Mexico. As of July 1, 2018, we concluded that Argentina represents a
hyperinflationary economy as its projected three-year cumulative inflation rate exceeds 100%. As a result, we changed the local

89

functional currency for our Argentinian operations from the Argentine Peso to the U.S. Dollar effective July 1, 2018 and
remeasured the financial statements for those operations to the U.S. Dollar as of July 1, 2018 in accordance with ASC 830
"Foreign Currency Matters." Although the remeasurement on July 1, 2018 did not have an impact on our Consolidated
Financial Statements, foreign exchange transaction gains and losses recognized on or after July 1, 2018 are based on our
Argentina operation's new U.S. dollar functional currency.

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

(In millions)

REORGANIZATION ITEMS, NET

Net gain on settlement of Liabilities subject to
compromise
Net gain on fresh start adjustments

Bankruptcy-related professional fees

Other items, net

Reorganization items, net

Cash payments for reorganization items

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$
$

— $

— $

— $

—

—

—

— $
— $

—

—

—

— $
— $

—

—

—

— $
$

1

1,778

1,697

(56)

(3)

3,416
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 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.

Consolidated Balance Sheet Information

(In millions)

VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts Receivable:

Balance at beginning of period

Increase in expense

Reductions

Impact of fresh start accounting

Balance at end of period

Deferred Tax Asset Valuation Allowance:

Balance at beginning of period

Increase (decrease) in expense

Additions (reductions)

Impact of fresh start accounting

Balance at end of period

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor
Period from
October 1, 2017
through
December 15, 2017

$

$

$

$

$

$

$

4

5

(2)

—

7

928

58

67

—

$

$

$

2

2

—

—

4

919

43

(34)

—

1,053

$

928

$

— $

2

—

—

2

836

105

(22)

—

919

$

$

$

13

1

(1)

(13)

—

2,152

(452)

(393)

(471)

836

90

(In millions)
PROPERTY, PLANT AND EQUIPMENT, NET

Leasehold improvements

Machinery and equipment

Assets under construction

Internal use software

Total property, plant and equipment

Less: Accumulated depreciation and amortization
Property, plant and equipment, net

As of September 30,

2020

2019

$

$

97

$

265

30

188

580

(312)
268

$

101

221

30

154

506

(251)
255

As of September 30, 2020, Machinery and equipment and Accumulated depreciation and amortization include $27 million and
$(15) million, respectively, for assets acquired under finance leases. As of September 30, 2019, Machinery and equipment and
Accumulated depreciation and amortization include $17 million and $(12) million, respectively, for assets acquired under
finance leases.

Supplemental Cash Flow Information

(In millions)
OTHER PAYMENTS

Interest payments

Income tax payments

NON-CASH INVESTING ACTIVITIES

Acquisition of equipment under finance leases
(Decrease) increase in Accounts payable, Other
current liabilities and Other liabilities for Capital
expenditures

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$

197 $

206 $

101

56

9 $

3 $

(4)

6

$

$

149

22

2

1

15

7

—

—

During fiscal 2020, the Company made payments for operating lease liabilities of $66 million and recorded non-cash additions
for operating lease right-of-use assets of $35 million.

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 Consolidated Statements of Cash Flows for the periods presented:

(In millions)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Successor

Predecessor

As of September 30,

2020

2019

2018

December 15,
2017

Cash and cash equivalents

Restricted cash included in other current assets

Restricted cash included in other assets

Total cash, cash equivalents, and restricted cash

$

$

727

$

752 $

700

$

—

4

—

4

—

4

731

$

756 $

704

$

366

65

4

435

As of December 15, 2017 (Predecessor), restricted cash in other current assets consisted primarily of funds held for bankruptcy-
related professional fees.

10. Business Restructuring Reserves and Programs

The following table summarizes the restructuring charges by activity for the periods presented:

91

(In millions)

Employee separation costs

Facility exit costs

Total restructuring charges

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$

6 $

24

30 $

19 $

3

22 $

70

11

81

$

$

$

13

1

14

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 employee separation costs generally consist of
severance 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. Facility exit costs primarily consist of
lease obligation charges for exited facilities, including the impact of accelerated lease expense for right-of-use assets and
accelerated depreciation expense for leasehold improvements with reductions in their estimated useful lives due to exited
facilities. The Company does not allocate restructuring reserves to its operating segments.

As a result of the adoption of ASC 842 on October 1, 2019, the Company no longer records facility-related restructuring
charges within the Business restructuring reserves on the Consolidated Balance Sheets. As a result, the Company recorded a
one-time reclassification of $5 million for certain facility-related lease obligations from Business restructuring reserves to
Operating lease right-of-use assets upon adoption of ASC 842.

92

The following table summarizes the activity for employee separation costs recognized under the Company's restructuring
programs for the periods presented:

(In millions)
Accrual balance as of September 30, 2017
(Predecessor)

Cash payments

Restructuring charges
Adjustments (1)
Impact of foreign currency fluctuations
Accrual balance as of December 15, 2017
(Predecessor)

Accrual balance as of December 16, 2017
(Successor)

Cash payments

Restructuring charges
Adjustments (1)
Impact of foreign currency fluctuations
Accrual balance as of September 30, 2018
(Successor)

Cash payments

Restructuring charges
Adjustments (1)
Impact of foreign currency fluctuations
Accrual balance as of September 30, 2019
(Successor)

Cash payments

Restructuring charges
Adjustments (1)
Impact of foreign currency fluctuations
Accrual balance as of September 30, 2020
(Successor)

Fiscal 2020
Restructuring
Program (2)

Fiscal 2019
Restructuring
Program (3)

Fiscal 2018
Restructuring
Program (3)

Fiscal 2008
through 2017
Restructuring
Programs (3)

Total

$

$

$

$

— $

— $

— $

55

$

—

—

—

—

—

—

—

—

(3)

12

—

—

(4)

1

4

—

— $

— $

9

$

56

$

— $

— $

9

$

56

$

—

—

—

—

—

—

—

—

—

—

(1)

8

—

1

8

$

—

—

—

—

—

(8)

20

—

(1)

11

(5)

—

—

1

7

(23)

70

—

(2)

54

(19)

—

(2)

(2)

31

(11)

—

(1)

2

(17)

—

—

(1)

38

(16)

—

1

(1)

22

(9)

—

(1)

1

$

21

$

13

$

55

(7)

13

4

—

65

65

(40)

70

—

(3)

92

(43)

20

(1)

(4)

64

(26)

8

(2)

5

49

(1)

(2)

(3)

Includes changes in estimates for increases and decreases in costs related to the Company's restructuring programs, which are recorded in
Restructuring charges, net in the Consolidated Statements of Operations in the period of the adjustment.

Payments related to the fiscal 2020 restructuring program are expected to be completed in fiscal 2027.

Payments related to the fiscal 2019, 2018 and 2008 through 2017 restructuring programs are expected to be completed in fiscal 2026.

93

11. Financing Arrangements

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

(In millions)

September 30, 2020

September 30, 2019

Net of
discounts
and
issuance
costs

Principal
amount

Net of
discounts
and
issuance
costs

Principal
amount

Term Loan Credit Agreement due December 15, 2024 and 2027

$

1,643

$

1,611

$

2,874

$

2,846

Senior 6.125% Notes due September 15, 2028

Convertible 2.25% Senior Notes due June 15, 2023
Total debt
Debt maturing within one year
Long-term debt, net of current portion

Term Loan and ABL Credit Agreements

1,000

350
2,993

$

984

291
2,886
—
2,886

$

—

350
3,224

$

—

273
3,119
(29)
3,090

$

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 ("Amendment No.1") 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%.
After Amendment No.1, the Term Loan Credit Agreement (a) in the case of alternative base rate ("ABR") Loans, bears interest
at a rate per annum equal to 3.25% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly
announced in the Wall Street Journal and (iii) the LIBOR Rate for an interest period of one month and (b) in the case of LIBOR
Loans, bears interest at a rate per annum equal to 4.25% plus the applicable LIBOR rate, subject to a 0.00% floor. Prior to
Amendment No.1, the Term Loan Credit Agreement, in the case of ABR Loans, bore interest at a rate per annum equal to
3.75% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced in the Wall
Street Journal and (iii) the LIBOR Rate for an interest period of one month and in the case of LIBOR Loans, bore interest at a
rate per annum equal to 4.75% plus the applicable LIBOR rate, subject to a 1.00% floor. As a result of Amendment No.1,
outstanding loan balances under the original Term Loan Credit Agreement were paid in full and new debt was issued for the
same outstanding principal amount. Amendment No.1 was accounted for as a loan modification under ASC 470, "Debt" ("ASC
470").

On September 25, 2020, the Company closed a private offering of $1,000 million aggregate principal amount of its Senior
6.125% First Lien Notes due September 15, 2028 (the “Senior Notes,” which are described in more detail below). On
September 25, 2020, the Company also amended the Term Loan Credit Agreement (“Amendment No. 2”), pursuant to which
the maturity of $800 million in principal amount of the first lien term loans outstanding under the Term Loan Credit Agreement
was extended from December 2024 to December 2027. Amendment No. 2 also made certain other changes to the Term Loan
Credit Agreement, including with respect to the change of control provisions. Concurrently with Amendment No. 2, the
Company also used the net proceeds from the issuance of its Senior Notes after debt issuance costs to repurchase and prepay
$981 million of certain first lien term loans under the Term Loan Credit Agreement whose maturity was not extended pursuant
to Amendment No. 2.

The Company evaluated the issuance of the Senior Notes, the $981 million principal prepayment on the Term Loan Credit
Agreement and Amendment No. 2 (collectively the “Debt Transactions”) under the loan modification and extinguishment
guidance within ASC 470. The Debt Transactions were accounted for as a partial modification, partial extinguishment and new
debt issuance at the syndicated lender level. Based on the application of the loan modification and extinguishment guidance
within ASC 470 to the Debt Transactions, the Company capitalized $32 million of new debt issuance costs and underwriting
discounts as a reduction to Long-term debt on the Consolidated Balance Sheets; recorded $9 million of new debt issuance costs
and underwriting discounts within Interest Expense in the Consolidated Statements of Operations; and wrote-off a portion of
the original underwriting discount on the Term Loan Credit Agreement of $5 million to Interest expense.

94

During fiscal 2020, the Company made total principal prepayments on its Term Loan Credit Agreement of $1,231 million,
including the $981 million prepayment on September 25, 2020 described above. Due to the prepayments, there are no amounts
due within one year on the Term Loan Credit Agreement and the balance has been classified as non-current as of September 30,
2020. For fiscal 2020, the Company recognized interest expense of $161 million related to the Term Loan Credit Agreement,
including the expenses associated with the Debt Transactions described above and the amortization of the underwriting
discount. For fiscal 2019 and the period from December 16, 2017 through September 30, 2018, the Company recognized
interest expense of $200 million and $154 million, respectively, related to the Term Loan Credit Agreement, including the
amortization of the underwriting discount.

On September 25, 2020, the Company also amended the ABL Credit Agreement to, among other things, extend its maturity to
September 25, 2025, subject to customary adjustments to the extent certain indebtedness matures prior to such date. The total
commitments under the ABL Credit Agreement were also reduced from $300 million to $200 million, subject to borrowing
base availability. As a result of the amendment, the Company capitalized $2 million of issuance costs within Other assets on the
Consolidated Balance Sheets in accordance with ASC 470.

Prior to the effectiveness of the September 25, 2020 amendment, the ABL Credit Agreement bore interest at the following rates:

1.

2.

3.

4.

5.

6.

7.

In the case of Base Rate Loans denominated in U.S. dollars, at a rate per annum equal to 0.75% (subject to a 0.25%
step-up or step-down based on availability) plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S.
prime rate as publicly announced by Citibank, N.A. and (iii) the LIBOR Rate for an interest period of one month;

In the case of LIBOR Rate Loans denominated in U.S. dollars, at a rate per annum equal to 1.75% (subject to a 0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate;

In the case of Canadian Prime Rate Loans denominated in Canadian dollars, at a rate per annum equal to 0.75%
(subject to a 0.25% step-up or step-down based on availability) plus the highest of (i) the "Base Rate" as publicly
announced by Citibank, N.A., Canadian branch and (ii) the rate of interest per annum equal to the average rate
applicable to Canadian Dollar Bankers Rate ("CDOR Rate") for an interest period of 30 days;

In the case of CDOR Rate Loans denominated in Canadian dollars, at a rate per annum equal to 1.75% (subject to a
0.25% step-up or step-down based on availability) plus the applicable CDOR Rate;

In the case of LIBOR Rate Loans denominated in Sterling, at a rate per annum equal to 1.75% (subject to a 0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate;

In the case of Euro Interbank Offered Rate ("EURIBOR Rate") Loans denominated in Euro, at a rate per annum equal
to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate; and

In the case of Overnight LIBOR Rate Loans, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-
down based on availability) plus the applicable Overnight LIBOR Rate.

Subsequent to the effectiveness of the September 25, 2020 amendment, the ABL Credit Agreement bears interest at the
following rates:

1.

2.

3.

4.

5.

6.

7.

In the case of Base Rate Loans denominated in U.S. dollars, at a rate per annum equal to 1.00% (subject to a 0.25%
step-up or step-down based on availability) plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S.
prime rate as publicly announced by Citibank, N.A. and (iii) the LIBOR Rate for an interest period of one month;

In the case of LIBOR Rate Loans denominated in U.S. dollars, at a rate per annum equal to 2.00% (subject to a 0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate;

In the case of Canadian Prime Rate Loans denominated in Canadian dollars, at a rate per annum equal to 1.00%
(subject to a 0.25% step-up or step-down based on availability) plus the highest of (i) the "Base Rate" as publicly
announced by Citibank, N.A., Canadian branch and (ii) the rate of interest per annum equal to the average rate
applicable to Canadian Dollar Bankers Rate ("CDOR Rate") for an interest period of 30 days;

In the case of CDOR Rate Loans denominated in Canadian dollars, at a rate per annum equal to 2.00% (subject to a
0.25% step-up or step-down based on availability) plus the applicable CDOR Rate;

In the case of LIBOR Rate Loans denominated in Sterling, at a rate per annum equal to 2.00% (subject to a 0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate;

In the case of Euro Interbank Offered Rate ("EURIBOR Rate") Loans denominated in Euro, at a rate per annum equal
to 2.00% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate; and

In the case of Overnight LIBOR Rate Loans, at a rate per annum equal to 2.00% (subject to a 0.25% step-up or step-
down based on availability) plus the applicable Overnight LIBOR Rate.

95

The Credit Agreements limit, among other things, the ability of Avaya Inc. and certain of its subsidiaries to (i) incur
indebtedness, (ii) incur liens, (iii) dispose of assets, (iv) make investments, (v) make dividends, or conduct redemptions and
repurchases of capital stock, (vi) prepay junior indebtedness or amend junior indebtedness documents, (vii) enter into restricted
agreements, (viii) enter into transactions with affiliates and (ix) modify the terms of any of their organizational documents. The
Credit Agreements also contain customary representations, warranties and events of default.

The Term Loan Credit Agreement does not contain any financial covenants. The ABL Credit Agreement does not contain any
financial covenants other than a requirement to maintain a minimum fixed charge coverage ratio of 1:1 that becomes applicable
only in the event that the net borrowing availability under the ABL Credit Agreement is less than the greater of $16 million and
10% of the lesser of the total borrowing base and the ABL commitments (commonly known as the "line cap").

Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At September 30,
2020, the Company had issued and outstanding letters of credit and guarantees of $41 million under the ABL Credit
Agreement. As of September 30, 2020, the Company had no borrowings outstanding under the ABL Credit Agreement. The
aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base
less $41 million of outstanding letters of credit and guarantees, was $153 million at September 30, 2020. For fiscal 2020, fiscal
2019 and the period from December 16, 2017 through September 30, 2018, the Company recognized interest expense of
$1 million related to the ABL Credit Agreement, primarily resulting from the unused commitment fee.

Senior Notes

As noted above, on September 25, 2020, the Company’s Senior Notes were issued pursuant to an indenture, among the
Company, the Company's subsidiaries that are guarantors of the Senior Notes and party thereto (the “Guarantors”) and
Wilmington Trust, National Association, as trustee and notes collateral agent. Interest is payable on the Senior Notes at a rate of
6.125% per annum on March 15 and September 15 of each year, commencing on March 15, 2021 until their maturity date of
September 15, 2028.

The Senior Notes are guaranteed on a senior secured basis by Avaya and each of the Company’s other wholly-owned domestic
subsidiaries that guarantee the Company’s term loan credit facility (the “Term Loan Facility”) under the Company’s Term Loan
Credit Agreement and asset-based revolving credit facility (the “ABL Facility”) under the Company’s ABL Credit Agreement.
The Senior Notes and related guarantees are secured on a first lien basis by substantially all assets of the Company and the
Guarantors (other than any excluded collateral as defined in the indenture or ABL Priority Collateral (as defined below)) which
assets also secure the Company’s and each Guarantor’s obligations under the Term Loan Facility ratably on a pari passu basis,
subject to permitted liens. The Senior Notes and related guarantees are also secured on a second-lien basis ratably on a pari
passu basis with the Term Loan Facility, subject to permitted liens, by certain of the assets of the Company and the Guarantors
that secure obligations under the ABL Facility on a first-lien basis (the “ABL Priority Collateral”).

The Senior Notes contain covenants that, among other things, limit the Company’s ability and the ability of its restricted
subsidiaries to: incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; pay dividends
and make other distributions or repurchase stock; make certain investments; create or incur liens; sell assets; enter into
restrictions affecting the ability of restricted subsidiaries to make distributions, loans or advances or transfer assets to the
Company or the Guarantors; enter into certain transactions with the Company’s affiliates; designate restricted subsidiaries as
unrestricted subsidiaries; and merge, consolidate or transfer or sell all or substantially all of the Company’s or the Guarantors’
assets. These covenants are subject to a number of important exceptions and qualifications.

The Company may redeem the Senior Notes at any time, in whole or in part, at any time prior to maturity. The redemption price
for Senior Notes that are redeemed before September 15, 2023 will be equal to 100% of the principal amount of the Senior
Notes to be redeemed, plus accrued and unpaid interest, if any, plus an applicable make-whole premium. The redemption price
for Senior Notes that are redeemed on or after September 15, 2023 will be equal to redemption prices as set forth in the
indenture, together with any accrued and unpaid interest. In addition, the Company may redeem up to 40% of the Senior Notes
using the proceeds of certain equity offerings completed before September 15, 2023.

During fiscal 2020, the Company recognized interest expense of $1 million related to the Senior Notes, including the
amortization of debt issuance costs.

Convertible Notes

On June 11, 2018, the Company issued its 2.25% Convertible Notes with an aggregate principal amount of $350 million
(including notes issued in connection with 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 (the "Indenture"), by
and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee. The Company received net
proceeds from the offering of $314 million after giving effect to debt issuance costs, including the underwriting discount, the
net cash used to purchase a bond hedge and the proceeds from the issuance of warrants, which are discussed below.

96

The Convertible Notes accrue interest at a rate of 2.25% per annum, payable semi-annually on June 15 and December 15 of
each year. On or after March 15, 2023, and until the close of business on the second scheduled trading day immediately
preceding the maturity date, holders may convert the Convertible Notes at the holders' option.

Holders may convert the Convertible Notes, at the holders' option, prior to March 15, 2023 only under the following
circumstances:

•

•

during any calendar quarter, if the last reported sale price of the Company's common stock for at least 20 trading days
(whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading
day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each
applicable trading day;

during the five business day period after any five consecutive trading day period (the "Measurement Period") in which
the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the Measurement Period
was less than 98% of the product of the last reported sales price of the Company's common stock and the conversion
rate on each such trading day; or

•

upon the occurrence of specified corporate events.

The Convertible Notes are convertible at an initial rate of 36.0295 shares per $1,000 of principal (equivalent to an initial
conversion price of $27.76 per share of the Company's common stock). The conversion rate is subject to customary adjustments
for certain events as described in the Indenture. Upon conversion, the Company will pay or deliver, as the case may be, cash,
shares of its common stock, or a combination of cash and shares of its common stock, at the Company's election. It is the
Company’s current intent to settle conversions of the Convertible Notes through combination settlement, which involves
repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its
common stock.

The Company may not redeem the Convertible Notes prior to their maturity date, and no sinking fund is provided for them. If
the Company undergoes a fundamental change, as described in the Indenture, subject to certain conditions, holders may require
the Company to repurchase for cash all or any portion of the Convertible Notes. The fundamental change repurchase price is
equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but
excluding, the fundamental change repurchase date. If holders elect to convert the Convertible Notes in connection with a
make-whole fundamental change, as described in the Indenture, the Company will, to the extent provided in the Indenture,
increase the conversion rate applicable to the Convertible Notes.

The Indenture does not contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence
of indebtedness, or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Indenture contains
customary events of default with respect to the Convertible Notes.

In accounting for the issuance of the Convertible Notes, the Company separated the Convertible Notes into liability and equity
components. The Company allocated $258 million of the Convertible Notes to the liability component, and $92 million to the
equity component. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt
instrument that does not have an associated convertible feature. The carrying amount of the equity component, which represents
the conversion option and does not meet the criteria for separate accounting as a derivative as it is indexed to the Company's
own stock, was determined by deducting the fair value of the liability component from the par value of the Convertible Notes.
The excess of the principal amount of the liability component over its carrying amount represents a debt discount, which was
recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and is amortized to interest
expense over the term of the Convertible Notes using the effective interest method. The equity component is included in
Additional paid-in capital in the Consolidated Balance Sheets and will not be remeasured as long as it continues to meet the
conditions for equity classification.

The Company incurred issuance costs of $10 million related to the Convertible Notes. Issuance costs were allocated to the
liability and equity components based on the same proportion used to allocate the proceeds. Issuance costs attributable to the
liability component of $7 million are amortized to interest expense over the term of the Convertible Notes, and issuance costs
attributable to the equity component of $3 million are included along with the equity component in stockholders' equity.

For fiscal 2020, fiscal 2019 and the period from December 16, 2017 through September 30, 2018, the Company recognized
interest expense of $26 million, $25 million, and $7 million related to the Convertible Notes, which includes $18 million, $17
million and $4 million of amortization of the underwriting discount and issuance costs, respectively.

97

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

(In millions)

Principal

Less:

Unamortized debt discount

Unamortized issuance costs

Net carrying amount

Bond Hedge and Call Spread Warrants

As of September 30,

2020

2019

350

$

(55)

(4)

291

$

350

(72)

(5)

273

$

$

In connection with the issuance of the Convertible Notes, the Company also entered into privately negotiated transactions to
purchase hedge instruments ("Bond Hedge"), covering 12.6 million shares of its common stock at a cost of $84 million. The
Bond Hedge is subject to anti-dilution provisions substantially similar to those of the Convertible Notes, has a strike price of
$27.76 per share, is exercisable by the Company upon any conversion of the Convertible Notes, and expires on June 15, 2023.
The cost of the Bond Hedge was recorded as a reduction of Additional paid-in capital in the accompanying Consolidated
Balance Sheets.

The Company also sold warrants for the purchase of up to 12.6 million shares of its common stock for aggregate proceeds of
$58 million ("Call Spread Warrants"). The Call Spread Warrants have a strike price of $37.3625 per share and are subject to
customary anti-dilution provisions. The Call Spread Warrants will expire in ratable portions on a series of expiration dates
commencing on September 15, 2023. The proceeds from the issuance of the Call Spread Warrants were recorded as an increase
to Additional paid-in capital.

The Bond Hedge and Call Spread Warrants are intended to reduce the potential dilution with respect to the Company’s common
stock and/or reduce the Company’s exposure to potential cash payments that the Company may be required to make upon
conversion of the Convertible Notes by, in effect, increasing the conversion price, from the Company’s economic standpoint, to
$37.3625 per share. However, the Call Spread Warrants could have a dilutive effect with respect to the Company's common
stock or, if the Company so elects, obligate the Company to make cash payments to the extent that the market price of common
stock exceeds $37.3625 per share on any date upon which the Call Spread Warrants are exercised.

Debt Maturity

The stated annual maturity of total debt for the fiscal years ended September 30, consist of:

(In millions)
2021

2022

2023

2024

2025 and thereafter
Total

$

$

—

—

350

—

2,643
2,993

The weighted average contractual interest rate of the Company’s outstanding debt was 6.5% and 6.3%, as of September 30,
2020 and 2019, respectively. The effective interest rate for the Term Loan Credit Agreement as of September 30, 2020 and
2019 was not materially different than its contractual interest rate including adjustments related to interest rate swap agreements
designated as highly effective cash flow hedges. The effective interest rate for the Senior Notes as of September 30, 2020 was
not materially different than its contractual interest rate. The effective interest rate for the Convertible Notes as of both
September 30, 2020 and 2019 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.

Effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as
liabilities subject to compromise. Contractual interest expense represented 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
(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 September 30, 2020, the Company was not in default under any of its debt agreements.

98

12. 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
outstanding variable rate loans.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fix a portion of the
variable interest due under its Term Loan Credit Agreement (the "Original Swap Agreements"). Under the terms of the Original
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. Through September 23, 2020, the total $1,800 million notional amount of the Original
Swap Agreements were designated as cash flow hedges and deemed highly effective as defined under ASC 815.

On September 23, 2020, the Company entered into an interest rate swap agreement for a notional amount of $257 million (the
“Offsetting Swap Agreement”). Under the terms of the Offsetting Swap Agreement, which matures on December 15, 2022, the
Company pays a variable rate of interest based on one-month LIBOR and receives a fixed rate of 0.1745%. The Company
entered into the Offsetting Swap Agreement to maintain a net notional amount less than the amount of the Company’s variable
rate loans outstanding. The Offsetting Swap Agreement was not designated for hedge accounting treatment. On September 23,
2020, Original Swap Agreements with a notional amount of $257 million were also de-designated from hedge accounting
treatment. As of September 30, 2020, Original Swap Agreements with a notional amount of $1,543 million continue to be
designated as cash flow hedges and deemed highly effective as defined under ASC 815.

On July 1, 2020, the Company entered into interest rate swap agreements with four counterparties, which fix a portion of the
variable interest due on its Term Loan Credit Agreement (the "New Swap Agreements") from December 15, 2022 (the maturity
date of the Original Swap Agreements) through December 15, 2024. Under the terms of the New Swap Agreements, the
Company will pay a fixed rate of 0.7047% and receive a variable rate of interest based on one-month LIBOR. The total notional
amount of the New Swap Agreements is $1,400 million. Since their execution, the New Swap Agreements have been
designated as cash flow hedges and deemed highly effective as defined by ASC 815.

The Company records changes in the fair value of interest rate swap agreements designated as cash flow hedges initially within
Accumulated other comprehensive loss in the Consolidated Balance Sheets. As interest expense is recognized on the Term
Loan Credit Agreement, the corresponding deferred gain or loss on the cash flow hedge is reclassified from Accumulated other
comprehensive loss to Interest expense in the Consolidated Statements of Operations. The Company records changes in the fair
value of interest rate swap agreements not designated for hedge accounting within Interest expense. On September 23, 2020, the
Company froze a $15 million deferred loss within Accumulated other comprehensive loss for the de-designated Original Swap
Agreements, which will be reclassified to Interest expense over the term of the Original Swap Agreements.

Based on the amount in Accumulated other comprehensive loss at September 30, 2020, approximately $50 million would be
reclassified to interest expense in the next twelve months.

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

Foreign Currency Forward Contracts

The Company, from time to time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with
certain monetary assets and liabilities including receivables, payables and certain intercompany balances. These foreign
currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these
contracts are recorded as a component of Other income (expense), net to offset the change in the value of the hedged assets and
liabilities. As of September 30, 2020, the Company maintained open foreign currency forward contracts with a total notional
value of $375 million, primarily hedging the British Pound Sterling, Euro, Chinese Renminbi and Indian Rupee. As of
September 30, 2019, the Company maintained open foreign currency forward contracts with a total notional value of
$400 million, primarily hedging the British Pound Sterling, Indian Rupee, Chinese Renminbi, Czech Koruna, Mexican Peso
and Australian Dollar.

Emergence Date Warrants

In accordance with the Plan of Reorganization, the Company issued warrants to purchase 5,645,200 shares of Company
common stock under a warrant agreement to the holders of the Predecessor second lien obligations extinguished pursuant to the
Plan of Reorganization (the "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 the fair value of the liability to be recognized in earnings each reporting period. On

99

November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to
repurchase up to $15 million worth of the Emergence Date Warrants. None of the Emergence Date Warrants have been
exercised or repurchased as of September 30, 2020.

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
September 30, 2020 and 2019 was determined using the input assumptions summarized below:

Expected volatility
Risk-free interest rates
Contractual remaining life (in years)
Price per share of common stock

As of September 30,

2020
68.53 %
0.14 %
2.21
$15.20

2019
56.89 %
1.55 %
3.21
$10.23

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 throughout the term of the warrants.

Financial Statement Information Related to Derivative Instruments

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

(In millions)
Derivatives Designated as Hedging
Instruments:

Balance Sheet Caption

Asset

Liability

Asset

Liability

September 30, 2020

September 30, 2019

Interest rate contracts

Interest rate contracts

Other current liabilities

Other liabilities

Derivatives Not Designated as
Hedging Instruments:

Interest rate contracts

Interest rate contracts

Other current liabilities

Other liabilities

Foreign exchange contracts

Other current assets

Foreign exchange contracts

Other current liabilities

Emergence Date Warrants

Other liabilities

Total derivative fair value

$

—

—
—

—

—

1

—

—

1

1

43

58
101

7

9

—

2

8

26

$

127

$

—

—
—

—

—

1

—

—

1

1

$

23

58
81

—

—

—

—

5

5

86

The following table provides information regarding the location and amount of pre-tax (losses) gains for interest rate swaps
designated as cash flow hedges:

(In millions)

Financial Statement Line Item in
which Cash Flow Hedges are Recorded $
Impact of cash flow hedging
relationships:

Loss recognized in AOCI - on interest
rate swaps

Interest expense reclassified from
AOCI

Fiscal years ended September 30,

2020

2019

Period from December 16, 2017
through
September 30, 2018

Interest
Expense

Other
Comprehensive
(Loss) Income

Interest
Expense

Other
Comprehensive
(Loss) Income

Interest
Expense

Other
Comprehensive
(Loss) Income

(226) $

(72)

$

(237) $

(191) $

(169) $

18

—

(35)

(69)

35

—

(10)

(87)

10

—

(6)

(9)

6

100

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

(In millions)

Location of Derivative Pre-tax Gain (Loss)

2020

2019

Fiscal years ended September 30,

Period from
December 16, 2017
through
September 30, 2018

Emergence Date Warrants

Other income (expense), net

Foreign exchange contracts

Other income (expense), net

(3) $

(1)

29

$

(5)

(17)

—

The Company records its derivatives on a gross basis in the 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:

(In millions)

Gross amounts recognized in the Consolidated Balance Sheet
Gross amount subject to offset in master netting arrangements
not offset in the Consolidated Balance Sheet

Net amounts

13. Fair Value Measurements

September 30, 2020

September 30, 2019

Asset

Liability

Asset

Liability

$

$

1

$

127

$

(1)

— $

(1)

126

$

1

$

(1)

— $

86

(1)

85

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. Considerable judgment was required in developing certain of
the estimates of fair value including the consideration of the recent COVID-19 pandemic that has caused significant volatility in
U.S. and international markets, and accordingly, the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange.

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.

101

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and 2019 were as follows:

(In millions)
Assets:

Investments in debt securities

Foreign exchange contracts

Total assets

Liabilities:

September 30, 2020

September 30, 2019

Fair Value Measurements Using

Fair Value Measurements Using

Total

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

$ — $ — $ — $ — $

1

1

—

$ — $

1

1

$

—

$ — $

10

1

11

81

5

—

5

91

$ — $ — $

—

$ — $

1

1

$

10

—

10

$ — $

—

—

—

$ — $

81

—

—

—

81

$ —

5

—

5

10

$

Interest rate contracts

$

117

$ — $

117

$ — $

Spoken acquisition Earn-outs

Foreign exchange contracts

Emergence Date Warrants

—

2

8

—

—

—

—

2

—

Total liabilities

$

127

$ — $

119

$

—

—

8

8

$

Investments in debt securities

The investments in debt securities were valued using a discounted cash flow model which includes various unobservable inputs
including cash flow projections, long-term growth rates, discount rates and market comparable companies. The investments in
debt securities were recorded in Other assets in the Consolidated Balance Sheets.

Interest rate and foreign exchange contracts

Interest rate and foreign exchange 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 were 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. The Earn-outs
were recorded in Other current liabilities in the Consolidated Balance Sheets.

Emergence Date Warrants

Emergence Date Warrants classified as Level 3 liabilities are valued using the Black-Scholes option pricing model.

During fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30, 2018 (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 assets and liabilities measured at fair value on a
recurring basis:

(In millions)
Balance as of September 30, 2019

Impairment(1)
Changes in fair value(2)
Settlement

Emergence
Date Warrants
5
$

$

—

3

Spoken
acquisition
earn-outs

5

—

—

Investments in
debt securities
10
$

(10)

—

—
8

(5)
— $

—
—

Balance as of September 30, 2020
(1) During fiscal 2020, the Company recorded an other-than-temporary impairment charge for a $10 million credit loss on its investments in

$

$

debt securities. See Note 6, "Business Combinations and Strategic Partnerships and Investments," for additional information.

(2) Changes in fair value of the Emergence Date Warrants are included in Other income (expense), net.

102

Fair Value of Financial Instruments

The estimated fair values of the Company’s Term Loan Credit Agreement, Senior Notes and Convertible Notes at
September 30, 2020 and 2019 were as follows:

(In millions)

September 30, 2020

September 30, 2019

Principal
amount

Fair value

Principal
amount

Fair value

Term Loan Credit Agreement due December 15, 2024 and 2027

$

1,643

$

1,624

$

2,874

$

2,739

Senior 6.125% Notes due September 15, 2028

Convertible 2.25% Senior Notes due June 15, 2023
Total

1,000

350
2,993

$

1,022

331
2,977

$

—

350
3,224

$

—

298
3,037

$

The estimated fair value of the Company's Term Loan Credit Agreement and Senior Notes was determined using Level 2 inputs
based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices. 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 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 their carrying values because of the short-term nature of these
instruments.

14. Income Taxes

During the year ended September 30, 2018, under the Plan of Reorganization, a substantial amount of the Company’s debt was
extinguished. Absent an exception, a debtor recognizes the cancellation of indebtedness income ("CODI") upon discharge of its
outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Company's U.S. federal
net operating loss ("NOL") and tax credits not utilized during the taxable year ended September 30, 2018 were eliminated in the
year ended September 30, 2018 due to the recognition of CODI. Prior to December 15, 2017, a full valuation allowance was
established in any jurisdiction that had a net deferred tax asset. A portion of the U.S. valuation allowance in the amount of $787
million was reversed as part of the reorganization adjustments as it was previously established against (i) the NOL and tax
credits that as of December 15, 2017 were estimated to be eliminated as a result of the CODI rules and (ii) other deferred tax
assets that were previously established for liabilities that were discharged in the Plan or Reorganization and eliminated as part
of the reorganization adjustments. The valuation allowance in the amount of $47 million was reversed in certain non-U.S.
jurisdictions as part of the reorganization adjustments as management concluded it was more likely than not that the related
deferred tax assets will be realized. The remaining U.S. valuation allowance in the amount of $460 million was reversed as part
of the fresh start adjustments because management concluded it was more likely than not that the deferred tax assets will be
realized primarily due to future sources of taxable income that will be generated by the reversal of deferred tax liabilities
established as a result of fresh start.

During the fourth quarter of fiscal 2018, the Company centralized the management and ownership of certain intellectual
property in a U.S. limited partnership. 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 Tax Cuts and Jobs Act (the "Act") was signed into law. The Act lowered the U.S. federal corporate
tax rate from 35% to 21% effective January 1, 2018. Corporations with a fiscal year-end that is not a calendar year but included
January 1, 2018 were subject to a blended tax rate based on the number of days in the fiscal year before and after January 1,
2018. The Company has a September 30th tax year-end and therefore the U.S. federal tax rate for the fiscal year ending
September 30, 2018 was 24.5%.

The SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") on December 22, 2017, which provided guidance to registrants
on the accounting for tax related impacts under the Act. The guidance provides a measurement period of up to one year after the
enactment date for companies to complete the tax accounting implications of the Act. As a fiscal year-end tax filer, the
Company was subject to various provisions under the Act for the period from December 16, 2017 through September 30, 2018,
including the change to the U.S. federal statutory tax rate and the mandatory deemed repatriation of unremitted foreign
earnings. In fiscal 2018, the Company recorded adjustments related to the Act, including a revaluation of its deferred taxes. The
amount of the reduction to the net deferred tax liability as a result of the Act was $245 million and had been recorded as an
income tax benefit in the period from December 16, 2017 through September 30, 2018.

During fiscal 2019, various U.S. tax provisions that were introduced or updated as part of the Act became effective for the
Company, including provisions that result in the current U.S. taxation of certain income earned by the Company’s foreign

103

subsidiaries. The FASB has published guidance (Topic 740, No. 5) regarding how to account for the Global Intangible Low-
Taxed Income ("GILTI") provisions included in the Act. The guidance states that a company may make a policy decision with
respect to the accounting for taxes related to GILTI and whether deferred taxes should be established. The Company has
generated income that is taxed as GILTI in fiscal 2020 and 2019. The Company has determined that it will account for any
taxes associated with GILTI as a period cost.

The Company previously established a deferred tax liability for non-U.S. withholding taxes to be incurred upon the remittance
of foreign earnings which was $17 million as of September 30, 2020. The Company has a taxable outside basis difference of
$83 million as of September 30, 2020 which was permanently reinvested. The Company estimates the unrecorded deferred tax
liability on the outside basis difference to be $20 million.

The (provision for) benefit from income taxes is comprised of U.S. federal, state and foreign income taxes. The following table
presents the U.S. and foreign components of (loss) income before income taxes and the (provision for) benefit from income
taxes for the periods indicated:

(In millions)
(LOSS) INCOME BEFORE INCOME TAXES:

U.S.
Foreign

(Loss) income before income taxes
(PROVISION FOR) BENEFIT FROM INCOME
TAXES:

CURRENT
Federal
State and local
Foreign

DEFERRED
Federal
State and local
Foreign

(Provision for) benefit from income taxes

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor

Period from
October 1, 2017
through
December 15, 2017

$

$

$

$

(639) $

21
(618) $

(510) $

(159)
(669) $

(165) $

(94)
(259) $

3,353

83
3,436

(58) $
(10)
(23)
(91)

30
3
(4)
29
(62) $

(20) $
(7)
(29)
(56)

47
10
(3)
54
(2) $

— $
4
(40)
(36)

530
34
18
582
546

$

—
—
(4)
(4)

(453)
(19)
17
(455)
(459)

Deferred income taxes are provided for the effects of temporary differences between the amounts of assets and liabilities
recognized for financial reporting purposes and the amounts recognized for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of the periods indicated were as follows:

104

(In millions)
DEFERRED INCOME TAX ASSETS:

Benefit obligations

Net operating losses/credit carryforwards

Property, plant and equipment

Other/accrued liabilities

Valuation allowance

Gross deferred income tax assets

DEFERRED INCOME TAX LIABILITIES:

Goodwill and intangible assets

Other/accrued liabilities

Gross deferred income tax liabilities
Net deferred income tax liabilities

As of September 30,

2020

2019

$

$

218

981

8

13

(1,053)

167

(174)

—

(174)

$

(7) $

225

918

15

—

(928)

230

(213)

(54)

(267)
(37)

A reconciliation of the Company’s (loss) income before income taxes at the U.S. federal statutory rate to the (provision for)
benefit from income taxes is as follows:

(In millions)
Income tax benefit (provision) computed at the U.S.
Federal statutory rate
State and local income taxes, net of federal income tax
effect

Tax differentials on foreign earnings

Loss on foreign subsidiaries

Taxes on unremitted foreign earnings and profits

Non-deductible portion of goodwill

Non-deductible reorganization items

Adjustment to deferred taxes

Audit settlements and accruals

Credits and other taxes

Impact of Tax Cuts and Jobs Act

NOL recognition / intellectual property

Warrants

Debt refinancing

Non-deductible impact of fresh start accounting

Non-taxable cancellation of debt income

Attribute reduction

Rate changes

U.S. tax on foreign source income

Valuation allowance

Other differences—net

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor
Period from
October 1, 2017
through
December 15, 2017

$

130

$

140 $

64

$

(1,203)

2

—

28

(8)

(125)

—

(14)

6

(2)

(3)

—

(1)

—

—

—

—

(3)

—

(58)

(14)

11

(11)

29

(4)

(123)

—

16

5

4

1

—

6

—

—

—

—

(19)

—

(43)

(14)

(12)

(12)

43

4

—

—

4

(48)

(5)

245

366

(4)

(8)

—

—

—

(3)

(10)

(85)

7

10

182

—

7

—

(11)

(1)

(6)

(1)

—

—

—

—

(555)

313

(452)

—

(2)

1,199

61

(459)

(Provision for) benefit from income taxes

$

(62) $

(2) $

546

$

In fiscal 2020 and 2019, the Company recognized goodwill impairment charges of $624 million and $657 million, respectively.
See Note 7, "Goodwill, net" for further discussion.

In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The Company considered the scheduled reversal of deferred tax assets and
liabilities, projected future taxable income and certain tax planning strategies in assessing the realization of its deferred tax

105

assets. Based on this assessment, the Company determined that it is more likely than not that the deferred tax assets in certain
significant jurisdictions, including the U.S., Ireland, Germany, Luxembourg and France, will not be realized to the extent they
exceed the scheduled reversal of deferred tax liabilities.

During fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30, 2018 (Successor) and the
period from October 1, 2017 through December 15, 2017 (Predecessor), the Company's valuation allowance increased
(decreased) by $125 million, $9 million, $82 million and $(1,316) million, respectively, primarily due to valuation allowances
established for additional NOLs and the tax effects related to other comprehensive income. At September 30, 2020, the
valuation allowance of $1,053 million is comprised of $76 million, $341 million, $589 million and $47 million related to the
U.S., Germany, Luxembourg, and other foreign subsidiaries, respectively. The recognition of valuation allowances will
continue to adversely affect the Company's effective income tax rate.

As of September 30, 2020, the Company had tax-effected NOLs and credits of $1,006 million, comprised of $17 million for
U.S. state and local taxes and $989 million for foreign taxes, including $260 million and $679 million in Germany and
Luxembourg, respectively.

The U.S. state NOLs expire through fiscal 2039, with the majority expiring in excess of 10 years. The majority of foreign NOLs
have no expiration.

As of September 30, 2020, there were $140 million of unrecognized tax benefits ("UTBs") associated with uncertain tax
positions and an additional $25 million of accrued interest and penalties related to these amounts. The Company estimates $89
million of UTBs would affect the effective tax rate if recognized. The reduction in the balance during fiscal 2020 is primarily
related to the expiration of relevant statute of limitations. At this time, the Company is unable to make a reasonably reliable
estimate of the timing of payments in connection with these tax liabilities. The Company’s policy is to include interest and
penalties related to its uncertain tax positions within the (provision for) benefit from income taxes. Included in the (provision
for) benefit from income taxes in fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30,
2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) was a net interest (expense)
benefit of $(3) million, $(4) million, $0 million and $1 million, respectively. The Company files corporate income tax returns
with the federal government in the U.S. and with multiple U.S. state and local jurisdictions and foreign tax jurisdictions. In the
ordinary course of business these income tax returns will be examined by the tax authorities. Various foreign income tax
returns, such as Brazil, Italy, Germany, India, Ireland, Israel, and Netherlands are under examination by taxing authorities for
tax years ranging from 2001 through 2019. It is reasonably possible that the total amount of UTB will decrease by an estimated
$8 million in the next 12 months as a result of these examinations and by an estimated $5 million as a result of the expiration of
the statute of limitations.

The following table summarizes the activity for the Company's gross UTB balance:

(In millions)

Gross UTB balance at September 30, 2017 (Predecessor)

Additions based on tax positions relating to the period

Gross UTB balance at December 15, 2017 (Predecessor)

Gross UTB balance at December 16, 2017 (Successor)

Additions based on tax positions relating to the period

Changes based on tax positions relating to prior periods

Statute of limitations expirations

Gross UTB balance at September 30, 2018 (Successor)

Additions based on tax positions relating to the period

Changes based on tax positions relating to prior periods

Statute of limitations expirations

Gross UTB balance at September 30, 2019 (Successor)

Additions based on tax positions relating to the period

Changes based on tax positions relating to prior periods

Settlements

Statute of limitations expirations

Gross UTB Balance at September 30, 2020 (Successor)

106

268

4

272

272

57

(143)

(12)

174

10

(32)

(5)

147

4

(1)

(2)

(8)

140

$

$

$

$

15. Benefit Obligations

Pension, Post-retirement and Postemployment Benefits

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 Company
froze benefit accruals and additional participation in the pension and post-retirement benefit plans for its U.S. management
employees effective December 31, 2003.

In June 2019, the Company announced a change in medical benefits under the post-retirement medical plan for represented
retirees effective January 1, 2020, to replace medical coverage through the Company's group plan for represented retirees who
are retired as of April 30, 2019 and their eligible dependents, with medical coverage through the private and public insurance
marketplace. As a result of the plan amendment, the Company recognized a $7 million reduction in the accumulated benefit
obligation with an offset to Accumulated other comprehensive loss in the Consolidated Balance Sheet during fiscal 2019.

On December 15, 2017, the Avaya Inc. Pension Plan for Salaried Employees ("APPSE"), a qualified pension plan, was settled
with the Pension Benefit Guaranty Corporation ("PBGC"). At that time, the Company and the PBGC executed a termination
and trusteeship agreement to terminate the APPSE and to appoint the PBGC as the statutory trustee of the plan. The Company
paid settlement consideration to the PBGC consisting of $340 million in cash and 6.1 million shares of Successor Company
common stock (fair value of $92 million). With this payment, any accrued but unpaid minimum funding contributions due were
deemed to have been paid in full. As a result of the plan termination on December 15, 2017, the Company's projected benefit
obligation and pension trust assets were reduced by $2,192 million and $1,573 million, respectively. Including the settlement
consideration and $703 million of Accumulated other comprehensive loss recorded in the Consolidated Balance Sheets, a
settlement loss of $516 million was recorded in Reorganization items, net in the Consolidated Statements of Operations for the
period from October 1, 2017 through December 15, 2017 (Predecessor).

On December 15, 2017, the unfunded Avaya Supplemental Pension Plan ("ASPP"), a non-qualified excess benefit plan, was
also terminated and settled. Benefit liabilities for ASPP participants were included as allowed claims in the general unsecured
recovery pool. Settlement consideration of $17 million in the form of allowed claims payable to ASPP participants was
estimated based upon claims data as of the Emergence Date as amounts due to individual general unsecured creditors had not
been finalized and paid. As a result of the termination, the Company's projected benefit obligation was reduced by $88 million.
Including the settlement consideration and $18 million of Accumulated other comprehensive loss recorded in the Consolidated
Balance Sheet, a settlement gain of $53 million was recorded in Reorganization items, net in the Consolidated Statements of
Operations for the period from October 1, 2017 through December 15, 2017 (Predecessor).

Remeasurement as a result of fresh start accounting increased the Avaya Pension Plan ("APP") and other post-retirement
benefit plan obligations by $3 million on December 15, 2017.

Effective September 9, 2019, the Company and the Communications Workers of America ("CWA") and the International
Brotherhood of Electrical Workers ("IBEW"), agreed to extend the 2009 Collective Bargaining Agreement ("CBA") until June
19, 2021. The contract extensions did not affect the Company’s obligation for pension and post-retirement benefits available to
U.S. employees of the Company who are represented by the CWA or IBEW ("represented employees").

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 CWA and IBEW, and contributions from the
participants, if required. Payments for retiree medical and dental benefits were $10 million, $12 million, $7 million and $2
million for fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through September 30, 2018 (Successor) and
the period from October 1, 2017 through December 15, 2017 (Predecessor), respectively, which were net of reimbursements
received of $3 million in both fiscal 2020 and 2019 related to payments in prior periods. The Company estimates it will make
payments for retiree medical and dental benefits totaling $11 million during fiscal 2021.

107

A reconciliation of the changes in the benefit obligations and fair value of assets of the defined benefit pension and post-
retirement plans, the funded status of the plans and the amounts recognized in the Consolidated Balance Sheets are provided in
the tables below:

(In millions)
Pension Benefits - U.S.
Change in benefit obligation

Projected benefit obligation at beginning of period

Service cost
Interest cost
Actuarial loss
Benefits paid

Projected benefit obligation at end of period

Change in plan assets

Fair value of plan assets at beginning of period

Actual return on plan assets
Employer contributions
Benefits paid

Fair value of plan assets at end of period

Underfunded status at end of period

Amount recognized in the Consolidated Balance Sheets consists of:

Accrued benefit liability, noncurrent

Net amount recognized

Amount recognized in Accumulated other comprehensive loss (pre-tax) consists of:

Net actuarial loss
Net amount recognized

Weighted average assumptions used to determine benefit obligations

Discount rate
Rate of compensation increase

Fiscal years ended September 30,

2020

2019

$

$

$

$
$

$
$

$

1,134
4
29
55
(77)
1,145

915
79
10
(77)
927
(218)

(218)
(218)

110
110

$

$

$

$
$

$
$

$

1,050
3
40
131
(90)
1,134

881
97
27
(90)
915
(219)

(219)
(219)

79
79

2.50 %
3.00 %

3.09 %
3.00 %

108

(In millions)
Pension Benefits - Non-U.S.
Change in benefit obligation

Fiscal years ended September 30,

2020

2019

Projected benefit obligation at beginning of period

$

573

$

Service cost

Interest cost

Actuarial (gain) loss

Benefits paid

Foreign currency exchange rate changes

Curtailments, settlements and other

Projected benefit obligation at end of period

Change in plan assets

Fair value of plan assets at beginning of period

Actual return on plan assets

Employer contributions
Benefits paid

Foreign currency exchange rate changes

Settlements

Fair value of plan assets at end of period

Underfunded status at end of period

Amount recognized in the Consolidated Balance Sheets consists of:

Noncurrent assets

Accrued benefit liability, current

Accrued benefit liability, noncurrent

Net amount recognized

Amount recognized in Accumulated other comprehensive loss
(pre-tax) consists of:
Net actuarial loss
Net amount recognized

Weighted average assumptions used to determine benefit
obligations

7

5

(34)

(21)

42

1

573

15

—

22

(21)

2

—

18

(555)

1

(25)

(531)
(555)

22

22

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

536

6

10

76

(22)

(32)

(1)

573

15

1

23

(22)

(1)

(1)

15

(558)

1

(19)

(540)
(558)

55

55

Discount rate

Rate of compensation increase

0.86 %

2.60 %

0.87 %

2.59 %

109

(In millions)
Post-retirement Benefits - U.S.

Change in benefit obligation

Fiscal years ended September 30,

2020

2019

Benefit obligation at beginning of period

$

404

$

Service cost

Interest cost

Actuarial loss

Benefits paid

Plan amendments

Projected benefit obligation at end of period

Change in plan assets

Fair value of plan assets at beginning of period

Actual return on plan assets

Employer contributions

Benefits paid

Fair value of plan assets at end of period

Underfunded status at end of period

Amount recognized in the Consolidated Balance Sheets consists of:

Accrued benefit liability, current

Accrued benefit liability, noncurrent

Net amount recognized

Amount recognized in Accumulated other comprehensive loss (pre-tax)
consists of:

Net prior service credit

Net actuarial loss
Net amount recognized

1

11

30

(15)

—
431

191

20

10

(15)
206

(225)

(10)

(215)
(225)

(6)

23
17

$

$

$

$

$

$

$

$
$

$

$

$

$

$

$

$

$
$

368

1

14

44

(16)

(7)
404

178

17

12

(16)
191

(213)

(13)

(200)
(213)

(7)

3
(4)

Weighted average assumptions used to determine benefit obligations

Discount rate
Rate of compensation increase

2.69 %
3.00 %

3.17 %
3.00 %

Effective September 30, 2020, to reflect its best estimate of future mortality for its salaried post-retirement benefit plans, the
Company started using the White-Collar PRI-2012 Private Retirement Plans Mortality Tables. For the U.S. pension and
represented post-retirement benefit plans, the Company continued to use the PRI-2012 Private Retirement Plans Mortality
Tables. The Company also updated its mortality rate assumptions to use the projected mortality improvement scale, Mortality
Projection-2020, as published by the Society of Actuaries. As of September 30, 2020, the changes in mortality rate assumptions
had the effect of decreasing the projected U.S. pension and post-retirement obligations by $10 million and $5 million,
respectively.

110

The following table provides the accumulated benefit obligation for all defined benefit pension plans and information for
pension plans with an accumulated benefit obligation in excess of plan assets:

(In millions)
Accumulated benefit obligation for all plans

Plans with accumulated benefit obligation in excess of plan
assets

Projected benefit obligation

Accumulated benefit obligation
Fair value of plan assets

Pension Benefits - U.S.

Pension Benefits - Non-U.S.

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

$

$
$
$

1,145

$

1,134

1,145
1,145
927

$
$
$

1,134
1,134
915

$

$
$
$

555

$

555

567
549
12

$
$
$

568
550
9

Estimated future benefits expected to be paid in each of the next five fiscal years, and in aggregate for the five fiscal years
thereafter, are presented below:

(In millions)
2021
2022
2023
2024
2025
2026 - 2030
Total

Pension Benefits

U.S.

Non-U.S.

Post-
retirement
Benefits

74
73
73
72
71
338
701

$

$

24
24
23
23
24
136
254

$

$

17
18
19
19
20
107
200

$

$

111

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

(In millions)
Pension Benefits - U.S.

Components of net periodic benefit (credit) cost

Service cost
Interest cost
Expected return on plan assets

Amortization of actuarial loss
Net periodic benefit (credit) cost
Weighted average assumptions used to determine
net periodic benefit cost

Discount rate
Expected return on plan assets
Rate of compensation increase

Pension Benefits - Non-U.S.

Components of net periodic benefit cost

Service cost
Interest cost
Expected return on plan assets

Amortization of actuarial loss

Net periodic benefit cost
Weighted average assumptions used to determine
net periodic benefit cost

Discount rate
Expected return on plan assets
Rate of compensation increase

Post-retirement Benefits - U.S.

Components of net periodic benefit cost

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit

Amortization of actuarial (gain) loss

Net periodic benefit cost
Weighted average assumptions used to determine
net periodic benefit cost

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$

$

$

$

$

4
29
(55)
—
(22)

2.84 %
6.40 %
3.00 %

7
5
(1)
—
11

0.87 %
3.72 %
2.59 %

1
11
(10)
(1)
—
1

$

$

$

$

$

$

3
40
(60)
—
(17)

3.94 %
7.00 %
4.00 %

6
10
(1)
—
15

1.92 %
3.67 %
2.58 %

1
14
(9)
—
(1)
5

$

$

$

$

$

$

3
28
(51)
—
(20)

3.29 %
7.65 %
4.00 %

5
7
—
—
12

1.92 %
3.68 %
3.62 %

1
11
(8)
—
—
4

$

$

$

$

$

$

1
22
(38)
20
5

3.19 %
7.75 %
4.00 %

2
3
(1)
2
6

1.22 %
1.82 %
3.45 %

—
3
(2)
(3)
2
—

Discount rate

Expected return on plan assets

Rate of compensation increase

2.18 %

5.50 %

3.00 %

4.02 %

5.50 %

4.00 %

3.39 %

5.50 %

4.00 %

3.37 %

5.90 %

4.00 %

The service components of net periodic benefit (credit) cost 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. As part of the Plan of Reorganization, on December 15, 2017, the Company paid the aggregate unpaid required
minimum funding for the APP of $49 million. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act

112

("CARES Act") was signed into law, providing limited relief for pension funding and retirement plan distributions. Under the
CARES Act, employers may delay contributions for single employer defined benefit pension plans until January 1, 2021.
Contributions to U.S. pension plans were $10 million, $27 million, $43 million and $49 million for fiscal 2020 and 2019
(Successor), the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017
through December 15, 2017 (Predecessor), respectively. Contributions to the non-U.S. pension plans were $22 million, $23
million, $22 million and $3 million for fiscal 2020 and 2019 (Successor), the period from December 16, 2017 through
September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), respectively.
In fiscal 2021, the Company estimates that it will make contributions totaling $18 million to satisfy the minimum statutory
funding requirements in the U.S. and contributions totaling $24 million for non-U.S. plans.

Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income are provided in the tables
below:

(In millions)
Pension Benefits - U.S.

Net loss (gain)

Amortization of actuarial loss

Reorganization adjustments

Total recognized in Other comprehensive (loss)
income
Total recognized in net periodic benefit cost and
Other comprehensive (loss) income(1)

Pension Benefits - Non-U.S.

Net (gain) loss

Foreign exchange rate loss

Amortization of actuarial loss

Reorganization adjustments

Total recognized in Other comprehensive (loss)
income
Total recognized in net periodic benefit cost and
Other comprehensive (loss) income(1)

Post-retirement Benefits - U.S.

Net loss (gain)

Prior service credit
Amortization of prior service credit

Amortization of actuarial gain (loss)

Reorganization adjustments

Total recognized in Other comprehensive (loss)
income

Total recognized in net periodic benefit cost and
Other comprehensive (loss) income(1)

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$

$

$

$

$

$

$

$

31

—

—

31

9

$

$

$

94 $

—

—

94 $

77 $

(15) $

—

—

—

(20)

(1,147)

(15) $

(1,167)

(35) $

(722)

(33) $

76 $

(19) $

—

—

—

(33) $

(22) $

20

—
1

—

—

21

22

$

$

$

(2)

—

—

74 $

89 $

—

—

—

(19) $

(7) $

36 $

(34) $

(7)
—

1

—

30 $

35 $

—
—

—

—

(34) $

(30) $

22

—

(2)

(163)

(143)

(137)

—

—
3

(2)

(40)

(39)

2

(1) For the period from October 1, 2017 through December 15, 2017, the U.S.; non-U.S.; and other Post-retirement benefits include Plan of Reorganization
settlements that were recorded in Reorganization items, net in the Consolidated Statements of Operations of $(440) million, $0 million and $(43) million,
respectively.

The estimated amount to be amortized from Accumulated other comprehensive loss as a net periodic cost during fiscal 2021 is
$3 million, consisting of the recognition of net actuarial expense for the Company's U.S. pension plan and post-retirement
benefit plan of $2 million and $2 million, respectively, partially offset by the recognition of a prior service credit for the
Company's post-retirement benefit plan of $1 million.

The discount rate is subject to change each year, consistent with changes in rates of return on high-quality fixed-income
investments currently available and expected to be available during the expected benefit payment period. The Company selects

113

the assumed discount rate for its U.S. pension and post-retirement benefit plans by applying the rates from the Aon AA Above
Median and Aon AA Only Bond Universe yield curves to the expected benefit payment streams and develops a rate at which it
is believed the benefit obligations could be effectively settled. The Company follows a similar process for its non-U.S. pension
plans by applying the Aon Euro AA corporate bond yield curve for the plans based in Europe and relevant country-specific
bond indices for other locations.

Based on the published rates as of September 30, 2020, the Company used a weighted average discount rate of 2.50% for the
U.S. pension plans, 0.86% for the non-U.S. pension plans and 2.69% for the post-retirement plans, a decrease of 59 basis
points, 1 basis points and 48 basis points from the prior year for the U.S. pension plans, the non-U.S. pension plans and the
post-retirement benefit plans, respectively. As of September 30, 2020, this had the effect of increasing the projected U.S.
pension, non-U.S. pension and post-retirement benefit obligations by $66 million, $2 million and $25 million, respectively. For
fiscal 2021, this will have a minimal effect on the U.S. pension and post-retirement service cost.

The expected long-term rate of return on U.S. pension and post-retirement benefit plan assets is selected by applying forward-
looking capital market assumptions to the strategic asset allocation approved by the governing body for each plan. The forward-
looking capital market assumptions are developed by an investment adviser and reviewed by the Company for reasonableness.
The return and risk assumptions consider such factors as anticipated long-term performance of individual asset classes, risk
premium for active management based on qualitative and quantitative analysis, and correlations of the asset classes that
comprise the asset portfolio.

The Company’s cost for post-retirement healthcare claims is capped and the projected post-retirement healthcare claims exceed
the cap. Therefore, a one-percentage-point increase or decrease in the Company’s healthcare cost trend rates will not impact the
post-retirement benefit obligation and the service and interest cost components of net periodic benefit cost.

The weighted average asset allocation of the pension and post-retirement plans by asset category and target allocation is as
follows:

Asset Category

Pension Benefits - U.S.

Debt Securities

Equity Securities

Hedge Funds

Real Estate

Commodities

Other(1)

Total

Pension Benefits - Non-U.S.

Debt Securities

Asset Allocation Fund

Insurance Contracts

Total

Post-retirement Benefits - U.S.

Equity Securities

Debt Securities

Total

As of September 30,

2020

2019

Long-term Target

52 %

29 %

6 %

5 %

2 %

6 %

52 %

29 %

7 %

6 %

2 %

4 %

100 %

100 %

22 %

11 %

67 %

100 %

34 %

66 %

100 %

27 %

13 %

60 %

100 %

40 %

60 %

100 %

52 %

34 %

6 %

6 %

2 %

— %

100 %

35 %

65 %

100 %

(1) Other includes cash/cash equivalents, derivative financial instruments and payables/receivables for pending transactions.

The Company’s asset management strategy focuses on the dual objectives of improving the funded status of the pension plans
and reducing the impact of changes in interest rates on the funded status. To improve the funded status of the pension plans,
assets are invested in a diversified mix of asset classes designed to generate higher returns over time, than the pension benefit
obligation discount rate assumption. To reduce the impact of interest rate changes on the funded status of the pension plans,
assets are invested in a mix of fixed income investments (including long-term debt) that are selected based on the characteristics
of the benefit obligation of the pension plans. Strategic asset allocation is the principal method for achieving the Company’s

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investment objectives, which are determined in the course of periodic asset-liability studies. The most recent asset-liability
study was completed in 2019 for the pension plans.

As part of the Company’s asset management strategy, investments are professionally managed and diversified across multiple
asset classes and investment styles to minimize exposure to any one specific investment. Derivative instruments (such as
forwards, futures, swaptions and swaps) may be held as part of the Company’s asset management strategy. However, the use of
derivative financial instruments for speculative purposes is prohibited by the Company’s investment policy. Also, as part of the
Company’s investment strategy, the U.S. pension plans invest in hedge funds, real estate funds, private equity and commodities
to provide additional uncorrelated returns.

The fair value of plan assets is determined by the trustee and reviewed by the Company, in accordance with the accounting
guidance for fair value measurements and the fair value hierarchy discussed in Note 13, "Fair Value Measurements." Because
of the inherent uncertainty of valuation, estimated fair values may differ significantly from the fair values that would have been
used had quoted prices in an active market existed.

The following table summarizes the fair value measurements of the U.S. pension plan assets by asset class:

(In millions)
U.S. Government debt securities (a)
Derivative instruments (b)

Total assets in the fair value hierarchy

Investments measured at net asset value: (c)

Real estate (d)
Private equity (e)
Multi-strategy hedge funds (f)
Investment funds: (g)
Cash equivalents

Long duration fixed income

High-yield debt

U.S. equity

Non-U.S. equity

Emerging market equity

Commodities

Total investments measured at net asset value

Other plan assets, net

Total plan assets at fair value
(a)

As of September 30, 2020

As of September 30, 2019

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

$ — $ 132

$ — $ 132

$ — $ 125

$ — $ 125

—
—

—
132

—
—

—
132

50

2

56

46

327

19

154

83

33

20

790

5

(2)
(2)

—
125

—
—

(2)
123

55

4

65

37

328

19

144

92

29

14

787

5

$ — $ 132

$ — $ 927

$

(2) $ 125

$ — $ 915

Includes U.S. Treasury STRIPS, which are generally valued using institutional bid evaluations from various contracted
pricing vendors. Institutional bid evaluations are estimated prices that represent the price a dealer would pay for a security.
Pricing inputs to the institutional bid evaluation vary by security and include benchmark yields, reported trades, unadjusted
broker/dealer quotes, issuer spreads, bids, offers or other observable market data.

(b)

Includes future contracts that are generally valued using the last trade price at which a specific contract/security was last
traded on the primary exchange, which is provided by a contracted vendor. If pricing is not available from the contracted
vendor, then pricing is obtained from other sources such as Bloomberg, broker bid, ask/offer quotes or the investment
manager.

(c) These investments are measured at fair value using the net asset value per share or its equivalent ("NAV") and have

therefore not been classified in the fair value hierarchy.

(d)

Includes open ended real estate commingled funds, close ended real estate limited partnerships, and insurance company
separate accounts that invest primarily in U.S. office, lodging, retail and residential real estate. The insurance company
separate accounts and the commingled funds account for their portfolio of assets at fair value and calculate the NAV on
either a monthly or quarterly basis. Shares can be redeemed at the NAV on a quarterly basis, provided a written redemption
request is received in advance (generally 45-91 days) of the redemption date. Therefore, the undiscounted NAV is used as
the fair value measurement. For limited partnerships, the fair value of the underlying assets and the capital account for each

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investor is determined by the General Partner ("GP"). The valuation techniques used by the GP generally consist of
unobservable inputs such as discounted cash flow analysis, analysis of recent comparable sales transactions, actual sale
negotiations and bona fide purchase offers received from third parties. The partnerships are typically funded over time as
capital is needed to fund asset purchases, and distributions from the partnerships are received as the partnerships liquidate
their underlying asset holdings. Therefore, the life cycle for a typical investment in a real estate limited partnership is
expected to be approximately 10 years from initial funding.

(e)

(f)

(g)

Includes limited partner interests in various limited partnerships ("LPs") that invest primarily in U.S. and non-U.S.
investments either directly, or through other partnerships or funds with a focus on venture capital, buyouts, expansion
capital, or companies undergoing financial distress or significant restructuring. The NAV of the LPs and of the capital
account of each investor is determined by the GP of each LP. Marketable securities held by the LPs are valued based on the
closing price on the valuation date on the exchange where they are principally traded and may be adjusted for legal
restrictions, if any. Investments without a public market are valued based on assumptions made and valuation techniques
used by the GP, which consist of unobservable inputs. Such valuation techniques may include discounted cash flow
analysis, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received
from third parties. The LPs are typically funded over time as capital is needed to fund purchases and distributions are
received as the partnerships liquidate their underlying asset holdings.

Includes hedge funds and funds of funds that pursue multiple strategies to diversify risks and reduce volatility. The funds
account for their portfolio of assets at fair value and calculate the NAV of their fund on a monthly basis. The funds limit
the frequency of redemptions to manage liquidity and protect the interests of the funds and its shareholders.

Includes open-end funds and unit investment trusts that invest in various asset classes including: U.S. and non-U.S.
corporate debt, U.S. government debt, municipal bonds, U.S. equity, non-U.S. developed and emerging markets equity, and
commodities. The funds account for their portfolio of assets at fair value and calculate the NAV of the funds on a daily
basis, and shares can be redeemed at the NAV. Therefore, the undiscounted NAV as reported by the funds is used as the
fair value measurement.

The following table summarizes the fair value of the non-U.S. pension plan assets by asset class:

(In millions)
Investments measured at net asset value: (a)

Investment funds: (b)
Debt securities

Asset allocation
Insurance contracts (c)

Total plan assets at fair value
(a)

As of September 30,

2020

2019

$

$

4

2

12

18

$

$

4

2

9

15

These investments are measured at fair value using the NAV and have therefore not been classified in the fair value
hierarchy.

(b)

Includes collective investment funds that invest in various asset classes including U.S. and non-U.S. corporate debt and
equity, and derivatives. The funds account for their portfolio of assets at fair value and calculate the NAV of the funds on
a daily basis, and shares can be redeemed at the NAV. Therefore, the undiscounted NAV as reported by the funds is used
as the fair value measurement.

(c) Most non-U.S. pension plans are funded through insurance contracts, which provide for a guaranteed interest credit and a
profit-sharing adjustment based on the actual performance of the underlying investment assets of the insurer. The fair
value of the contract is determined by the insurer based on the premiums paid by the Company plus interest credits plus
the profit-sharing adjustment less benefit payments. The underlying assets of the insurer are invested in compliance with
local rules or law, which tend to require a high allocation to fixed income securities.

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The following table summarizes the fair value of the post-retirement plan assets by asset class:

(In millions)
Investments measured at net asset value: (a)

Group life insurance contract measured at net asset value (b)

Total plan assets at fair value
(a)

As of September 30,

2020

2019

$

$

206

206

$

$

191

191

These investments are measured at fair value using the NAV and have therefore not been classified in the fair value
hierarchy.

(b)

The group life insurance contracts are held in a reserve of an insurance company that provides for investment of pre-
funding amounts in a family of pooled separate accounts. The fair value of each group life insurance contract is primarily
determined by the value of the units it owns in the pooled separate accounts that back the policy. Each of the pooled
separate accounts provides a unit NAV on a daily basis, which is based on the fair value of the underlying assets owned
by the account. The post-retirement benefit plans can transact daily at the unit NAV without restriction. As of
September 30, 2020, the asset allocation of the pooled separate accounts in which the contracts invest was approximately
66% fixed income securities, 24% U.S. equity securities and 10% non-U.S. equity securities.

Savings Plans

Substantially all of the Company’s U.S. employees are eligible to participate in savings plans sponsored by the Company. The
plans allow employees to contribute a portion of their compensation on a pre-tax and after-tax basis in accordance with
specified guidelines. The Company matches a percentage of employee contributions up to certain limits. The Company's
expense related to these savings plans was $8 million, $8 million, $7 million and $0 million for fiscal 2020 and 2019
(Successor), the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017
through December 15, 2017 (Predecessor).

16. Share-based Compensation

The Predecessor Company's common and preferred stock were canceled and new common stock was issued on the Emergence
Date. Accordingly, the Predecessor Company’s then existing share-based compensation awards were also canceled, which
resulted in the recognition of any previously unamortized expense on the date of cancellation. As a result, share-based
compensation for the Successor and Predecessor periods are not comparable.

Successor

2017 Equity Incentive Plan

On the Emergence Date, the Company adopted the Avaya Holdings Corp. 2017 Equity Incentive Plan (the "2017 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 ("PRSUs") and other forms of
awards granted or denominated in shares of the Company's common stock, as well as certain cash-based awards.

2019 Equity Incentive Plan

On November 13, 2019, the Board of Directors of the Company (the "Board") approved the Avaya Holdings Corp. 2019 Equity
Incentive Plan and on January 8, 2020 approved an amendment to such plan (as so amended, the "2019 Plan"). On November
13, 2019, the Board also adopted the 2019 Omnibus Inducement Equity Plan (the "Inducement Plan"), which reserved up to
1,700,000 shares of the Company's common stock for awards to be made to certain prospective employees pursuant to the
"inducement grant" exemption under the NYSE Listing Rules. On March 4, 2020, the stockholders of the Company approved
the 2019 Plan and, as of such date, no additional awards may be granted under the 2017 Plan or the Inducement Plan (together,
the "Prior Plans"). The Board or any committee duly authorized thereby administers the 2019 Plan. The administrator has broad
authority to, among other things: (i) select participants; (ii) determine the types of awards that participants are to receive and the
number of shares that are to be granted under such awards; and (iii) establish the terms and conditions of awards, including the
price to be paid for the shares or the awards.

The 2019 Plan provides an initial pool of 18,800,000 shares of common stock (the "Initial Pool") that may be issued or granted,
which can be adjusted for shares that become available from existing awards issued under the Prior Plans in accordance with
the terms of the 2019 Plan. The Initial Pool will be reduced by one share of common stock for every option granted and 1.7
shares for any awards granted other than options. As of September 30, 2020, there were 14,407,473 shares available to be
granted under the 2019 Plan. If any awards granted under the 2019 Plan expire, terminate or are canceled or forfeited for any
reason without having been exercised in full, the number of shares of common stock underlying any unexercised award will

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again be available for issuance under the 2019 Plan. Any award under the 2019 Plan settled in cash will not be counted against
the foregoing maximum share limitations. Shares withheld by the Company in satisfaction of the applicable exercise price or
withholding taxes upon the issuance, vesting or settlement of awards, shares reacquired by the Company on the open market or
otherwise using cash proceeds from the exercise of options, in each case, shall not be available for future issuance under the
2019 Plan or the Prior Plans.

Stock options and RSUs granted to employees generally vest ratably over a period of three years. PRSUs granted to certain
senior executive employees vest at the end of a three year service period. Awards granted to non-employee directors during
fiscal 2020 and 2019 vest immediately, while those granted during the period from December 16, 2017 through September 30,
2018 vested ratably over one year. The aggregate grant date fair value of all awards granted to any non-employee director
during any fiscal year (excluding awards made pursuant to deferred compensation arrangements made in lieu of all or a portion
of cash retainers and any dividends payable in respect of outstanding awards) may not exceed $750,000. As of the Emergence
Date, forfeitures are accounted for as incurred.

Pre-tax share-based compensation expense for fiscal 2020, fiscal 2019 and the period from December 16, 2017 through
September 30, 2018 was $30 million, $25 million and $19 million and the income tax benefit recognized in the Consolidated
Statements of Operations for share-based compensation arrangements was $2 million, $2 million and $1 million, respectively.

Restricted Stock Units

Compensation cost for RSUs granted to employees and non-employee directors is generally measured by using the closing
market price of the Company's common stock at the date of grant.

A summary of RSU activity for fiscal 2020 is presented below:

Non-vested at September 30, 2019

Granted
Vested

Forfeited

Non-vested at September 30, 2020

Restricted Stock
Units
(In thousands)

Weighted
Average Grant-
Date Fair Value

2,797 $

2,128

(1,533)

(698)

2,694 $

15.60

12.42

15.31

15.30

13.32

As of September 30, 2020, there was $31 million of unrecognized share-based compensation expense related to RSUs, which is
expected to be recognized over a period up to 2.9 years, or 2.0 years on a weighted average basis. The weighted average grant
date fair value for RSUs granted during fiscal 2020, fiscal 2019 and the period from the Emergence Date through September 30,
2018 was $12.42, $15.29 and $16.11, respectively. The total grant date fair value of RSUs vested during fiscal 2020, fiscal
2019 and the period from the Emergence Date through September 30, 2018 was $23 million, $27 million and $6 million,
respectively.

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Performance Restricted Stock Units

The Company grants PRSUs which vest based on the attainment of specified performance metrics for each of the next three
separate fiscal years (collectively the "Performance Period"), and the Company's total shareholder return over the Performance
Period as compared to the total shareholder return for a specified index of companies over the same period (the “Performance
PRSUs”). During the Performance Period, the Company adjusts compensation expense for the Performance PRSUs based on its
best estimate of attainment of the specified annual performance metrics. The cumulative effect on current and prior periods of a
change in the estimated number of Performance PRSUs that are expected to be earned during the Performance Period is
recognized as an adjustment to earnings in the period of the revision.

The weighted average grant date fair value for Performance PRSUs granted during fiscal 2020 and 2019 was $13.69 and
$17.39, respectively. There were no Performance PRSUs granted during the period from December 16, 2017 through
September 30, 2018. The grant date fair value of the Performance PRSUs was determined using a Monte Carlo simulation
model that incorporated multiple valuation assumptions, including the probability of achieving the total shareholder return
market condition and the following assumptions presented on a weighted-average basis:

Expected volatility(1)
Risk-free interest rate(2)
Dividend yield(3)

Fiscal years ended September 30,

2020

2019

55.75 %

53.00 %

1.61 %

— %

2.46 %

— %

(1)

Expected volatility based on a blend of Company and peer group company historical data adjusted for the Company's leverage.
(2) Risk-free interest rate based on U.S. Treasury yields with a term equal to the remaining Performance Period as of the grant date.
(3) Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

The Company has also granted PRSUs which become eligible to vest if prior to the vesting date the average closing price of one
share of the Company’s Common Stock for sixty consecutive days equals or exceeds a specified price (the “Market PRSUs”).
The grant date fair value of the Market PRSUs is recognized as expense ratably over the vesting period and is not adjusted in
future periods for the success or failure to achieve the specified market condition.

The grant date fair value of Market PRSUs granted during fiscal 2019 was $11.18. There were no Market PRSUs granted
during fiscal 2020 or the period from December 16, 2017 through September 30, 2018. The grant date fair value of Market
PRSUs was determined using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the
probability of achieving the specified market condition and the following assumptions:

Expected volatility(1)
Risk-free interest rate(2)
Dividend yield(3)

Fiscal year ended
September 30, 2019

53.76 %

2.45 %

— %

(1)

Expected volatility based on a blend of Company and peer group company historical data adjusted for the Company's leverage.
(2) Risk-free interest rate based on U.S. Treasury yields with a term equal to the remaining Performance Period as of the grant date.
(3) Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

A summary of total PRSU activity for fiscal 2020 is presented below:

Non-vested at September 30, 2019

Granted

Change in shares due to performance

Forfeited

Non-vested at September 30, 2020

Performance
Restricted Stock
Units
(In thousands)

Weighted
Average Grant-
Date Fair Value

274 $

662

(314)

(34)

588 $

11.18

13.69

13.71

13.29

12.53

As of September 30, 2020, there was $5 million of unrecognized share-based compensation expense related to PRSUs, which is
expected to be recognized over a period of 2.4 years or 2.1 years on a weighted average basis.

119

Stock Options

A lattice option pricing model was used to determine the fair value of options granted on the Emergence Date as they were
premium priced options. The Black-Scholes option pricing model is used to value all options granted after the Emergence Date.
The weighted average grant date fair value of options granted in fiscal 2020 and the period from the Emergence Date through
September 30, 2018 was $6.11 and $8.18, respectively. There were no options granted during fiscal 2019. The weighted
average grant date assumptions used in calculating the fair value of options granted on the Emergence Date and thereafter were
as follows:

Fiscal year ended
September 30, 2020

$

Exercise price
Expected volatility(1)
Expected life (in years)(2)
Risk-free interest rate(3)
Dividend yield(4)
(1) Expected volatility based on peer group companies adjusted for the Company's leverage.
(2) Expected life based on the vesting terms of the option and a contractual life of ten years.
(3) Risk-free interest rate based on U.S. Treasury yields with a term equal to the expected option term.
(4) Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

11.38

56.76 %

5.97

1.71 %

— %

Period from
December 16, 2017
through
September 30, 2018

$

21.66

$

49.67 %

5.86

2.72 %

— %

Emergence Date

19.46

56.59 %

6.65

2.35 %

— %

A summary of option activity for fiscal 2020 is presented below:

Outstanding at September 30, 2019

Granted

Forfeited or expired

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Options
(In thousands)

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual Term
(in years)

Aggregate
Intrinsic Value
(In thousands)

925

164

(147)

942

715

$

$

$

19.59

11.38

19.84

18.13

19.54

7.3 $

6.9 $

625

—

The intrinsic value is the difference between the Company's common stock price and the option exercise price. There were no
stock options exercised during fiscal 2020 and 2019. The total pretax intrinsic value of stock options exercised for the period
from December 16, 2017 through September 30, 2018 was not material. As of September 30, 2020, there was $1 million of
unrecognized share-based compensation expense related to stock options, which is expected to be recognized over a period up
to 2.4 years, or 1.5 years on a weighted average basis. The total grant date fair value of stock options vested during fiscal 2020,
fiscal 2019 and the period from December 16, 2017 through September 30, 2018 was $2 million, $4 million and $1 million
respectively.

Employee Stock Purchase Plan

On January 8, 2020, the Board approved the Avaya Holdings Corp. 2020 Employee Stock Purchase Plan ("ESPP"). A
maximum of 5,500,000 shares of the Company's common stock has been reserved for issuance under the ESPP. Under the
ESPP, eligible employees may purchase the Company's common stock through payroll deductions at a discount not to exceed
15% of the lower of the fair market values of the Company's common stock as of the beginning or end of each 3-month offering
period. Payroll deductions are limited to 10% of the employee's eligible compensation and a maximum of 6,250 shares of the
Company's common stock may be purchased by an employee each offering period. The first offering period began on June 1,
2020. During fiscal 2020, the Company withheld $3 million of eligible employee compensation for purchases of common stock
and issued 204,445 shares under the ESPP. As of September 30, 2020, 5,295,555 shares of common stock were available for
future issuance under the ESPP.

The grant date fair value for shares issued under the ESPP is measured on the date that each offering period commences. The
average grant date fair value for the offering periods that commenced during fiscal 2020 was $4.99 per share. The grant date
fair value was determined using a Black-Scholes option pricing model with the following average grant date assumptions:

120

Expected volatility(1)
Risk-free interest rate(2)
Dividend yield(3)

Fiscal year ended
September 30, 2020

93.51 %

0.13 %

— %

(1)

Expected volatility based on the Company's historical data.

(2) Risk-free interest rate based on U.S. Treasury yields with a term equal to the length of the offering period.
(3) Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

As of September 30, 2020, there was $0.4 million of unrecognized share-based compensation expense related to the ESPP,
which is expected to be recognized over a period of 0.2 years.

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. No income tax benefit was recognized in the income statement for
share-based compensation arrangements for the period from October 1, 2017 through December 15, 2017.

Option Awards

Under the terms of the Predecessor Company's equity incentive plan, stock options could not be granted with an exercise price
of less than the fair market value of the underlying stock on the date of grant. Share-based compensation expense recognized in
the Consolidated Statements of Operations was based on awards ultimately expected to vest. Forfeitures were estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates in accordance
with the authoritative guidance. All options awarded under the Predecessor Company's equity incentive plan expired the earlier
of ten years from the date of grant or upon cessation of employment, in which event there were limited exercise provisions
allowed for vested options.

Subsequent to October 1, 2012, the Company granted time-based options to purchase Predecessor common stock. Time-based
options vested over their performance periods and were payable in shares of common stock upon vesting and exercise. The
performance period for time-based options was generally three to four years. Compensation expense equal to the fair value of
the option measured on the grant date was recognized utilizing graded attribution over the requisite service period.

During the period from October 1, 2017 through December 15, 2017, there were no options granted or exercised and
19,842,268 options were canceled upon the Company’s emergence from bankruptcy.

Restricted Stock Units

Avaya Holdings had issued RSUs, each of which represented the right to receive one share of its Predecessor common stock
when fully vested. The fair value of the common stock underlying the RSUs was estimated by the Compensation Committee of
Avaya Holdings’ Board of Directors at the date of grant.

During the period from October 1, 2017 through December 15, 2017, there were no RSUs granted or vested and 369,584
unvested RSUs were canceled upon the Company’s emergence from bankruptcy.

17. Capital Stock

Successor

Preferred Stock

The Successor 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.

On October 31, 2019, the Company issued 125,000 shares of its 3% Series A Convertible Preferred Stock, par value $0.01 per
share ("Series A Preferred Stock"), to RingCentral for an aggregate purchase price of $125 million. The Series A Preferred
Stock is convertible into shares of the Company's common stock at an initial conversion price of $16.00 per share, which
represents an approximately 9% interest in the Company's common stock on an as-converted basis as of September 30, 2020,
assuming no holders of options, warrants, convertible notes or similar instruments exercise their exercise or conversion rights.
The holders of the Series A Preferred Stock are entitled to vote, on an as-converted basis, together with holders of the
Company's common stock on all matters submitted to a vote of the holders of the common stock. Holders of the Series A
Preferred Stock are entitled to receive dividends, in preference and priority to holders of the Company's common stock, which

121

accrue on a daily basis at the rate of 3% per annum of the stated value of the Series A Preferred Stock. The stated value of the
Series A Preferred Stock was initially $1,000 per share and will be increased by the sum of any dividends on such shares not
paid in cash. These dividends are cumulative and compound quarterly. The holders of the Series A Preferred Stock participate
in any dividends the Company pays on its common stock, equal to the dividend which holders would have received if their
Series A Preferred Stock had been converted into common stock on the date such common stock dividend was determined. In
the event the Company is liquidated or dissolved, the holders of the Series A Preferred Stock are entitled to receive an amount
equal to the liquidation preference (which equals the then stated value plus any accrued and unpaid dividends) for each share of
Series A Preferred Stock before any distribution is made to holders of the Company's common stock.

The Series A Preferred Stock are redeemable at the Company's election upon the termination of the Framework Agreement. In
addition, the holders of the Series A Preferred Stock have certain rights to require the Company to redeem or put rights to
require the Company to repurchase all or any portion of the Series A Preferred Stock. The holders can exercise such redemption
rights, upon at least 21 days' notice, after the termination of the Framework Agreement or upon the occurrence of certain
events. If and to the extent the redemption right is exercised, the Company would be required to purchase each share of Series
A Preferred Stock at the per share price equal to the stated value of the Series A Preferred Stock which will be increased by the
sum of any dividends on such shares that have accrued and have been paid in kind, plus all accrued but unpaid dividends. Given
that the holders of the Series A Preferred Stock may require the Company to redeem all or a portion of its shares, the Series A
Preferred Stock is classified in the mezzanine section of the Consolidated Balance Sheets between Total liabilities and
Stockholders' equity. As of September 30, 2020, the carrying value of the Series A Preferred Stock was $128 million, which
includes $3 million of accreted dividends paid in kind.

In connection with the issuance of the Series A Preferred Stock, the Company granted RingCentral certain customary consent
rights with respect to certain actions by the Company, including amending the Company's organizational documents in a
manner that would have an adverse effect on the Series A Preferred Stock and issuing securities that are senior to, or equal in
priority with, the Series A Preferred Stock. In addition, pursuant to an Investor Rights Agreement, until such time when
RingCentral and its affiliates hold or beneficially own less than 4,759,339 shares of the Company's common stock (on an as-
converted basis), RingCentral has the right to nominate one person for election to the Company's Board of Directors. The
director designated by RingCentral has the option (i) to serve on the Company's Audit and Nominating and Corporate
Governance Committees or (ii) to attend (but not vote at) all of the Company's Board of Directors' committee meetings. During
the fourth quarter of fiscal 2020, RingCentral nominated Robert Theis for election to the Company's Board of Directors. On
November 6, 2020, Robert Theis was elected to join the Board.

As of September 30, 2020, there were 125,000 shares of preferred stock outstanding. There were no preferred shares
outstanding as of September 30, 2019.

Common Stock

The Successor 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 September 30, 2020, there were 83,278,383 shares issued and outstanding. As of
September 30, 2019, there were 111,046,085 shares issued and 111,033,405 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 September 30, 2020,
there were no warrant repurchases under the program.

On October 1, 2019, the Board of Directors of the Company approved a share repurchase program authorizing the Company to
repurchase the Company's common stock for an aggregate expenditure of up to $500 million. The repurchases may be made
from time to time in the open market, through block trades or in privately negotiated transactions. The Company adopted a
purchase plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, to implement the share
repurchase program. The share repurchase program does not obligate the Company to purchase any common stock and may be
terminated, increased or decreased by the Board in its discretion at any time. All shares that are repurchased under the program
are retired by the Company. During fiscal 2020, the Company repurchased 28,923,664 shares of its common stock at a
weighted average price per share of $11.41, including transaction costs. As of September 30, 2020, the remaining authorized
amount for share repurchases under this program was $170 million.

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Predecessor

In connection with the Successor Company’s Plan of Reorganization and emergence from bankruptcy, all equity interests in the
Predecessor Company were canceled, including preferred and common stock, warrants and equity-based awards. As a result,
the carrying value of the Predecessor Company’s equity interests were adjusted to $0 during the period from October 1, 2017
through December 15, 2017. See Note 24, “Fresh Start Accounting,” for additional information.

18. (Loss) Earnings Per Common Share

Basic (loss) earnings per share is calculated by dividing net (loss) income attributable to common stockholders by the weighted
average number of common shares outstanding. Diluted (loss) 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 Series A Preferred Stock were converted into shares of the Company’s common stock; 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 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 (loss) income attributable to common shareholders and the computation of
basic and diluted (loss) earnings per share for the periods indicated:

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

(680)

$

(671)

$

(7)

(687)

—

(671)

287

—

287

100.0 %

100.0 %

100.0 %

$

2,977

(6)

2,971

86.9 %

$

(687)

$

(671)

$

287

$

2,582

(In millions, except per share amounts)

(Loss) Earnings per share:

Numerator

Net (loss) income

Dividends and accretion to preferred stockholders

Undistributed (loss) income

Percentage allocated to common stockholders(1)
Numerator for basic and diluted (loss) earnings per
common share

Denominator
Denominator for basic (loss) earnings per weighted
average common shares

Effect of dilutive securities

Restricted stock units

Denominator for diluted (loss) earnings per weighted
average common shares

92.2

—

92.2

110.8

—

110.8

109.9

1.2

111.1

2.61

2.58

109.9

109.9

100.0 %

$

$

497.3

—

497.3

5.19

5.19

497.3

572.4

86.9 %

(Loss) earnings per common share

Basic

Diluted

$

$

(7.45)

(7.45)

$

$

(6.06)

(6.06)

$

$

(1) Basic weighted average common stock outstanding
Basic weighted average common stock and common

stock equivalents (preferred shares)

92.2

92.2

110.8

110.8

Percentage allocated to common stockholders

100.0 %

100.0 %

The Company's preferred stock are participating securities, which requires the application of the two-class method to calculate
basic and diluted earnings per share. Under the two-class method, undistributed earnings are allocated to common stock and
participating securities according to their respective participating rights in undistributed earnings, as if all the earnings for the
period had been distributed. Basic (loss) earnings per common share is computed by dividing the net (loss) income attributable
to common stockholders by the weighted average number of common shares outstanding during the period. Net (loss) income
attributable to common stockholders is reduced for preferred stock dividends earned and accretion recognized during the
period. No allocation of undistributed earnings to participating securities was performed for periods with net losses as such
securities do not have a contractual obligation to share in the losses of the Company.

123

For fiscal 2020, the Company excluded 0.9 million stock options, 2.7 million RSUs, 0.2 million shares issuable under the ESPP,
0.1 million shares of Series A Preferred Stock and 5.6 million Emergence Date Warrants from the diluted loss per share
calculation as their effect would have been anti-dilutive. The Company also excluded 1.0 million PRSUs from the diluted loss
per share calculation as either their performance metrics have not been attained or their effect would have been anti-dilutive.
For fiscal 2019, the Company excluded 0.9 million stock options, 2.8 million RSUs and 5.6 million Emergence Date Warrants
from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 0.5 million
PRSUs from the diluted loss per share calculation as their performance metrics have not been attained. During the period from
December 16, 2017 through September 30, 2018, the Company excluded 1.1 million stock options, 0.2 million restricted stock
units and 5.6 million Emergence Date Warrants to purchase common shares 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 from the diluted (loss) earnings per share
calculation for fiscal 2020 and 2019 and the period from December 16, 2017 through September 30, 2018 as their effect would
have been anti-dilutive. For purposes of considering the Convertible Notes in determining diluted (loss) 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, if it would have a dilutive impact, 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 September 30, 2020, 2019 and 2018, they were excluded
from the diluted (loss) earnings per share calculation for fiscal 2020, fiscal 2019 and the period from December 16, 2017
through September 30, 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.

19. 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. Revenue from customers who upgrade and acquire new technology through the
Company's subscription offerings is reported within the Services segment.

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.

124

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

(In millions)
REVENUE

Products & Solutions

Services
Unallocated Amounts (1)

GROSS PROFIT

Products & Solutions

Services
Unallocated Amounts (2)

OPERATING EXPENSES

Selling, general and administrative

Research and development

Amortization of intangible assets

Impairment charges

Restructuring charges, net

OPERATING (LOSS) INCOME

INTEREST EXPENSE, OTHER INCOME

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

$

$

1,074

$

1,228

$

$

$

1,805

(6)

2,873

669

1,092

(181)

1,580

$

$

1,680

(21)

2,887

791

996

(212)

1,575

1,013

1,001

207

161

624

30

2,035

(455)

204

162

659

22

2,048

(473)

$

$

$

1,052

1,401

(206)

2,247

696

843

(396)

1,143

888

172

127

—

81

1,268

(125)

253

351

—

604

169

196

(3)

362

264

38

10

—

14

326

36

(EXPENSE), NET AND REORGANIZATION
ITEMS, NET

3,400
(LOSS) INCOME BEFORE INCOME TAXES
3,436
(1) Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from

(163)
(618) $

(196)
(669) $

(134)
(259)

$

$

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.

As of September 30,

2020

2019

$

31

$

1,501

4,699

662

1,504

4,784

6,950

(In millions)
ASSETS:

Products & Solutions

Services
Unallocated Assets (1)

Total
(1) Unallocated Assets consist of cash and cash equivalents, accounts receivable, contract assets, contract costs, deferred

6,231

$

$

income tax assets, property, plant and equipment, operating lease right-of-use assets, acquired intangible assets and other
assets. Unallocated Assets are managed at the corporate level and are not identified with a specific segment.

The decrease in Products & Solutions total assets was mainly driven by the $624 million impairment of goodwill recorded
during fiscal 2020 as described in Note 7, "Goodwill, net."

Geographic Information

Financial information relating to the Company’s revenue and long-lived assets by geographic area is as follows:

125

(In millions)
REVENUE(1):
U.S.
International:
EMEA
APAC—Asia Pacific

Americas International—Canada and Latin America

Total International
Total

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

1,640 $

1,553

$

1,184

$

714
296

223
1,233
2,873 $

753
327

254
1,334
2,887

$

$

603
256

204
1,063
2,247

$

331

166
57

50
273
604

(In millions)
LONG-LIVED ASSETS(2)
U.S.

International:

EMEA

APAC—Asia Pacific

Americas International—Canada and Latin America

Total International

Total

(1) Revenue is attributed to geographic areas based on the location of customers.
(2) Represents property, plant and equipment, net.

As of September 30,

2020

2019

$

191

$

184

57

13

7

77

54

10

7

71

$

268

$

255

126

20. 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
Interest Rate
Swaps

Other

Balance as of September 30, 2017 (Predecessor)

(1,375)

(72)

Accumulated
Other
Comprehensive
(Loss) Income

(1,448)

Other comprehensive (loss) income before

reclassifications

Amounts reclassified to earnings

Pension settlement

Provision for income taxes

Balance as of December 15, 2017 (Predecessor)

Elimination of Predecessor Company Accumulated
other comprehensive loss

Balance as of December 15, 2017 (Predecessor)

Balance as of December 16, 2017 (Successor)
Other comprehensive income (loss) before
reclassifications

(Provision for) benefit from income taxes

Balance as of September 30, 2018 (Successor)
Other comprehensive (loss) income before

reclassifications

Amounts reclassified to earnings

Benefit from income taxes

(24)

16

721

(58)

(720)

720

3

—

—

—

(69)

69

—

—

—

—

—

—

—

(1)

—

—

—

—

(1)

1

$

$

— $

— $

— $

— $

— $

— $

— $

— $

70

(19)

51

(186)

—

29

(31)

—

(31)

24

—

—

(3)

1

(2)

(87)

10

19

—

—

—

—

—

Balance as of September 30, 2019 (Successor)

$

(106) $

(7) $

(60) $

— $

Other comprehensive loss before reclassifications

Amounts reclassified to earnings

Benefit from income taxes

(2)

—

—

(66)

27

—

(69)

35

3

—

—

—

(21)

16

721

(58)

(790)

790

—

—

36

(18)

18

(249)

10

48

(173)

(137)

62

3

Balance as of September 30, 2020 (Successor)

$

(108) $

(46) $

(91) $

— $

(245)

Reclassifications from Accumulated other comprehensive (loss) income related to changes in unamortized pension, post-
retirement and postemployment benefit-related items are recorded in Other income (expense), net. Reclassifications from
Accumulated other comprehensive (loss) income related to the unrealized loss on interest rate swap agreements are recorded in
Interest expense. Reclassifications from Accumulated other comprehensive (loss) income related to foreign currency translation
reflect the impact of certain liquidated entities and are recorded in Other income (expense), net.

21. Related Party Transactions

Successor

As of September 30, 2020, the Company's Board of Directors was comprised of seven directors, including the Company's Chief
Executive Officer, James M. Chirico, Jr., and six non-employee directors, William D. Watkins, Stephan Scholl, Susan L.
Spradley, Stanley J. Sutula, III, Scott D. Vogel and Jacqueline E. Yeaney. On November 6, 2020, Robert Theis was elected to
join the Company's Board of Directors as a result of his nomination by RingCentral pursuant to an Investor Rights Agreement
entered into in conjunction with the issuance of the Company's Series A Preferred Stock.

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 the Company and serves on the board of directors of
Flex Ltd. ("Flex"), an electronics design manufacturer. During fiscal 2020, the Company sold goods and services to subsidiaries
of Flex of $1 million. Sales to Flex during fiscal 2019 (Successor), the period from December 16, 2017 through September 30,
2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) were not material. As of

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September 30, 2020, the Company had outstanding accounts receivable due from Flex of $1 million. Outstanding accounts
receivable due from Flex as of September 30, 2019 was not material. During fiscal 2020 and 2019 (Successor), the period from
December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017
(Predecessor), the Company purchased goods and services from subsidiaries of Flex of $23 million, $29 million, $19 million
and $6 million, respectively. As of September 30, 2020 and 2019, the Company had outstanding accounts payable due to Flex
of $3 million and $6 million, respectively.

Effective April 13, 2020, Stephan Scholl, a Director of the Company, assumed the role of Chief Executive Officer of Alight
Solutions LLC ("Alight"), a provider of integrated benefits, payroll and cloud solutions. During fiscal 2020, the Company
purchased goods and services from subsidiaries of Alight of $5 million. As of September 30, 2020, the Company had
outstanding accounts payable due to Alight of $1 million.

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

Laurent Philonenko was a Senior Vice President of Avaya Holdings through February 15, 2019. While he was a Senior Vice
President of Avaya Holdings, Mr. Philonenko served as an Advisor to Koopid, Inc. ("Koopid"), a software development
company specializing in mobile communications, a position he had held until January 2018. For the period from December 16,
2017 through September 30, 2018, the Company purchased goods and services from Koopid of $1 million. For the period from
October 1, 2017 through December 15, 2017 (Predecessor), purchased goods and services from Koopid were not material.

Ronald A. Rittenmeyer was a Director of Avaya Holdings through April 29, 2018. While he was a Director of Avaya Holdings,
Mr. Rittenmeyer served on the board of directors of Tenet Healthcare Corporation ("Tenet Healthcare"), a healthcare services
company, and also served on the board of directors of American International Group, Inc. ("AIG"), a global insurance
organization. For the period from December 16, 2017 through September 30, 2018, sales of the Company’s products and
services to Tenet Healthcare were $1 million. For the period from October 1, 2017 through December 15, 2017 (Predecessor),
sales of the Company's products and services to Tenet Healthcare were not material. For the period from December 16, 2017
through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), sales
of the Company’s products and services to AIG were $5 million and $2 million, respectively.

Predecessor

In connection with the acquisition of Avaya Inc., through Avaya Holdings by Silver Lake Partners ("Silver Lake"), TPG Capital
("TPG") and their respective affiliates (collectively, the "Predecessor Sponsors"), in a transaction that was completed on
October 26, 2007 (the "Merger"), Avaya Holdings entered into certain stockholder agreements and registration rights
agreements with the Predecessor Sponsors and various co-investors. In addition, Avaya Holdings entered into a management
services agreement with affiliates of the Predecessor Sponsors and, from time to time, Avaya Holdings entered into various
other contracts with companies affiliated with the Predecessor Sponsors. These arrangements terminated upon emergence from
bankruptcy. In addition, all Predecessor Company equity held by the Predecessor Sponsors was canceled. No fees were paid to
the Predecessor Sponsors in the period from October 1, 2017 through December 15, 2017 (Predecessor).

Stockholders’ Agreement

In connection with the Merger, Avaya Holdings entered into a stockholders’ agreement with the Predecessor Sponsors and
certain of their affiliates. The stockholders’ agreement was amended and restated in connection with the financing of certain
acquisitions. The stockholders’ agreement contained certain restrictions on the Predecessor Sponsors’ and their affiliates’
transfer of Avaya Holdings’ equity securities, contained provisions regarding participation rights, contained standard tag-along
and drag-along provisions, provided for the election of Avaya Holdings’ directors, mandated board of directors approval of
certain matters to include the consent of each Predecessor Sponsor and generally set forth the respective rights and obligations
of the stockholders who were parties to that agreement. None of Avaya Holdings’ officers or directors were parties to the
agreement, although certain of Avaya Holdings' non-employee directors may have had an indirect interest in the agreement to
the extent of their affiliations with the Predecessor Sponsors. This agreement was terminated upon emergence from bankruptcy.

Registration Rights Agreement

In addition, in connection with the Merger, Avaya Holdings entered into a registration rights agreement with the Predecessor
Sponsors and certain of their affiliates, which was amended and restated in connection with the financing of certain
acquisitions. Pursuant to the registration rights agreement, as amended, Avaya Holdings would provide the Predecessor
Sponsors and certain of their affiliates party thereto with certain demand registration rights. In addition, in the event that Avaya
Holdings registered shares of common stock for sale to the public, Avaya Holdings would be required to give notice of such
registration to the Predecessor Sponsors and their affiliates party to the agreement of its intention to effect such a registration,
and, subject to certain limitations, the Predecessor Sponsors and such holders would have piggyback registration rights
providing them with the right to require Avaya Holdings to include shares of common stock held by them in such registration.
Avaya Holdings would have been required to bear the registration expenses, other than underwriting discounts and
commissions and transfer taxes, if any, associated with any registration of shares by the Predecessor Sponsors or other holders

128

described above. Avaya Holdings had agreed to indemnify each holder of its common stock covered by the registration rights
agreement for violations of federal or state securities laws by it in connection with any registration statement, prospectus or any
preliminary prospectus. Each holder of such securities had in turn agreed to indemnify Avaya Holdings for federal or state
securities law violations that occur in reliance upon written information the holder provided to Avaya Holdings in connection
with any registration statement in which a holder of such securities was participating. None of Avaya Holdings’ officers or
directors were a party to this agreement, although certain of Avaya Holdings’ non-employee directors may have had an indirect
interest in the agreement to the extent of their affiliations with the Predecessor Sponsors. This agreement was terminated upon
emergence from bankruptcy.

Management Services Agreement and Consulting Services

Both Avaya Holdings and Avaya Inc. were party to a Management Services Agreement with Silver Lake Management
Company, L.L.C., an affiliate of Silver Lake, and TPG Capital Management, L.P., an affiliate of TPG, collectively "the
Managers," pursuant to which the Managers provided management and financial advisory services to the Company. Pursuant to
the Management Services Agreement, the Managers received a monitoring fee of $7 million per annum and reimbursement on
demand for out-of-pocket expenses incurred in connection with the provision of such services. In the event of a financing,
acquisition, disposition or change of control transaction involving the Company during the term of the Management Services
Agreement, the Managers had the right to require the Company to pay a fee equal to customary fees charged by internationally-
recognized investment banks for serving as a financial advisor in similar transactions. The Management Services Agreement
could have been terminated at any time by the Managers, but otherwise had an initial term ending on December 31, 2017 that
automatically extended each December 31st for an additional year unless terminated earlier by the Company or the Managers.
The term had been automatically extended nine times since the execution of the agreement such that the term was through
December 31, 2026. In the event that the Management Services Agreement was terminated, the Company was required to pay a
termination fee equal to the net present value of the monitoring fees that would have been payable during the remaining term of
the Management Services Agreement. Therefore, if the Management Services Agreement was terminated at September 30,
2017, the termination fee would have been calculated using the term ending December 31, 2026. In accordance with the
Management Services Agreement, the Company did not record monitoring fees for the period from October 1, 2017 through
December 15, 2017 (Predecessor).

In December 2013, the Company and TPG Capital Management, L.P. executed a letter agreement reducing the portion of the
monitoring fees owed to TPG Capital Management, L.P. by $1,325,000 for fiscal 2014 and thereafter on an annual basis by
$800,000. Afshin Mohebbi was a Director of Avaya Holdings and Avaya Inc. and held the position of Senior Advisor of TPG.
Ronald A. Rittenmeyer was a Director of Avaya Holdings and Avaya Inc. and served in these capacities as a director designated
by TPG. The Company agreed to pay Messrs. Mohebbi and Rittenmeyer in aggregate $800,000 annually.

This Management Services Agreement and consulting services were terminated upon emergence from bankruptcy.

Transactions with Other Predecessor Sponsor Portfolio Companies

The Predecessor Sponsors were private equity firms that had investments in companies that did business with the Company. For
the period from October 1, 2017 through December 15, 2017, the Company recorded $10 million associated with sales of the
Company’s products and services to companies in which one or both of the Predecessor Sponsors had investments. For the
period from October 1, 2017 through December 15, 2017, the Company purchased goods and services of $15 million from
companies in which one or both of the Predecessor Sponsors had investments. In September 2015, a company in which a
Predecessor Sponsor had an investment merged with a commercial real estate services firm that began providing management
services associated with the Company’s leased properties. Included in the above purchased goods and services amounts was $5
million incurred by the Company for management services provided by the commercial real estate services firm for the period
from October 1, 2017 through December 15, 2017.

Arrangements Involving the Predecessor Company’s Directors and Executive Officers

In connection with the Merger, Avaya Holdings entered into a senior manager registration and preemptive rights agreement
with certain members of its senior management who owned shares of Avaya Holdings’ common stock and options and RSUs
convertible into shares of Avaya Holdings’ common stock. Pursuant to the senior manager registration and preemptive rights
agreement, the senior managers party thereto that held registrable securities thereunder were provided with certain registration
rights upon either (a) the exercise of the Predecessor Sponsors or their affiliates of demand registration rights under the
Predecessor Sponsors’ registration rights agreement discussed above or (b) any request by the Predecessor Sponsors to file a
shelf registration statement for the resale of such shares, as well as certain notification and piggyback registration rights. Avaya
Holdings was required to bear the registration expenses, other than underwriting discounts and commissions and transfer taxes,
if any, associated with any registration of stock by the senior managers as described above. Avaya Holdings had agreed to
indemnify each holder of registrable securities covered by the agreement for violations of federal or state securities laws by
Avaya Holdings in connection with any registration statement, prospectus or any preliminary prospectus. Each holder of such
registrable securities had in turn agreed to indemnify Avaya Holdings for federal or state securities law violations that occurred

129

in reliance upon written information the holder provided to Avaya Holdings in connection with any registration statement in
which a holder of such registrable securities was participating.

In addition, pursuant to the senior manager registration and preemptive rights agreement, the Company agreed to provide each
senior manager party thereto with certain preemptive rights to participate in any future issuance of shares of Avaya Holdings’
common stock to the Predecessor Sponsors or their affiliates.

In connection with the Merger, Avaya Holdings also entered into a management stockholders’ agreement with certain
management stockholders. The stockholders’ agreement contained certain restrictions on such stockholders’ transfer of Avaya
Holdings equity securities, contained rights of first refusal upon disposition of shares, contained standard tag-along and drag-
along provisions, and generally set forth the respective rights and obligations of the stockholders who were parties to the
agreement.

The senior manager registration and preemptive rights agreement and the management stockholders’ agreement terminated
upon emergence from bankruptcy.

22. Commitments and Contingencies

Legal Proceedings

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

In the opinion of the Company's management, while the outcome of these matters is uncertain, the likely results of these matters
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. However, an unfavorable resolution could have a material adverse effect on the Company's
financial position, results of operations or cash flows in the periods in which the matters are ultimately resolved, or in the
periods in which more information is obtained that changes management's opinion of the ultimate disposition.

During fiscal 2020 and 2019 (Successor) and the period from December 16, 2017 through September 30, 2018 (Successor),
there were no costs incurred in connection with the resolution of legal matters other than those incurred in the ordinary course
of business. During the period from October 1, 2017 through December 15, 2017 (Predecessor), costs incurred in connection
with the resolution of certain legal matters were $37 million.

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 Consolidated Balance Sheets, for actual experience. As of
September 30, 2020 and 2019, the amount reserved for product warranties was $2 million. For fiscal 2020 and 2019
(Successor), the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017
through December 15, 2017 (Predecessor), product warranty expense recorded in the Consolidated Statements of Operations
was $4 million, $3 million, $2 million and $1 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 September 30, 2020, the maximum potential payment obligation with regards to letters of credit, guarantees
and surety bonds was $52 million. The outstanding letters of credit are collateralized by restricted cash of $4 million which is
included in Other assets on the Consolidated Balance Sheets as of September 30, 2020.

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,

130

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 quality control standards.

Transactions with Nokia

Pursuant to the Contribution and Distribution Agreement effective October 1, 2000 (the "Contribution and Distribution
Agreement"), Nokia Corporation ("Nokia", formerly known as Lucent Technologies, Inc. ("Lucent")) contributed to the
Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the
"Contributed 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 Contributed Businesses and all contingent
liabilities primarily relating to the Contributed 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.

23. Emergence from Voluntary Reorganization under Chapter 11 Proceedings

Plan of Reorganization

On November 28, 2017, the Bankruptcy Court entered an order confirming the Plan of Reorganization. On the Emergence Date,
the Plan of Reorganization became effective and the Debtors emerged from bankruptcy.

On or following the Emergence Date and pursuant to the terms of the Plan of Reorganization, the following occurred:

•

•

•

•

•

Debtor-in-Possession Credit Agreement. The Company paid in full the debtor-in-possession credit agreement (the
"DIP Credit Agreement") in the amount of $725 million;

Predecessor Equity and Indebtedness. The Debtors' obligations under stock certificates, equity interests and/or any
other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of, or
ownership interest in, the Debtors or giving rise to any claim or equity interest were canceled, except as provided
under the Plan of Reorganization;

Successor Equity. The Company's certificate of incorporation was amended and restated to authorize the issuance of
605.0 million shares of Successor Company stock, consisting of 55.0 million shares of preferred stock, par value $0.01
per share, and 550.0 million shares of common stock, par value $0.01 per share, of which 110.0 million shares of
common stock were issued (as discussed below);

Exit Financing. The Successor Company entered into (1) a term loan credit agreement with a principal amount of
$2,925 million maturing on December 15, 2024, and (2) a $300 million asset-based revolving credit facility maturing
on December 15, 2022;

First Lien Debt Claims. All of the Predecessor Company's outstanding obligations under the variable rate term B-3,
B-4, B-6, and B-7 loans and the 7% and 9% senior secured notes (collectively, the "Predecessor first lien obligations")
were canceled, and the holders of claims under the Predecessor first lien obligations received 99.3 million shares of
Successor Company common stock. In addition, the holders of the Predecessor first lien obligations received cash in
the amount of $2,061 million;

131

•

•

•

Second Lien Debt Claims. All the Predecessor Company's outstanding obligations under the 10.50% senior secured
notes (the "Predecessor second lien obligations") were canceled, and the holders of claims under the Predecessor
second lien obligations received 4.4 million shares of Successor Company common stock. In addition, holders of the
Predecessor second lien obligations received warrants to purchase 5.6 million shares of Successor Company common
stock at an exercise price of $25.55 per warrant;

Claims of Pension Benefit Guaranty Corporation ("PBGC"). The Predecessor Company's outstanding obligations
under the Avaya Inc. Pension Plan for Salaried Employees ("APPSE") were terminated and transferred to the PBGC.
The PBGC received 6.1 million shares of Successor Company common stock and $340 million in cash; and

General Unsecured Claims. Holders of the Predecessor Company's general unsecured claims were to receive their pro
rata share of the general unsecured recovery pool. A liquidating trust was established in the amount of $58 million
(comprised of cash and stock) for the benefit of the general unsecured claims. Included in the 110.0 million Successor
Company common stock issued upon emergence were 0.2 million additional shares of common stock that were issued
(but were not outstanding) for the benefit of the general unsecured creditors. Any excess cash and/or common stock
not distributed to the general unsecured creditors was to be distributed to the holders of the Predecessor first lien
obligations.

Section 363 Asset Sale

In July 2017, the Company sold its networking business ("Networking" or the "Networking business") to Extreme Networks,
Inc. ("Extreme"). As part of the sale, Extreme paid the Company $70 million, deposited $10 million in an indemnity escrow
account and assumed certain liabilities, primarily lease obligations, of $20 million. The Networking business provided wired,
WLAN and Fabric technology, and included the related customers, personnel, software and technology assets. The Networking
business was comprised primarily of certain assets of the Company's Networking segment (which prior to the sale was a
separate operating segment), along with the maintenance and professional services of the Networking business, which was part
of the Services segment. Under a transition services agreement (the "TSA"), the Company provided administrative services to
Extreme for process support, maintenance services and product logistics on a fee basis. As of September 30, 2018, all activities
required to be provided under the TSA were completed and the TSA was terminated. The $10 million indemnity escrow was
distributed in September 2018, with the Successor Company receiving $7 million and Extreme receiving the remaining $3
million as final settlement. The Company recorded income from the TSA, net of $5 million and $3 million during the period
from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15,
2017 (Predecessor), respectively.

24. Fresh Start Accounting

In connection with the Company's emergence from bankruptcy and in accordance with FASB ASC 852,
"Reorganizations" ("ASC 852"), the Company applied the provisions of fresh start accounting to its Consolidated Financial
Statements on the Emergence Date. The Company was required to use fresh start accounting since (i) the holders of existing
voting shares of the Predecessor Company received less than 50% of the voting shares of the emerging entity and (ii) the
reorganization value of the Company's assets immediately prior to confirmation of the Plan of Reorganization was less than the
post-petition liabilities and allowed claims.

ASC 852 prescribes that with the application of fresh start accounting, the Company allocated its reorganization value to its
individual assets based on their estimated fair values in conformity with ASC 805, "Business Combinations". The
reorganization value represents the fair value of the Successor Company's assets before considering liabilities. The excess
reorganization value over the fair value of identified tangible and intangible assets is reported as goodwill. As a result of the
application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the Consolidated
Financial Statements after December 15, 2017 are not comparable with the Consolidated Financial Statements as of or prior to
that date.

Reorganization Value

As set forth in the Plan of Reorganization, the agreed upon enterprise value of the Company was $5,721 million. This value was
within the initial range calculated by the Company of approximately $5,100 million to approximately $7,100 million using an
income approach. The $5,721 million enterprise value was selected as it was the transaction price agreed to in the global
settlement agreement with the Company’s creditor constituencies, including the PBGC. The reorganization value was then
determined by adding liabilities other than interest bearing debt, pension obligations and the deferred tax impact of the
reorganization and fresh start adjustments.

132

The following table reconciles the enterprise value to the estimated fair value of the Successor stockholders' equity as of the
Emergence Date:

(In millions, except per share amount)

Enterprise value

Plus:

Cash and cash equivalents

Less:

Minimum cash required for operations
Fair value of Term Loan Credit Agreement(1)
Fair value of capitalized leases
Fair value of pension and other post-retirement obligations, net of tax(2)
Change in net deferred tax liabilities from reorganization
Fair value of Successor Emergence Date Warrants(3)

Fair value of Successor common stock

Shares issued at December 15, 2017 upon emergence

Successor common stock value per share
(1)

$

5,721

366

(120)

(2,896)

(20)

(856)

(510)

(17)

1,668

110.0

15.16

$

$

The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in
addition to bid/ask prices and was estimated to be 99% of par value.

(2)

(3)

The following assumptions were used when measuring the fair value of the U.S. pension, non-U.S. pension, and post-retirement benefit plans: weighted-
average return on assets of 7.75%, 3.80% and 5.90%, and weighted-average discount rate to measure plan obligations of 3.70%, 1.52% and 3.77%,
respectively.

The fair value of the Emergence Date Warrants was estimated using the Black-Scholes pricing model.

The following table reconciles the enterprise value to the estimated reorganization value as of the Emergence Date:

(In millions)

Enterprise value

Plus:

Non-debt current liabilities

Non-debt non-current liabilities

Excess cash and cash equivalents

Less:

Pension and other post-retirement obligations, net of deferred taxes

Capital lease obligations

Change in net deferred tax liabilities from reorganization

Emergence Date Warrants issued

Reorganization value of Successor assets

Consolidated Balance Sheet

$

5,721

955

2,090

246

(856)

(20)

(510)

(17)

$

7,609

The adjustments set forth in the following consolidated balance sheet as of December 16, 2017 reflect the effect of the
consummation of the transactions contemplated by the Plan of Reorganization (reflected in the column "Reorganization
Adjustments") as well as fair value adjustments as a result of applying fresh start accounting (reflected in the column "Fresh
Start Adjustments"). The explanatory notes highlight methods used to determine fair values or other amounts of the assets and
liabilities, as well as significant assumptions or inputs.

133

(In millions)
ASSETS
Current assets:

Cash and cash equivalents
Accounts receivable, net
Inventory
Other current assets
TOTAL CURRENT ASSETS

Property, plant and equipment, net
Deferred income taxes, net
Intangible assets, net
Goodwill
Other assets
TOTAL ASSETS
LIABILITIES
Current liabilities:

Debt maturing within one year
Accounts payable
Payroll and benefit obligations
Deferred revenue
Business restructuring reserve
Other current liabilities

TOTAL CURRENT LIABILITIES
Non-current liabilities:

Long-term debt, net of current portion
Pension obligations
Other post-retirement obligations
Deferred income taxes, net
Business restructuring reserve
Other liabilities

TOTAL NON-CURRENT LIABILITIES
LIABILITIES SUBJECT TO COMPROMISE
TOTAL LIABILITIES
Commitments and contingencies
Equity awards on redeemable shares
Preferred stock:
Series B
Series A

STOCKHOLDERS' (DEFICIT) EQUITY

Common stock (Successor)
Additional paid-in capital (Successor)
Common stock (Predecessor)
Additional paid-in capital (Predecessor)
(Accumulated deficit) retained earnings

Accumulated other comprehensive (loss) income

TOTAL STOCKHOLDERS' (DEFICIT) EQUITY
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIT) EQUITY

Predecessor
Company
December 15,
2017

Reorganization
Adjustments

Fresh Start
Adjustments

Successor
Company
December 16,
2017

$

$

$

$

$

$

770
497
90
374
1,731
194
—
298
3,541
70
5,834

725
325
123
627
35
97
1,932

—
539
—
28
26
180
773
7,585
10,290

6

397
186

—
—
—
2,387
(5,978)

(1,454)
(5,045)

(404)
—
—
(58)
(462)
—
48
—
—
6
(408)

(696)
(49)
23
50
3
65
(604)

2,771
246
212
113
4
233
3,579
(7,585)
(4,610)

(1)

$

$

$

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(6,10)

(11)

(12)

(13)

(14)

(9)

(8,15)

(16)

(6)

(17)

(397)
(186)

(17)

(17)

1
1,667
—
(2,387)
4,846

664
4,791

(18)

(18)

(17)

(19)

(20)

$

$

$

—
(106)
29
(66)
(143)
116
(17)
3,137
(883)
(27)
2,183

—
—
—
(341)
—
(3)
(344)

96
—
—
548
4
(43)
605
—
261

—

—
—

—
—
—
—
1,132

790
1,922

(21)

(22)

(23)

(24)

(25)

(26)

(27)

(28)

(29)

(30)

(31)

(32)

(33)

(29,34)

(36)

(35)

366
391
119
250
1,126
310
31
3,435
2,658
49
7,609

29
276
146
336
38
159
984

2,867
785
212
689
34
370
4,957
—
5,941

—

—
—

1
1,667
—
—
—

—
1,668

$

5,834

$

(408)

$

2,183

$

7,609

134

Reorganization Adjustments

In accordance with the Plan of Reorganization, the following adjustments were made:

1.

Sources and Uses of Cash. The following reflects the net cash payments recorded as of the Emergence Date as a result of
implementing the Plan of Reorganization:

(In millions)
Sources:

Proceeds from Term Loan Credit Agreement, net of original issue discount
Release of restricted cash
Total sources of cash

Uses:

Repayment of DIP Credit Agreement
Payment of DIP Credit Agreement accrued interest
Cash paid to Predecessor first lien debt-holders
Cash paid to PBGC
Payment for professional fees escrow account
Funding payment for Avaya represented employee pension plan
Payment of accrued professional and administrative fees
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement
Payment for general unsecured claims
Total uses of cash

Net uses of cash

2.

Other Current Assets.

(In millions)
Release of restricted cash
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement
Payment of fees related to the ABL Credit Agreement
Restricted cash for bankruptcy related professional fees
Total other current assets

$

$

$

$

2,896
76
2,972

(725)
(1)
(2,061)
(340)
(56)
(49)
(27)
(59)
(58)
(3,376)
(404)

(76)
(42)
5
55
(58)

135

3.

4.

5.

6.

7.

8.

9.

Deferred Income Taxes. The adjustment represents the release of the valuation allowance on deferred tax assets for
certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of the
bankruptcy reorganization.

Other Assets. The adjustment represents the re-establishment of foreign prepaid taxes.

Debt Maturing Within One Year. The adjustment represents the net effect of the Company’s repayment of $725 million
for the DIP Credit Agreement and Term Loan Credit Agreement principal payments of $29 million due over the next
year.

Accounts Payable. The net decrease of $49 million includes $50 million for professional fees that were reclassified to
Other current liabilities for accrued bankruptcy related professional fees that were paid from an escrow account and a
payment of $3 million of bankruptcy related professional fees, partially offset by reinstatement of $4 million contract
cure costs from liabilities subject to compromise.

Payroll and Benefit Obligations. The Company reinstated $23 million of liabilities subject to compromise related to the
post-employment and post-retirement benefit obligations.

Deferred Revenue. The reinstatement of liabilities subject to compromise was $79 million of which $50 million is
included in deferred revenue and $29 million in other liabilities.

Business Restructuring Reserve. The reinstatement of liabilities subject to compromise was $7 million, of which $3
million is current and $4 million is non-current.

10. Other Current Liabilities.

(In millions)
Reclassification of accrued bankruptcy related professional fees
Reinstatement of other current liabilities
Payment of accrued interest on the DIP Credit Agreement
Total other current liabilities

$

$

50
16
(1)
65

11.

Exit Financing. In accordance with the Plan of Reorganization, the Company entered into the Term Loan Credit
Agreement with a principal amount of $2,925 million, and the ABL Credit Agreement, which allows borrowings up to an
aggregate principal amount of $300 million, subject to borrowing base availability.

(In millions)
Term Loan Credit Agreement
Less:

Discount
Upfront and underwriting fees
Cash received upon emergence from bankruptcy
Reclassification of debt issuance costs incurred prior to emergence from bankruptcy
Current portion of Long-term debt
Long-term debt, net of current portion

$

$

2,925

(29)
(54)
2,842
(42)
(29)
2,771

12.

Pension Obligations. In accordance with the Plan of Reorganization, the Company reinstated from liabilities subject to
compromise $295 million related to the Avaya Pension Plan for represented employees and also contributed $49 million
to the related pension trust.

13. Other Post-retirement Obligations. Other post-retirement benefit obligations of $212 million were reinstated from

liabilities subject to compromise.

14. Deferred Income Taxes. The adjustment represents the reinstatement of the deferred tax liability that was included in

liabilities subject to compromise.

15. Other Liabilities. The increase of $233 million primarily relates to the reinstatement of employee benefits, tax liabilities
and deferred revenue from liabilities subject to compromise. Also included is the value of the Emergence Date Warrants
issued to the holders of the Predecessor second lien obligations.

16.

Liabilities Subject to Compromise. Liabilities subject to compromise were reinstated or settled as follows in accordance
with the Plan of Reorganization:

136

(In millions)
Liabilities subject to compromise
Less amounts settled per the Plan of Reorganization

Pre-petition first lien debt
Pre-petition second lien debt
Avaya Pension Plan for Salaried Employees

Amounts reinstated:
Accounts payable
Payroll and benefit obligations
Deferred revenue
Business restructuring reserves
Other current liabilities
Pension obligations
Other post-retirement obligations
Deferred income taxes, net
Other liabilities

7,585

(4,281)
(1,440)
(620)

$

(4)
(23)
(50)
(7)
(16)
(295)
(212)
(118)
(216)

Total liabilities reinstated at emergence
General unsecured credit claims(1)
Liabilities subject to compromise
(1) In settlement of allowed general unsecured claims, each claimant will receive a pro-rata distribution of $58 million of the general unsecured claims
account.

$

(941)
(303)
—

The following table displays the detail on the gain on settlement of liabilities subject to compromise:

(In millions)

Pre-petition first lien debt

Pre-petition second lien debt

Avaya pension plan for salaried employees

General unsecured creditors' claims

Net gain on settlement of Liabilities subject to compromise

$

$

711

1,356

(516)

227

1,778

17. Cancellation of Predecessor Preferred and Common Stock. All common stock, Series A and B preferred stock and all

other equity awards of the Predecessor Company were canceled on the Emergence Date without any recovery on account
thereof.

18.

Issuance of Successor Common Stock and Emergence Date Warrants. In settlement of the Company's $5,721 million
Predecessor first lien obligations and Predecessor second lien obligations, the holders of the Predecessor first lien
obligations received a total of 99.3 million shares of common stock (fair value of $1,509 million) and $2,061 million in
cash and the holders of the Predecessor second lien obligations received a total of 4.4 million shares of common stock
(fair value of $67 million) and 5.6 million Emergence Date Warrants to purchase a like amount of common shares (fair
value of $17 million). In addition, as part of the Plan of Reorganization, the Company completed a distressed termination
of the APPSE in accordance with a stipulation settlement with the PBGC, the PBGC received $340 million in cash and
6.1 million shares of common stock (fair value of $92 million).

19.

Accumulated Deficit.

(In millions)

Accumulated deficit:

Net gain on settlement of liabilities subject to compromise

Expense for certain professional fees

Benefit from income taxes

Cancellation of Predecessor equity awards

Cancellation of Predecessor Preferred stock Series B

Cancellation of Predecessor Preferred stock Series A

Cancellation of Predecessor Common stock

Total

137

$

$

1,778

(26)

118

6

397

186

2,387

4,846

20.

Accumulated Comprehensive Loss. The changes to Accumulated comprehensive loss relate to the settlement of the
APPSE and the Avaya Supplemental Pension Plan ("ASPP") and the associated taxes.

Fresh Start Adjustments

At the Emergence Date, the Company met the requirements under ASC 852 for the adoption of fresh start accounting. These
adjustments reflect actual amounts recorded as of the Emergence Date.

21.

22.

Accounts Receivable. This adjustment relates to a change in accounting policy for the way the Company will present
uncollected deferred revenue upon emergence from bankruptcy. The Company offset such deferred revenue against the
related account receivable.

Inventory. This adjustment relates to the write-up of inventory to fair value based on estimated selling prices, less costs
of disposal.

23. Other Current Assets. This adjustment reflects the write-off of certain prepaid commissions, deferred installation costs

and debt issuance costs that do not meet the definition of an asset upon emergence.

24.

Property, Plant and Equipment. An adjustment of $116 million was recorded to increase the net book value of property,
plant and equipment to its estimated fair value based on estimated current acquisition price, plus costs to make the
property fully operational.

The following table reflects the components of property, plant and equipment, net as of December 15, 2017:

(In millions)

Buildings and improvements

Machinery and equipment

Rental equipment

Assets under construction

Internal use software

Total property, plant and equipment

Less: accumulated depreciation and amortization

Property, plant and equipment, net

$

$

82

38

85

13

92

310

—

310

25. Deferred Income Tax. The adjustment represents the release of the valuation allowance on deferred tax assets for certain
non-U.S. subsidiaries which management believes more likely than not will be realized as a result of future taxable
income from the reversal of deferred tax liabilities that were established as part of fresh start accounting.

26.

Intangible Assets. The Company recorded an adjustment to intangible assets for $3,137 million as follows:

(In millions)

Customer relationships and other intangible assets

Technology and patents

Trademarks and trade names

Total

Successor

Predecessor

December 15, 2017
Post-emergence

December 15, 2017
Pre-emergence

Difference

$

$

2,155

$

905

375

3,435

$

96

12

190

298

$

$

2,059

893

185

3,137

The fair value of customer relationships was determined using the excess earnings method, a derivation of the income
approach that calculates residual profit attributable to an asset after proper returns are paid to complementary or
contributory assets.

The fair value of technology and patents and trademarks and trade names was determined using the royalty savings
method, a derivation of the income approach that estimates the royalties saved through ownership of the assets.

27. Goodwill. Predecessor Company goodwill of $3,541 million was eliminated and Successor Company goodwill of $2,658

million was established based on the calculated reorganization value.

138

(In millions)

Reorganization value of Successor Company

Less: Fair value of Successor Company assets

Reorganization value of Successor Company assets in excess of fair value - Goodwill

$

$

7,609

(4,951)

2,658

139

28. Other Assets. The $27 million decrease to other assets is related to prepaid commissions that do not meet the definition

of an asset upon emergence as there is no future benefit to the Successor Company.

29. Deferred Revenue. The fair value of deferred revenue, which principally relates to payments on annual maintenance
contracts, was determined by deducting selling costs and associated profit from the Predecessor Company deferred
revenue balance to arrive at the costs and profit associated with fulfilling the liability. Additionally, the decrease includes
the impact of an accounting policy change whereby the Successor Company no longer recognizes deferred revenue
relating to sales transactions that have been billed, but for which the related account receivable has not yet been
collected.

30. Other Current Liabilities. The decrease of $3 million to other current liabilities is related to the fair value of real estate
leases determined to be above or below market using the income approach based on the difference between the
contractual rental rate and the estimated market rental rate, discounted utilizing a risk-related discount rate.

31.

Long-term Debt. The fair value of the Term Loan Credit Agreement was determined based on a market approach
utilizing market-clearing data on the valuation date in addition to bid/ask prices.

32. Deferred Income Taxes. The adjustment represents the establishment of deferred tax liabilities related to book/tax

differences created by fresh start accounting adjustments. The amount is net of the release of the valuation allowance on
deferred tax assets, which management believes more likely than not will be realized as a result of future taxable income
from the reversal of such deferred tax liabilities.

33.

Business Restructuring Reserve. The Company recorded an increase to its non-current business restructuring reserves
based on estimated future cash flows applied to a current discount rate at emergence.

34. Other Liabilities. A decrease in other liabilities of $43 million relates to deferred revenue and real estate leases as

previously discussed.

35.

36.

Accumulated Other Comprehensive Loss. The remaining balance in Accumulated comprehensive loss was reversed to
Reorganization expenses, net.

Fresh Start Adjustments. The following table reflects the cumulative impact of the fresh start adjustments as discussed
above, the elimination of the Predecessor Company's accumulated other comprehensive loss and the adjustments
required to eliminate accumulated deficit:

(In millions)

Eliminate Predecessor Intangible assets

Eliminate Predecessor Goodwill

Establish Successor Intangible assets

Establish Successor Goodwill

Fair value adjustment to Inventory

Fair value adjustment to Other current assets

Fair value adjustment to Property, plant and equipment

Fair value adjustment to Other assets

Fair value adjustment to Deferred revenue

Fair value adjustment to Business restructuring reserves

Fair value adjustment to Other current liabilities

Fair value adjustment to Long-term debt

Fair value adjustment to Other liabilities

Release Predecessor Accumulated comprehensive loss

Fresh start adjustments included in Reorganization items, net

Tax impact of fresh start adjustments

Gain on fresh start accounting, net

140

$

$

(298)

(3,541)

3,435

2,658

29

(66)

116

(27)

235

(4)

3

(96)

43

(790)

1,697

(565)

1,132

25. Quarterly Financial Data (Unaudited)

The following tables present unaudited quarterly financial data. This information has been derived from the Company’s
unaudited financial statements and has been prepared on the same basis as the audited Consolidated Financial Statements
appearing elsewhere in this Annual Report on Form 10-K.

(In millions, except per share amounts)
Fiscal year ended September 30, 2020
Revenue

Gross profit
Operating income (loss)

Benefit from (provision for) income taxes

Net income (loss)
Net income (loss) attributable to common
stockholders

Earnings (loss) per common share - basic

Earnings (loss) per common share - diluted

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

$

755 $

721 $

682 $

418
74

20

37

33

397
53

(20)

9

7

371
(597)

(37)

(672)

(673)

$

$

0.40 $

0.39 $

0.08 $

0.08 $

(7.24) $

(7.24) $

715

394
15

(25)

(54)

(59)

(0.54)

(0.54)

(In millions, except per share amounts)
Fiscal year ended September 30, 2019

Revenue
Gross profit

Operating income (loss)

(Provision for) benefit from income taxes

Net (loss) income
Net (loss) income attributable to common
stockholders

Earnings (loss) per common share - basic
Earnings (loss) per common share - diluted

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

$

$
$

$

723
392

52

(32)

(34)

(34)

$

717
390

(613)

27

(633)

(633)

$

709
386

38

6

(13)

(13)

(0.31) $
(0.31) $

(5.70) $
(5.70) $

(0.12) $
(0.12) $

738
407

50

(3)

9

9

0.08
0.08

26. Condensed Financial Information of Parent Company

Avaya Holdings has no material assets or stand-alone operations other than its ownership in Avaya Inc. and its subsidiaries.

These condensed financial statements have been presented on a "Parent Company only" basis. Under a Parent Company only
basis of presentation, the Company's investments in its consolidated subsidiaries are presented using the equity method of
accounting. These Parent Company only condensed financial statements should be read in conjunction with the Company's
Consolidated Financial Statements.

The following presents:

(1) the Successor Company, Parent Company only, statements of financial position as of September 30, 2020 and 2019, the
statements of operations, comprehensive (loss) income and cash flows for the fiscal years ended September 30, 2020 and
2019 and the period from December 16, 2017 through September 30, 2018, and;

(2) the Predecessor Company, Parent Company only, statements of operations, comprehensive (loss) income and cash flows

for the period from October 1, 2017 through December 15, 2017.

141

Avaya Holdings Corp.
Parent Company Only
Condensed Statements of Financial Position
(In millions)

ASSETS

Investment in Avaya Inc.

TOTAL ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES

Long-term debt

Other liabilities

TOTAL LIABILITIES

Commitments and contingencies

Convertible series A preferred stock; 125,000 shares issued and outstanding at September 30,
2020 and no shares issued and outstanding at September 30, 2019
TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

As of September 30,

2020

2019

888

888

291

233

524

128

236

888

$

$

$

$

1,604

1,604

273

31

304

—

1,300

1,604

$

$

$

$

142

Avaya Holdings Corp.
Parent Company Only
Condensed Statements of Operations
(In millions, except per share amounts)

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

Equity in net (loss) income of Avaya Inc.

$

(616) $

(672) $

311

$

2,977

Selling, general and administrative

Interest expense

Other (expense) income, net

(LOSS) INCOME BEFORE INCOME TAXES

Provision for income taxes

NET (LOSS) INCOME
Less: Accretion and accrued dividends on Series A
preferred stock
NET (LOSS) INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS

(LOSS) EARNINGS PER SHARE AVAILABLE TO
COMMON STOCKHOLDERS

Basic

Diluted

Weighted average shares outstanding

Basic

Diluted

$

$

$

(35)

(26)

(3)

(680)

—

(680)

(7)

(3)

(25)

29

(671)

—

(671)

—

—

(3)

(21)

287

—

287

—

—

—

—

2,977

—

2,977

—

(687) $

(671) $

287

$

2,977

(7.45) $

(7.45) $

(6.06) $

(6.06) $

2.61

2.58

$

$

92.2

92.2

110.8

110.8

109.9

111.1

5.19

5.19

497.3

497.3

Avaya Holdings Corp.
Parent Company Only
Condensed Statements of Comprehensive (Loss) Income
(In millions)

Successor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Predecessor
Period from
October 1, 2017
through
December 15, 2017

Net (loss) income

Equity in other comprehensive (loss) income of
Avaya Inc.
Elimination of Predecessor Company accumulated
other comprehensive loss
Comprehensive (loss) income

$

$

(680) $

(671) $

287

$

(72)

(191)

—
(752) $

—
(862) $

18

—
305

$

2,977

658

790
4,425

143

Avaya Holdings Corp.
Parent Company Only
Condensed Statements of Cash Flows
(In millions)

Net (loss) income

Adjustments to reconcile net (loss) income to net cash
used for operating activities:

Equity in net loss (income) of Avaya Inc.
Share-based compensation

Amortization of debt issuance costs

Change in fair value of emergence date warrants

Changes in operating assets and liabilities

Net cash used for operating activities

Net cash used for investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Successor

Predecessor

Fiscal years ended September 30,

2020

2019

Period from
December 16, 2017
through
September 30, 2018

Period from
October 1, 2017
through
December 15, 2017

$

(680) $

(671) $

287

$

2,977

(311)

(2,977)

616

2

18

3

—

(41)

—

41

—

—

672

2

17

(29)

9

—

—

—

—

—

—

4

17

3

—

(314)

314

—

—

—

—

—

—

—

—

—

—

—

—

Cash and cash equivalents at end of period

$

— $

— $

— $

144

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Disclosure Controls and Procedures

As of September 30, 2020, the end of the period covered by this report, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the
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 the Chief Financial Officer concluded that the Company’s disclosure
controls and procedures were effective as of September 30, 2020 to ensure that information required to be disclosed by the
Company in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to
the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.

Management's Report on Internal Control Over Financial Reporting

The Company’s management, including the CEO and CFO, is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Management
conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria set
forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO"). Based on that evaluation, management has concluded that its internal control over financial reporting
was effective as of September 30, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with generally accepted accounting principles. The Company’s independent
registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report on the Company’s internal control
over financial reporting, which appears in Part II, Item 8 of this Form 10-K.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2020 that have materially
affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B.

Other Information

None.

145

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Information required by this item will be included in an amendment hereto or a definitive proxy statement to be filed with the
SEC within 120 days of the fiscal year ended September 30, 2020.

Item 11.

Executive Compensation

Information required by this item will be included in an amendment hereto or a definitive proxy statement to be filed with the
SEC within 120 days of the fiscal year ended September 30, 2020.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item will be included in an amendment hereto or a definitive proxy statement to be filed with the
SEC within 120 days of the fiscal year ended September 30, 2020.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Information required by this item will be included in an amendment hereto or a definitive proxy statement to be filed with the
SEC within 120 days of the fiscal year ended September 30, 2020.

Item 14.

Principal Accountant Fees and Services

Information required by this item will be included in an amendment hereto or a definitive proxy statement to be filed with the
SEC within 120 days of the fiscal year ended September 30, 2020.

146

PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a) (1) Financial Statements - The information required by this item is included in Part II Item 8 of this Annual Report on

Form 10-K.

(2) Financial Statement Schedules - The information required by this item is included in Note 9, "Supplementary Financial
Information," to our Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

(3) Exhibits - See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the

accompanying Index to Exhibits are filed herewith or incorporated by reference as part of this Annual Report on Form
10-K.

(b) Exhibits - See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the accompanying
Index to Exhibits are filed herewith or incorporated by reference as part of this Annual Report on Form 10-K.

INDEX TO EXHIBITS

Incorporated by Reference
Exhibit
File No.
Form
2.1
10-12B 001-38289

Filing Date
December 15, 2017

Filed
Herewith

10-12B 001-38289

3.1

December 15, 2017

8-K

001-38289

3.1

October 31, 2019

8-K

001-38289

3.1

November 14, 2018

10-12B 001-38289

4.1

December 15, 2017

10-12B 001-38289

4.2

December 15, 2017

10-K

001-38289

10-12B 001-38289

10-12B 001-38289

8-K

001-38289

4.3

4.6

4.7

4.1

November 29, 2019

December 15, 2017

December 15, 2017

June 12, 2018

X

8-K

001-38289

10.1

October 3, 2019

8-K

001-38289

10.1

October 31, 2019

10-Q

001-38289

10.1

February 10, 2020

10-12B 001-38289

10.5 December 22, 2017

Exhibit
Number Exhibit Description
2.1

3.1

3.2

3.3

4.1

4.2

4.3

4.4

4.5

4.6

4.7

10.1

10.2

10.3 +

10.4

Second Amended Joint Chapter 11 Plan of
Reorganization of Avaya Inc. and its Debtor Affiliates
Amended and Restated Certificate of Incorporation of
Avaya Holdings Corp.
Certificate of Designations of the Series A Convertible
Preferred Stock
Amended and Restated Bylaws of Avaya Holdings
Corp.
Form of Certificate of Common Stock of Avaya
Holdings Corp.
Form of Registration Rights Agreement between
Avaya Holdings Corp. and the stockholders party
thereto
Description of Capital Stock

Warrant Agreement, dated as of December 15, 2017,
between Avaya Holdings Corp. and American Stock
Transfer & Trust Company, LLC
Form of Warrant Certificate

Indenture, dated June 11, 2018, by and between Avaya
Holdings Corp. and The Bank of New York Mellon
Trust Company, N.A.
Indenture, dated September 25, 2020, among Avaya
Inc., the guarantors named therein and Wilmington
Trust, National Association, as trustee and notes
collateral agent
Investment Agreement, dated as of October 3, 2019, by
and between Avaya Holdings Corp. and RingCentral,
Inc.
Investor Rights Agreement, dated October 31, 2019,
by and between Avaya Holdings Corp. and
RingCentral, Inc.
First Amended and Restated Framework Agreement,
dated as of February 10, 2020, by and between Avaya
Inc. and RingCentral, Inc.
Term Loan Credit Agreement, dated as of
December 15, 2017, by and among Avaya Inc., Avaya
Holdings Corp., Goldman Sachs Bank USA, as
administrative agent and collateral agent, the
subsidiary guarantors party thereto and each lender
from time to time party thereto

147

Exhibit
Number Exhibit Description
10.5

Amendment No. 1, dated as of June 18, 2018, to the
Term Loan Credit Agreement, dated as of December
15, 2017, among Avaya Inc., as borrower, Avaya
Holdings Corp., the lenders from time to time party
thereto, Goldman Sachs Bank USA, as the
Administrative Agent and the Collateral Agent, and the
other parties from time to time party thereto

10.6

10.7

10.8

10.9*

10.10*

10.11*

10.12*

10.13*

10.14*

10.15*

10.16*

10.17*

10.18*

10.19*

Amendment No. 2, dated as of September 25, 2020, to
the Term Loan Credit Agreement, dated as of
December 15, 2017, among Avaya Inc., as borrower,
Avaya Holdings Corp., the lenders from time to time
party thereto, Goldman Sachs Bank USA, as the
Administrative Agent and the Collateral Agent, and the
other parties from time to time party thereto

ABL Credit Agreement, dated as of December 15,
2017, among Avaya Inc., Avaya Holdings Corp.,
Avaya Canada Corp., Avaya UK, Avaya International
Sales Limited, Avaya Deutschland GmbH, Avaya
GmbH & Co. KG, Citibank, N.A. as collateral agent
and administrative agent, the lending institutions from
time to time party thereto and the lending institutions
named therein as letters of credit issuers and swing line
lenders
Amendment No. 1, dated as of September 25, 2020, to
the ABL Credit Agreement, dated as of December 15,
2017, among Avaya Inc., Avaya Holdings Corp.,
Avaya Canada Corp., Avaya UK, Avaya International
Sales Limited, Avaya Deutschland GmbH, Avaya
GmbH & Co. KG, Citibank, N.A. as collateral agent
and administrative agent, the lending institutions from
time to time party thereto and the lending institutions
named therein as letters of credit issuers and swing line
lenders
Avaya Holdings Corp. 2017 Equity Incentive Plan

Form of Restricted Stock Unit Emergence Award
Agreement Pursuant to the Avaya Holdings Corp.
2017 Equity Incentive Plan for James M. Chirico, Jr.
Form of Restricted Stock Unit Emergence Award
Agreement Pursuant to the Avaya Holdings Corp.
2017 Equity Incentive Plan for Senior Executives
Form of Restricted Stock Unit Emergence Award
Agreement Pursuant to the Avaya Holdings Corp.
2017 Equity Incentive Plan for Other Employees
Form of Nonqualified Stock Option Emergence Award
Agreement Pursuant to the Avaya Holdings Corp.
2017 Equity Incentive Plan for James M. Chirico, Jr.
Form of Nonqualified Stock Option Emergence Award
Agreement Pursuant to the Avaya Holdings Corp.
2017 Equity Incentive Plan for Senior Executives
Form of Nonqualified Stock Option Emergence Award
Agreement Pursuant to the Avaya Holdings Corp.
2017 Equity Incentive Plan for Other Employees
Form of Restricted Stock Unit Award Agreement
pursuant to the Avaya Holdings Corp. 2017 Equity
Incentive Plan
Form of Nonqualified Stock Option Award Agreement
pursuant to the Avaya Holdings Corp. 2017 Equity
Incentive Plan
Form of Performance Restricted Stock Unit Award
Agreement pursuant to the Avaya Holdings Corp. 2017
Equity Incentive Plan
Form of Performance Restricted Stock Unit Award
Agreement for the Chief Executive Officer pursuant to
the Avaya Holdings Corp. 2017 Equity Incentive Plan

148

Incorporated by Reference
Exhibit
File No.
10.1
001-38289

Filing Date
June 20, 2018

Form
8-K

Filed
Herewith

X

X

10-12B 001-38289

10.6 December 22, 2017

10-12B 001-38289

10.7 December 15, 2017

10-12B 001-38289

10.9 December 22, 2017

10-12B 001-38289

10.10 December 22, 2017

10-12B 001-38289

10.11 December 22, 2017

10-12B 001-38289

10.12 December 22, 2017

10-12B 001-38289

10.13 December 22, 2017

10-12B 001-38289

10.14 December 22, 2017

10-Q

001-38289

10.1

August 14, 2018

10-Q

001-38289

10.2

August 14, 2018

10-Q

001-38289

10.1

February 15, 2019

10-Q

001-38289

10.2

February 15, 2019

Exhibit
Number Exhibit Description
10.20*

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

10.28*

10.29*

10.30*

10.31*

10.32*

10.33*

10.34*

10.35*

10.36*

10.37

10.38

10.39

10.40

10.41

Form of Restricted Stock Unit Award Agreement for
Non-Employee Directors pursuant to the Avaya
Holdings Corp. 2017 Equity Incentive Plan
Form of Restricted Stock Unit Award Agreement for
Non-Employee Directors pursuant to the Avaya
Holdings Corp. 2017 Equity Incentive Plan
Avaya Holdings Corp. 2019 Omnibus Inducement
Equity Plan
Form of Restricted Stock Unit Award Agreement
pursuant to the Avaya Holdings Corp. 2019 Omnibus
Inducement Equity Plan
Form of Nonqualified Stock Option Award Agreement
Pursuant to the Avaya Holdings Corp. 2019 Omnibus
Inducement Equity Plan
Avaya Holdings Corp. 2019 Equity Incentive Plan

Form of Restricted Stock Unit Award Agreement
pursuant to the Avaya Holdings Corp. 2019 Equity
Incentive Plan
Form of Non-Qualified Stock Option Award
Agreement pursuant to the Avaya Holdings Corp. 2019
Equity Incentive Plan
Form of Performance Restricted Stock Unit Award
Agreement pursuant to the Avaya Holdings Corp. 2019
Equity Incentive Plan
Form of Restricted Stock Unit Award Agreement
pursuant to the Avaya Holdings Corp. 2019 Equity
Incentive Plan
Form of Performance Restricted Stock Unit Award
Agreement pursuant to the Avaya Holdings Corp.
2019 Equity Incentive Plan
Form of Non-Employee Director Deferred
Restricted Stock Unit Award Agreement pursuant to
the Avaya Holdings Corp. 2019 Equity Incentive
Plan
Avaya Holdings Corp. 2020 Employee Stock
Purchase Plan
Avaya Inc. Executive Annual Incentive Plan, effective
March 7, 2018
Avaya Inc. Involuntary Separation Plan for Senior
Executives, dated May 16, 2018
Avaya Inc. Change in Control Severance Plan, dated
May 16, 2018
First Amendment to Avaya Inc. Change in Control
Severance Plan, dated May 16, 2018, effective
February 11, 2019
Base Convertible Bond Hedge Confirmation, by and
between Avaya Holdings Corp. and Barclays Bank
PLC, dated June 6, 2018
Base Convertible Bond Hedge Confirmation, by and
between Avaya Holdings Corp. and Credit Suisse
Capital LLC, dated June 6, 2018
Base Convertible Bond Hedge Confirmation, by and
between Avaya Holdings Corp. and JPMorgan Chase
Bank, National Association, dated June 6, 2018
Base Warrant Confirmation, by and between Avaya
Holdings Corp. and Barclays Bank PLC, dated June 6,
2018
Base Warrant Confirmation, by and between Avaya
Holdings Corp. and Credit Suisse Capital LLC, dated
June 6, 2018

149

Incorporated by Reference

Form
10-Q

File No.
001-38289

Exhibit
10.1

Filing Date
May 15, 2018

Filed
Herewith

10-Q

001-38289

10.3

February 15, 2019

S-8

333-234716

99.2 November 15, 2019

10-Q

001-38289

10.4

February 10, 2020

10-Q

001-38289

10.5

February 10, 2020

S-8

333-234716

99.1 November 15, 2019

10-Q

001-38289

10.1

May 11, 2020

10-Q

001-38289

10.2

May 11, 2020

10-Q

001-38289

10.3

May 11, 2020

X

X

10-Q 001-38289

10.4

May 11, 2020

10-Q 001-38289

10.5

May 11, 2020

8-K

001-38289

10.1

March 8, 2018

8-K

001-38289

10.1

May 18, 2018

8-K

001-38289

10.2

May 18, 2018

10-Q

001-38289

10.4

February 15, 2019

8-K

001-38289

10.1

June 12, 2018

8-K

001-38289

10.2

June 12, 2018

8-K

001-38289

10.3

June 12, 2018

8-K

001-38289

10.4

June 12, 2018

8-K

001-38289

10.5

June 12, 2018

Exhibit
Number Exhibit Description
10.42

Base Warrant Confirmation, by and between Avaya
Holdings Corp. and JPMorgan Chase Bank, National
Association, dated June 6, 2018
Additional Convertible Bond Hedge Confirmation, by
and between Avaya Holdings Corp. and Barclays Bank
PLC, dated June 26, 2018
Additional Convertible Bond Hedge Confirmation, by
and between Avaya Holdings Corp. and Credit Suisse
Capital LLC, dated June 26, 2018
Additional Convertible Bond Hedge Confirmation, by
and between Avaya Holdings Corp. and JPMorgan
Chase Bank, National Association, dated June 26,
2018
Additional Warrant Confirmation, by and between
Avaya Holdings Corp. and Barclays Bank PLC, dated
June 26, 2018
Additional Warrant Confirmation, by and between
Avaya Holdings Corp. and Credit Suisse Capital LLC,
dated June 26, 2018
Additional Warrant Confirmation, by and between
Avaya Holdings Corp. and JPMorgan Chase Bank,
National Association, dated June 26, 2018
Executive Employment Agreement, dated
November 13, 2017, between James M. Chirico, Jr.
and Avaya Inc.
Amendment No. 1 to Executive Employment
Agreement, dated January 3, 2020, between James M.
Chirico, Jr. and Avaya Inc.
Employment Offer Letter, dated January 30, 2019,
between Kieran McGrath and Avaya Inc.
Employment Offer Letter, dated November 16, 2017,
between Shefali Shah and Avaya Inc.
Employment Offer Letter, dated November 3, 2019,
between Anthony F. Bartolo and Avaya Inc.
Employment Offer Letter, dated August 9, 2020,
between Stephen D. Spears and Avaya Inc.
Form of Director and Officer Indemnification
Agreement
List of Subsidiaries

10.43

10.44

10.45

10.46

10.47

10.48

10.49*

10.50*

10.51*

10.52*

10.53*

10.54*

10.55*

21.1

31.1

23.1

23.2

Consent of Independent Registered Public Accounting
Firm
Consent of Independent Registered Public Accounting
Firm
Certification of James M. Chirico, Jr. pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Kieran J. McGrath, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Certification of James M. Chirico, Jr. pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Kieran J. McGrath, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document - The instance document

31.2

32.1

32.2

does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL
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

150

Form
8-K

Incorporated by Reference
Exhibit
File No.
10.6
001-38289

Filing Date
June 12, 2018

Filed
Herewith

8-K

001-38289

10.1

June 28, 2018

8-K

001-38289

10.2

June 28, 2018

8-K

001-38289

10.3

June 28, 2018

8-K

001-38289

10.4

June 28, 2018

8-K

001-38289

10.5

June 28, 2018

8-K

001-38289

10.6

June 28, 2018

10-12B 001-38289

10.8 December 15, 2017

8-K

001-38289

10.1

January 6, 2020

10-K

001-38289

10.38 November 29, 2019

10-K

001-38289

10.39 November 29, 2019

10-12B 001-38289

10.1 December 22, 2017

X

X

X

X

X

X

X

X

X

X

X
X
X
X
X

104

Cover Page Interactive Data File (Formatted as
Inline XBRL in Exhibit 101)

* Indicates management contract or compensatory plan or arrangement.

X

+ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K, which portions will be furnished
to the Securities and Exchange Commission upon request.

(c) Not applicable.

Item 16.

Form 10-K Summary

None.

Pursuant to the requirements of Section 13 or 15(d) 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 on November 25, 2020.

SIGNATURES

AVAYA HOLDINGS CORP.

By:
Name:

Title:

/s/ KEVIN SPEED
Kevin Speed

Vice President, Controller and Chief Accounting
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/

JAMES M. CHIRICO, JR.
James M. Chirico, Jr.

/s/ KIERAN J. MCGRATH
Kieran J. McGrath

/s/ KEVIN SPEED
Kevin Speed

/s/ WILLIAM D. WATKINS
William D. Watkins

/s/ STEPHAN SCHOLL
Stephan Scholl

/s/ SUSAN L. SPRADLEY
Susan L. Spradley

/s/ STANLEY J. SUTULA, III
Stanley J. Sutula, III

/s/ ROBERT THEIS
Robert Theis

/s/ SCOTT D. VOGEL
Scott D. Vogel

/s/

JACQUELINE E. YEANEY

Jacqueline E. Yeaney

Director, President and Chief
Executive Officer
(Principal Executive Officer)

Executive Vice President, Chief
Financial Officer
(Principal Financial Officer)

Vice President, Corporate
Controller and Chief Accounting
Officer
Chairman of the Board of
Directors

Director

Director

Director

Director

Director

Director

151

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

November 25, 2020

[THIS PAGE INTENTIONALLY LEFT BLANK]

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