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Accounts Receivable, Net
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Accounts Receivable, Net Accounts Receivable, Net
Accounts receivable, net were as follows:
September 30,
2023		December 31,
2022
Invoiced$741 $698 
Accrued(1)
200 211 
Allowance for doubtful accounts(61)(52)
Accounts receivable, net$880 $857 
_____________
(1)Accrued receivables include amounts to be invoiced in the subsequent quarter for current services provided.
The allowance for doubtful accounts was as follows:
20232022
Balance at January 1st
$52 $58 
Provision3 9 
Charge-offs(5)(3)
Recoveries and other(1)
3 (1)
Balance at March 31st
53 63 
Provision6 3 
Charge-offs(3)(2)
Recoveries and other(1)
2 (1)
Balance at June 30th
58 63 
Provision5 (1)
Charge-offs(4)(5)
Recoveries and other(1)
2 (6)
Balance at September 30th
$61 $51 
_____________
(1)Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.
We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. The allowance for uncollectible accounts receivable is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 6.5% at September 30, 2023 and 5.7% at December 31, 2022. The increase is primarily the result of slight increase in receivables aging.
Accounts Receivable Sales Arrangements
Accounts receivable sales arrangements are utilized in the normal course of business as part of our cash and liquidity management. The accounts receivable sold are generally short-term trade receivables with payment due dates of less than 60 days. We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse. Under this arrangement, we sell our entire interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser.
Of the accounts receivable sold and derecognized from our balance sheet, $79 and $159 remained uncollected as of September 30, 2023 and December 31, 2022, respectively.
Accounts receivable sales activity was as follows:
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Accounts receivable sales(1)
$103 $164 $277 $400 
____________
(1)Losses on sales were not material. Customers may also enter into structured-payable arrangements that require us to sell our receivables from that customer to a third-party financial institution, which then makes payments to us to settle the customer's receivable. In these instances, we ensure the sale of the receivables are bankruptcy-remote and the payment made to us is without recourse. The activity associated with these arrangements is not reflected in this disclosure, as payments under these arrangements have not been material and these are customer directed arrangements.
Finance Receivables, Net
Finance receivables include sales-type leases and installment loans arising from the marketing of our equipment. These receivables are typically collateralized by a security interest in the underlying assets.
Finance receivables, net were as follows:
 September 30,
2023		December 31,
2022
Gross receivables$2,986 $3,593 
Unearned income(296)(374)
Subtotal2,690 3,219 
Residual values— — 
Allowance for doubtful accounts(99)(117)
Finance receivables, net2,591 3,102 
Less: Billed portion of finance receivables, net80 93 
Less: Current portion of finance receivables not billed, net906 1,061 
Finance receivables due after one year, net$1,605 $1,948 
Finance Receivables – Allowance for Credit Losses and Credit Quality
Our finance receivable portfolios are primarily in the U.S., Canada and EMEA. We generally establish customer credit limits and estimate the allowance for credit losses on a country or geographic basis. Customer credit limits are based upon an initial evaluation of the customer's credit quality and we adjust that limit accordingly based upon ongoing credit assessments of the customer, including payment history and changes in credit quality.
The allowance for doubtful credit losses is principally determined based on an assessment of origination year and past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.7% at September 30, 2023 and 3.6% at December 31, 2022. Our finance receivable bad debt provision in the first quarter 2023 was a credit of $12 primarily related to a reserve release in the U.S. due to the favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment, which improved our credit position. The bad debt provision followed normal trends in the second and third quarter 2023 and is slightly higher than the prior year primarily due to increased lease originations partially offset by sales of finance lease receivables.
Our allowance for doubtful finance receivables is effectively determined by geography. The risk characteristics in our finance receivable portfolio segments are generally consistent with the risk factors associated with the economies of the countries/regions included in those geographies. Since EMEA is comprised of various countries and regional
economies, the risk profile within that portfolio segment is somewhat more diversified due to the varying economic conditions among and within the countries.
In determining the level of reserve required we critically assessed current and forecasted economic conditions and trends to ensure we objectively considered those expected impacts in the determination of our reserve. Our assessment also included a review of current portfolio credit metrics and the level of write-offs incurred over the past year. We believe our current reserve position remains sufficient to cover expected future losses that may result from current and future macro-economic conditions including higher inflation, interest rates, and the potential for recessions in the geographic areas of our customers. We continue to monitor developments in future economic conditions and trends, and as a result, our reserves may need to be updated in future periods.
The allowance for doubtful accounts as well as the related investment in finance receivables were as follows:
United StatesCanada
EMEA(1)
Total
Balance at December 31, 2022
$83 $7 $27 $117 
Provision(15)— 3 (12)
Charge-offs(5)— (2)(7)
Recoveries and other(2)
2 — 1 3 
Balance at March 31, 2023$65 $7 $29 $101 
Provision5 1 3 9 
Charge-offs(4)(1)(4)(9)
Recoveries and other(2)
— 1 1 2 
Balance at June 30, 2023$66 $8 $29 $103 
Provision2 — 4 6 
Charge-offs(6)(1)(1)(8)
Recoveries and other(2)
— — (2)(2)
Balance at September 30, 2023$62 $7 $30 $99 
Balance at December 31, 2021
$77 $11 $30 $118 
Provision3 — 3 6 
Charge-offs(2)(1)(1)(4)
Recoveries and other(2)
— 1 (1)— 
Balance at March 31, 2022$78 $11 $31 $120 
Provision— 1 3 4 
Charge-offs(3)(1)(2)(6)
Recoveries and other(2)
— — (2)(2)
Balance at June 30, 2022$75 $11 $30 $116 
Provision6 1 2 9 
Charge-offs(4)(1)(1)(6)
Recoveries and other(2)
— — (2)(2)
Balance at September 30, 2022$77 $11 $29 $117 
Finance receivables collectively evaluated for impairment (3)
September 30, 2023(3)
$1,343 $244 $1,103 $2,690 
September 30, 2022(3)
$1,883 $214 $920 $3,017 
_____________
(1)Includes developing market countries.
(2)Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.
(3)Total Finance receivables exclude the allowance for credit losses of $99 and $117 at September 30, 2023 and 2022, respectively.
In the U.S., customers are further evaluated by class based on the type of lease origination. The primary categories are direct, which primarily includes leases originated directly with end-user customers through bundled lease arrangements, and indirect, which primarily includes leases originated through our XBS sales channel and lease financing to end-user customers who purchased equipment we sold to distributors or resellers.
We evaluate our customers based on the following credit quality indicators:
•Low Credit Risk: This rating includes accounts with excellent to good business credit, asset quality and capacity to meet financial obligations. These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance. Loss rates in this category in the normal course are generally less than 1%.
•Average Credit Risk: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. Although we experience higher loss rates associated with this customer class, we believe the risk is somewhat mitigated by the fact that our leases are fairly well dispersed across a large and diverse customer base. In addition, the higher loss rates are largely offset by the higher rates of return we obtain with such leases. Loss rates in this category in the normal course are generally in the range of 2% to 5%.
•High Credit Risk: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk including higher rates of interest, prepayments, personal guarantees, etc. Accounts in this category include customers who were downgraded during the term of the lease from low and average credit risk evaluation when the lease was originated. Accordingly, there is a distinct possibility for a loss of principal and interest or customer default. The loss rates in this category in the normal course are generally in the range of 7% to 10%.
Credit quality indicators are updated at least annually, or more frequently to the extent required by economic conditions, and the credit quality of any given customer can change during the life of the portfolio.
Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are as follows:
 September 30, 2023
 20232022202120202019PriorTotal
Finance
Receivables
United States (Direct)
Low Credit Risk$92 $58 $70 $52 $25 $5 $302 
Average Credit Risk67 35 53 27 14 3 199 
High Credit Risk26 38 27 24 8 3 126 
Total $185 $131 $150 $103 $47 $11 $627 
Charge-offs$— $1 $1 $1 $1 $1 $5 
United States (Indirect)
Low Credit Risk$142 $107 $69 $32 $13 $1 $364 
Average Credit Risk122 98 62 24 10 1 317 
High Credit Risk12 11 8 3 1 — 35 
Total$276 $216 $139 $59 $24 $2 $716 
Charge-offs$— $4 $1 $2 $1 $5 $13 
Canada
Low Credit Risk$30 $26 $17 $11 $5 $1 $90 
Average Credit Risk48 38 20 15 9 1 131 
High Credit Risk5 5 4 6 2 1 23 
Total$83 $69 $41 $32 $16 $3 $244 
Charge-offs$— $— $— $— $— $1 $1 
EMEA(1)
Low Credit Risk$189 $190 $120 $57 $27 $7 $590 
Average Credit Risk158 159 78 41 23 4 463 
High Credit Risk13 14 11 7 4 1 50 
Total$360 $363 $209 $105 $54 $12 $1,103 
Charge-offs$— $4 $— $— $1 $— $5 
Total Finance Receivables
Low Credit Risk$453 $381 $276 $152 $70 $14 $1,346 
Average Credit Risk395 330 213 107 56 9 1,110 
High Credit Risk56 68 50 40 15 5 234 
Total$904 $779 $539 $299 $141 $28 $2,690 
Total Charge-offs$— $9 $2 $3 $3 $7 $24 
 December 31, 2022
 20222021202020192018PriorTotal
Finance
Receivables
United States (Direct)
Low Credit Risk$173 $104 $80 $53 $23 $2 $435 
Average Credit Risk83 36 26 28 7 2 182 
High Credit Risk71 70 49 18 6 2 216 
Total $327 $210 $155 $99 $36 $6 $833 
United States (Indirect)
Low Credit Risk$249 $165 $91 $49 $12 $1 $567 
Average Credit Risk210 156 73 40 11 — 490 
High Credit Risk22 20 9 5 2 — 58 
Total$481 $341 $173 $94 $25 $1 $1,115 
Canada
Low Credit Risk$31 $22 $17 $12 $5 $— $87 
Average Credit Risk46 25 22 16 5 — 114 
High Credit Risk6 6 8 4 2 1 27 
Total$83 $53 $47 $32 $12 $1 $228 
EMEA(1)
Low Credit Risk$269 $167 $90 $59 $24 $5 $614 
Average Credit Risk152 105 63 43 15 3 381 
High Credit Risk17 13 9 7 2 — 48 
Total$438 $285 $162 $109 $41 $8 $1,043 
Total Finance Receivables
Low Credit Risk$722 $458 $278 $173 $64 $8 $1,703 
Average Credit Risk491 322 184 127 38 5 1,167 
High Credit Risk116 109 75 34 12 3 349 
Total$1,329 $889 $537 $334 $114 $16 $3,219 
_____________
(1)Includes developing market countries.
The aging of our receivables portfolio is based upon the number of days an invoice is past due. Receivables that are more than 90 days past due are considered delinquent. Receivable losses are charged against the allowance when management believes the uncollectibility of the receivable is confirmed and is generally based on individual credit evaluations, results of collection efforts and specific circumstances of the customer. Subsequent recoveries, if any, are credited to the allowance.
We generally continue to maintain equipment on lease and provide services to customers that have invoices for finance receivables that are 90 days or more past due and, as a result of the bundled nature of billings, we also continue to accrue interest on those receivables. However, interest revenue for such billings is only recognized if collectability is deemed probable.
The aging of our billed finance receivables is as follows:
 September 30, 2023
 Current
31-90
Days
Past Due
>90 Days
Past Due
Total BilledUnbilled
Total
Finance
Receivables
>90 Days
and
Accruing
Direct $24 $5 $5 $34 $593 $627 $39 
Indirect22 6 4 32 684 716 — 
Total United States46 11 9 66 1,277 1,343 39 
Canada5 1 1 7 237 244 10 
EMEA(1)
7 2 2 11 1,092 1,103 26 
Total$58 $14 $12 $84 $2,606 $2,690 $75 
 December 31, 2022
 Current
31-90
Days
Past Due
>90 Days
Past Due
Total BilledUnbilled
Total
Finance
Receivables
>90 Days
and
Accruing
Direct$30 $6 $6 $42 $791 $833 $47 
Indirect27 6 4 37 1,078 1,115 — 
Total United States57 12 10 79 1,869 1,948 47 
Canada5 1 — 6 222 228 6 
EMEA(1)
9 2 1 12 1,031 1,043 12 
Total$71 $15 $11 $97 $3,122 $3,219 $65 
_____________
(1)Includes developing market countries.
Sales of Receivables
In December 2022, the Company entered into a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) pursuant to which the Company agreed to offer for sale, and HPS agreed to purchase, certain eligible pools of finance receivables on a monthly basis in transactions structured as "true sales at law" and bankruptcy remote transfers and we have received an opinion to that effect from outside legal counsel. Accordingly, the receivables sold were derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables.
The finance receivables funding agreement has an initial term through January 31, 2024, with automatic one-year extensions thereafter, unless terminated by either the Company or HPS. Additionally, the Company will continue to service the lease receivables for a specified fee and will also be paid a commission on lease receivables sold under the finance receivables funding agreement.
During the second quarter 2023, the finance receivables funding agreement with HPS was amended to expand the pools of finance receivables eligible for sale and to include the sale of the underlying leased equipment to HPS. The commission paid by HPS was also accordingly amended to cover the value associated with the underlying equipment being sold to HPS. The company will retain a first right of refusal to repurchase the underlying equipment at the end of the lease term, to the extent offered for sale by HPS at its then fair value. The amendments were retroactive to prior sales but the adjusted impact on net proceeds and the gain/loss on prior sales was immaterial.
Of the finance receivables sold and derecognized from our balance sheet, $809 and $60 remained uncollected as of September 30, 2023, and December 31, 2022, respectively.
Finance receivable sales activity was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Finance receivable sales - net proceeds(1)
$206 $— $848 $— 
Gain on sale/Commissions(2)(3)
5 — 16 — 
Servicing revenue(2)
$2 $— $5 $— 
_____________
(1)Cash proceeds were reported in Net cash provided by operating activities.
(2)Recorded in Services, maintenance and rentals as Other Revenue. Amounts include revenues associated with the sale of the underlying leased equipment.
(3)The three and nine months ended September 30, 2023, includes $1 and $3, respectively, of revenues associated with the sale of the underlying leased equipment and which are expected to be paid over the term of the agreements.
Secured Borrowings and Collateral
In 2022 and 2021, we sold certain finance receivables to consolidated special purpose entities included in our Condensed Consolidated Balance Sheet as collateral for secured loans.
Refer to Note 13 - Debt for additional information related to these arrangements.