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Accounts Receivable, Net

12 Months Ended

Dec. 31, 2023

Accounts receivable, net were as follows:


	December 31,
	2023		2022
Invoiced	$	710	$	698
Accrued (1)	204		211
Allowance for doubtful accounts	(64)		(52)
Accounts receivable, net	$	850	$	857

____________

(1)Accrued receivables includes amounts to be invoiced in the subsequent quarter for current services provided.

The allowance for doubtful accounts was as follows:


Balance at December 31, 2021	$	58
Provision	17
Charge-offs, net	(14)
Other(1)	(9)
Balance at December 31, 2022	$	52
Provision	22
Charge-offs, net	(17)
Other(1)	7
Balance at December 31, 2023	$	64

_____________

(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 percentage of gross receivables was 7.0% at December 31, 2023 and 5.7% at December 31, 2022. The increase in the allowance is primarily due to an increase in aged receivables in the U.S.

Accounts Receivable Sale Arrangements

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, $99 and $159 remained uncollected as of December 31, 2023 and 2022, respectively.

Accounts receivable sales activity was as follows:


	Year Ended December 31,
	2023		2022		2021
Accounts receivable sales(1)	$	399	$	593	$	478

_____________

(1)Losses on sales were not material.

Finance Receivables, Net

Finance receivables include sales-type leases and installment loans arising from the sales of our equipment. These receivables are typically collateralized by a security interest in the underlying equipment.

Finance receivables, net were as follows:


	December 31,
	2023		2022
Gross receivables	$	2,899	$	3,593
Unearned income	(297)		(374)
Subtotal	2,602		3,219
Residual values	—		—
Allowance for doubtful accounts	(92)		(117)
Finance Receivables, Net	2,510		3,102
Less: Billed portion of finance receivables, net	71		93
Less: Current portion of finance receivables not billed, net	842		1,061
Finance Receivables Due After One Year, Net	$	1,597	$	1,948

A summary of our gross finance receivables' future contractual maturities, including those previously billed, is as follows:


	December 31,
	2023		2022
12 months	$	1,075	$	1,325
24 months	758		967
36 months	547		690
48 months	343		411
60 months	143		169
Thereafter	33		31
Total	$	2,899	$	3,593

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.

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.

The net bad debt provision was $6 for the year ended December 31, 2023. This compares to the bad debt provision of $26 for the year ended December 31, 2022. The decrease in the bad debt provision was primarily due to a credit of $(12) related to a reserve release in the U.S. as the result of a favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment, which improved our credit position. In addition, the bad debt provision benefited from the sales of finance lease receivables and a lower balance of finance receivables in 2023 as compared to 2022. The allowance for credit losses as a percentage of net finance receivables before allowance was 3.5% at December 31, 2023 and 3.6% at December 31, 2022.

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 includes 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 macroeconomic 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 credit losses as well as the related investment in finance receivables were as follows:


Allowance for Credit Losses:	United States		Canada		EMEA(1)		Total
Balance at December 31, 2021	$	77	$	11	$	30	$	118
Provision	20		(2)		8		26
Charge-offs, net	(15)		(3)		(8)		(26)
Other(2)	1		1		(3)		(1)

Balance at December 31, 2022	$	83	$	7	$	27	$	117
Provision	(8)		1		13		6
Charge-offs, net	(17)		(3)		(14)		(34)
Other(2)	—		2		1		3

Balance at December 31, 2023	$	58	$	7	$	27	$	92
Finance Receivables Collectively Evaluated for Impairment:
December 31, 2022(3)	$	1,948	$	228	$	1,043	$	3,219
December 31, 2023(3)	$	1,205	$	255	$	1,142	$	2,602

_____________

(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 $92 and $117 at December 31, 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:


	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Total Finance Receivables
United States (Direct):
Low Credit Risk	$	122	$	51	$	61	$	43	$	17	$	3	$	297
Average Credit Risk	104		35		49		23		9		2		222
High Credit Risk	34		36		25		22		6		3		126
Total	$	260	$	122	$	135	$	88	$	32	$	8	$	645
Charge-offs	$	1	$	1	$	1	$	1	$	1	$	2	$	7

United States (Indirect):
Low Credit Risk	$	136	$	77	$	48	$	22	$	6	$	—	$	289
Average Credit Risk	111		69		41		15		6		—		242
High Credit Risk	12		8		6		2		1		—		29
Total	$	259	$	154	$	95	$	39	$	13	$	—	$	560
Charge-offs	$	4	$	3	$	3	$	2	$	2	$	3	$	17

Canada
Low Credit Risk	$	45	$	24	$	16	$	9	$	4	$	—	$	98
Average Credit Risk	63		36		18		12		6		—		135
High Credit Risk	6		5		4		5		1		1		22
Total	$	114	$	65	$	38	$	26	$	11	$	1	$	255
Charge-offs	$	—	$	—	$	—	$	2	$	—	$	1	$	3

EMEA(1)
Low Credit Risk	$	251	$	182	$	110	$	48	$	19	$	6	$	616
Average Credit Risk	192		148		73		36		17		3		469
High Credit Risk	19		16		11		7		4		—		57
Total	$	462	$	346	$	194	$	91	$	40	$	9	$	1,142
Charge-offs	$	3	$	8	$	4	$	2	$	—	$	—	$	17

Total Finance Receivables
Low Credit Risk	$	554	$	334	$	235	$	122	$	46	$	9	$	1,300
Average Credit Risk	470		288		181		86		38		5		1,068
High Credit Risk	71		65		46		36		12		4		234
Total	$	1,095	$	687	$	462	$	244	$	96	$	18	$	2,602
Total Charge-offs	$	8	$	12	$	8	$	7	$	3	$	6	$	44


	December 31, 2022
	2022		2021		2020		2019		2018		Prior		Total Finance Receivables
United States (Direct):
Low Credit Risk	$	173	$	104	$	80	$	53	$	23	$	2	$	435
Average Credit Risk	83		36		26		28		7		2		182
High Credit Risk	71		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 Risk	210		156		73		40		11		—		490
High Credit Risk	22		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 Risk	46		25		22		16		5		—		114
High Credit Risk	6		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 Risk	152		105		63		43		15		3		381
High Credit Risk	17		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 Risk	491		322		184		127		38		5		1,167
High Credit Risk	116		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:


	December 31, 2023
	Current		31-90 Days Past Due		>90 Days Past Due		Total Billed		Unbilled		Total Finance Receivables		>90 Days and Accruing






Direct	$	24	$	6	$	5	$	35	$	610	$	645	$	41
Indirect	16		3		3		22		538		560		—
Total United States	40		9		8		57		1,148		1,205		41
Canada	6		1		1		8		247		255		10





EMEA (1)	7		2		1		10		1,132		1,142		10

Total	$	53	$	12	$	10	$	75	$	2,527	$	2,602	$	61


	December 31, 2022
	Current		31-90 Days Past Due		>90 Days Past Due		Total Billed		Unbilled		Total Finance Receivables		>90 Days and Accruing






Direct	$	30	$	6	$	6	$	42	$	791	$	833	$	47
Indirect	27		6		4		37		1,078		1,115		—
Total United States	57		12		10		79		1,869		1,948		47
Canada	5		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 are derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables.

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 retained 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 amended finance receivables funding agreement automatically renews each year for a one-year period, 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.

Of the finance receivables sold and derecognized from our balance sheet, $994 and $60 remained uncollected as of December 31, 2023 and 2022, respectively.

Finance receivable sales activity was as follows:


	Year Ended December 31,
	2023		2022
Finance receivable sales - net proceeds(1)	$	1,102	$	60
Gain on sale/Commissions(2)(3)	25		2

Servicing revenue(2)	$	9	$	—

_____________

(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 year ended December 31, 2023 includes $4 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 Consolidated Balance Sheet as collateral for secured loans.

Refer to Note 15 - Debt, for additional information related to these arrangements.