Xerox Holdings Corp 10-Q

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Throughout the Management’s Discussion and Analysis (MD&A) that follows, references to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries, while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” and the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to "Xerox Holdings Corporation" refer to the stand-alone parent company and do not include its subsidiaries. References to "Xerox Corporation" refer to the stand-alone company and do not include its subsidiaries. Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, the Condensed Consolidated Financial Statements and the accompanying notes. Throughout this MD&A, references are made to various notes in the Condensed Consolidated Financial Statements which appear in Item 1 of this combined Quarterly Report on Form 10-Q (this Form 10-Q), and the information contained in such notes is incorporated by reference into the MD&A in the places where such references are made. Xerox Holdings' other direct subsidiary is Myriad Ventures Fund I LP (Myriad), which was established solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies. Myriad is fully consolidated by Xerox Holdings. At June 30, 2025 and December 31, 2024 Xerox Ventures, LLC held investments of $39 million and $40 million, respectively. Due to its immaterial nature, and for ease of discussion, Xerox Ventures LLC's results are included within the following discussion. Currency Impact To understand the trends in the business, we believe that it is helpful to analyze the impact of changes in the translation of foreign currencies into U.S. Dollars on revenue and expenses. We refer to this analysis as "constant currency," “currency impact” or “the impact from currency.” This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate. This impact is calculated for all countries where the functional currency is the local country currency. We do not hedge the translation effect of revenues or expenses denominated in currencies where the local currency is the functional currency. Management believes the constant currency measure provides investors an additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency growth rates. Overview Second quarter results demonstrated an improved resilience in revenue and adjusted 1 operating income afforded by our Reinvention. Actions taken to shift Xerox’s revenue mix toward businesses with higher underlying rates of growth and the implementation of a more flexible, simplified operating structure provided revenue stability and supported adjusted 1 operating income amid a volatile operating landscape. Equipment sales of $336 million in the second quarter 2025 declined 5.6% in actual currency, or 6.7% in constant currency 1 , as compared to the second quarter 2024. The decline primarily reflects lower installations, due in part to a period of soft demand in April and May amid peak tariff and trade-related uncertainty. Excluding Reinvention-related actions, equipment sales declined 3.3%. Total equipment installations decreased approximately 12.0% year-over-year, with declines concentrated in the high-end and entry level equipment categories. Post-sale revenue of $1.2 billion increased 1.5% in actual currency, or 0.5% in constant currency 1 , as compared to second quarter 2024. Second quarter 2025 post-sale revenue included a 10.6-percentage point benefit from the recent acquisition of ITsavvy. Excluding ITsavvy, post-sale revenue declined 9.1% in actual currency. The organic decline was primarily due to lower managed print services 2 revenue, and to a lesser extent, delays in supplies sales associated with recently implemented tariffs. Reinvention-related actions, including the intentional reductions in non-strategic revenue and the effects of geographic and offering simplification, contributed to the decline. Excluding these impacts, organic post-sale revenue declined mid single digits in constant currency 1 . Pre-tax loss of $60 million for the second quarter 2025 decreased by approximately $85 million as compared to pre-tax income of $25 million in the second quarter 2024. Pre-tax loss margin decreased 5.4-percentage points for the second quarter 2025 as compared to the second quarter 2024 and included a 0.7-percentage point benefit from the recent acquisition of ITsavvy. The decrease is primarily due to lower gross profit, which included the effects of product cost increases, incremental tariff-related costs and declines in financing and other fees associated with the intentional reduction of our finance receivable portfolio. Pre-tax loss was further affected by an increase in Other expenses, net, which reflected higher non-financing interest expense in the current year quarter related to recently Xerox 2025 Form 10-Q 46 completed borrowings in support of the Lexmark acquisition and the benefits of insurance proceeds related to a legal settlement in the second quarter 2024. These impacts were partially offset by lower Selling, administrative and general expenses, primarily reflecting productivity and cost savings related to the Company's Reinvention and lower incentive compensation and benefits costs. Adjusted 1 operating income of $59 million decreased by $26 million as compared to second quarter 2024, primarily due to lower gross profit, reflecting product cost increases, incremental tariff-related costs and declines in financing-related fees. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention, including lower incentive compensation and benefits costs. ____________________________ (1) Refer to the “Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure. (2) Includes revenues from Services, maintenance and rentals. IT Solutions and digital services are not included in managed print services. Recent Developments Acquisition of Lexmark On July 1, 2025, Xerox Corporation completed its previously announced acquisition of all of the issued and outstanding equity securities of Lexmark International II, LLC (Lexmark) from Ninestar Group Company Limited We continue to expect adjusted 1 earnings and Earnings Per Share accretion associated with the Lexmark Acquisition, despite a slightly higher than expected cost of funding. Based on U.S. tariffs currently proposed, we expect no material impact from tariffs on Lexmark’s results. Lexmark has a large manufacturing facility in Juarez, Mexico that can support all expected imports of branded product into the U.S. market on a USMCA compliant basis. Refer to Note 21 - Subsequent Events in the condensed consolidated financial statements for additional information regarding the acquisition of Lexmark. Segments During the first quarter of 2025, the Company updated its determination of reportable segments to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies. As such, it was determined that there are two reportable segments - Print and Other, and IT Solutions. Prior to this change, the company had two reportable segments - Print and Other, and Xerox Financial Services (XFS). As a result of this change, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments. Refer to Note 4 - Segment Reporting in the condensed consolidated financial statements for additional information regarding this change. Valuation Allowance During the first quarter 2025, a valuation allowance was recorded primarily related to certain deferred tax assets in the United States. Refer to Note 1 - Basis of Presentation in the Condensed Consolidated Financial Statements for additional information regarding the valuation allowance. Tax Law Change On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act (the Act), was signed into law. Refer to Note 21 - Subsequent Events for additional information regarding the Act. ____________________________ (1) Refer to the “Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure. 2025 Review Total revenue of $1.58 billion for second quarter 2025 decreased 0.1% from second quarter 2024, including a 8.2-percentage point benefit from the recent acquisition of ITSavvy, as well as a 1.0-percentage point favorable impact from currency. Total revenue reflected an increase of 1.5% in Post sale revenue, including a 10.6-percentage point benefit from the recent acquisition of ITSavvy, as well as a 1.0-percentage point favorable impact from currency, and a decrease of 5.6% in Equipment sales revenue, including a 1.1-percentage point favorable impact from currency. Total revenue of $3.03 billion for the six months ended June 30, 2025 decreased 1.5% as compared to the prior year period, including a 7.5-percentage point benefit from the recent acquisition of ITSavvy, as well as a 0.4-percentage point unfavorable impact from currency. Total revenue for the six months ended June 30, 2025 reflected a decrease of 0.9% in Post sale revenue, including a 9.4-percentage point benefit from the recent acquisition of ITSavvy including, and a 0.6-percentage point unfavorable impact from currency, and a decrease of 4.0% in Equipment sales revenue, with no impact from currency. Xerox 2025 Form 10-Q 47 Net (loss) income and adjusted 1 Net (loss) income were as follows: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 B/(W) 2025 2024 B/(W) Net (Loss) Income $ (106) $ 18 $ (124) $ (196) $ (95) $ (101) Adjusted (1) Net (Loss) Income (77) 41 (118) (81) 52 (133) ____________________________ (1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. Second quarter 2025 Net (loss) was $106 million as compared to the second quarter 2024 Net Income of $18 million. Net loss was higher by $124 million primarily reflecting lower gross profit, as well as higher Other expenses, net, and Income tax expense, all of which was partially offset by lower Selling, administrative and general expenses, Research, development and engineering expenses (RD&E), and Restructuring and related costs, net. Second quarter 2025 adjusted 1 Net (loss) was $77 million as compared to Net Income of $41 million during the second quarter 2024. Adjusted 1 Net (loss) was higher by $118 million primarily reflecting higher Income tax expense, as well as lower gross profit and revenues, and Other expenses, net. These negative impacts were partially offset by lower Selling, administrative and general expenses, and RD&E. Net (loss) for the six months ended June 30, 2025 of $196 was an increase of $101 million as compared to the prior year period Net (loss) of $95 million. The higher level of loss primarily reflected higher Income tax expense, as well as lower gross profit and revenues, and higher Other expenses, net. These negative impacts were partially offset by lower divestitures, as the prior year included the divestiture of certain direct business operations in Latin America, as well as lower Selling, administrative and general expenses, Restructuring and related costs, net, and RD&E. A djusted 1 Net (loss) for the six months ended June 30, 2025 was $81 million as compared to the prior year period adjusted 1 net income of $52 million. A djusted 1 Net (loss) was higher by $133 million primarily reflecting lower gross profit and revenue, as well as higher Income tax expense and Other expenses, net. These negative impacts were partially offset by lower Selling, administrative and general expenses, and RD&E. ____________________________ (1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. The following is a summary of our segments - Print and Other and IT Solutions : Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 % Change 2025 2024 % Change Revenue Print and Other $ 1,366 $ 1,494 (8.6) % $ 2,660 $ 2,922 (9.0) % IT Solutions 213 84 153.6 % 377 158 138.6 % Total Segment revenue 1,579 1,578 0.1 % 3,037 3,080 (1.4) % Intersegment Elimination (1) (3) — NM (4) — NM Corporate Other — — NM — — NM Total Revenue $ 1,576 $ 1,578 (0.1) % $ 3,033 $ 3,080 (1.5) % Expenses Print and Other $ 1,301 $ 1,387 (6.2) % $ 2,554 $ 2,757 (7.4) % IT Solutions 203 83 144.6 % 362 158 129.1 % Total Segment expenses 1,504 1,470 2.3 % 2,916 2,915 — % Intersegment Elimination (2) (3) — NM (4) — NM Corporate Other 16 23 (30.4) % 40 47 (14.9) % Total Expenses $ 1,517 $ 1,493 1.6 % $ 2,952 $ 2,962 (0.3) % Profit Print and Other $ 65 $ 107 (39.3) % $ 106 $ 165 (35.8) % IT Solutions 10 1 NM 15 — NM Total Segment profit 75 108 (30.6) % 121 165 (26.7) % Corporate Other (16) (23) (30.4) % (40) (47) (14.9) % Total Profit $ 59 $ 85 (30.6) % $ 81 $ 118 (31.4) % __________________________ (1) Reflects primarily IT hardware, software solutions and services revenues, sold by the IT Solutions segment to the Print and Other segment. (2) Reflects primarily costs related to the sale of IT hardware, software solutions and services by the IT Solutions segment, to the Print and Other segment. Xerox 2025 Form 10-Q 48 Cash flows from operating activities during the six months ended June 30, 2025 were a use of $100 million and decreased $144 million as compared to the prior year period. The decrease primarily related to lower net proceeds from the on-going sales of finance receivables under the finance receivables funding agreements, as well as lower profitability, both of which were partially offset by the timing of working capital 1 , lower finance receivable originations, the timing of payments for accrued compensation, and lower payments for restructuring. Cash used in investing activities during the six months ended June 30, 2025 was $12 million, reflecting capital expenditures of $39 million, as well as the investment in a noncontrolling interest of $4 million, both of which were partially offset by $19 million related to the sale of a surplus facility, $5 million related to a change in lease classification for certain vehicles, and $6 million from a divestiture. Cash provided by financing activities during the six months ended June 30, 2025 was $459 million, reflecting proceeds from the issuance of our First Lien Senior Secured Notes of $400 million (First Lien Notes), and the issuance of our Second Lien Senior Secured Notes of $500 million (Second Lien Notes), offset by deferred debt issuance costs of $23 million and discounts of $17 million. Payments on debt reflected $102 million on the Term Loan B facility, $90 million on the 5.000% Senior Notes due in August 2025, $72 million on secured financing arrangements, and $55 million on secured promissory notes. Dividend payments were $58 million, and other financing, net was $29 million, reflecting $15 million for payments of financing commitment fees related to the acquisition of Lexmark, $6 million for repurchases related to stock-based compensation and $7 million related to finance leases. __________________________ (1) Working capital, net reflects Accounts receivable, Billed portion of finance receivables, Inventories and Accounts payable. Outlook Xerox's 2025 guidance now includes six months of activity associated with the recent Lexmark acquisition, which closed on July 1, 2025. We expect Revenue to grow 16%-17% in constant currency 1 . While profitability is expected to improve, the impacts of tariff-related expenses, net of mitigation efforts, and modest Lexmark-related synergies, will result in modestly lower margins. We now expect operating cash flows to be approximately $345 million, which is a decrease from our previous guidance of between $420 million to $470 million. The decrease reflects a higher level of cash tariff expenses and one-time costs associated with the implementation of synergy savings. Additionally, we now expect capital expenditures to be approximately $95 million in 2025, an increase from our original guidance of approximately $70 million, reflecting, in part, the inclusion of Lexmark. ____________________________ (1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. Xerox 2025 Form 10-Q 49 Financial Review Revenues Three Months Ended June 30, Six Months Ended June 30, % of Total Revenue (in millions) 2025 2024 % Change CC % Change 2025 2024 % Change CC % Change 2025 2024 Equipment sales $ 336 $ 356 (5.6) % (6.7) % $ 620 $ 646 (4.0) % (4.0) % 20 % 21 % Post sale revenue 1,240 1,222 1.5 % 0.5 % 2,413 2,434 (0.9) % (0.3) % 80 % 79 % Total Revenue $ 1,576 $ 1,578 (0.1) % (1.1) % $ 3,033 $ 3,080 (1.5) % (1.1) % 100 % 100 % Reconciliation to Condensed Consolidated Statements of (Loss) Income: Sales $ 665 $ 611 8.8 % 8.5 % $ 1,222 $ 1,134 7.8 % 8.6 % Less: IT products (1) (153) (56) 173.2 % 173.2 % (258) (103) 150.5 % 151.5 % Less: Supplies, paper and other sales (176) (199) (11.6) % (10.7) % (344) (385) (10.6) % (8.4) % Equipment sales $ 336 $ 356 (5.6) % (6.7) % $ 620 $ 646 (4.0) % (4.0) % Services, maintenance, rentals and other (2)(3) $ 911 $ 967 (5.8) % (7.2) % $ 1,811 $ 1,946 (6.9) % (6.8) % Add: IT products (1) 153 56 173.2 % 173.2 % 258 103 150.5 % 151.5 % Add: Supplies, paper and other sales 176 199 (11.6) % (10.7) % 344 385 (10.6) % (8.4) % Post sale revenue $ 1,240 $ 1,222 1.5 % 0.5 % $ 2,413 $ 2,434 (0.9) % (0.3) % Segments Print and Other $ 1,366 $ 1,494 (8.6) % (9.7) % $ 2,660 $ 2,922 (9.0) % (8.7) % 88 % 95 % IT Solutions 213 84 153.6 % 152.4 % 377 158 138.6 % 139.5 % 12 % 5 % Intersegment elimination (4) (3) — NM NM (4) — NM NM — % — % Total Revenue (5) $ 1,576 $ 1,578 (0.1) % (1.1) % $ 3,033 $ 3,080 (1.5) % (1.1) % 100 % 100 % _____________ CC - See "Currency Impact" section for a description of Constant Currency. (1) IT Products reflect IT hardware, software solutions and services provided by the IT Solutions segment. Refer to Reportable Segments - IT Solutions for further information. (2) Includes financing revenue generated from direct and indirectly financed Xerox equipment sale transactions of $32 million and $38 million for the three months ended June 30, 2025 and 2024, respectively and $65 million and $80 million for the six months ended June 30, 2025 and 2024, respectively. (3) Services, maintenance, rentals and other revenue include IT services support of $57 million and $28 million for the three months ended June 30, 2025 and 2024, respectively, and $115 million and $55 million for the six months ended June 30, 2025 and 2024, respectively. provided by our IT Solutions segment. (4) Primarily reflects IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment. (5) Refer to Note 4 - Segment Reporting in the Condensed Consolidated Financial Statements for additional information regarding our reportable segments. Second quarter 2025 total revenue decreased 0.1% as compared to second quarter 2024, and included a 1.0-percentage point benefit from currency. The decrease is primarily due to lower equipment sales, reflecting, in part, the effects of Reinvention, and lower installations. These adverse impacts were partially offset by higher post sale revenue. Second quarter 2025 total revenue also included an 8.2-percentage point benefit from the recent acquisition of ITsavvy. Total revenue for the six months ended June 30, 2025 decreased 1.5%, and included a 0.4-percentage point adverse impact from currency. The decrease is due to lower equipment and post sale revenue, reflecting, in part, the effects of Reinvention, and unfavorable equipment mix, partially offset by higher installation activity. Total revenue for the six months ended June 30, 2025 also included a 7.5-percentage point benefit from the recent acquisition of ITsavvy. Second quarter 2025 equipment sales revenue decreased at constant currency 1 due to lower installations and included a 2.3-percentage point adverse impact from Reinvention-related actions, including the exit of certain production print manufacturing operations in the prior year period. Xerox 2025 Form 10-Q 50 Total equipment sales revenue for the six months ended June 30, 2025 decreased at constant currency 1 , and included a 3.1-percentage point adverse impact from Reinvention-related actions including the impact from the exit of certain production print manufacturing operations in the prior year period, as well as unfavorable product mix. The impacts were partially offset by higher installations. Second quarter 2025 Post sale revenue increased at constant currency 1 and included an 10.6-percentage point benefit from the recent acquisition of ITsavvy. The organic decline reflects lower managed print services 2 revenue, driven by lower outsourcing and print services, and lower supplies revenue. Post sale revenue was also adversely affected by intentional reductions in non-strategic revenue, such as paper and financing revenue, and the effects of geographic and offering simplification. Total post sales revenue for the six months ended June 30, 2025 decreased at constant currency 1 , and included a 9.4-percentage point benefit from the recent acquisition of ITsavvy. The organic decline reflected lower managed print services 2 revenue, driven by lower outsourcing and print service revenue, and lower supplies. Post sale revenue declines also reflect intentional reduction in non-strategic revenue, such as paper and financing income, and the effects of geographic and offering simplification. These impacts were partially offset by modest growth in digital services revenue. ____________________________ (1) See "Currency Impact" section for a description of Constant Currency. (2) Includes revenues from service, maintenance and rentals. IT solutions and digital services are not included in managed print services. Total revenue for the six months ended June 30, 2025 reflected the following: Post sale revenue Post sale revenue primarily reflects revenues from managed print services 2 , supplies, paper and financing. These revenues are associated not only with the population of devices in the field, which is affected by installs and removals, but also by the page volumes generated from the usage of such devices and the revenue per printed page. Post sale revenue also includes revenues from IT Solutions, comprised of IT products and services, Digital services, as well as gains, commissions, and servicing revenue associated with the sale of finance receivables. Post sale revenue increased 1.5% as compared to the second quarter of 2024, which included a 1.0-percentage point benefit from currency, as well as a 10.6-percentage point benefit from the recent acquisition of ITSavvy. Post sale revenue decreased 0.9% for the six months ended June 30, 2025 as compared to the prior year period, including a 0.6-percentage point adverse impact from currency, and a 9.4-percentage point benefit from the recent acquisition of ITsavvy. Post sale revenue reflected the following: • Services, maintenance, rentals and other revenue includes maintenance and outsourcing revenue (including bundled supplies), the services portion of our IT Solutions offering, digital services revenue, rentals, financing, and other revenues. For the three months ended June 30, 2025, these revenues decreased 5.8% as compared to second quarter of 2024, which included a 1.4-percentage point benefit from currency, as well as a 3.1-percentage point benefit from the recent acquisition of ITsavvy. For the six months ended June 30, 2025 the revenues decreased 6.9% as compared to the prior year period, which included a 0.1-percentage point adverse impact from currency, as well as a 3.2-percentage point benefit from the recent acquisition of ITsavvy. The respective decline in constant currency 1 for both the three and six months ended June 30, 2025 was primarily due to managed print services 2 revenue which declined high-single digits as compared to the respective prior year periods, reflecting lower outsourcing and print service revenue, and the effects of geographic and offering simplification, which had a 2.1-percentage point adverse impact and a 2.5-percentage point adverse impact during the three and six months ended June 30, 2025. The decline is also due to lower financing revenue, which had a 1.9-percentage point adverse impact and a 1.2-percentage point adverse impact during the three and six months ended June 30, 2025, reflecting a continued reduction of the average finance receivable balance in the first half of 2025 as a result of the sales of finance receivables in recent quarters to HPS Investment Partners (HPS), and De Lage Landen Financial Services Canada Inc., and De Lage Landen Financial Services France Inc. For the six months ended June 30, 2025, these impacts were partially offset by modest growth in digital services revenue. • IT products revenue includes the sale of notebooks, network communications and other endpoint devices, desktop computers and other IT hardware. Software product sales include deployments of cloud and security solutions, endpoint security application suites, operating systems, other applications and network management solutions. Xerox 2025 Form 10-Q 51 ◦ For the three months ended June 30, 2025, these revenues increased 173.2% as compared to second quarter of 2024, and included no impact from currency. Second quarter 2025 revenues included a 177.0-percentage point benefit from the recent acquisition of ITsavvy. Excluding the impact of ITsavvy, IT products revenues decreased 3.8% in actual currency as compared to second quarter of 2024 due primarily to a larger product mix subject to net classification and revenue deferrals. ◦ For the six months ended June 30, 2025, these revenues increased 150.5% as compared to the prior year period, and included a 1.0-percentage point adverse impact from currency. 2025 revenues included a 162.0-percentage point benefit from the recent acquisition of ITsavvy. Excluding the impact of ITsavvy, IT products revenues decreased 11.5% in actual currency as compared to the prior year period due the timing of large product placements in the prior year, a larger product mix subject to net classification and revenue deferrals. • Supplies, paper and other sales revenue includes unbundled supplies, paper and other sales. For the three months ended June 30, 2025, these revenues decreased 11.6% as compared to the second quarter of 2024, which included a 0.9-percentage point adverse impact from currency. For the six months ended June 30, 2025, these revenues decreased 10.6% as compared to the prior year period, and included a 2.2-percentage point adverse impact from currency. The respective decline in constant currency 1 for both the three and six months ended June 30, 2025 primarily reflects lower paper sales as a result of the sale of our European paper business and lower supplies revenue. Equipment sales revenue Equipment sales revenue decreased 5.6% as compared to the second quarter of 2024, which included a 1.1-percentage point benefit from currency. The decrease in constant currency 1 was attributable to lower installations, and Reinvention-related actions including the exit of certain production print manufacturing operations in the prior year and geographic simplification, partially offset by higher pricing. For the six months ended June 30, 2025 Equipment sales revenue decreased 4.0%, with no impact from currency. The decrease in constant currency 1 was primarily attributable to Reinvention-related actions, including the exit of certain production print manufacturing operations in the prior year and geographic simplification. Revenue declines for Entry and High-End products were partially offset by growth in Mid-Range. See Segment Review - Print and Other below for additional discussion on Equipment sales revenue. ____________________________ (1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. (2) Includes revenues from service, maintenance and rentals. IT solutions and digital services are not included in managed print services. Xerox 2025 Form 10-Q 52 Costs, Expenses and Other Income Summary of Key Financial Ratios The following is a summary of key financial ratios used to assess our performance: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 B/(W) 2025 2024 B/(W) Gross Profit $ 451 $ 520 $ (69) $ 877 $ 963 $ (86) RD&E 43 50 7 85 99 14 SAG 368 393 25 746 790 44 Equipment Gross Margin 24.0 % 34.5 % (10.5) pts. 25.8 % 32.9 % (7.1) pts. Post sale Gross Margin 29.9 % 32.5 % (2.6) pts. 29.7 % 30.8 % (1.1) pts. Total Gross Margin 28.6 % 33.0 % (4.4) pts. 28.9 % 31.3 % (2.4) pts. RD&E as a % of Revenue 2.7 % 3.2 % 0.5 pts. 2.8 % 3.2 % 0.4 pts. SAG as a % of Revenue 23.4 % 24.9 % 1.5 pts. 24.6 % 25.6 % 1.0 pts. Pre-tax (Loss) Income $ (60) $ 25 $ (85) $ (127) $ (125) $ (2) Pre-tax (Loss) Income Margin (3.8) % 1.6 % (5.4) pts. (4.2) % (4.1) % (0.1) pts. Adjusted (1) Operating profit $ 59 $ 85 $ (26) $ 81 $ 118 $ (37) Adjusted (1) Operating Margin 3.7 % 5.4 % (1.7) pts. 2.7 % 3.8 % (1.1) pts. ____________ (1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. Gross Margin Second quarter 2025 gross margin of 28.6% decreased by 4.4-percentage points as compared to second quarter of 2024, which included a 1.0-percentage point adverse impact related to our recent acquisition of ITsavvy. Excluding the impact of ITsavvy, the decrease primarily reflects lower gross profit, including the adverse impact related to unfavorable product mix, reflecting, in part, lower page volumes, and a 2.0-percentage point adverse impact related to tariff and product-related cost increases. These impacts were partially offset by benefits associated with Reinvention-related cost, productivity actions and recent pricing initiatives. Gross margin for the six months ended June 30, 2025 of 28.9% decreased by 2.4-percentage points as compared to the prior year period, which included a 0.9-percentage point adverse impact related to our recent acquisition of ITsavvy. Excluding the impact of ITsavvy, the decrease primarily reflects lower gross profit, including the adverse impact related to unfavorable product mix, reflecting, in part, lower page volumes, and a 1.4-percentage point adverse impact related to tariff and product-related cost increases. These impacts were partially offset by the benefits associated with Reinvention-related costs, primarily related to the exit of certain production print manufacturing operations, which had a 1.6-percentage point unfavorable impact on gross margin in the prior year period. Second quarter 2025 equipment gross margin of 24.0% decreased by 10.5-percentage points as compared to second quarter of 2024. The decrease reflects lower revenue and gross profit, including a 6.4-percentage point adverse impact related to tariff and product-related cost increases, and an unfavorable product mix, as well as a 1.0-percentage point adverse impact due to the exit of certain production print manufacturing operations in the prior year, and unfavorable currency. These impacts were partially offset by recent pricing initiatives. Equipment gross margin for the six months ended June 30, 2025 of 25.8% decreased by 7.1-percentage points as compared to the prior year period. The decrease reflects lower revenue and gross profit, including a 3.8-percentage point adverse impact related to tariff and product-related cost increases, and an unfavorable product mix, as well as a 0.5-percentage point adverse impact due to the exit of certain production print manufacturing operations in the prior year, and unfavorable currency. These impacts were partially offset by recent pricing initiatives, as well as lower freight costs. Second quarter 2025 Post sale gross margin of 29.9% decreased by 2.6-percentage points as compared to second quarter of 2024, which included a 1.5-percentage point adverse impact related to our recent acquisition of ITsavvy. Excluding the impact of ITsavvy, the decrease primarily reflects lower gross profit, including the adverse impact related to unfavorable revenue mix associated with lower financing fees and lower page volumes, and higher product and incremental tariff-related costs. These impacts were partially offset by benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives. Xerox 2025 Form 10-Q 53 Post sale gross margin for the six months ended June 30, 2025 of 29.7% decreased by 1.1-percentage points as compared to the prior year period, which included a 1.2-percentage point adverse impact related to our recent acquisition of ITsavvy, as well as the adverse impact related to unfavorable revenue mix associated with lower financing fees and lower page volumes, and higher product and incremental tariff-related costs. Partially offsetting these impacts were benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives. Research, Development and Engineering Expenses (RD&E) Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 Change 2025 2024 Change R&D $ 31 $ 38 $ (7) $ 60 $ 75 $ (15) Sustaining engineering 12 12 — 25 24 1 Total RD&E Expenses $ 43 $ 50 $ (7) $ 85 $ 99 $ (14) Second quarter 2025 RD&E as a percentage of revenue of 2.7% decreased 0.5-percentage points as compared to second quarter 2024. RD&E as a percentage of revenue for the six months ended June 30, 2025 of 2.8% decreased by 0.4-percentage points as compared to the prior year period. The decrease, as compared to the respective prior year periods, reflected reductions in RD&E spending that outpaced revenue declines. RD&E of $43 million decreased $7 million as compared to second quarter 2024. For the six months ended June 30, 2025 RD&E of $85 million decreased $14 million as compared to the prior year period. The decrease, as compared to the respective prior year periods, primarily reflected productivity and cost savings related to the Company's Reinvention. Selling, Administrative and General Expenses (SAG) Second quarter 2025 SAG as a percentage of revenue of 23.4% decreased by 1.5-percentage points as compared to second quarter 2024, including a 1.0-percentage point benefit from the acquisition of ITsavvy, as reductions in SAG spending outpaced revenue declines. Second quarter 2025 SAG of $368 million decreased by $25 million as compared to second quarter 2024, primarily reflecting productivity and cost savings related to the Company's Reinvention, and lower incentive compensation and benefits costs. These benefits were partially offset by expenses related to the recent acquisitions of ITsavvy and Lexmark, other Reinvention-related investments, as well as higher bad debt expense and unfavorable currency. SAG as a percentage of revenue for the six months ended June 30, 2025 of 24.6% decreased by 1.0-percentage points as compared to the prior year period, including a 1.6-percentage point benefit from the acquisition of ITsavvy, as reductions in SAG spending outpaced revenue declines. SAG for the six months ended June 30, 2025 of $746 million decreased by $44 million as compared to the prior year period, primarily reflecting productivity and cost savings related to the Company's Reinvention, lower incentive compensation expense, lower bad debt expense, and favorable currency. These benefits were partially offset by expenses related to the recent acquisitions of ITsavvy and Lexmark, other Reinvention-related investments, and higher advertising expense. The bad debt provision for the second quarter 2025 of $15 million increased by $5 million as compared to second quarter 2024 due primarily to a reserve release in the prior year. The bad debt provision for six months ended June 30, 2025 of $24 million, decreased by $1 million as compared to the prior year period, due to a lower finance receivable balance, reflecting sales of finance receivables in recent quarters to HPS Investment Partners and DLL, which were partially offset by additional reserves on finance receivables. We continue to monitor developments in future economic conditions, and as a result our reserves may need to be updated in future periods. As of June 30, 2025, on a trailing twelve-month basis, bad debt expense was 1.9% of total receivables, as compared to approximately 1.5% for the prior year comparable period. Refer to Note 6 - Accounts Receivable, Net and Note 7 - Finance Receivables, Net in the Condensed Consolidated Financial Statements for additional information regarding our bad debt provision. Xerox 2025 Form 10-Q 54 Restructuring and Related Costs, Net Restructuring and related costs, net for the second quarter 2025 was $10 million, as compared to $12 million for the second quarter 2024, and $9 million for the six months ended June 30, 2025, as compared to $51 million in the prior year period. Charges incurred during 2025 and 2024 for restructuring actions were associated with Reinvention initiatives under the Company's Reinvention and other transformation programs to reduce and realign our cost structure to the changing nature of our business, and included the following: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 2025 2024 Restructuring and severance costs $ 11 $ 5 $ 21 $ 14 Asset impairments - leased ROU assets (1) — — 4 — Net asset impairments - owned assets (1) 2 (2) (8) 24 Other contractual termination costs (2) — — 5 — Reversals (3) (2) — (12) (4) Restructuring and asset impairment costs 11 3 10 34 Retention-related severance/bonuses (4) — — — (2) Contractual severance costs (5) (1) — (1) — Consulting and other costs (6) — 9 — 19 Restructuring and related costs, net $ 10 $ 12 $ 9 $ 51 _____________ (1) Primarily related to the sale, exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries. Asset impairments of owned assets include cash proceeds resulting from asset sales of $19 million for the first quarter 2025. (2) Primarily includes additional costs incurred upon the exit from our facilities, including decommissioning costs and associated contractual termination costs. (3) Reversals of prior charges primarily include net changes in estimated reserves from initiatives accrued for in prior periods, including Reinvention. (4) Includes retention-related severance and bonuses for employees expected to continue working beyond their minimum retention period before termination. (5) Amounts primarily reflect severance and other related costs we are contractually required to pay in connection with employees transferred as part of the shared service arrangement entered into with third party providers. (6) Represents professional support services associated with our business transformation initiatives. Second quarter 2025 actions impacted several functional areas, with approximately 85% focused on gross margin improvements, and the remainder focused on SAG reductions. Second quarter 2024 actions entirely impacted gross margin improvements. The Restructuring and related costs, net reserve balance for all programs as of June 30, 2025 was $100 million, of which $68 million is expected to be paid over the next twelve months. Refer to Note 10 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs. Worldwide Employment Worldwide employment was approximately 16,600 as of June 30, 2025, a decrease of approximately 200 since December 31, 2024. The decrease, primarily due to the impact of the Company's Reinvention, which includes the effects of workforce reduction decisions, was partially offset by gross hires. Xerox 2025 Form 10-Q 55 Other Expenses, Net Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 2025 2024 Non-financing interest expense $ 55 $ 31 $ 88 $ 57 Interest income (6) (4) (8) (7) Non-service retirement-related costs 19 26 37 49 Currency losses, net 1 2 1 13 Commitment fee expense 4 — 22 — Transaction and related costs, net — (23) — (23) Loss (gain) on early extinguishment of debt 4 — 4 (3) Gain on release of contingent consideration — — — (5) All other expenses, net 3 1 4 (4) Other expenses, net $ 80 $ 33 $ 148 $ 77 Non-Financing Interest Expense Second quarter 2025 non-financing interest expense of $55 million was $24 million higher than second quarter 2024, while for the six months ended June 30, 2025, non-financing interest expense of $88 million increased by $31 million from the prior year period. The increase, as compared to the respective prior year periods, reflects recently completed borrowings in support of the Lexmark acquisition financing, repayment of existing borrowings, and general corporate purposes. New borrowings include $15 million of escrow interest related to net proceeds on the $500 million in aggregate principal amount of 13.500% Senior Secured Second Lien Notes due 2031, as well as additional interest associated with the $400 million in aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030. Contributing to the increase is a lower debt level allocated to Xerox Financial Services, which reflects a continued reduction in the average finance receivables balance associated with the sales of finance receivables in recent quarters to HPS Investment Partners and De Lage Landen Financial Services Canada Inc. and France, as well as lower originations. When non-financing interest is combined with equipment financing interest expense, total interest expense for the second quarter 2025 of $78 million increased by $18 million as compared to the second quarter 2024, and total interest expense for the six months ended June 30, 2025 of $133 million increased by $20 million as compared to the prior year period. The increase, as compared to the respective prior year periods, reflects the impact of higher interest rates on new debt. Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity and interest expense. Non-Service Retirement-Related Costs Non-service retirement-related costs for the second quarter 2025 of $19 million were $7 million lower than second quarter 2024, and for the six months ended June 30, 2025 non-service retirement-related costs of $37 million were $12 million lower than the prior year periods. The decrease as compared to the respective prior year periods was primarily due to the absence of settlement expense in the current year. The decrease for the six months ended June 30, 2025 as compared to the prior year period was partially offset by higher interest costs associated with higher discount rates. Refer to Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs. Currency losses, net Second quarter 2025 currency losses, net were $1 million lower than the second quarter 2024, while for the six months ended June 30, 2025, currency losses, net were $12 million lower as compared to the prior year period. The reduction of losses for the three and six months ended June 30, 2025 as compared to the respective prior year periods was driven by lower currency volatility, particularly against the Egyptian pound, in addition to prior period sales of our direct business operations in Argentina, Chile & Peru. Commitment fee expense Commitment fee expense for the three and six months ended June 30, 2025 primarily reflects fees associated with the recently completed Lexmark acquisition financing which includes: the private offering of $400 million in aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030; $500 million aggregate principal amount of 13.500% Senior Secured Second Lien Notes due 2031; $250 million aggregate principal amount of 13.00% Senior Notes due 2030; and an incremental term loan borrowing of $327 million under the First Lien Term Loan Credit Agreement. Xerox 2025 Form 10-Q 56 Transaction and related costs, net Transaction and related costs, net primarily reflect costs from third party providers for professional services associated with certain major and strategic M&A projects. Second quarter 2024 Transaction and related costs, net reflect insurance proceeds related to a legal settlement, for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020. Loss (Gain) on early extinguishment of debt The loss on early extinguishment of debt for the three and six months ended June 30, 2025 of $4 million reflects the write-off of deferred debt issuance costs and unamortized discount, as well as other extinguishment costs related to the repayment of Senior Notes. The (gain) on early extinguishment of debt of $3 million for the six months ended June 30, 2024 reflects a $4 million gain on the repayment of Senior Notes (via tender offer) in the first quarter of 2024, partially offset by a loss of approximately $1 million on the write-off of deferred debt issuance costs. Gain on release of contingent consideration The gain on the release of contingent consideration of $5 million for the three and six months ended June 30, 2024 reflects a reserve release related to earn-out provisions which were not met, in connection with a prior acquisition. Pre-tax (Loss) Income Margin Second quarter 2025 pre-tax (loss) margin of (3.8)% decreased 5.4-percentage points as compared to second quarter of 2024 pre-tax income margin of 1.6% and included a 0.7-percentage point benefit from the recent acquisition of ITsavvy. The decrease as compared to the second quarter 2024 is primarily due to lower gross profit, including unfavorable product mix, product cost increases, and incremental tariff-related costs. In addition, Other expenses, net, included higher non-financing interest expense related to recently completed debt offerings, as well as insurance proceeds related to a legal settlement in the second quarter 2024. These impacts were partially offset by lower Selling, administrative and general expenses, as well as lower Research, development and engineering expenses, primarily reflecting productivity and cost savings related to the Company's Reinvention, and lower incentive compensation and benefits costs. Pre-tax (loss) margin for the six months ended June 30, 2025 of (4.2)% decreased 0.1-percentage points as compared to the prior year period pre-tax (loss) margin of (4.1)% and included a 0.6-percentage point benefit from the recent acquisition of ITsavvy. The decrease as compared to the prior year period is primarily due to lower gross profit, including unfavorable product mix and product cost increases. In addition, Other expenses, net, included higher non-financing interest expense related to recently completed borrowings in support of the financing related to recently completed debt offerings, as well as commitment fees associated with those debt offerings and insurance proceeds related to a legal settlement in the second quarter 2024. These impacts were partially offset by lower Selling, administrative and general expenses, lower Restructuring and related costs, net, and lower Research, development and engineering expenses, primarily reflecting productivity and cost savings related to the Company's Reinvention, as well as lower incentive compensation and benefits costs. 2024 reflected the sales of certain direct business operations in Latin America, resulting in a net disposal loss of $54 million. Adjusted 1 Operating Margin Second quarter 2025 adjusted 1 operating income margin of 3.7% decreased by 1.7-percentage points as compared to second quarter of 2024, which included a 0.3-percentage point benefit from the recent acquisition of ITsavvy. The decrease reflected lower gross margin, due to unfavorable revenue mix, product cost increases and incremental tariff-related costs. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention, lower incentive compensation and benefits costs, as well as price increases employed to offset higher tariff and product-related costs. Adjusted 1 operating margin income for the six months ended June 30, 2025 of 2.7% decreased by 1.1-percentage points as compared to the prior year period, which included a 0.4-percentage point benefit from the recent acquisition of ITsavvy. The decrease primarily reflected lower gross margin, due to unfavorable revenue mix, product cost increases and incremental tariff-related costs, as well as unfavorable currency. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention, lower incentive compensation and benefits costs and lower bad debt expense. ______________ (1) Refer to the Adjusted Operating Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section. Xerox 2025 Form 10-Q 57 Income Taxes Second quarter 2025 effective tax rate was (76.7)% and resulted in a tax expense. On an adjusted 1 basis, the second quarter 2025 effective tax rate was 527.8%. Both these rates were higher than the U.S. federal statutory tax rate of 21.0% primarily due to not benefiting certain current year losses and expenses, as well as the geographical mix of earnings. Second quarter 2024 effective tax rate was a 28.0%, which was higher than the U.S. federal statutory tax rate of 21% due primarily to the redetermination of certain unrecognized tax positions and the geographical mix of earnings, including the mix associated with charges related to the Company's Reinvention. On an adjusted 1 basis, second quarter 2024 effective tax rate was 25.5% which was higher than the U.S. federal statutory tax rate of 21% primarily due to changes in our uncertain tax positions and the geographical mix of earnings. The effective tax rate for the six months ended June 30, 2025 was (54.3)% and resulted in a tax expense. On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2025 was 1,112.5%. Both these rates were higher than the U.S. federal statutory tax rate of 21.0% primarily due to the establishment of a valuation allowance in the first quarter 2025 against certain deferred tax assets as well as not benefiting certain current year losses and expenses and the geographical mix of earnings. The effective tax rate for the six months ended June 30, 2024 was 24.0% which resulted in a tax benefit. This tax benefit is higher than the benefit under the U.S. federal statutory tax rate of 21% due primarily to the redetermination of certain unrecognized tax positions, partially offset by the geographical mix of earnings, including the mix associated with charges related to the Company's Reinvention. On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2024 was 18.8%. The difference between this rate and the U.S. federal statutory tax rate of 21% primarily reflects the redetermination of certain unrecognized tax positions partially offset by the geographical mix of earnings. The effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income. In addition, the effective tax rate will change based on discrete or other nonrecurring events that may not be predictable. _____________ (1) Refer to the Adjusted Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section. Xerox 2025 Form 10-Q 58 Net (Loss) Income Second quarter 2025 Net (Loss) was $(106) million, or $(0.87) per diluted share. On an adjusted 1 basis, Net (Loss) was $(77) million, or $(0.64) per diluted share. Second quarter 2024 Net Income was $18 million, or $0.11 per diluted share. On an adjusted 1 basis, Net Income was $41 million, or $0.29 per diluted share. Net (Loss) for the six months ended June 30, 2025 was $(196) million, or $(1.62) per diluted share. On an adjusted 1 basis, Net (Loss) was $(81) million, or $(0.71) per diluted share. Net (Loss) for the six months ended June 30, 2024 was $(95) million, or $(0.83) per diluted share. On an adjusted 1 basis, Net Income was $52 million, or $0.35 per diluted share Refer to Note 19 - (Loss) Earnings per Share in the Condensed Consolidated Financial Statements for additional information regarding the calculation of basic and diluted loss per share. _____________ (1) Refer to the Adjusted Net (Loss) Income and EPS reconciliation table in the "Non-GAAP Financial Measures" section. For the calculations of basis and diluted loss per share, refer to Note 19 - (Loss) Earnings per Share in the Notes to the Condensed Consolidated Financial Statements. Other Comprehensive (Loss) Income Second quarter 2025 Other Comprehensive Income, Net was $169 million and included the following: i) net translation adjustment gains of $229 million reflecting the strengthening of all of our major foreign currencies against the U.S. Dollar during the quarter; ii) $(56) million of net (losses) from the changes in defined benefit plans primarily reflecting the negative impact of currency, partially offset by the amortization of net actuarial losses; and iii) $(4) million of net unrealized (losses). This compares to Other Comprehensive (Loss), Net of $(14) million for the second quarter 2024, which included the following: i) net translation adjustment losses of $(20) million reflecting the weakening of most of our major foreign currencies against the U.S. Dollar during the quarter; and ii) $6 million of net gains from the changes in defined benefit plans reflecting the amortization of actuarial losses, partially offset by actuarial losses. Other Comprehensive Income, Net for the six months ended June 30, 2025 was $251 million and included the following: i) net translation adjustment gains of $334 million reflecting the strengthening of all of our major foreign currencies against the U.S. Dollar during the quarter; ii) $(77) million of net (losses) from the changes in defined benefit plans primarily reflecting the negative impact of currency, partially offset by the amortization of net actuarial losses; and iii) $(6) million of net unrealized (losses). This compares to Other Comprehensive (Loss), Net for the six months ended June 30, 2024 of $(11) million, which included the following: i) net translation adjustment losses of $(52) million reflecting the weakening of our major foreign currencies against the U.S. Dollar; ii) $(1) million of net unrealized (losses); and iii) $42 million of net gains from the changes in defined benefit plans primarily reflecting the amortization of actuarial losses, the positive impact of currency, partially offset by actuarial losses. Refer to Note 18 - Other Comprehensive Income (Loss) in the Condensed Consolidated Financial Statements for the components of Other Comprehensive Income, Note 13 - Financial Instruments in the Condensed Consolidated Financial Statements for additional information regarding unrealized gains (losses), net, and Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding net changes in our defined benefit plans. Xerox 2025 Form 10-Q 59 Reportable Segments Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate. We have two operating and reportable segments – Print and Other and IT Solutions . Refer to Note 4 - Segment Reporting in the Condensed Consolidated Financial Statements for additional information regarding our reportable segments. Segment Review Three Months Ended June 30, (in millions) Print and Other IT Solutions Total Segment Intersegment Elimination (1) Corporate Other (2) Total 2025 Revenues $ 1,366 $ 213 $ 1,579 $ (3) $ — $ 1,576 % of Total Revenue 87 % 13 % 100 % Expenses $ 1,301 $ 203 $ 1,504 $ (3) $ 16 $ 1,517 Segment Profit $ 65 $ 10 $ 75 $ — $ (16) $ 59 Segment Margin (3) 4.8 % 4.8 % 3.7 % 2024 Revenues $ 1,494 $ 84 $ 1,578 $ — $ — $ 1,578 % of Total Revenue 95 % 5 % 100 % Expenses $ 1,387 $ 83 $ 1,470 $ — $ 23 $ 1,493 Segment Profit $ 107 $ 1 $ 108 $ — $ (23) $ 85 Segment Margin (3) 7.2 % 1.2 % 5.4 % Six Months Ended June 30, (in millions) Print and Other IT Solutions Total Segment Intersegment Elimination (1) Corporate Other (2) Total 2025 Revenues $ 2,660 $ 377 $ 3,037 $ (4) $ — $ 3,033 % of Total Revenue 88 % 12 % 100 % Expenses $ 2,554 $ 362 $ 2,916 $ (4) $ 40 $ 2,952 Segment Profit $ 106 $ 15 $ 121 $ — $ (40) $ 81 Segment Margin (3) 4.0 % 4.0 % 2.7 % 2024 Revenues $ 2,922 $ 158 $ 3,080 $ — $ — $ 3,080 % of Total Revenue 95 % 5 % 100 % Expenses $ 2,757 $ 158 $ 2,915 $ — $ 47 $ 2,962 Segment Profit $ 165 $ — $ 165 $ — $ (47) $ 118 Segment Margin (3) 5.6 % — % 3.8 % ___________ (1) Reflects primarily IT hardware, software solutions and services, sold by the IT Solutions segment to the Print and Other segment. (2) Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to either of our reportable segments. (3) Segment margin is based on total revenue. IT Solutions segment margin is net of Intersegment Elimination. Xerox 2025 Form 10-Q 60 Print and Other The Print and Other segment includes the design, development and sale of document management systems, supplies and services as well as financing and technology-related offerings, digital and print-related software products and services. Revenue Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 % Change 2025 2024 % Change Equipment sales $ 336 $ 356 (5.6)% $ 620 $ 646 (4.0)% Post sale revenue (1) 1,030 1,138 (9.5)% 2,040 2,276 (10.4)% Total Print and Other Revenue $ 1,366 $ 1,494 (8.6)% $ 2,660 $ 2,922 (9.0)% _____________ (1) Post sale revenue includes financing revenue generated from direct and indirectly financed Xerox equipment sale transactions of $32 million and $38 million for the three months ended June 30, 2025 and 2024, respectively and $65 million and $42 million for the six months ended June 30, 2025 and 2024, respectively. Second quarter 2025 Print and Other segment revenue decreased 8.6% as compared to second quarter of 2024 and Print and Other segment revenue decreased 9.0% for the six months ended June 30, 2025 as compared to the prior year period. The decrease for both the three and six months ended June 30, 2025 was primarily driven by lower Post sale revenue, as compared to their respective prior year periods. Print and Other segment revenues included the following: Equipment sales revenue decreased 5.6% during the second quarter 2025 as compared to second quarter of 2024, which included a 1.1-percentage point benefit from currency. The decrease in constant currency 1 was attributable to lower installations, and Reinvention-related actions, including the exit of certain production print manufacturing operations in the prior year and geographic simplification. Equipment sales revenue decreased 4.0% for the six months ended June 30, 2025 as compared to the prior year period, with no impact from currency. The decrease in constant currency 1 was primarily attributable to Reinvention-related actions, including the exit of certain production print manufacturing operations in the prior year and geographic simplification, as well as unfavorable product mix. Revenue declines for Entry and High-End products were partially offset by growth in Mid-Range. Post sale revenue decreased 9.5% during the second quarter 2025 as compared to second quarter of 2024, which included a 1.0-percentage point benefit from currency. The decrease in constant currency 1 was primarily due to a decline in managed print services 2 revenue, driven by lower outsourcing and print service revenue, and lower supplies revenue. The decline in post sale revenue also reflected a 4.2-percentage point adverse impact from intentional reductions in non-strategic revenue, including paper and financing revenue, and the effects of geographic and offering simplification. Post sale revenue decreased 10.4% for the six months ended June 30, 2025 as compared to the prior year period, which included a 0.5-percentage point adverse impact from currency. The decrease in constant currency 1 was primarily due to a decline in managed print services 2 revenue, driven by lower outsourcing and print service revenue. The decline in post sale revenue also reflected a 4.1-percentage point adverse impact from intentional reductions in non-strategic revenue, including paper and financing revenue, and the effects of geographic and offering simplification, as well as lower supplies revenue. These impacts were partially offset by modest growth in digital services revenue. ____________ (1) Refer to the “Currency Impact” section for a description of constant currency. (2) Includes revenues from service, maintenance and rentals. IT solutions and digital services are not included in managed print services. Xerox 2025 Form 10-Q 61 Detail by product group is shown below. Three Months Ended June 30, Six Months Ended June 30, % of Equipment Sales (in millions) 2025 2024 % Change CC % Change 2025 2024 % Change CC % Change 2025 2024 Entry $ 51 $ 56 (8.9)% (9.8)% $ 94 $ 101 (6.9)% (7.3)% 15% 16% Mid-range 235 235 —% (0.9)% 433 428 1.2% 1.3% 70% 66% High-end 44 60 (26.7)% (26.0)% 84 107 (21.5)% (21.1)% 14% 17% Other 6 5 20.0% 20.0% 9 10 (10.0)% (10.0)% 1% 1% Equipment sales (1) $ 336 $ 356 (5.6)% (6.7)% $ 620 $ 646 (4.0)% (4.0)% 100% 100% _____________ CC - See "Currency Impact" section for a description of constant currency. (1) Refer to the Products and Offerings Definitions section. The change at constant currency 1 reflects the decision to the exit certain production print manufacturing operations made in the prior year period and the effects of geographic simplification, as well as the following: • Entry - The decrease for the three months ended June 30, 2025 reflects a lower installations in black-and-white. The decrease for the six months ended June 30, 2025 reflects growth in installs with a higher mix to black-and-white devices, as well as a higher mix of sales to indirect channel partners. • Mid-range - The decrease for the three months ended June 30, 2025 reflects declines in black-and-white installations, partially offset by a favorable product family mix. The increase for the six months ended June 30, 2025 reflects growth in color revenues driven by higher installs, partially offset by lower black-and-white installs. • High-end - The decrease for the three and six months ended June 30, 2025 as compared to the respective prior year periods was primarily due to lower installations, and the exit certain production print manufacturing operations in the prior year period. _____________ (1) Refer to the “Currency Impact” section for a description of constant currency. Total Installs Installs reflect new placements of devices only (i.e., measure does not take into account removal of devices which may occur as a result of contract renewals or cancellations). Revenue associated with equipment installations may be reflected up-front in Equipment sales or over time either through rental income or as part of our services revenues (which are both reported within our post sale revenues), depending on the terms and conditions of our agreements with customers. Installs include activity for Xerox and non-Xerox branded products installed by XBS. Detail by product group (see Products and Offerings Definitions ) is shown below. Installs for the three months ended June 30, 2025, as compared to the prior year period, reflect the following: Entry • 4% decrease in entry color installs, driven by Entry Color Printers, partially offset by modest Entry Color MFP growth. • 18% decrease in entry black-and-white installs, driven by declines in A4 Mono MFPs, as well as Entry Mono Printers. Mid-Range • Mid-range color installs were flat driven by growth in Entry Production Color Low offset by declines in A3 Color MFPs. • 23% decrease in mid-range black-and-white installs driven by A3 Mono MFPs, partially offset by modest growth in Light Production Digital Business. High-End • 16% decrease in high-end color installs primarily reflecting declines in Entry Production Color Mid, partially offset by modest growth in Xerox Color Press products and Entry Production Color High. • 73% decrease in high-end black-and-white driven by declines in High End Cut Sheet products. Xerox 2025 Form 10-Q 62 Installs for the six months ended June 30, 2025: Entry • 7% increase in entry color installs, driven by growth in A4 Color MFPs, partially offset by Entry Color Printers. • 3% increase in entry black-and-white installs, driven by growth in A4 Mono MFPs and Entry Mono Printers. Mid-Range (2) • 5% increase in mid-range color installs driven by growth in A3 Color MFPs and Entry Production Color Low. • 17% decrease in mid-range black-and-white installs driven by A3 Mono MFPs, partially offset by modest growth in Light Production Digital Business. High-End (2) • 18% decrease in high-end color installs primarily reflecting declines in Entry Production Color Mid and High. • 70% decrease in high-end black-and-white driven by declines in High End Cut Sheet products, partially offset by modest growth in Xerox Color Press products. Products and Offerings Definitions Our product groupings range from: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. • “Mid-Range” , which include A3 devices that generally serve large workgroup/work teams environments as well as products in the Light Production product groups serving centralized print centers, print for pay and low volume production print establishments. • “High-End” , which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises. Segment Expenses Research, Development and Engineering Expenses (RD&E) Second quarter 2025 RD&E of $43 million decreased $7 million as compared to second quarter 2024. For the six months ended June 30, 2025 RD&E of $85 million decreased $14 million as compared to the prior year period. The decrease, as compared to the respective prior year periods, primarily reflected productivity and cost savings related to the Company's Reinvention. Selling, Administrative and General Expenses (SAG) Second quarter 2025 SAG of $318 million decreased by $40 million as compared to second quarter 2024, primarily reflecting productivity and cost savings related to the Company's Reinvention and lower incentive compensation and benefit costs. These benefits were partially offset by expenses related to the recent acquisition of Lexmark, other Reinvention-related investments, as well as higher bad debt expense, and unfavorable currency. SAG expenses for the six months ended June 30, 2025 of $640 million decreased by $79 million primarily reflecting productivity and cost savings related to the Company's Reinvention, lower bad debt expense, and lower incentive compensation and benefit costs, and lower bad debt expense. These benefits were partially offset by expenses related to the recent acquisition of Lexmark, other Reinvention-related investments, and higher advertising expense. Segment Margin Second quarter 2025 Print and Other segment margin of 4.8% decreased by 2.4-percentage points as compared to second quarter of 2024, primarily due to lower revenue and gross profit, impacted by unfavorable mix and higher product and incremental tariff-related costs. These impacts were partially offset by lower SAG and RD&E expenses, reflecting Reinvention-related cost and productivity actions, and recent pricing initiatives. Print and Other segment margin for the six months ended June 30, 2025 of 4.0% decreased by 1.6-percentage points as compared to second quarter of 2024, primarily due to lower revenue and gross profit, impacted by unfavorable mix and higher product and incremental tariff-related costs. These impacts were partially offset by lower SAG and RD&E expenses, reflecting Reinvention-related cost and productivity actions, as well as lower freight costs. Xerox 2025 Form 10-Q 63 IT Solutions The IT Solutions segment provides clients with global infrastructure technology solutions, with a focus on delivering business outcomes through a frictionless sales and service delivery experience. IT Solutions’ offerings include the provision of hardware, software and associated services as well as product lifecycle, deployment and network monitoring services, and managed services. It is comprised of our recent acquisition of ITsavvy, as well as our Canadian IT Services provider Powerland, and our legacy XBS IT solutions. Revenue Three Months Ended June 30, Six Months Ended June 30, (in millions) 2025 2024 % Change 2025 2024 % Change IT Products (1) $ 153 $ 56 173.2% $ 258 $ 103 150.5% IT Services (2) 57 28 103.6% 115 55 109.1% Intersegment revenue (3) 3 — NM 4 — NM Total IT Solutions $ 213 $ 84 153.6% $ 377 $ 158 138.6% _____________ (1) IT Products reflect the sale of IT hardware and software solutions, Hardware product sales include the sale of notebooks, network communications and other endpoint devices, desktop computers and other IT hardware. Software product sales include deployments of cloud and security solutions, endpoint security application suites, operating systems, other applications and network management solutions. (2) IT Services reflect revenue associated with the implementation of IT solutions, including product lifecycle, deployment and network monitoring services, and other managed IT services. (3) Reflects primarily IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment. Second quarter 2025 IT Solutions segment revenue increased 153.6% as compared to second quarter of 2024, and for the six months ended June 30, 2025 increased 138.6% as compared to the prior year period, and reflected the following: IT Products revenue increased 173.2% during the three months ended June 30, 2025 as compared to second quarter of 2024, primarily due to the ITsavvy acquisition, partially offset by larger product mix subject to net classification and revenue deferrals. IT Products revenue increased 150.5% during the six months ended June 30, 2025 as compared to prior year period, primarily due to the ITsavvy acquisition, partially offset by the timing of large product placements in the prior year, a larger mix of revenue subject to net classification and revenue deferrals. IT Services revenue increased 103.6% during the three months ended June 30, 2025 as compared to the second quarter of 2024. IT services revenue for the six months ended June 30, 2025 increased 109.1% as compared to the prior year period. The increase in the respective prior year periods was primarily due to the ITsavvy acquisition. Segment Expenses Selling, Administrative and General Expenses (SAG) Second quarter 2025 SAG of $25 million increased by $13 million as compared to second quarter 2024, and SAG expenses for six months ended June 30, 2025 of $48 million increased by $24 million. The increase as compared to the respective prior year periods was primarily due to the acquisition of ITsavvy, as well as higher bad debt expense. Segment Margin Second quarter 2025 IT Solutions segment margin of 4.8% increased 3.6-percentage points as compared to second quarter of 2024, driven by ITsavvy acquisition. Segment margin of 4.0% for the six months ended June 30, 2025 was flat as compared to the prior year period, reflecting the ITsavvy acquisition, offset by higher incentive compensation expense and bad debt expense. Xerox 2025 Form 10-Q 64 2024 Segment Review The following are our 2024 segment results, recast for comparison purposes, to reflect the changes made to segment reporting in 2025: (in millions) Print and Other IT Solutions Total Segment Intersegment Elimination (1) Corporate Other (2) Total Q1 2024 Revenues $ 1,428 $ 74 $ 1,502 $ — $ — $ 1,502 Expenses 1,370 75 1,445 — 24 1,469 Segment Profit 58 (1) 57 — (24) 33 Segment Margin (3) 4.1 % (1.4) % 2.2 % Q2 2024 Revenues $ 1,494 $ 84 $ 1,578 $ — $ — $ 1,578 Expenses 1,387 83 1,470 — 23 1,493 Segment Profit 107 1 108 — (23) 85 Segment Margin (3) 7.2 % 1.2 % 5.4 % Q3 2024 Revenues $ 1,442 $ 86 $ 1,528 $ — $ — $ 1,528 Expenses 1,339 86 1,425 — 23 1,448 Segment Profit 103 — 103 — (23) 80 Segment Margin (3) 7.1 % — % 5.2 % Q4 2024 Revenues $ 1,500 $ 114 $ 1,614 $ (1) $ — $ 1,613 Expenses 1,372 114 1,486 (1) 24 1,509 Segment Profit 128 — 128 — (24) 104 Segment Margin (3) 8.5 % — % 6.4 % 2024 Revenues $ 5,864 $ 358 $ 6,222 $ (1) $ — $ 6,221 Expenses 5,468 358 5,826 (1) 94 5,919 Segment Profit 396 — 396 — (94) 302 Segment Margin (3) 6.8 % — % 4.9 % _____________ (1) Reflects primarily IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment. (2) Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to either of our reportable segments. (3) Segment margin is based on total revenue. The following are reconciliations of our segment profit to our pre-tax (loss) income for 2024: (in millions) Q1 2024 Q2 2024 Q3 2024 Q4 2024 Full Year 2024 Pre-tax (Loss) Income Total reported segments $ 33 $ 85 $ 80 $ 104 $ 302 Inventory-related impact - exit of certain production print manufacturing operations (1) (36) (8) — (7) (51) Reinvention costs — — — (12) (12) Goodwill impairment — — (1,058) — (1,058) Restructuring and related costs, net (39) (12) (56) (5) (112) Amortization of intangible assets (10) (10) (10) (43) (73) Divestitures (54) 3 — 4 (47) Transaction and related costs, net — — — (7) (7) Other expenses, net (44) (33) (43) (38) (158) Total Pre-tax (loss) income $ (150) $ 25 $ (1,087) $ (4) $ (1,216) _____________ (1) As a result of the exit of certain production print manufacturing operations, reflects the inventory-related charges of approximately $32 million in Q1-24, $6 million in Q2-24, and $7 million in Q4-24, as well as the cancellation of related purchase contracts of approximately $4 million in Q1-24, and $2 million in Q2-24. Xerox 2025 Form 10-Q 65 Capital Resources and Liquidity The following is a summary of our liquidity position: • As of June 30, 2025 and December 31, 2024, total cash, cash equivalents and restricted cash of Xerox Holdings Corporation were $985 million and $631 million, respectively, and apart from restricted cash of $536 million and $55 million at June 30, 2025 and December 31, 2024, respectively, was readily accessible for use. The increase in total cash, cash equivalents and restricted cash of $354 million primarily reflects net cash provided by in financing activities of $459 million, as well as net cash used in operating activities of $100 million, and cash provided by investing activities of $12 million. The restricted cash of $536 million at June 30, 2025, includes the net proceeds of approximately $492 million from the issuance of $500 aggregate principal amount of 13.500% Senior Secured Second Lien Notes due 2031 (the Second Lien Notes), which were released from escrow upon the consummation of the Lexmark acquisition on July 1, 2025 (the Lexmark Acquisition). • Total debt at June 30, 2025 was $3,942 million, of which $1,635 million is allocated to and supports the Company's finance assets. The remaining debt of $2,307 million is attributable to the non-financing business and increased from $1,658 million at December 31, 2024. Debt at June 30, 2025 consists of senior secured and unsecured notes, secured promissory notes, and borrowings under a Term Loan B facility. During 2025, we issued $400 million aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030 (the First Lien Notes) and the Second Lien Notes. • During 2025, we prepaid approximately $90 million of the Senior Notes due August 2025 (2025 Notes) using proceeds from the First Lien Notes, with the remaining balance of the 2025 Notes of approximately $298 million due in August 2025. We also repaid $95 million of aggregate principal amount of borrowings under Xerox Corporation’s first lien senior secured term loan credit facility (the TLB Facility). Refer to Note 12 - Debt for additional information related to our Debt activity in the first half of 2025. • In connection with the Lexmark Acquisition, on July 1, 2025, Xerox Holdings Corporation issued $250 million aggregate principal amount of 13.00% Senior Notes due 2030 (the 2030 Notes), and Xerox Corporation made an incremental term loan borrowing of approximately $327 million (Incremental Term Loans) under its TLB Facility. The net proceeds from the 2030 Notes and the Incremental Term Loans were used to fund the Lexmark Acquisition. Additionally, Xerox Holdings Corporation issued $125 million aggregate principal amount of 13.00% Senior Unsecured Notes due 2026 (the 2026 Notes). Refer to Note 21 - Subsequent Events for additional information related to our Debt activity in July 2025. • As of June 30, 2025, the ABL facility had an available borrowing base of approximately $260, with no borrowings outstanding, and approximately $63 million of letters of credit were issued under the facility. During the six months ended June 30, 2025, the maximum amount outstanding under the ABL Facility was $53 million. • We now expect operating cash flows to be approximately $345 million, which is a decrease from our previous guidance of between $420 million to $470 million. The decrease reflects a higher level of cash tariff expenses and one-time costs associated with the implementation of synergy savings. Additionally, we now expect capital expenditures to be approximately $95 million in 2025, and increase from our original guidance of approximately $70 million, due, in part, to the inclusion of Lexmark. We have the ability to sell finance receivables for additional liquidity. Cash Flow Analysis The following summarizes our cash, cash equivalents and restricted cash: Six Months Ended June 30, Change (in millions) 2025 2024 Net cash (used in) provided by operating activities $ (100) $ 44 $ (144) Net cash used in investing activities (12) (19) 7 Net cash provided by (used in) financing activities 459 (75) 534 Effect of exchange rate changes on cash, cash equivalents and restricted cash 7 (16) 23 Increase (decrease) in cash, cash equivalents and restricted cash 354 (66) 420 Cash, cash equivalents and restricted cash at beginning of period 631 617 14 Cash, Cash Equivalents and Restricted Cash at End of Period $ 985 $ 551 $ 434 Xerox 2025 Form 10-Q 66 Cash Flows from Operating Activities Net cash used in operating activities was $100 million for the six months ended June 30, 2025. The $144 million decrease in operating cash from the prior year period was primarily due to the following: • $142 million decrease in pre-tax income before provisions, divestitures, restructuring and related costs and non-service retirement-related costs. • $187 million decrease from finance receivables primarily due to lower sales of finance receivables partially offset by a higher level of run-off due to lower originations. • $113 million increase from accounts payable primarily due to the timing of supplier and vendor payments. • $42 million increase from accrued compensation due to the timing of payments of lower year-end accruals. • $23 million increase from lower payments associated with restructuring and related costs. Cash Flows from Investing Activities Net cash used in investing activities was $12 million for the six months ended June 30, 2025. The $7 million change from the prior year period was primarily due to higher proceeds from the sale of surplus property and assets in the U.S. and lower noncontrolling investments, partially offset by higher capital expenditures. Cash Flows from Financing Activities Net cash provided by financing activities was $459 million for the six months ended June 30, 2025. The $534 million increase in cash from the prior year period was primarily due to the following: • $511 million increase from net debt activity. 2025 reflects net proceeds $860 million from Senior Notes issuances offset by payments of $102 million on the Term Loan B facility, $90 million on Senior Notes, $72 million on secured financing arrangements and $55 million on secured promissory notes. The $860 million net proceeds from Senior Notes issuances includes proceeds of $900 million offset by deferred debt issuance costs of $23 million and discounts of $17 million. 2024 reflects proceeds of $500 million on Senior Notes and $400 million on Convertible Senior Notes offset by net payments of $658 million on Senior Notes, deferred debt issuance costs of $15 million from Senior Notes issuances, $178 million on secured financing arrangements and $14 million on the Term Loan B facility. The $658 million net payments on Senior Notes include $300 million on Senior Notes maturing in May 2024 and $362 million for the early redemption of 2025 Senior Notes offset by early redemption premium of $4 million. • $23 million increase due to no purchases of capped calls in the current year. • $13 million increase from lower common stock dividends due to dividend reductions. • Other financing, net includes $15 million of commitment fees related to the Lexmark Acquisition. Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity. Cash, Cash Equivalents and Restricted Cash Refer to Note 11 - Supplementary Financial Information in the Condensed Consolidated Financial Statements for additional information regarding Cash, cash equivalents and restricted cash. Operating Leases We have operating leases for real estate and vehicles in our domestic and international operations, and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our operating leases have remaining terms of up to ten years and a variety of renewal and/or termination options. As of June 30, 2025 and December 31, 2024, total operating lease liabilities were $193 million and $188 million, respectively. Finance Leases Xerox has finance leases for equipment in the U.S. and Europe, as well as for vehicles and related infrastructure, within outsourced warehouse supply arrangements, in the U.S. These leases have remaining maturities up to six years. As of June 30, 2025 and December 31, 2024, total finance lease liabilities were $11 million and $53 million, respectively. The decrease in finance leases since December 31, 2024 is primarily related to the modification of a lease agreement entered into during the first quarter of 2025, which resulted in a change in the lease classification from financing to operating. Accordingly, we remeasured the right of use asset and the corresponding lease liability. Refer to Note 9 - Lessee in the Condensed Consolidated Financial Statements for additional information regarding our leases accounted for under lessee accounting. Xerox 2025 Form 10-Q 67 Debt and Customer Financing Activities The following summarizes our debt: (in millions) June 30, 2025 December 31, 2024 Xerox Holdings Corporation $ 1,948 $ 2,038 Xerox Corporation 2,086 1,343 Xerox - Other Subsidiaries (1) — 70 Subtotal - Principal debt balance 4,034 3,451 Debt issuance costs Xerox Holdings Corporation (16) (19) Xerox Corporation (44) (11) Subtotal - Debt issuance costs (60) (30) Net unamortized premium (32) (22) Total Debt $ 3,942 $ 3,399 _____________ (1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables in prior year. These securitizations were repaid during the first quarter 2025. Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt. Finance Assets and Related Debt The following represents our total finance assets, net associated with our lease and finance operations: (in millions) June 30, 2025 December 31, 2024 Total finance receivables, net (1) $ 1,620 $ 1,745 Equipment on operating leases, net 249 245 Total Finance Assets, net (2) $ 1,869 $ 1,990 _____________ (1) Includes (i) Billed portion of finance receivables, net, (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets. Our lease contracts permit customers to pay for equipment over time rather than at the date of installation; therefore, we maintain a certain level of debt (that we refer to as financing debt) to support our investment in these lease contracts, which are reflected in Total finance assets, net. For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets. Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt: (in millions) June 30, 2025 December 31, 2024 Finance receivables debt (1) $ 1,417 $ 1,527 Equipment on operating leases debt 218 214 Financing debt 1,635 1,741 Core debt 2,307 1,658 Total Debt $ 3,942 $ 3,399 __________________ (1) Finance receivables debt is the basis for our calculation of Equipment financing interest expense, which is included in Cost of services, maintenance, rentals and other in the Condensed Consolidated Statements of Loss. Sales of Finance Receivables and Third Party Leasing Programs Refer to Note 7 - Finance Receivables, Net in the Condensed Consolidated Financial Statements for additional information regarding our sales of finance receivables and our third party leasing programs. Capital Market/Debt Activity Refer to Note 12 - Debt and Note 21 - Subsequent Events in the Condensed Consolidated Financial Statements for additional information regarding our debt activity. Xerox 2025 Form 10-Q 68 Liquidity and Financial Flexibility We manage our worldwide liquidity using internal cash management practices, which are subject to i) the statutes, regulations and practices of each of the local jurisdictions in which we operate, ii) the legal requirements of the agreements to which we are a party, and iii) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services. Our principal debt maturities are spread over the next five years as follows: (in millions) Xerox Holdings Corporation Xerox Corporation Total 2025 Q3 298 27 325 2025 Q4 — 28 28 2026 — 110 110 2027 — 22 22 2028 750 55 805 2029 500 344 844 2030 and thereafter 400 1,500 1,900 Total $ 1,948 $ 2,086 $ 4,034 Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt. Treasury Stock Xerox Holdings Corporation made no open-market repurchases of its Common Stock during 2025. Financial Risk Management We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. We utilize derivative financial instruments to hedge economic exposures, as well as to reduce earnings and cash flow volatility resulting from shifts in market rates. We enter into limited types of derivative contracts, including interest rate swap agreements, interest rate caps, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage interest rate and foreign currency exposures. Our primary foreign currency market exposures include the Euro, U.K. Pound Sterling and Japanese Yen. The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency exchange rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities. We are required to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. As permitted, certain of these derivative contracts have been designated for hedge accounting treatment. Certain of our derivatives that do not qualify for hedge accounting are effective as economic hedges. These derivative contracts are likewise required to be recognized each period at fair value and therefore do result in some level of volatility. The level of volatility will vary with the type and amount of derivative hedges outstanding, as well as fluctuations in the currency and interest rate markets during the period. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities. By their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange and interest rate movements is expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. We do not believe there is significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a diversified group of major financial institutions. Further, our policy is to deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties. The current market events have not required us to materially modify or change our financial risk management strategies with respect to our exposures to interest rate and foreign currency risk. Refer to Note 13 – Financial Instruments in the Condensed Consolidated Financial Statements for further discussion and information on our financial risk management strategies. Xerox 2025 Form 10-Q 69 Non-GAAP Financial Measures We have reported our financial results in accordance with generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures described below. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related income tax effects. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth below. Adjusted Earnings Measures • Adjusted Net Income and Earnings per Share (EPS) • Adjusted Effective Tax Rate The above measures were adjusted for the following items: Restructuring and related costs, net: Restructuring and related costs, net include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges. Restructuring consists of costs primarily related to severance and benefits paid to employees pursuant to formal restructuring and workforce reduction plans. Asset impairment includes costs incurred for those assets sold, abandoned or made obsolete as a result of our restructuring actions, exiting from a business or other strategic business changes. Additional costs for our transformation programs are primarily related to the implementation of strategic actions and initiatives and include third-party professional service costs as well as one-time incremental costs. All of these costs can vary significantly in terms of amount and frequency based on the nature of the actions as well as the changing needs of the business. Accordingly, due to that significant variability, we will exclude these charges since we do not believe they provide meaningful insight into our current or past operating performance, nor do we believe they are reflective of our expected future operating expenses as such charges are expected to yield future benefits and savings with respect to our operational performance. Amortization of intangible assets: The amortization of intangible assets is driven by our acquisition activity which can vary in size, nature and timing as compared to other companies within our industry and from period to period. The use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods. Non-service retirement-related costs: Our defined benefit pension and retiree health costs include several elements impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity markets as well as those that are predominantly legacy in nature and related to employees who are no longer providing current service to the Company (e.g. retirees and ex-employees). These elements include (i) interest cost, (ii) expected return on plan assets, (iii) amortization of prior plan amendments, (iv) amortized actuarial gains/losses and (v) the impacts of any plan settlements/curtailments. Accordingly, we consider these elements of our periodic retirement plan costs to be outside the operational performance of the business or legacy costs and not necessarily indicative of current or future cash flow requirements. This approach is consistent with the classification of these costs as non-operating in Other expenses, net. Adjusted earnings will continue to include the service cost elements of our retirement costs, which are related to current employee service as well as the cost of our defined contribution plans. Transaction and related costs, net : Transaction and related costs, net are costs and expenses primarily associated with certain major or significant strategic M&A projects. These costs are primarily for third-party legal, accounting, consulting and other similar types of professional services as well as potential legal settlements that may arise in connection with those M&A transactions. These costs are considered incremental to our normal operating charges and were incurred or are expected to be incurred solely as a result of the planned transactions. Accordingly, we exclude these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis. Xerox 2025 Form 10-Q 70 Discrete, unusual or infrequent items: We exclude these item(s), when applicable, given their discrete, unusual or infrequent nature and their impact on the comparability of our results for the period to prior periods and future expected trends. • Inventory-related impact - exit of certain production print manufacturing operations • Divestitures • Reinvention-related costs • Loss (gain) on early extinguishment of debt • Commitment fee expenses • Lexmark acquisition financing - escrow interest, net • Deferred tax asset valuation allowance • Income tax on PARC Donation Adjusted Operating Income and Margin We calculate and utilize adjusted operating income and margin measures by adjusting our reported pre-tax (loss) income and margin amounts. In addition to the costs and expenses noted above as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses. We exclude these amounts in order to evaluate our current and past operating performance and to better understand the expected future trends in our business. Constant Currency (CC) Refer to "Currency Impact" for a discussion of this measure and its use in our analysis of revenue growth. Xerox 2025 Form 10-Q 71 Adjusted Net (Loss) Income and EPS reconciliation: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 (in millions, except per share amounts) Net Loss Diluted EPS Net Income Diluted EPS Net Loss Diluted EPS Net Income Diluted EPS Reported (1) $ (106) $ (0.87) $ 18 $ 0.11 $ (196) $ (1.62) $ (95) $ (0.83) Adjustments: Inventory-related impact - exit of certain production print manufacturing operations (2) 10 8 17 44 Restructuring and related costs, net 10 12 9 51 Amortization of intangible assets 10 10 20 20 Divestitures — (3) (4) 51 Non-service retirement-related costs 19 26 37 49 Reinvention-related costs 3 — 9 — Transaction and related costs, net 6 (23) 9 (23) Loss (gain) on early extinguishment of debt 4 — 4 (3) Commitment fee expense (3) 4 — 22 — Lexmark acquisition financing - escrow interest, net (4) 12 — 12 — Deferred tax asset valuation allowance (5) — — 50 — Income Tax on PARC Donation (6) — — 9 — Income tax on adjustments (7) (49) (7) (79) (42) Adjusted $ (77) $ (0.64) $ 41 $ 0.29 $ (81) $ (0.71) $ 52 $ 0.35 Dividends on preferred stock used in adjusted EPS calculation (8) $ 3 $ — $ 3 $ 7 $ 7 Weighted average shares for adjusted EPS (8) 126 — 126 125 125 Fully diluted shares at June 30, 2025 (9) 126 ____________________________ (1) Net (Loss) Income and EPS. For the three months ended June 30, 2025, Net (Loss) and Diluted (Loss) include $22 million ($17 million after-tax) of financing-related charges, net or $0.13 per share, related to recently completed borrowings in support of the Lexmark acquisition financing, repayment of existing borrowings, and general corporate purposes, and $28 million of tax expense, or $0.22 per share, related to interest expense that was not deductible according to tax guidelines in place as of June 30, 2025. For the three months ended June 30, 2024, Net Income and Diluted Earnings per Share included $23 million ($17 million after-tax), or $0.14 per share, related to insurance proceeds from a legal settlement for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020. For the six months ended June 30, 2025, Net (Loss) and Diluted (Loss) include a charge to tax expense related to the establishment of $59 million of valuation allowances, or $0.47 per share, financing-related charges, net of $40 million ($30 million after-tax), or $0.24 per share, related to recently completed borrowings in support of the Lexmark acquisition financing, repayment of existing borrowings, and general corporate purposes, and tax expense of $28 million, or $0.22 per share, related to interest expense that was not deductible according to tax guidelines in place as of June 30, 2025. For the six months ended June 30, 2024, Net Income and Diluted Earnings per Share includes Reinvention-related charges of $129 million ($100 million after-tax), or $0.80 per share, primarily related to the exit of certain production print manufacturing operations and geographic simplification, and insurance proceeds of $23 million ($17 million after-tax), or $0.14 per share, related to a legal settlement for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020. (2) As a result of the exit of certain production print manufacturing operations, Cost of sales and Cost of services, maintenance, rentals and other reflects inventory-related charges of $9 million and $6 million for the three months ended June 30, 2025 and 2024, respectively, and $16 million and $38 million, for the six months ended June 30, 2025 and 2024, respectively, as well as the cancellation of related purchase contracts $1 million and $2 million for the three months ended June 30, 2025 and 2024, respectively, and $1 million and $6 million for the six months ended June 30, 2025 and 2024, respectively. (3) Primarily reflects fees related to recently completed borrowings in support of the Lexmark acquisition financing, repayment of existing borrowings, and general corporate purposes, which includes: the private offering of $400 million in aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030 and $500 million aggregate principal amount of 13.500% Senior Secured Second Lien Notes Due in 2031; the private offering of $250 million aggregate principal amount of 13.00% Senior Notes due 2030; and an incremental term loan borrowing of $327 million under the First Lien Term Loan Credit Agreement. (4) Reflects net interest expense on net proceeds received from debt issuances which were placed in escrow to fund the Lexmark Acquisition. (5) Reflects the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. (6) Reflects the change in the realizability of the PARC donation tax benefit recognized in the second quarter of 2023. (7) Refer to Adjusted Effective Tax Rate reconciliation. (8) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude the 7 million shares associated with Xerox Holdings Corporation's Series A Convertible preferred stock. (9) Reflects common shares outstanding at June 30, 2025, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the first quarter 2025. Excludes potentially dilutive common shares associated with our series A convertible preferred stock, as well as shares granted under stock-based compensation programs, all of which were anti-dilutive for the first quarter 2025. Xerox 2025 Form 10-Q 72 Adjusted Effective Tax Rate reconciliation: Three Months Ended June 30, 2025 2024 (in millions) Pre-Tax (Loss) Income Income Tax Expense Effective Tax Rate Pre-Tax Income Income Tax Expense Effective Tax Rate Reported (1) $ (60) $ 46 (76.7) % $ 25 $ 7 28.0 % Non-GAAP Adjustments (2) 78 49 30 7 Adjusted (3) $ 18 $ 95 527.8 % $ 55 $ 14 25.5 % Six Months Ended June 30, 2025 2024 (in millions) Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Reported (1) $ (127) $ 69 (54.3) % $ (125) $ (30) 24.0 % Deferred tax asset valuation allowance (2) — (50) — — Income tax on PARC donation (2) — (9) — — Non-GAAP Adjustments (2) 135 79 189 42 Adjusted (3) $ 8 $ 89 1,112.5 % $ 64 $ 12 18.8 % ____________________________ (1) Pre-tax (loss) income and Income tax expense (benefit). (2) Refer to Adjusted Net (Loss) Income and EPS reconciliation for details. (3) The tax impact on the Adjusted Pre‐Tax Income is calculated under the same accounting principles applied to the As Reported Pre-Tax (Loss) Income under ASC 740, which employs an annual effective tax rate method to the results. Xerox 2025 Form 10-Q 73 Adjusted Operating Income and Margin reconciliation: Three Months Ended June 30, 2025 2024 (in millions) (Loss) Profit Revenue Margin Profit Revenue Margin Reported (1) $ (106) $ 1,576 $ 18 $ 1,578 Income tax expense 46 — 7 — Pre-tax (loss) income $ (60) $ 1,576 (3.8) % $ 25 $ 1,578 1.6 % Adjustments: Inventory-related impact - exit of certain production print manufacturing operations (2) 10 8 Reinvention-related costs 3 — Restructuring and related costs, net 10 12 Amortization of intangible assets 10 10 Divestitures — (3) Transaction and related costs, net 6 — Other expenses, net (3)(4) 80 33 Adjusted $ 59 $ 1,576 3.7 % $ 85 $ 1,578 5.4 % Six Months Ended June 30, 2025 2024 (in millions) (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin Reported (1) $ (196) $ 3,033 $ (95) $ 3,080 Income tax (benefit) expense 69 — (30) — Pre-tax loss $ (127) $ 3,033 (4.2) % $ (125) $ 3,080 (4.1) % Adjustments: Inventory-related impact - exit of certain production print manufacturing operations (2) 17 44 Reinvention-related costs 9 — Restructuring and related costs, net 9 51 Amortization of intangible assets 20 20 Divestitures (4) 51 Transaction and related costs, net 9 — Other expenses, net (3)(4) 148 77 Adjusted $ 81 $ 3,033 2.7 % $ 118 $ 3,080 3.8 % ____________________________ (1) Net (Loss) income. (2) Includes inventory-related charges of approximately $9 and $6 for the three months ended June 30, 2025 and 2024, respectively, and $16 and $38 for the six months ended June 30, 2025 and 2024 respectively, as well as charges for the cancellation of related purchase contracts of $1 and $2 for the three months ended June 30, 2025 and 2024, respectively, and $1 and $6 for the six months ended June 30, 2025 and 2024, respectively. (3) Includes non-service retirement-related costs. (4) The three and six months ended June 30, 2025 includes $22 million and $43 million, respectively, of interest and financing-related charges, net, related to recently completed borrowings in support of the Lexmark acquisition financing, repayment of existing borrowings, and general corporate purposes . The three and six months ended June 30, 2024 includes $23 million, respectively, of insurance proceeds from a legal settlement for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020. Xerox 2025 Form 10-Q 74 ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information set forth under the “Financial Risk Management” section of this Quarterly Report on Form 10-Q is hereby incorporated by reference in answer to this Item.