Revenue

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Revenues disaggregated by primary geographic markets, major product lines, and sales channels are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Primary geographical markets(1):
United States	$	986	$	1,012	$	2,918	$	3,001
Europe	470		487		1,403		1,500
Canada	131		97		381		294
Other	164		162		464		466
Total Revenues	$	1,751	$	1,758	$	5,166	$	5,261
Major product and services lines:
Equipment	$	390	$	387	$	1,070	$	1,197
Supplies, paper and other sales	300		270		879		732
Maintenance agreements(2)	420		447		1,295		1,330
Service arrangements(3)	487		493		1,451		1,490
Rental and other	103		106		315		346
Financing	51		55		156		166
Total Revenues	$	1,751	$	1,758	$	5,166	$	5,261
Sales channels:
Direct equipment lease(4)	$	146	$	170	$	425	$	506
Distributors & resellers(5)	318		283		877		826
Customer direct	226		204		647		597
Total Sales	$	690	$	657	$	1,949	$	1,929

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(1)Geographic area data is based upon the location of the subsidiary reporting the revenue.

(2)Includes revenues from maintenance agreements on sold equipment as well as revenues associated with service agreements sold through our channel partners as Xerox Partner Print Services (XPPS).

(3)Primarily includes revenues from our Managed Services arrangements. Also includes revenues from embedded operating leases in our Managed Service arrangements, which were not significant.

(4)Primarily reflects sales through bundled lease arrangements.

(5)Primarily reflects sales through our two-tier distribution channels.

Contract Assets and Liabilities: We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time. Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $131 and $144 at September 30, 2022 and December 31, 2021, respectively. The majority of the balance at September 30, 2022 will be amortized to revenue over approximately the next 30 months.

Contract Costs: Incremental direct costs of obtaining a contract primarily include sales commissions paid to sales people and agents in connection with the placement of equipment with associated post sale services arrangements. These costs are deferred and amortized on the straight-line basis over the estimated contract term, which is currently estimated to be approximately four years. We pay commensurate sales commissions upon customer renewals, therefore our amortization period is aligned to our initial contract term.

Incremental direct costs are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Incremental direct costs of obtaining a contract	$	15	$	14	$	43	$	44
Amortization of incremental direct costs	17		18		51		55

The balance of deferred incremental direct costs net of accumulated amortization at September 30, 2022 and December 31, 2021 was $121 and $132, respectively. This amount is expected to be amortized over its estimated period of benefit, which we currently estimate to be approximately four years.

We may also incur costs associated with our services arrangements to generate or enhance resources and assets that will be used to satisfy our future performance obligations included in these arrangements. These costs are considered contract fulfillment costs and are amortized over the contractual service period of the arrangement to cost of services. In addition, we provide inducements to certain customers in various forms, including contractual credits, which are capitalized and amortized as a reduction of revenue over the term of the contract. As of September 30, 2022 and December 31, 2021, amounts deferred associated with contract fulfillment costs and inducements were $11 and $15, respectively, and the related amortization was $1 and $2 for the three months ended September 30, 2022 and 2021, respectively, and $4 and $5 for the nine months ended September 30, 2022 and 2021, respectively.

Equipment and software used in the fulfillment of service arrangements, and where the Company retains control, are capitalized and depreciated over the shorter of their useful life or the term of the contract if an asset is contract specific.