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Item 2. Management’s Discussion and Analysis

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 Throughout the Management’s Discussion and Analysis (MD&A), 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,” 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. 
 Currently, 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 Quarterly Report on 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 operating subsidiary is CareAR, Inc. (CareAR), an SaaS solutions provider, which was acquired in 2020. CareAR incurred $5 million and $7 million of costs and expenses for the three and six months ended June 30, 2021, respectively. Due to their immaterial nature, and for ease of discussion, CareAR's expenses are included in this discussion with Xerox's costs and expenses. 
 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. 
 
 
 Xerox 2021 Form 10-Q 40 

 
 

 Impact of COVID-19 on Our Business Operations 
 In response to the COVID-19 pandemic, we continue to prioritize the health and safety of our employees, customers and partners and support their needs so they can perform their work flawlessly, whether in the office or a remote location. 
 During the second quarter 2021, our business continued to be impacted by the pandemic. However, we saw a continued gradual recovery of our revenues in the quarter as businesses gained confidence in the control of the pandemic and as a result invested in new printing technology and services. We continued to see a positive correlation between the roll-out of vaccinations, the return of employees to the office, and the gradual recovery of our page-volume driven post sale revenues. We expect that measures to control the pandemic and expand economic activity will result in a moderate economic improvement in 2021. However, in the near term, the recovery may be uneven and affected by the emergence of new variants of the COVID-19 virus which could result in a resurgence of cases in various countries and regions. 
 We have a strong balance sheet and sufficient liquidity, including approximately $2.1 billion of cash and cash equivalents and access to our undrawn $1.8 billion revolver. With our Project Own It transformation and cost savings, we have built a leaner and more flexible cost structure. We also continue to focus our efforts on incremental actions to prioritize and preserve cash as we manage through the pandemic. These actions include the continued reduction of discretionary spend such as near-term targeted marketing programs and the suspension of 401(k) matching contributions. In addition, in response to the COVID-19 pandemic, various governments continue to employ temporary measures to provide aid and economic stimulus directly to companies through cash grants and credits or indirectly through payments to temporarily furloughed employees. We recognized savings from the use of such measures in the U.S., Canada and Europe. We continue to monitor government programs and actions being implemented or expected to be implemented to counter the economic impacts of the COVID-19 pandemic. 
 The savings from government assistance were recorded as follows in the Condensed Consolidated Statements of Income: 
 
 
 
 (in millions) Three Months Ended
June 30, Six Months Ended
June 30, 
 2021 2020 2021 2020 
 Cost of services, maintenance and rentals $ 6 $ 40 $ 13 $ 40 
 Research, development and engineering expenses — 1 — 1 
 Selling, administrative and general expenses 4 19 7 19 
 Total Estimated savings $ 10 $ 60 $ 20 $ 60 

 
 Overview 
 Second Quarter 2021 Review 
 Total revenue of $1.79 billion for second quarter 2021 increased 22.4% from second quarter 2020, including a 4.3-percentage point favorable impact from currency. The increase in revenue reflected an increase of 18.1% in Post sale revenue, including a 4.3-percentage point favorable impact from currency and an increase of 38.4% in Equipment sales revenue, including a 4.4-percentage point favorable impact from currency. 
 Total revenue of $3.50 billion for the six months ended June 30, 2021 increased 5.4% as compared to the prior year period, including a 3.3-percentage point favorable impact from currency. The increase in revenue reflected an increase of 0.1% in Post sale revenue, including a 3.1-percentage point favorable impact from currency and an increase of 27.6% in Equipment sales revenue, including a 3.7-percentage point favorable impact from currency. 
 The increase in revenue for the three and six months ended June 30, 2021 reflected the significant effect of the COVID-19 pandemic in the respective prior year periods, which caused business closures and office building capacity restrictions that impacted our customers' purchasing decisions in 2020 and drove lower printing volumes on our devices. 
 Xerox 2021 Form 10-Q 41 

 
 

 Net income attributable to Xerox Holdings and adjusted 1 Net income attributable to Xerox Holdings were as follows: 
 Three Months Ended June 30, Six Months Ended June 30, 
 (in millions) 2021 2020 B/(W) 2021 2020 B/(W) 
 Net income attributable to Xerox Holdings $ 91 $ 27 $ 64 $ 130 $ 25 $ 105 
 Adjusted (1) Net income attributable to Xerox Holdings 
 94 36 58 141 86 55 

 Second quarter 2021 Net income attributable to Xerox Holdings increased $64 million as compared to second quarter 2020 primarily due to higher revenues as compared to the prior year period, as well as lower Transaction and related costs, net, non-service retirement-related costs and the benefit from a change in tax law, which were partially offset by higher Restructuring and related costs, net, Amortization of intangible assets and non-financing interest expense. Second quarter 2021 A djusted 1 net income attributable to Xerox Holdings increased $58 million as compared to the prior year, primarily reflecting higher revenues as well continued cost and expense reductions associated with our Project Own It transformation actions and lower bad debt expense, which helped to improve operating income and margin. These benefits were partially offset by reduced temporary government assistance and furlough measures and higher freight costs as well as higher non-financing interest expense. 
 Net income attributable to Xerox Holdings for the six months ended June 30, 2021 increased $105 million as compared to the prior year period primarily due to higher revenues and lower bad debt expense, as the prior year period included a $60 million incremental provision to cover estimated write-offs on our trade and finance receivable portfolio from the COVID-19 pandemic, as well as lower Transaction and related costs, net, non-service retirement-related costs, Restructuring and related costs, net and the benefit from a change in tax law in second quarter 2021. These benefits were partially offset by reduced temporary government assistance and furlough measures, as well as higher Amortization of intangible assets and higher non-financing interest expense. A djusted 1 net income attributable to Xerox Holdings for the six months ended June 30, 2021 increased $55 million as compared to the prior year, primarily due to higher revenues and lower bad debts expense. These benefits were partially offset by reduced temporary government assistance and furlough measures as well higher non-financing interest expense. 
 Cash flows provided by operating activities for the six months ended June 30, 2021 were $331 million, as compared to $207 million in the prior year period, which includes the receipt of an upfront prepaid fixed royalty from FUJIFILM Business Innovation Corp. (formerly Fuji Xerox) (FX) of $100 million, partially offset by a lower run-off of finance receivables and cash from working capital, net 2 . Cash used in investing activities for the six months ended June 30, 2021 was $72 million reflecting capital expenditures of $33 million and acquisitions of $37 million. Cash used in financing activities for the six months ended June 30, 2021 was $747 million reflecting $413 million for repurchases of our Common Stock, payments of $209 million on secured borrowing arrangements and dividend payments of $108 million. 
 2021 Outlook 
 We continue to expect a modest recovery in 2021 and expect full year total revenues to increase to at least $7.2 billion, or approximately 2.5%, excluding the impact of currency. We are confident in our ability to generate cash and plan to continue our capital allocation policy of returning at least 50% of our annual free cash flow to shareholders, as disclosed in our 2020 Annual Report. We expect operating cash flows to be approximately $600 million, with capital expenditures of approximately $100 million and plan to opportunistically make share repurchases utilizing our remaining share repurchase authorization of approximately $88 million. 
 ____________________________ 
 (1) See the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. 
 (2) Working capital, net reflects Accounts receivable, net, Inventories and Accounts payable. 
 Xerox 2021 Form 10-Q 42 

 
 
 

 Financial Review 
 Revenues 
 Three Months Ended
June 30, Six Months Ended
June 30, % of Total Revenue 
 (in millions) 2021 2020 % Change CC % Change 2021 2020 % Change CC % Change 2021 2020 
 Equipment sales $ 429 $ 310 38.4 % 34.0 % $ 810 $ 635 27.6 % 23.9 % 23 % 19 % 
 Post sale revenue 1,364 1,155 18.1 % 13.8 % 2,693 2,690 0.1 % (3.0) % 77 % 81 % 
 Total Revenue $ 1,793 $ 1,465 22.4 % 18.1 % $ 3,503 $ 3,325 5.4 % 2.1 % 100 % 100 % 
 
 Reconciliation to Condensed Consolidated Statements of Income: 
 Sales $ 670 $ 460 45.7 % 40.7 % $ 1,272 $ 1,025 24.1 % 20.6 % 
 Less: Supplies, paper and other sales (241) (150) 60.7 % 54.4 % (462) (390) 18.5 % 15.3 % 
 
 Equipment sales $ 429 $ 310 38.4 % 34.0 % $ 810 $ 635 27.6 % 23.9 % 
 
 Services, maintenance and rentals $ 1,067 $ 949 12.4 % 8.3 % $ 2,120 $ 2,185 (3.0) % (6.1) % 
 Add: Supplies, paper and other sales 241 150 60.7 % 54.4 % 462 390 18.5 % 15.3 % 
 Add: Financing 56 56 — % (3.4) % 111 115 (3.5) % (6.1) % 
 
 Post sale revenue 
 $ 1,364 $ 1,155 18.1 % 13.8 % $ 2,693 $ 2,690 0.1 % (3.0) % 
 
 Americas $ 1,133 $ 990 14.4 % 12.7 % $ 2,209 $ 2,229 (0.9) % (1.8) % 63 % 67 % 
 EMEA 617 428 44.2 % 33.2 % 1,204 1,003 20.0 % 11.5 % 34 % 30 % 
 Other 43 47 (8.5) % (8.5) % 90 93 (3.2) % (3.2) % 3 % 3 % 
 Total Revenue (1) 
 $ 1,793 $ 1,465 22.4 % 18.1 % $ 3,503 $ 3,325 5.4 % 2.1 % 100 % 100 % 
 
 
 

 _____________ 
 CC - See "Currency Impact" section for a description of Constant Currency. 
 (1) Refer to the "Geographic Sales Channels and Products and Offerings Definitions" section. 
 Second quarter 2021 total revenue increased 22.4% as compared to second quarter 2020, including a 4.3-percentage point favorable impact from currency, while total revenue for the six months ended June 30, 2021 increased 5.4% as compared to the prior year period, including a 3.3-percentage point favorable impact from currency and an approximate 0.7-percentage point favorable impact from recent partner dealer acquisitions. The increase for both the three and six months ended June 30, 2021 reflected the significant effect of the COVID-19 pandemic in the prior year, which at that time caused business closures and office building capacity restrictions that drove lower printing volumes on our devices and impacted our customers' purchasing decisions. Business closures and limited office occupancy continue to affect our revenues. However, the progress of vaccinations and the gradual reopening of workplaces in second quarter 2021 have resulted in higher installations of Mid-range devices to near pre-pandemic levels, as well as a continued modest sequential increase in our page volumes (as compared to first quarter 2021). Improvements in total revenue for both the three and six months ended June 30, 2021 were partially offset by the impact of global freight disruptions and product supply constraints that started in the second quarter of 2021 (the result of market-wide shortages of computer chips and resins). 
 Geographically, revenue increased more significantly in our EMEA operations for both the three and six months ended June 30, 2021, partially due to the region's more expansive shutdown in the prior year and its larger indirect channel business, which in the prior year experienced a significant reduction of inventory purchases from channel partners seeking to protect their liquidity amidst market uncertainty. EMEA also benefited from a faster recovery of SMB businesses, while our North American operations include a higher proportion of Education, State and Local government and Enterprise customers who are experiencing a slower pace of return to workplaces. Our EMEA revenues were also favorably impacted by prior year acquisitions in the region. 
 Total revenue for the three and six months ended June 30, 2021 reflected the following: 
 Post sale revenue 
 Post sale revenue primarily reflects contracted services, equipment maintenance, supplies and financing. These revenues are associated not only with the population of devices in the field, which are 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 transactional IT hardware sales and implementation services primarily from our XBS organization in the U.S. 
 Xerox 2021 Form 10-Q 43 

 
 

 For the three months ended June 30, 2021, Post sale revenue increased 18.1% as compared to second quarter 2020, including a 4.3-percentage point favorable impact from currency, while Post Sale revenues increased 0.1% for the six months ended June 30, 2021, including a 3.1-percentage point favorable impact from currency. The increases in Post Sale revenue correspond with the gradual reopening of workplaces. Post sale revenue reflected the following: 
 • Services, maintenance and rentals revenue includes rental and maintenance revenue (including bundled supplies) as well as the post sale component of the document services revenue from our Xerox Services offerings. While these revenues are contractual in nature, our bundled services contracts generally include a minimum fixed charge and a significant variable component based on print volumes. 
 ◦ For the three months ended June 30, 2021, these revenues increased 12.4% as compared to second quarter 2020, including a 4.1-percentage point favorable impact from currency, reflecting the impact of higher page volumes, corresponding with the reopening of workplaces, which more than offset the effect of a lower population of devices (which is partially associated with lower installs in prior periods), and an ongoing competitive price environment. 
 ◦ For the six months ended June 30, 2021, these revenues decreased 3.0% as compared to the prior year period, including a 3.1-percentage point favorable impact from currency, reflecting a lower population of devices (which is partially associated with lower installs in prior periods), an ongoing competitive price environment, and lower page volumes during first quarter 2021 (including a higher mix of lower average-page-volume products) as business shutdowns only started at the end of first quarter 2020. 
 • Supplies, paper and other sales includes unbundled supplies and other sales. 
 ◦ For the three months ended June 30, 2021, these revenues increased 60.7% as compared to second quarter 2020, including a 6.3-percentage point favorable impact from currency, reflecting primarily higher supplies revenues consistent with the gradual reopening of workplaces which drove higher demand. 
 ◦ For the six months ended June 30, 2021, these revenues increased 18.5% as compared to the prior year period, including a 3.2-percentage point favorable impact from currency, reflecting primarily higher supplies revenues. 
 • Financing revenue is generated from financed equipment sale transactions. For the three months ended June 30, 2021, these revenues were flat as compared to second quarter 2020, including a 3.4-percentage point favorable impact from currency, while Financing revenue for the six months ended June 30, 2021 decreased 3.5%, including a 2.6-percentage point favorable impact from currency. The decrease at constant currency 1 reflected a lower finance receivables balance due to lower equipment sales in prior periods. Our lease originations increased for both the three and six months ended June 30, 2021 as compared to the respective prior year periods, as well as on a sequential basis for the second quarter 2021 as compared to the first quarter 2021, due to a higher level of lease originations from our XBS sales unit as well as higher equipment sales. 
 ____________ 
 (1) See the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. 
 
 
 Xerox 2021 Form 10-Q 44 

 
 

 Equipment sales revenue 
 
 Three Months Ended June 30, Six Months Ended
June 30, % of Equipment Sales 
 (in millions) 2021 2020 % 
 Change 
 CC % Change 2021 2020 % Change CC % Change 2021 2020 
 Entry $ 69 $ 44 56.8% 54.0% $ 137 $ 92 48.9% 44.5% 17% 15% 
 Mid-range 276 195 41.5% 37.0% 514 401 28.2% 24.8% 63% 63% 
 High-end 80 67 19.4% 14.4% 150 134 11.9% 8.3% 19% 21% 
 Other 4 4 —% —% 9 8 12.5% 12.5% 1% 1% 
 Equipment sales $ 429 $ 310 38.4% 34.0% $ 810 $ 635 27.6% 23.9% 100% 100% 

 _____________ 
 CC - See "Currency Impact" section for a description of Constant Currency. 
 Note: During first quarter 2021, we revised the classification of equipment sales revenue by category for our XBS sales unit. Refer to the Equipment Sales Revenue - Classification Update section, for the revision of prior periods based on the new classification. 
 Equipment sales revenue increased 38.4% for the three months ended June 30, 2021 as compared to second quarter 2020, including a 4.4-percentage point favorable impact from currency partially offset by the impact of price declines of less than 5%, while for the six months ended June 30, 2021, Equipment sales revenue increased 27.6% as compared to the prior year period, including a 3.7-percentage point favorable impact from currency partially offset by the impact of price declines of less than 5%. The increase is partially the result of a favorable compare to the three and six month ended June 30, 2020, when businesses were extensively shut down due to the COVID-19 pandemic. Equipment sales revenue increased at a higher pace through our indirect channels, both in the U.S. and EMEA, as demand continued to increase with business reopenings. Sales of office-centric devices led the increase of these revenues (as businesses re-open and prepare for a broader return to the office), while sales of high-end production systems, which demand larger capital investments, had a more moderate increase. Equipment sales were significantly impacted by global freight disruptions and product supply constraints (the result of market-wide shortages of computer chips and resins) which resulted in a backlog of orders at the end of the second quarter 2021 that increased over the first quarter 2021 and was significantly above prior year and pre-pandemic levels. The growth at constant currency 1 reflected the following: 
 • Entry - The increase for the three months ended June 30, 2021 as compared to second quarter 2020, was driven by higher demand for our printers and MFPs through our indirect channels in EMEA and the Americas, which resulted in markedly higher installations of Entry devices. While sales increased across this portfolio, we experienced an unfavorable mix from significantly higher sales of our lower-end black-and-white devices. The increase for the six months ended June 30, 2021 as compared to the prior year period, was driven primarily by higher demand for our lower-end printers and MFPs through our indirect channels in EMEA and the Americas, as well as higher installs related to government deals in the developing regions of EMEA, which resulted in markedly higher installations of Entry devices. While sales increased across this portfolio, we experienced an unfavorable mix from significantly higher sales of our lower-end black-and-white devices. 
 • Mid-range - The increase for the three months ended June 30, 2021 as compared to second quarter 2020, was driven primarily by higher demand across geographies, consistent with the gradual reopening of workplaces as well as improved activity from our indirect channels as they moderately eased their tight cash preservation measures to rebuild their inventories. The increase for the six months ended June 30, 2021 as compared to the prior year period, was also driven primarily by higher demand across geographies, consistent with the gradual reopening of workplaces, as compared to business shutdowns that reduced purchases of office devices in the prior year period, as well as higher demand for our MFP devices and improved activity from our indirect channels. 
 • High-end - The increase for the three months ended June 30, 2021 as compared to second quarter 2020, primarily reflected improvement in sales of devices in the lower-end of the range and to SMB customers, as well as sales of black-and-white systems corresponding with our customers' refresh cycles. Sales of larger color production engines, while higher than the second quarter 2020, had a more moderate increase, as a result of our customers' delayed capital investment decisions as they assess their post-pandemic operational print requirements. The increase for the six months ended June 30, 2021 as compared to the prior year period, reflected primarily improvement in sales of devices in the lower-end of the range and to SMB customers, as well as sales of black-and-white systems corresponding with our customers' refresh cycles, while sales of larger color production engines continued to be depressed as a result of our customers' delayed capital investment decisions. 
 
 
 Xerox 2021 Form 10-Q 45 

 
 

 Total Installs 
 Installs reflect new placement 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 from Xerox and non-Xerox branded products installed by our XBS sales unit. Detail by product group (see Geographic Sales Channels and Products and Offerings Definitions ) is shown below. 
 Installs for the three months ended June 30, 2021: 
 Entry 
 • 19% increase in color multifunction devices reflecting higher installs of ConnectKey devices through our indirect channels primarily in EMEA, as well as in the Americas. 
 • 63% increase in black-and-white multifunction devices reflecting higher activity primarily from low-end devices through indirect channels in developing regions of EMEA and Latin America. 
 Mid-Range (1) 
 • 62% increase in mid-range color installs primarily reflecting higher installs of our recently launched new-generation of ConnectKey multi-function printers and our PrimeLink entry-production color devices. 
 • 36% increase in mid-range black-and-white installs reflecting higher installs of our recently launched new-generation of ConnectKey multi-function devices and our PrimeLink light-production devices. 
 High-End (1) 
 • 27% increase in high-end color installs primarily reflecting growth from our lower-end Versant devices. 
 • 47% increase in high-end black-and-white systems reflecting higher installs of our Nuvera devices related to cyclical account refreshes in the U.S. 
 
 
 Installs for the six months ended June 30, 2021: 
 Entry 
 • 13% increase in color multifunction devices reflecting higher installs of ConnectKey devices through our indirect channels in EMEA and the Americas. 
 • 80% increase in black-and-white multifunction devices reflecting higher activity primarily from low-end devices through indirect channels in the Americas, and from developing regions in EMEA, which included large order government deals. 
 Mid-Range (1) 
 • 35% increase in mid-range color installs primarily reflecting higher installs of our recently launched new-generation of ConnectKey multi-function printers and our PrimeLink entry-production color devices. 
 • 24% increase in mid-range black-and-white installs reflecting higher installs of our recently launched new-generation of ConnectKey multi-function devices and our PrimeLink light-production devices. 
 High-End (1) 
 • 36% increase in high-end color installs reflecting primarily growth from our lower-end Versant devices and our Iridesse systems partially offset by lower installs of our higher-end production presses. 
 • 33% increase in high-end black-and-white systems reflecting higher installs of our Nuvera devices related to cyclical account refreshes in the U.S. 
 _____________ 
 (1) Mid-range and High-end color installations exclude FX digital front-end sales in 2020. When we include these sales in 2020, installs of Mid-range color devices increased 63% and 35%, respectively, and High-end color systems increased 25% and 34%, respectively, for the three and six months ended June 30, 2021. 
 
 
 Xerox 2021 Form 10-Q 46 

 
 

 Geographic Sales Channels and Products and Offerings Definitions 
 Our business is aligned to a geographic focus and is primarily organized on the basis of go-to-market sales channels, which are structured to serve a range of customers for our products and services. In 2019 we changed our geographic structure to create a more streamlined, flatter and more effective organization, as follows: 
 • Americas, which includes our sales channels in the U.S. and Canada, as well as Mexico, and Central and South America. 
 • EMEA, which includes our sales channels in Europe, the Middle East, Africa and India. 
 • Other, primarily includes sales to and royalties from FX, and our licensing revenue. 
 Our products and offerings include: 
 • “Entry”, which includes A4 devices and desktop printers. Prices in this product group can range from approximately $150 to $3,000. 
 • “Mid-Range”, which includes A3 Office and Light Production devices that generally serve workgroup environments in mid to large enterprises. Prices in this product group can range from approximately $2,000 to $75,000+. 
 • “High-End”, which includes production printing and publishing systems that generally serve the graphic communications marketplace and large enterprises. Prices for these systems can range from approximately $30,000 to $1,000,000+. 
 
 Equipment Sales Revenue - Classification Update 
 During first quarter 2021, we revised the classification of equipment sales revenue by category for our XBS sales unit to conform the classification of devices across Xerox sales channels. The revision had no impact on reported total equipment sales revenue. 
 
 2020 Equipment Sales Revenue As Reported 
 (in millions) Q1 Q2 Q3 Q4 FY 
 Entry $ 40 $ 34 $ 55 $ 59 $ 188 
 Mid-range 218 209 291 325 1,043 
 High-end 64 64 69 115 312 
 Other 3 3 4 11 21 
 Equipment Sales Revenue $ 325 $ 310 $ 419 $ 510 $ 1,564 

 
 Change 
 (in millions) Q1 Q2 Q3 Q4 FY 
 Entry $ 8 $ 10 $ 11 $ 11 $ 40 
 Mid-range (12) (14) (15) (16) (57) 
 High-end 3 3 3 4 13 
 Other 1 1 1 1 4 
 Equipment Sales Revenue $ — $ — $ — $ — $ — 

 
 2020 Equipment Sales Revenue As Revised 
 (in millions) Q1 Q2 Q3 Q4 FY 
 Entry $ 48 $ 44 $ 66 $ 70 $ 228 
 Mid-range 206 195 276 309 986 
 High-end 67 67 72 119 325 
 Other 4 4 5 12 25 
 Equipment Sales Revenue $ 325 $ 310 $ 419 $ 510 $ 1,564 

 
 
 Xerox 2021 Form 10-Q 47 

 
 
 

 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) 2021 2020 B/(W) 2021 2020 B/(W) 
 
 
 
 
 
 Gross Profit $ 639 $ 564 $ 75 $ 1,250 $ 1,276 $ (26) 
 RD&E 79 76 (3) 153 160 7 
 SAG 434 426 (8) 882 967 85 
 
 Equipment Gross Margin 28.1 % 28.8 % (0.7) pts. 28.0 % 27.5 % 0.5 pts. 
 Post sale Gross Margin 38.1 % 41.1 % (3.0) pts. 38.0 % 40.9 % (2.9) pts. 
 Total Gross Margin 35.6 % 38.5 % (2.9) pts. 35.7 % 38.4 % (2.7) pts. 
 RD&E as a % of Revenue 4.4 % 5.2 % 0.8 pts. 4.4 % 4.8 % 0.4 pts. 
 SAG as a % of Revenue 24.2 % 29.1 % 4.9 pts. 25.2 % 29.1 % 3.9 pts. 
 
 Pre-tax Income $ 99 $ 35 $ 64 $ 152 $ 30 $ 122 
 Pre-tax Income Margin 5.5 % 2.4 % 3.1 pts. 4.3 % 0.9 % 3.4 pts. 
 
 Adjusted (1) Operating Profit 
 $ 126 $ 62 $ 64 $ 215 $ 149 $ 66 
 Adjusted (1) Operating Margin 
 7.0 % 4.2 % 2.8 pts. 6.1 % 4.5 % 1.6 pts. 
 
 
 

 ____________ _ 
 (1) See the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. 
 Pre-tax Income Margin 
 Second quarter 2021 pre-tax income margin of 5.5% increased 3.1-percentage points as compared to second quarter 2020. The increase primarily reflected the impact of higher adjusted 1 operating margin (see below) as well as lower Transaction and related costs, net and Other expenses, net, partially offset by higher Restructuring and related costs, net and Amortization of intangible assets. 
 Pre-tax income margin for the six months ended June 30, 2021 of 4.3% increased 3.4-percentage points as compared to the prior year period. The increase primarily reflected the impact of higher adjusted 1 operating margin (see below) as well as lower Restructuring and related costs, net, Transaction and related costs, net and Other expenses, net, partially offset by higher Amortization of intangible assets. 
 Adjusted 1 Operating Margin 
 Second quarter 2021 adjusted 1 operating margin of 7.0% increased by 2.8-percentage points as compared to second quarter 2020, reflecting the impact of higher revenues, primarily due to the significant effect of the COVID-19 pandemic on our business during the prior year period, as well as cost and expense reductions associated with our Project Own It transformation actions and additional savings from various other cost reductions to mitigate the impact of the pandemic (including reductions in discretionary spend such as near-term targeted marketing programs, and the suspension of 401(k) matching contributions), and lower bad debt expenses. These favorable factors were partially offset by an approximate $50 million reduction of temporary government assistance and furlough measures and higher freight costs. 
 Adjusted 1 operating margin for the six months ended June 30, 2021 of 6.1% increased by 1.6-percentage points as compared to the prior year period, reflecting an approximate 2.1-percentage point favorable impact from lower bad debt expense due to a higher provision in the prior year to reflect the expected impact to our trade and finance receivable portfolio from the COVID-19 pandemic. Additionally, higher revenues favorably impacted adjusted 1 operating margin, primarily due to the significant effect of the COVID-19 pandemic on our business during the prior year period, as well as cost and expense reductions associated with our Project Own It transformation actions and additional savings from various other cost reductions to mitigate the impact of the pandemic (including reductions in discretionary spend such as near-term targeted marketing programs, and the suspension of 401(k) matching contributions). These favorable factors were partially offset by an approximate $40 million reduction of temporary government assistance and furlough measures and higher freight costs. 
 ______________ 
 (1) Refer to the Operating Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section. 
 Xerox 2021 Form 10-Q 48 

 
 

 Gross Margin 
 Second quarter 2021 gross margin of 35.6% decreased by 2.9-percentage points as compared to second quarter 2020, reflecting the impact of lower savings from temporary government assistance and furlough measures as well as higher freight costs and the impact of the ongoing competitive price environment, partially offset by higher revenue and cost savings from our Project Own It transformation actions as well as the additional cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as the suspension of 401(k) matching contributions). 
 Gross margin for the six months ended June 30, 2021 of 35.7% decreased by 2.7-percentage points as compared to the prior year period, reflecting the impact of lower savings from temporary government assistance and furlough measures and the impact of the ongoing competitive price environment, as well as the impact of a lower mix of our higher-margin post sale stream and higher freight costs. These headwinds were partially offset by the cost savings from our Project Own It transformation actions as well as the additional cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as the suspension of 401(k) matching contributions). 
 Second quarter 2021 equipment gross margin of 28.1% decreased by 0.7-percentage points as compared to second quarter 2020, reflecting higher freight costs, the impact of targeted price promotions sales and the higher mix of sales from our EMEA channel, partially offset by higher revenue and a larger contribution from our mid-range product portfolio. 
 Equipment gross margin for the six months ended June 30, 2021 of 28.0% increased by 0.5-percentage points as compared to the prior year period, primarily reflecting higher revenues and favorable transaction currency, partially offset by higher freight costs, as well as an unfavorable mix of growth in low-end devices and the impact of targeted price promotions. 
 Second quarter 2021 Post sale gross margin of 38.1% decreased by 3.0-percentage points as compared to second quarter 2020, reflecting the impact of lower savings from temporary government assistance and furlough measures, as well as price erosion on contract renewals and lower royalty revenues, partially offset by productivity and cost savings and restructuring savings associated with Project Own It transformation actions, as well as savings from the additional cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as the suspension of 401(k) matching contributions). 
 Post sale gross margin for the six months ended June 30, 2021 of 38.0% decreased by 2.9-percentage points as compared to the prior year period, reflecting the impact of lower savings from temporary government assistance and furlough measures and the impact of the ongoing competitive price environment, partially offset by productivity and cost savings and restructuring savings associated with Project Own It transformation actions, as well as savings from additional cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as the suspension of 401(k) matching contributions). 
 Research, Development and Engineering Expenses (RD&E) 
 
 Three Months Ended
June 30, Six Months Ended
June 30, 
 (in millions) 2021 2020 Change 2021 2020 Change 
 R&D $ 63 $ 65 $ (2) $ 122 $ 133 $ (11) 
 Sustaining engineering 16 11 5 31 27 4 
 Total RD&E Expenses $ 79 $ 76 $ 3 $ 153 $ 160 $ (7) 

 Second quarter 2021 RD&E as a percentage of revenue of 4.4% decreased by 0.8-percentage points as compared to second quarter 2020, as a result of higher revenues that outpaced the rate of investments. 
 RD&E of $79 million increased $3 million as compared to second quarter 2020 reflecting primarily investments in our innovation portfolio and higher compensation related accrual expenses (corresponding with higher expected operating results) partially offset by savings from restructuring and productivity as well as benefits from the timing of program cycles. 
 RD&E as a percentage of revenue for the six months ended June 30, 2021 of 4.4% decreased by 0.4-percentage points as compared to the prior year period, as a result of higher revenues and Project Own It cost reductions, that outpaced the rate of investments. 
 Xerox 2021 Form 10-Q 49 

 
 

 RD&E for the six months ended June 30, 2021 of $153 million decreased $7 million as compared to the prior year period, primarily reflecting the benefits from the timing of program cycles, as well as savings from simplification and rationalization in our core technology, partially offset by investments in our innovation portfolio and higher compensation related accrual expenses (corresponding with higher expected operating results). 
 Selling, Administrative and General Expenses (SAG) 
 Second quarter 2021 SAG as a percentage of revenue of 24.2% decreased 4.9-percentage points as compared to second quarter 2020, primarily as a result of higher revenues and lower bad debt provision offsetting higher selling and administrative expenses. 
 Second quarter 2021 SAG of $434 million increased by $8 million as compared to second quarter 2020, including an approximate $15 million adverse impact from translation currency, partially offset by a $10 million benefit from a lower bad debt provision. The remaining increase reflected the impact of lower savings from temporary government assistance and furlough measures, as well as higher compensation related accrual expenses and other investments in the business corresponding with higher expected operating results, partially offset by productivity and cost savings from our Project Own It transformation actions and other cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as near-term targeted marketing programs and the suspension of 401(k) matching contributions). 
 SAG as a percentage of revenue for the six months ended June 30, 2021 of 25.2% decreased 3.9-percentage points as compared to the prior year period, primarily as a result of an approximate 2.1-percentage point favorable impact from lower bad debt expense due to a higher provision in the prior year to reflect the expected impact to our trade and finance receivable portfolio from the COVID-19 pandemic. The remaining decrease was primarily due to the impact of lower expenses as a result of cost savings and restructuring associated with our Project Own It transformation actions, and savings from additional cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as near-term targeted marketing programs and the suspension of 401(k) matching contributions). 
 SAG for the six months ended June 30, 2021 of $882 million decreased by $85 million as compared to the prior year period, primarily reflecting lower bad debt expenses, as well as cost savings and restructuring savings associated with our Project Own It transformation actions and from additional cost reduction actions to mitigate the impact of the pandemic (including reductions in discretionary spend such as near-term targeted marketing programs and the suspension of 401(k) matching contributions), partially offset by an approximate $25 million adverse impact from translation currency, higher compensation related accrual expenses and other investments in the business corresponding with higher expected operating results, the impact of lower savings from temporary government assistance and furlough measures and higher expenses from prior year acquisitions. 
 Our bad debt provision for the six months ended June 30, 2021 of $13 million decreased by $74 million as compared to the prior year period, primarily due to the prior year reflecting an approximate $60 million incremental provision to cover estimated write-offs on our trade and finance receivable portfolio from the COVID-19 pandemic, as well as a reserve reduction, in second quarter 2021, of approximately $6 million reflecting improvements in the macroeconomic environment as well as lower write-offs. Although actual write-offs incurred to date have lagged expectations, we believe our current reserve position remains sufficient to cover expected future losses that may result from future economic conditions. Despite the improvement in the global economy, economies continue to recover from the impacts of the COVID-19 pandemic including the cessation of government support as well as labor, interest rate and inflation risks and the potential for higher taxes. As a result of these uncertainties, we continue to consider various adverse macroeconomic scenarios in our models. Accordingly, our reserves as a percent of receivables have remained fairly consistent subsequent to the first quarter 2020 charge of approximately $60 million to initially record expected losses from the COVID-19 pandemic. We continue to monitor developments regarding the pandemic, including business closures and reopenings and mitigating government support actions as well as future economic conditions, and as a result our reserves may need to be updated in future periods. On a trailing twelve-month basis (TTM), bad debt expense was approximately 1.0% of total receivables, which is consistent with the pre-pandemic trend and reflects the consistent level of reserves subsequent to the first quarter 2020 charge. 
 
 
 Xerox 2021 Form 10-Q 50 

 
 

 Restructuring and Related Costs, Net 
 We incurred Restructuring and related costs, net of $12 million for the second quarter 2021 , as compared to $3 million for second quarter 2020, and $29 million for the six months ended June 30, 2021, as compared to $44 million in the prior year period. These costs were primarily related to the implementation of initiatives under our business transformation projects including Project Own It. The following is a breakdown of those costs: 
 
 Three Months Ended
June 30, Six Months Ended
June 30, 
 (in millions) 2021 2020 2021 2020 
 Severance (1) 
 $ 6 $ 7 $ 20 $ 39 
 Asset impairments (2) 
 2 — 11 2 
 Other contractual termination costs (3) 
 1 — 2 1 
 Net reversals (4) 
 (5) (9) (8) (15) 
 Restructuring and asset impairment costs 4 (2) 25 27 
 Retention related severance/bonuses (5) 
 3 4 (1) 11 
 Contractual severance costs (6) 
 3 — 3 4 
 Consulting and other costs (7) 
 2 1 2 2 
 Total $ 12 $ 3 $ 29 $ 44 

 _____________ 
 (1) Reflects headcount reductions of approximately 50 and 150 employees worldwide in second quarter 2021 and 2020, respectively and 400 and 450 employees worldwide for the six months ended June 30, 2021 and 2020, respectively. 
 (2) Primarily related to the exit and abandonment of leased and owned facilities. The charge includes the accelerated write-off of $1 million in second quarter 2021, as compared to no write-offs in second quarter 2020 and $2 million and $1 million for the six months ended June 30, 2021 and 2020, respectively, for leased right-of-use assets, as well as no write-offs in second quarter 2021 and 2020, and $9 million and $1 million for the six months ended June 30, 2021 and 2020, respectively, for owned assets upon exit from the facilities, net of any potential sublease income and other recoveries, including potential sales.. 
 (3) Primarily includes additional costs incurred upon the exit from our facilities including decommissioning costs and associated contractual termination costs. 
 (4) Reflects net reversals for changes in estimated reserves from prior period initiatives. 
 (5) Includes retention related severance and bonuses for employees expected to continue working beyond their minimum notification period before termination. The $1 million credit through the six months ended June 30, 2021 , reflected a change in estimate. 
 (6) 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 HCL Technologies. 
 (7) Represents professional support services associated with our business transformation initiatives. 
 Second quarter 2021 actions impacted several functional areas, with approximately 30% focused on gross margin improvements and approximately 70% focused on SAG reductions. 
 Second quarter 2020 actions impacted several functional areas, with approximately 10% focused on gross margin improvements and approximately 90% focused on SAG reductions. 
 The Restructuring and related costs, net reserve balance as of June 30, 2021 for all programs was $63 million, which is expected to be paid over the next twelve months. 
 Refer to Note 11 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs. 
 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. There were no Transaction and related costs, net incurred during 2021. Transaction and related costs, net for the three and six months ended June 30, 2020 were $7 million and $24 million, respectively, and primarily related to legal and other professional costs associated with the terminated proposal to acquire HP Inc. 
 Amortization of Intangible Assets 
 Amortization of intangible assets for the three and six months ended June 30, 2021 of $14 million and $29 million, respectively, increased by $4 million and $8 million as compared to the respective prior year periods, primarily related to intangible assets associated with our recent acquisitions. 
 Xerox 2021 Form 10-Q 51 

 
 

 Worldwide Employment 
 Worldwide employment was approximately 24,000 as of June 30, 2021 and decreased by approximately 1,100 1 from December 31, 2020. The reduction resulted from net attrition (attrition net of gross hires), of which a large portion is not expected to be backfilled, as well as the impact of organizational changes. 
 _____________ 
 (1) Decrease based on revised headcount at December 31, 2020 of 25,100 from 24,700 due to the change in definition of full-time equivalent employee. 
 Other Expenses, Net 
 
 Three Months Ended
June 30, Six Months Ended
June 30, 
 (in millions) 2021 2020 2021 2020 
 Non-financing interest expense $ 24 $ 18 $ 48 $ 39 
 Interest income (1) (3) (2) (11) 
 Non-service retirement-related costs (22) (8) (42) (7) 
 Gains on sales of businesses and assets (1) — (1) (1) 
 Currency losses, net 1 2 3 4 
 
 
 
 Contract termination costs - IT services — — — 3 
 
 All other expenses, net — (2) (1) 3 
 Other expenses, net $ 1 $ 7 $ 5 $ 30 

 Non-Financing Interest Expense 
 Second quarter 2021 non-financing interest expense of $24 million was $6 million higher than second quarter 2020. When combined with financing interest expense (Cost of financing), total interest expense increased by $4 million as compared to second quarter 2020 primarily reflecting a higher average debt balance and average interest rate. 
 Non-financing interest expense for the six months ended June 30, 2021 of $48 million was $9 million higher than the prior year. When combined with financing interest expense (Cost of financing), total interest expense increased by $5 million from the prior year period reflecting a higher average debt balance and average interest rate. 
 Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements, for additional information regarding debt activity and the interest expense. 
 Interest Income 
 Interest income for the three and six months ended June 30, 2021 were $2 million and $9 million lower, respectively, than the respective prior year periods, primarily due to lower interest rates and a lower cash balance. 
 Non-Service Retirement-Related Costs 
 Non-service retirement-related costs for the three and six months ended June 30, 2021 were $14 million and $35 million lower than the respective prior year periods, primarily driven by lower discount rates and higher expected returns on plan assets due to higher asset balances as well as lower losses from pension settlements in the U.S. 
 Refer to Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements, for additional information regarding non-service retirement-related costs. 
 Income Taxes 
 Second quarter 2021 effective tax rate was 9.1%. On an adjusted 1 basis, second quarter 2021 effective tax rate was 9.7%. Both rates include the benefit from a change in tax law, resulting in the remeasurement of deferred tax assets of approximately 16%. The adjusted 1 effective tax rate was lower than the U.S. federal statutory tax rate of 21% primarily due to the change in tax law, partially offset by state taxes and the geographical mix of earnings. The adjusted 1 effective tax rate excludes the tax impacts associated with the following charges: Restructuring and related costs, net, Amortization of intangible assets, non-service retirement-related costs and other discrete, unusual or infrequent items (as applicable) as described in our Non-GAAP Financial Measures section. 
 Second quarter 2020 effective tax rate was 22.9%. On an adjusted 1 basis, second quarter 2020 effective tax rate was 23.4%. This rate was higher than the U.S. federal statutory tax rate of 21% primarily due to state taxes and the geographical mix of earnings partially offset by the impact from various non-deductible and discrete items on lower pre-tax income. The adjusted 1 effective tax rate excludes the tax impacts associated with the following charges: Restructuring and related costs, net, Amortization of intangible assets, Transaction and related costs, net, non-service retirement-related costs and other discrete, unusual or infrequent items (as applicable), as described in our Non-GAAP Financial Measures section. 
 Xerox 2021 Form 10-Q 52 

 
 

 The effective tax rate for the six months ended June 30, 2021 was 15.1%. On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2021 was 16.7%. Both rates include the benefit from a change in tax law, resulting in the remeasurement of deferred tax assets of approximately 10%. The adjusted 1 effective tax was lower than the U.S. federal statutory tax rate of 21% primarily due to the change in the tax law, partially offset by state taxes and the geographical mix of earnings. The adjusted 1 effective tax rate excludes the tax impacts associated with the following charges: Restructuring and related costs, net, Amortization of intangible assets, non-service retirement-related costs and other discrete, unusual or infrequent items (as applicable), as described in our Non-GAAP Financial Measures section. 
 The effective tax rate for the six months ended June 30, 2020 was 23.3%. On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2020 was 27.0%. This rate was higher than the U.S. federal statutory tax rate of 21% primarily due to the impact of changes in our uncertain tax positions, state taxes and various non-deductible items partially offset by the impact of tax law changes and other discrete items. The adjusted 1 effective tax rate excludes the tax impacts associated with the following charges: Restructuring and related costs, net, Amortization of intangible assets, Transaction and related costs, net, as well as non-service retirement-related costs and other discrete, unusual or infrequent items (as applicable), as described in our Non-GAAP Financial Measures section. 
 Our effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income. In addition, our effective tax rate will change based on discrete or other nonrecurring events that may not be predictable. 
 _____________ 
 (1) Refer to the Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section. 
 Equity in Net Income of Unconsolidated Affiliates 
 Investment in Affiliates, at Equity largely consists of several minor investments in entities in the Middle East region. Equity in net income of unconsolidated affiliates for the six months ended June 30, 2021 was $1 million, as compared to $2 million for the six months ended June 30, 2020. 
 Net Income 
 Second quarter 2021 Net income attributable to Xerox Holdings was $91 million, or $0.46 per diluted share and included the benefit from a change in tax law (see Income Taxes above). On an adjusted 1 basis, Net income attributable to Xerox Holdings was $94 million, or $0.47 per diluted share. Second quarter 2021 adjustments to Net income included Restructuring and related costs, net, Amortization of intangible assets, and non-service retirement-related costs (see Non-GAAP Financial Measures ). 
 Net income attributable to Xerox Holdings for the six months ended June 30, 2021 was $130 million, or $0.64 per diluted share and included the benefit from a change in tax law (see Income Taxes above). On an adjusted 1 basis, Net income attributable to Xerox Holdings was $141 million, or $0.69 per diluted share. Adjustments to Net income for the six months ended June 30, 2021 included Restructuring and related costs, net, Amortization of intangible assets, and non-service retirement-related costs (see Non-GAAP Financial Measures ). 
 Second quarter 2020 Net income attributable to Xerox Holdings was $27 million, or $0.11 per diluted share. On an adjusted 1 basis, Net income attributable to Xerox Holdings was $36 million, or $0.15 per diluted share. Second quarter 2020 adjustments to Net income included Restructuring and related costs, net, Amortization of intangible assets, Transaction and related costs, net as well as non-service retirement-related costs (see Non-GAAP Financial Measures ). 
 Net income attributable to Xerox Holdings for the six months ended June 30, 2020 was $25 million, or $0.08 per diluted share. On an adjusted 1 basis, Net income attributable to Xerox Holdings was $86 million, or $0.36 per diluted share. Both amounts included the impact of the approximately $60 million pre-tax increase in bad debt expense (approximately $43 million after-tax) as compared to the prior year period, primarily reflecting the expected impact to our customer base and related outstanding receivable portfolio from the COVID-19 pandemic. Adjustments to Net income for the six months ended June 30, 2020 included Restructuring and related costs, net, Amortization of intangible assets, Transaction and related costs, net as well as non-service retirement-related costs and other discrete, unusual or infrequent items (see Non-GAAP Financial Measures ). 
 Refer to Note 19 - Earnings per Share (EPS) in the Condensed Consolidated Financial Statements, for additional information regarding the calculation of basic and diluted earnings per share. 
 _____________ 
 (1) Refer to the Net Income and EPS reconciliation table in the "Non-GAAP Financial Measures" section. 
 Xerox 2021 Form 10-Q 53 

 
 

 Other Comprehensive Income (Loss) 
 Second quarter 2021 Other Comprehensive Income, Net Attributable to Xerox was $70 million and included the following: i) net translation adjustment gains of $54 million reflecting the strengthening of our major foreign currencies against the U.S. Dollar during the quarter; and ii) $16 million of net gains from the changes in defined benefit plans primarily due to remeasurement and net actuarial gains as a result of higher discount rates. This compares to Other Comprehensive Income, Net Attributable to Xerox of $103 million for the second quarter 2020, which reflected the following: i) $80 million of net gains from the changes in defined benefit plans primarily due to remeasurement; ii) net translation adjustment gains of $25 million reflecting the strengthening of our major foreign currencies against the U.S. Dollar; and iii) $2 million of net unrealized losses. 
 Other Comprehensive Income, Net Attributable to Xerox for the six months ended June 30, 2021 was $67 million and included the following: i) $71 million of net gains from the changes in defined benefit plans primarily due to remeasurement in the second quarter of 2021 and net actuarial gains as a result of higher discount rates.; ii) net translation adjustment gains of $3 million reflecting the strengthening of the GBP and CAD that was only partially offset by the weakening of the EUR against the U.S. Dollar; and iii) $7 million of net unrealized losses. This compares to Other Comprehensive Loss, Net Attributable to Xerox for the six months ended June 30, 2020 of $35 million, which reflected the following: i) net translation adjustment losses of $172 million reflecting the significant weakening of our major foreign currencies against the U.S. Dollar; ii) $134 million of net gains from the changes in defined benefit plans primarily due to remeasurement in the second quarter of 2020; and iii) $3 million of net unrealized gains. 
 Refer to Note 18 - Other Comprehensive Income (Loss) in the Condensed Consolidated Financial Statements, for the components of Other Comprehensive Income (Loss), Note 13 - Financial Instruments in the Condensed Consolidated Financial Statements, for additional information regarding unrealized (losses) gains, net, and Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements, for additional information regarding net changes in our defined benefit plans. 
 New Business Strategy 
 As disclosed in our 2020 Annual Report, in January 2021 we announced our intention to stand up our Software, Financing and Innovation businesses as separate units by 2022. At this stage, the operations and financial results for these units continue to be primarily managed by and reported in our “go-to-market” (GTM) sales channels. We have begun the process of reorganizing these new units from the GTM units but we have not progressed to the point where we have discrete and complete financial information for these new businesses. Accordingly, the chief operating decision maker (CODM) and management continue to manage the Company’s operations, including the products and services from these units, through the GTM sales channels and as result, we continue to have one operating and reportable segment. 
 We expect that the business and financial information for these new units, as well as the operational management of these businesses, will continue to be refined and improved during 2021. Accordingly, a reassessment of our operating segments may be required later in 2021. 
 Xerox 2021 Form 10-Q 54 

 
 
 

 Capital Resources and Liquidity 
 Our financial results through June 30, 2021 were impacted by COVID-19 related business closures and office building capacity restrictions. However, we believe we have sufficient liquidity to manage the business through the economic disruption caused by this pandemic: 
 • A majority of our business is contractually based and most of our bundled services contracts include not only a variable component linked to print volumes, but also a fixed minimum, which provides us with a continuing stream of operating cash flow. 
 • As of June 30, 2021, total cash, cash equivalents and restricted cash were $2,203 million and, apart from the restricted cash of $79 million, was readily accessible for use. We have access to an undrawn $1.8 billion Credit Facility that matures in August 2022. 
 
 
 Cash Flow Analysis 
 The following summarizes our cash, cash equivalents and restricted cash: 
 
 Six Months Ended
June 30, Change 
 (in millions) 2021 2020 
 
 
 Net cash provided by operating activities $ 331 $ 207 $ 124 
 
 
 
 Net cash used in investing activities (72) (232) 160 
 
 Net cash used in financing activities (747) (432) (315) 
 Effect of exchange rate changes on cash, cash equivalents and restricted cash — (24) 24 
 
 Decrease in cash, cash equivalents and restricted cash (488) (481) (7) 
 Cash, cash equivalents and restricted cash at beginning of period 2,691 2,795 (104) 
 Cash, Cash Equivalents and Restricted Cash at End of Period $ 2,203 $ 2,314 $ (111) 

 Cash Flows from Operating Activities 
 Net cash provided by operating activities was $331 million for the six months ended June 30, 2021. The $124 million increase in operating cash from the prior year period was primarily due to the following: 
 • $229 million increase from inventory primarily due to increased revenues as well as significant cash usage in 2020 as inventory levels increased with the onset of the COVID-19 pandemic. 
 • $126 million increase from accounts payable primarily due to the increase in spending as compared to the prior year partially offset by the timing of supplier and vendor payments. 
 • $122 million increase from other current and long-term liabilities, reflecting higher accruals from the increased level of operations as compared to the prior year. 
 • $100 million increase due to the receipt of an upfront prepaid fixed royalty from FX for their continued use of the Xerox brand trademark subsequent to the termination of our technology agreement with them. 
 • $94 million increase from accrued compensation primarily related to higher employee incentive accruals and year-over-year timing of employee incentive payments. 
 • $391 million decrease from accounts receivable primarily due to higher revenues as compared to the prior year partially offset by the timing of collections. 
 • $178 million decrease from a lower net run-off of finance receivables due to an increased level of direct lease originations from our XBS sales unit as well as higher equipment sales. 
 Cash Flows from Investing Activities 
 Net cash used in investing activities was $72 million for the six months ended June 30, 2021. The $160 million change from the prior year period was primarily due to two acquisitions completed in the current year for $37 million compared to four acquisitions in the prior year for $193 million. Other investing, net includes $3 million of noncontrolling investments as part of our corporate venture capital fund. 
 Cash Flows from Financing Activities 
 Net cash used in financing activities was $747 million for the six months ended June 30, 2021. The $315 million increase in the use of cash from the prior year period was primarily due to the following: 
 • $413 million increase due to share repurchases in the current year compared to no share repurchases in the prior year. 
 Xerox 2021 Form 10-Q 55 

 
 

 • $99 million decrease from net debt activity primarily due to payments of $209 million on secured financing arrangements in the current year compared to payments of $313 million on Senior Notes in the prior year. 
 • Other financing, net includes the receipt of $5 million for a noncontrolling investment in Eloque, a newly-formed joint venture for the remote monitoring of critical infrastructure assets, such as road and railway bridges. 
 Cash, Cash Equivalents and Restricted Cash 
 Refer to Note 6 - 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 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 leases have remaining terms of up to eleven years and a variety of renewal and/or termination options. As of June 30, 2021 and December 31, 2020, total operating liabilities were $302 million and $333 million, respectively. 
 Refer to Note 10 - Lessee in the Condensed Consolidated Financial Statements for additional information regarding our leases accounted under lessee accounting. 
 Debt and Customer Financing Activities 
 The following summarizes our debt: 
 
 (in millions) June 30, 2021 December 31, 2020 
 Xerox Holdings Corporation $ 1,500 $ 1,500 
 Xerox Corporation 2,200 2,200 
 Xerox - Other Subsidiaries (1) 
 559 767 
 Subtotal - Principal debt balance 4,259 4,467 
 Debt issuance costs 
 Xerox Holdings Corporation (12) (13) 
 Xerox Corporation (9) (11) 
 Xerox - Other Subsidiaries (1) 
 (2) (3) 
 Subtotal - Debt issuance costs (23) (27) 
 Net unamortized premium 3 3 
 Fair value adjustments (2) 
 
 - terminated swaps — 1 
 
 Total Debt $ 4,239 $ 4,444 

 _____________ 
 (1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables - Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information. 
 (2) Fair value adjustments normally include the following: (i) fair value adjustments to debt associated with terminated interest rate swaps, which are being amortized to interest expense over the remaining term of the related notes; and (ii) changes in fair value of hedged debt obligations attributable to movements in benchmark interest rates. Hedge accounting requires hedged debt instruments to be reported inclusive of any fair value adjustment. 
 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, 2021 December 31, 2020 
 Total finance receivables, net (1) 
 $ 3,117 $ 3,165 
 Equipment on operating leases, net 271 296 
 Total Finance Assets, net (2) 
 $ 3,388 $ 3,461 

 _____________ 
 (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. 
 (2) The change from December 31, 2020 includes a decrease of $19 million due to currency. 
 Xerox 2021 Form 10-Q 56 

 
 

 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, 2021 December 31, 2020 
 Finance receivables debt (1) 
 $ 2,728 $ 2,769 
 Equipment on operating leases debt 237 259 
 Financing debt 2,965 3,028 
 Core debt 1,274 1,416 
 Total Debt $ 4,239 $ 4,444 

 ____________________________ 
 (1) Finance receivables debt is the basis for our calculation of "Cost of financing" expense in the Condensed Consolidated Statements of Income. 
 Sales of Accounts Receivable 
 Activity related to sales of accounts receivable is as follows: 
 
 Three Months Ended
June 30, Six Months Ended
June 30, 
 (in millions) 2021 2020 2021 2020 
 Estimated increase (decrease) to operating cash flows (1) 
 $ 1 $ (58) $ (26) $ (136) 

 _____________ 
 (1) Represents the difference between current and prior period accounts receivable sales adjusted for the effects of currency. 
 Refer to Note 7 - Accounts Receivable, Net in the Condensed Consolidated Financial Statements for additional information regarding our accounts receivable sales arrangements. 
 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 Xerox - Other Subsidiaries (1) 
 Total 
 2021 Q3 $ — $ — $ 95 $ 95 
 2021 Q4 — — 89 89 
 2022 — 300 293 593 
 2023 — 1,000 82 1,082 
 2024 — 300 — 300 
 2025 750 — — 750 
 2026 and thereafter 750 600 — 1,350 
 Total (2) 
 $ 1,500 $ 2,200 $ 559 $ 4,259 

 _____________ 
 (1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of securitization of Finance Receivables - Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information. 
 (2) Includes fair value adjustments. 
 Xerox 2021 Form 10-Q 57 

 
 

 Treasury Stock 
 Xerox Holdings repurchased 10.4 million shares of our common stock for an aggregate $251 million, including fees, in second quarter 2021. Xerox Holdings repurchased 17.1 million shares of our common stock for an aggregate cost of $413 million, including fees, during the six months ended June 30, 2021. The cumulative total of shares repurchased by Xerox Holdings under the current share repurchase program is 41.8 million shares for an aggregate cost of $1,013 million, including fees. As of June 30, 2021, the remaining share repurchase authorization, excluding fees and expenses, is approximately $88 million. 
 Shared Services Arrangement with HCL Technologies 
 In March 2019, as part of Project Own It, Xerox entered into a shared services arrangement with HCL Technologies (HCL) pursuant to which we transitioned certain global administrative and support functions, including, among others, selected information technology and finance functions, from Xerox to HCL. This transition was expected to be completed during 2020, however, it sustained some delays caused by the COVID-19 pandemic, and it is now expected to be finalized by the end of 2021. HCL is expected to make certain ongoing investments in software, tools and other technology to consolidate, optimize and automate the transferred functions with the goal of providing improved service levels and significant cost savings. The shared services arrangement with HCL includes a remaining aggregate spending commitment of approximately $925 million over the next 5 years. However, we can terminate the arrangement at any time at our discretion, subject to payment of termination fees that decline over the term, or for cause. 
 We incurred net charges of approximately $50 million and $45 million during the three months ended June 30, 2021 and 2020, respectively, and approximately $100 million and $90 million for the six months ended June 30, 2021 and 2020. The cost has been allocated to the various functional expense lines in the Condensed Consolidated Statements of Income based on an assessment of the nature and amount of the costs incurred for the various transferred functions prior to their transfer to HCL. 
 ServiceNow License Purchase 
 In June 2021, Xerox entered into a software services agreement with a system integrator that included Xerox's use of ServiceNow software licenses for a 5-year commitment of approximately $60 million. A portion of licenses obtained through this new arrangement are expected to be used by Xerox as part of a future project with the system integrator for the reengineering and restructure of Xerox's current global technical service force. 
 Shared Services Arrangement with Tata Consulting Services 
 In July 2021, Xerox entered into an arrangement with Tata Consulting Services (TCS), whereby TCS will provide business processing outsourcing services in support of our global finance organization. TCS will leverage their existing technology and make additional investments as required to consolidate, optimize and automate the supported services with the goal of providing improved service levels and cost savings. The arrangement is initially for 6 years with a total contract value of approximately $160 million. We can terminate the arrangement subject to payment of termination fees that decline over the term. 
 Xerox 2021 Form 10-Q 58 

 
 
 

 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 Japanese Yen, Euro and U.K. Pound Sterling. 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 2021 Form 10-Q 59 

 
 
 

 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. 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. 
 A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth below as well as in the second quarter 2021 presentation slides available at www.xerox.com/investor. 
 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. 
 Adjusted Earnings Measures 
 • Net Income and EPS 
 • 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. 
 Transaction and related costs, net: Transaction and related costs, net are costs and expenses primarily associated with certain strategic M&A projects. These costs are primarily for third-party legal, accounting, consulting and other similar type 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 are excluding these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis. 
 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 is related to current employee service as well as the cost of our defined contribution plans. 
 Other discrete, unusual or infrequent items: We excluded these items, when applicable, given their discrete, unusual or infrequent nature and its impact on our results for the period. 
 
 
 Xerox 2021 Form 10-Q 60 

 
 

 We believe the exclusion of these items allows investors to better understand and analyze the results for the period as compared to prior periods and expected future trends in our business. 
 Adjusted Operating Income and Margin 
 We calculate and utilize adjusted operating income and margin measures by adjusting our reported pre-tax income and margin amounts. In addition to the costs and expenses noted 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. 
 Summary 
 Management believes that all of these non-GAAP financial measures provide an additional means of analyzing the current period’s results against the corresponding prior period’s results. 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. Our 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. 
 A reconciliation of these non-GAAP financial measures and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on the following tables: 
 Net Income and EPS reconciliation: 
 
 Three Months Ended June 30, Six Months Ended June 30, 
 2021 2020 2021 2020 
 (in millions, except per share amounts) Net Income EPS Net Income EPS Net Income EPS Net Income EPS 
 Reported (1) 
 $ 91 $ 0.46 $ 27 $ 0.11 $ 130 $ 0.64 $ 25 $ 0.08 
 Adjustments: 
 Restructuring and related costs, net 12 3 29 44 
 Amortization of intangible assets 14 10 29 21 
 Transaction and related costs, net — 7 — 24 
 Non-service retirement-related costs (22) (8) (42) (7) 
 Contract termination costs - IT services — — — 3 
 
 Income tax on adjustments (2) 
 (1) (3) (5) (24) 
 
 
 
 Adjusted $ 94 $ 0.47 $ 36 $ 0.15 $ 141 $ 0.69 $ 86 $ 0.36 
 
 Dividends on preferred stock used in adjusted EPS calculation (3) 
 $ 3 $ 3 $ 7 $ 7 
 Weighted average shares for adjusted EPS (3) 
 189 216 194 216 
 Fully diluted shares at June 30, 2021 (4) 
 184 

 ____________________________ 
 (1) Net income and EPS attributable to Xerox Holdings. 
 (2) Refer to Effective Tax Rate reconciliation. 
 (3) Average shares for the calculation of adjusted diluted EPS for 2021 and 2020 excludes 7 million shares associated with our Series A convertible preferred stock and therefore earnings includes the preferred stock dividend. 
 (4) Represents common shares outstanding at June 30, 2021 plus potential dilutive common shares as used for the calculation of adjusted diluted EPS for 2021. The amount excludes shares associated with our Series A convertible preferred stock as they were anti-dilutive for 2021. 
 Xerox 2021 Form 10-Q 61 

 
 

 Effective Tax Rate reconciliation: 
 
 Three Months Ended June 30, 
 2021 2020 
 (in millions) Pre-Tax Income Income Tax Expense Effective
Tax Rate Pre-Tax Income Income Tax Expense Effective
Tax Rate 
 Reported (1) 
 $ 99 $ 9 9.1 % $ 35 $ 8 22.9 % 
 Non-GAAP Adjustments (2) 
 4 1 12 3 
 
 Adjusted (3) 
 $ 103 $ 10 9.7 % $ 47 $ 11 23.4 % 
 
 Six Months Ended June 30, 
 2021 2020 
 (in millions) Pre-Tax Income Income Tax Expense Effective
Tax Rate Pre-Tax Income Income Tax Expense Effective
Tax Rate 
 Reported (1) 
 $ 152 $ 23 15.1 % $ 30 $ 7 23.3 % 
 Non-GAAP Adjustments (2) 
 16 5 85 24 
 
 Adjusted (3) 
 $ 168 $ 28 16.7 % $ 115 $ 31 27.0 % 

 ____________________________ 
 (1) Pre-tax income and income tax expense. 
 (2) Refer to Net Income and EPS reconciliation for details. 
 (3) The tax impact on Adjusted Pre-Tax Income is calculated under the same accounting principles applied to the Reported Pre-Tax Income under ASC 740, which employs an annual effective tax rate method to the results. 
 Operating Income and Margin reconciliation: 
 
 Three Months Ended June 30, 
 2021 2020 
 (in millions) Profit Revenue Margin Profit Revenue Margin 
 Reported (1) 
 $ 99 $ 1,793 5.5 % $ 35 $ 1,465 2.4 % 
 Adjustments: 
 Restructuring and related costs, net 12 3 
 Amortization of intangible assets 14 10 
 Transaction and related costs, net — 7 
 
 
 
 Other expenses, net 1 7 
 Adjusted $ 126 $ 1,793 7.0 % $ 62 $ 1,465 4.2 % 
 
 Six Months Ended June 30, 
 2021 2020 
 (in millions) Profit Revenue Margin Profit Revenue Margin 
 Reported (1) 
 $ 152 $ 3,503 4.3 % $ 30 $ 3,325 0.9 % 
 Adjustments: 
 Restructuring and related costs, net 29 44 
 Amortization of intangible assets 29 21 
 Transaction and related costs, net — 24 
 
 Other expenses, net 5 30 
 Adjusted $ 215 $ 3,503 6.1 % $ 149 $ 3,325 4.5 % 

 ____________________________ 
 (1) Pre-Tax Income 
 Xerox 2021 Form 10-Q 62 

 
 
 

 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.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Xerox Holdings Corp 10-Q

Item 2. Management’s Discussion and Analysis
