Xerox Holdings Corp 10-K

xrx-20221231 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________ FORM 10-K _________________________________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31 , 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: ______ to: _______ _________________________________________________ XEROX HOLDINGS CORPORATION XEROX CORPORATION (Exact Name of Registrant as specified in its charter) _________________________________________________ New York 001-39013 83-3933743 New York 001-04471 16-0468020 (State or other jurisdiction of incorporation or organization) (Commission File Number) (IRS Employer Identification No.) P.O. Box 4505, 201 Merritt 7 Norwalk , Connecticut 06851-1056 (Address of principal executive offices and Zip Code) 203 - 849-5216 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Xerox Holdings Corporation Common Stock, $1 par value XRX Nasdaq Global Select Market Title of each class Trading Symbol Name of each exchange on which registered Securities registered pursuant to Section 12(g) of the Act: None ____________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Xerox Holdings Corporation Yes ☐ No ☒ Xerox Corporation Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Xerox Holdings Corporation Xerox Corporation Large accelerated filer ☒ Large accelerated filer ☐ Accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Smaller reporting company ☐ Emerging growth company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Xerox Holdings Corporation ☐ Xerox Corporation ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Xerox Holdings Corporation ☒ Xerox Corporation ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements Xerox Holdings Corporation ☐ Xerox Corporation ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). Xerox Holdings Corporation ☐ Xerox Corporation ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Xerox Holdings Corporation Yes ☐ No ☒ Xerox Corporation Yes ☐ No ☒ The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2022 was $ 2,301,252,154 . Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Class Outstanding at January 31, 2023 Xerox Holdings Corporation Common Stock, $1 par value 156,434,437 DOCUMENTS INCORPORATED BY REFERENCE Portions of the following document are incorporated herein by reference: Document Part of Form 10-K in which Incorporated Xerox Holdings Corporation Notice of 2023 Annual Meeting of Shareholders and Proxy Statement (to be filed no later than 120 days after the close of the fiscal year covered by this report on Form 10-K) III Cautionary Statement Regarding Forward-Looking Statements This combined Annual Report on Form 10-K (Form 10-K), and other written or oral statements made from time to time by management contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 that involve certain risks and uncertainties. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “would”, “could”, “can” “should”, “targeting”, “projecting”, “driving”, “future”, “plan”, “predict”, “may” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. Additional risks that may affect Xerox’s operations that are set forth in the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Form 10-K, as well as in Xerox Holdings Corporation’s and Xerox Corporation’s combined Quarterly Reports on Form 10-Q and Xerox Holdings Corporation’s and Xerox Corporation’s Current Reports on Form 8-K filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document or as of the date to which they refer, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law. Throughout this Form 10-K, 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,” or 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 subsidiaries. Xerox Holdings Corporation's primary direct operating subsidiary is Xerox and therefore Xerox reflects nearly all of Xerox Holdings' operations. Xerox Holdings Corporation Xerox Corporation Form 10-K December 31, 2022 Table of Contents Page Part I Item 1. Business 1 Item 1A. Risk Factors 11 Item 1B. Unresolved Staff Comments 25 Item 2. Properties 25 Item 3. Legal Proceedings 25 Item 4. Mine Safety Disclosures 25 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. [Reserved] 27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8. Financial Statements and Supplementary Data 67 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 150 Item 9A. Controls and Procedures 150 Item 9B. Other Information 151 Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 151 Part III Item 10. Directors, Executive Officers and Corporate Governance 152 Item 11. Executive Compensation 153 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 153 Item 13. Certain Relationships, Related Transactions and Director Independence 153 Item 14. Principal Accounting Fees and Services 153 Part IV Item 15. Exhibit and Financial Statement Schedules 154 Schedule II Xerox Holdings Corporation Valuation and Qualifying Accounts 155 Schedule II Xerox Corporation Valuation and Qualifying Accounts 156 Index of Exhibits 157 Item 16. Form 10-K Summary 164 Signatures Xerox Holdings Corporation 165 Signatures Xerox Corporation 166 Table of Contents Part I Item 1. Business Xerox is a workplace technology company, building and integrating software and hardware for enterprises large and small. As customers seek to manage information and document workflows across digital and physical platforms, we deliver a seamless, secure and sustainable experience. Whether inventing the copier, the Ethernet, the laser printer or more, Xerox has long defined the modern work experience and continues to do so with investments in artificial intelligence (AI), augmented reality (AR)-driven service experiences, robotic process automation (RPA) and other technologies that enable Xerox to deliver essential products and services to address productivity challenges of a hybrid workplace and distributed workforce. Xerox serves customers globally in North America, Central and South America, Brazil, Europe, Eurasia, the Middle East, Africa and India. This geographic span allows us to deliver our technology and solutions to customers of all sizes, regardless of complexity or number of customer locations. Recent Changes and Developments In 2022, we made progress in our efforts to monetize or improve and broaden the financial profile of two of the businesses we stood up in 2021: FITTLE (formerly known as Xerox Financial Services) and Innovation (PARC). FITTLE focused its strategy in 2022 to broaden its portfolio of financed assets to include growth opportunities independent of Xerox equipment and services, such as the expansion of its dealer relationships to include an increasing number of non-Xerox dealers, leveraging its existing dealer relationships to finance a wider breadth of products and forming relationships with new vendors. In 2022, FITTLE’s non-captive (i.e., indirect) originations grew more than 20%. In December, FITTLE entered into a receivables funding solution (the Receivables Funding Agreement) with an affiliate of HPS Investment Partners to sell pools of future lease receivables, primarily covering U.S. direct leases (including leases originated through XBS) through January 2024. The Receivables Funding Agreement, which anticipates sales of approximately $600 million in 2023, represents a strategic shift in the Company’s approach to funding FITTLE’s growth, allowing FITTLE to focus on being an asset-light, best-in-class provider and servicer of equipment leases while freeing up Xerox’s operating cash. We also spun out two businesses incubated at PARC: Mojave, an energy efficient HVAC technology development business, and Novity, an industrial predictive maintenance business. Both companies were spun out as separate, independent businesses, with Xerox continuing to hold a noncontrolling minority share. The transactions allow Xerox to preserve free cash flow as Mojave and Novity invest for growth, all while maintaining the opportunity to realize value from their future success. Due to recent adverse changes in macroeconomic and other operating conditions, we have recently taken a more focused approach to the way in which we allocate R&D spending, placing greater emphasis on margin-accretive growth opportunities with near-term returns. In 2022, we took actions to reduce and reallocate R&D spend toward projects and partnerships that augment our existing strengths and opportunities within Print, IT Services and Digital Services. As a result, we paused growth investments at Elem, our 3D printing business, we exited our infrastructure-monitoring joint venture, Eloque, and rationalized spending at PARC’s research facilities. Strategic Priorities Our long-term strategic objective is to grow the share of our customer's technology spending as well as the Total Addressable Market (TAM) through expanded penetration of existing solutions and the development of new, data-driven solutions. We believe Xerox’s globally recognizable brand, our deep understanding of clients’ industries and businesses and client trust have afforded us a path to win in IT and digital services – markets where we already have leading solutions and where we are actively investing to develop more. Our strategic priorities for 2023 are: Customer Success, Focus on Profitability and Shareholder Returns. Customer Success: We will take measures to make it easier to do business with Xerox by employing a holistic, client-centric approach to delivering essential products and services that address the productivity challenges of a hybrid workplace and distributed workforce. The COVID-19 pandemic has accelerated the transformation of the workplace into a more flexible, hybrid environment. In response, we continue to invest in innovation to bolster and diversify our portfolio of offerings for hybrid workplace environments, including investments in Workflow Central and Digital Services such as Capture & Content and Customer Engagement Services, which enable work to flow seamlessly between the office and home. By focusing our sales efforts on providing solutions closely aligned to clients’ needs, rather than products, we believe we can grow our revenue while improving customer outcomes. Xerox 2022 Annual Report 1 Table of Contents Focus on Profitability: We plan to implement a more flexible cost base and operating model to expand margins and direct investments towards margin-accretive growth opportunities with nearer-term returns. Project Own It delivered approximately $2.2 billion of gross cost savings from 2018 to 2022, and the behaviors and processes instilled by this program remain a priority. Just as we will focus on making it easier to do business with Xerox, we will look to make it easier to do business within Xerox by investing in processes that drive incremental organizational efficiencies and enable collaboration required to offer holistic solutions for our clients. Shareholder Returns: We will manage the business with the aim of optimizing free cash flow generation and return at least 50% of free cash flow to shareholders. We expect to focus on driving higher profits, but we also remain focused on generating more cash flow per profit dollar. In 2022, FITTLE entered into a Receivables Funding Agreement that we expect to improve Xerox’s cash flow profile while continuing to support FITTLE’s growth and we also intend to concentrate on inventory efficiency, which we expect to improve as supply chain conditions normalize. Acquisitions and Investments We maintain a broad M&A pipeline that includes targets within the print industry and adjacent markets. In 2022, Xerox acquired Powerland, an IT service provider in Canada, and Go Inspire, a print and digital marketing and communication services provider in the U.K. Further details about our acquisitions and investments can be found in Note 6 - Acquisitions and Investments, in the Consolidated Financial Statements. Reportable Segments and Geographic Sales Channels 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 Financing (FITTLE) . • Print and Other – the design, development and sale of document management systems, solutions, and services as well as associated technology offerings including IT and software products and services. • Financing (FITTLE) – a financing solutions business primarily providing financing for the sales of Xerox equipment and also non-Xerox office equipment and IT services equipment. We also operate a matrix organization that includes a geographic focus that is primarily organized from a sales perspective on the basis of “go-to-market” (GTM) sales channels as follows: • Americas , which includes our sales channels in the U.S. and Canada, as well as Mexico, Brazil, and Central and South America. • EMEA , which includes our sales channels in Europe, the Middle East, Africa and India. • Other , which primarily includes royalties and licensing revenue. These GTM sales channels are structured to serve a range of customers for our products and services, including financing. Accordingly, we will continue to provide information, primarily revenue related, with respect to our principal GTM sales channels. Please refer to the Reportable Segments section of Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information. Revenues We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized market clients to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business does not depend upon a single customer, or a few customers, the loss of which would have a material adverse effect on our business. Our business spans four primary offering areas: Workplace Solutions, Production Solutions, Xerox Services and FITTLE. Workplace Solutions is made up of two strategic product groups, Entry and Mid-Range , much of which share common solutions, apps and ConnectKey® software. Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as the supplies and associated technical service and financing of those products through FITTLE (captured as post sale revenue). • Entry primarily comprises A4 desktop monochrome and color printers and multifunction printers (MFPs) ranging from small personal devices to office workgroup devices. We offer our ConnectKey® system of digital workflow and applications across a large portion of these devices. Xerox 2022 Annual Report 2 Table of Contents • Mid-Range are primarily A3 devices that have more features and can handle higher print volumes and larger paper sizes than entry devices. We are a leader in this area of the market and offer a wide range of MFPs, digital printing presses and light production devices, as well as solutions that deliver flexibility and advanced features. Production Solutions (High-End) are designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements. Our broad portfolio of presses and solutions provides full-color, on-demand printing of a wide range of applications. Our xerographic and ink jet presses provide high-speed, high-volume cut-sheet printing, ideal for publishing, and transactional printing, including variable data for personalized content and one-to-one marketing, to the highest quality of color and embellishment requirements. Our cut-sheet press enables new applications in true high-definition resolution with high fusion ink, AI Powered image quality and advanced productivity technologies. Our portfolio spans a variety of print speeds, image quality, feeding, finishing and media options. Production Solutions revenues include the sale of products (captured primarily in equipment sales) as well as, software, supplies and the associated technical service and financing of those products (captured as post sale revenue). FreeFlow® is a portfolio of software offerings that brings intelligent workflow automation and integration to the processing of high-end print jobs, from file preparation to final production, helping customers of all sizes address a wide range of business opportunities including automation, personalization and even electronic publishing. Xerox® Services includes a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. Xerox has the capability to support integration and document security on a global scale, which are critical factors for large enterprises. Our primary offerings in this area are Xerox® Managed Print Services (MPS), Xerox® Capture & Content Services (CCS) and Xerox® Customer Engagement Services (CES) as well as IT Services. CCS and CES encompass a range of Digital Services that leverage our software capabilities in Workflow Automation, Personalization and Communication Software, Content Management Solutions, and Digitization Services. The COVID-19 pandemic shifted our customers’ focus toward secure, efficient and flexible solutions to operate in a hybrid work environment. As a result, we enhanced our focus on the development and promotion of offerings to help our customers accelerate their digital transformations. • Managed Print Solutions (MPS) utilizes our portfolio of security, analytics, cloud, digitization and ConnectKey® technologies to help companies optimize their print infrastructure, secure their print environment and automate related business processes. We provide the most comprehensive portfolio of MPS services in the industry and are recognized as an industry leader by major analyst firms including IDC and Quocirca. Our MPS offering targets clients ranging from global enterprises to governmental entities to small and mid-sized markets businesses, including those served via our channel partners. This portfolio includes a suite of services to help clients manage hybrid workforces, including cost effective and secure printing devices along with apps and software tools that enable work from anywhere, cloud server-enabled fleet management, security and automation software and remote customer support. Xerox® Workflow Central extends the document workflow solutions available through our ConnectKey® technologies to all devices, including PCs and smartphones, for easier access to workflow solutions in hybrid workplace environments. • Capture & Content Services (CCS) enables content digitization and management, workflow automation and intelligent document processing and includes offerings such as Xerox® Digital Mailroom , where we use scanning and capture technology combined with AI to extract printed and digital information into usable data that is routed into business workflows (such as accounts payable) or into archives, integrating with cloud-based content management systems such as our DocuShare® software. • Customer Engagement Services (CES) enable the integration of Xerox technology, software and services to securely design and manage our clients’ personalization and customization of targeted communications. These services include Xerox® Digital Hub and Cloud Print services, a one-stop shop where customers can submit print jobs from anywhere and leverage our Web2Print portal with on and off-site printing networks to meet their printing or marketing collateral needs on demand. Our Customer Communications Management and Campaigns on Demand solutions, such as those provided by recently acquired Go Inspire, help drive personalized and meaningful communications and touchpoints. • IT Services , provides small and mid-sized markets clients with cost efficient and secure solutions, including end user computing devices, network infrastructure, communications technology, and a range of managed IT solutions, such as technology product support, professional engineering and commercial RPA. FITTLE is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment through bundled lease agreements, lease financing to end-user customers who purchase Xerox and non-Xerox equipment through our indirect channels and leasing solutions for OEMs of print and non-print related office equipment and IT services equipment. Xerox 2022 Annual Report 3 Table of Contents In addition to our four primary offering areas described above, a smaller but growing portion of our revenues comes from non-core streams including paper sales in our developing market countries, wide-format systems, licensing revenue, as well as standalone software such as CareAR, DocuShare® and XMPie. In addition, our PARC innovation group, which comprises the research efforts undertaken at our facilities located in Palo Alto, Calif.; Webster, N.Y.; Cary, N.C., and Toronto, Canada, is focused on incubating, productizing and commercializing disruptive technology. Geographic Information Overall, approximately 45% of our revenue is generated by customers outside the U.S. Additional details can be found in Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements. Patents, Trademarks and Licenses In 2022, Xerox and its subsidiaries were awarded 266 U.S. utility and design patents. Our patent portfolio evolves as new patents are awarded to us and older patents expire. As of December 31, 2022, Xerox held 7,105 U.S. utility and design patents. These patents expire at various dates up to 20 years or more from their original filing dates. While we believe that our portfolio of patents and applications has value, in general no single patent is essential to our business. In addition, any of our proprietary rights could be challenged, invalidated or circumvented, or may not provide significant competitive advantages. In 2022, we were party to multiple patent-related agreements in which we licensed or assigned our patents to others in return for revenue and/or access to their patents or to further our business goals. Most patent licenses expire concurrently with the expiration of the last patent identified in the license or after a specified term of years. We were also party to a number of cross-licensing agreements with companies that also hold substantial patent portfolios. These agreements vary in subject matter, scope, compensation, significance and duration. In the U.S., we own approximately 161 U.S. trademarks, either registered or applied for. These trademarks have a perpetual life, subject to renewal every 10 years. We vigorously enforce and protect our trademarks. Environmental, Social, and Governance (ESG) At our core is a deep and long-lasting commitment to ESG, a pledge to inspire and support our people, conduct business ethically across the value chain and preserve our planet. This commitment stems from our corporate values established over sixty years ago, which include: succeeding through satisfied customers; delivering quality and excellence in all we do; requiring a premium return on assets; using technology to develop market leaders; valuing and empowering our employees; and behaving responsibly as a corporate citizen. We continue this legacy by creating products and services that help our customers be more productive, profitable and sustainable. We deliver solutions that drive customer success and enable a new, better world. We do this in our own operations, as well as in workplaces, communities and cities around the world. We recognize the world’s challenges such as climate change and human rights and understand the role we play. Our pledge to inspire and support our people, conduct business ethically and protect our planet remains at the core of everything we do. At Xerox, we believe in continuously improving, and we apply this mentality to ensuring we are always finding ways to improve the sustainability of our operations. The Xerox 2022 Corporate Social Responsibility (CSR) Report describes our management approach related to ESG. Our work aligns with the United Nations Sustainable Development Goals (SDGs), which provide a framework to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere. To ensure we are responsive to all stakeholders, Xerox has also been reporting in accordance with the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate Change Related Disclosures (TCFD). (The 2022 CSR Report, SASB report and TCFD report are accessible at www.xerox.com/CSR. The content of our website is not incorporated by reference in this combined Form 10-K unless expressly noted.) Environment With climate change being one of the defining issues of our time, we fast-tracked our net zero goal by 10 years to 2040 and integrated climate change-related risks and opportunities into our Enterprise Risk Management. We share our roadmap to reach net zero in our 2022 CSR Report. Our roadmap covers our full value chain and focuses on improving processes and energy efficiency as well as designing environmentally responsible products and clean technologies that extend beyond print. Our interim goal is to reduce our Scope 1 and Scope 2 GHG emissions at least 60% by 2030, against the Company’s 2016 baseline. This is in line with the ambitious science-based global warming target, validated and approved by the Science Based Targets initiative (SBTi). Our GHG emissions are Xerox 2022 Annual Report 4 Table of Contents third-party assured in accordance with ISO 14064-3:2019 and are updated in our progress summary as new data becomes available. In 2022, Xerox was named to CDP’s Annual "A List” for climate change transparency and performance. CDP is a nonprofit organization that runs the global disclosure system for investors, companies, and regions to manage their environmental impacts. Xerox has long paired its technology with sustainability, influencing not just our industry but others. Serving as an ENERGY STAR Charter Partner, Xerox helped the U.S. Environmental Protection Agency (EPA) create its standards and still works with the agency today. Since 1993, more than 500 Xerox® products have achieved ENERGY STAR registration. In 2022, 100% of our eligible new products have achieved ENERGY STAR and EPEAT registration. ENERGY STAR requirements serve as the foundation for other eco-labels such as Electronic Products Environmental Assessment Tool (EPEAT) that is composed of criteria spanning corporate and product requirements. EPEAT product criteria combine comprehensive requirements for design, production, energy use, and recycling, with ongoing independent verification of manufacturer claims. Circular economy initiatives remain a part of our business strategy. Our first commercial product in 1959, the Xerox 914, introduced electronics remanufacturing long before the term “circular economy” became popular. Our vision was to transform Xerox manufacturing, operations, offices and facilities into waste-free workplaces. We had this same vision for our clients’ workplaces: a world where electronics and supplies at the end of their useful life would come full circle to become raw materials for tomorrow’s technology. In this model, quality and performance are not compromised, precious natural resources are conserved, and waste becomes obsolete. Six decades later, we continue to demonstrate that a circular economy delivers environmental, economic and societal benefits. To meet this commitment, we have developed several collection and waste reduction programs, while also designing technology to align with the circular economy’s key elements. The majority of spent toner cartridges and other consumables returned through Green World Alliance, Xerox's customer recycling program, are recycled, reused or remanufactured. We continue to make progress towards increasing the post-consumer recycled content in our eco-label eligible devices. Social Our Employees As of December 31, 2022, we had approximately 20,500 employees; a reduction of approximately 2,800 (12.0%) employees since December 31, 2021. The reduction in headcount resulted from net attrition (attrition net of gross hires), restructuring, as well as the impact of organizational changes including employee transfers associated with shared services arrangements. On a geographic basis, approximately 10,300 employees were located in the U.S. and approximately 10,200 employees were located outside the U.S. We had approximately 11,900 employees or approximately 60% of our employees engaged in providing services to customers (direct service and managed services) and approximately 3,000 engaged in direct sales. Approximately 20% of our employees are represented by unions or similar organizations, such as worker’s councils with approximately 90% located outside the U.S. As of December 31, 2022, approximately 25% of our employees were women and 30% of our U.S. employees self-identified as diverse. Employee Safety At Xerox, we are committed to maintaining a safe workplace environment for our people. We have an incident reporting process, workplace safety inspections and hazard analysis that allows improvements in areas where we can reduce or prevent incidents. Several methods are also used to raise employee safety awareness including site-specific hazard management, off-the-job safety information and communications regarding safety concerns. In 2022, Xerox’s Day Away from Work Case Injury Rate was 0.40, which was an 8.1% increase from the 2021 rate of 0.37, and better than the 2022 targeted rate of 0.44 by 9.1%. Diversity, Inclusion and Belonging Diversity, inclusion and belonging (DIB) is more than in our DNA at Xerox, it connects us culturally. Our first CEO, Joseph Wilson, called for social responsibility, diversity and inclusion by shaping our core values to reflect on the value of our employees for races and ethnicities. After we reaffirmed our commitment to DIB in 2020, we have expanded our commitment to social responsibility and diversity through employee listening sessions to educate and to cultivate belonging. Joseph Wilson’s vision is still reflected today in our DIB roadmap through the development and execution of ESG targets. Our DIB roadmap continues to enable us to have a bigger impact on employees and society. To support this, our roadmap and our actions focuses on: Xerox 2022 Annual Report 5 Table of Contents • Diverse Pipeline : Recruit, hire and promote more women globally, and underrepresented talent within the U.S. for professional-level job roles. Our pipeline is governed by Xerox's diversity policy known as the Wilson Rule. • Partnership : Build relationships with external organizations to increase the sourcing of incoming talent to better reflect the markets and communities we serve. For example, we are working with AI vendors using their unique algorithms to increase the pool of women and underrepresented candidates for our job openings. • Culture Change : Leveled-up our culture cohesion by hosting organization-wide DIB learning events and listening sessions, and expansion of our Employee Resource Groups (ERGs) to 10 groups. In 2022, we held our third annual global DIB virtual event, called All of Us Together. This global event is planned by members of our ERGs, and it is open to all Xerox employees. In addition to increasing global employee participation in ERGs, we expanded the footprint of our ERGs with the creation of our new disability ERG called Enable_All. • Community Outreach : Fostering relationships with partners that reflect the communities that we serve is at the heart of our DIB roadmap. We continue to nurture our partnership with A Better Chance (ABC) and the Thurgood Marshall College Fund Leadership Institute through mentorship, sponsorship, and scholarship support to youth of color, providing equality-opportunities for more successful career outcomes. In the U.K., we partner with the Black Young Professionals Network to mentor black professionals and provide career opportunities. • Accountability : Measuring our progress against our ESG metrics and continuing to be transparent by utilizing our CSR Report to inform the public about our strategy and progress. We are confident that over time, our efforts will yield sustainable progress in this critical business challenge. In 2022, we completed an assurance audit against the Social KPIs that confirmed the accuracy in the methodology. Talent Management and Workforce Development Talent management and workforce development are critical for the future of Xerox and fueling business growth and innovation. We use high-impact practices and technology to drive global workforce capability and integrate learning with work. Our organization and talent planning processes include reviews with business leaders to build our talent pipeline. More broadly, Human Resources (HR) provides a forum for management to review the future needs of the organization, noting strengths, gaps and strategies to build strong teams for the next chapter at Xerox. During our most recent organization and talent planning process, we identified the potential successors for critical roles. We utilize a third-party, online learning platform that is available to all Xerox employees for self-directed learning, which supports skill and career growth. The Company is also committed to accelerating the careers of high-potential, diverse employees and women along with identifying more diverse candidates for open roles. For example, Vista, our high-potential development program, recently completed its second year, and we are preparing to launch the third cohort in early 2023. This is a one-year program that provides opportunities for our highest-potential employees across the globe, to accelerate their career development through education, experience, and exposure. This program also includes individualized career coaching, mentorship, and networking opportunities with Executive Committee and Senior Leadership members, which accelerates our talent pipeline, retains early talent, and increases employee engagement. Additionally, our leaders embrace and support the Wilson Rule, which requires that one out of every three final candidates for professional roles be diverse. Finally, we provide ongoing diversity training sessions to managers to reinforce the importance of a diverse workforce. Global Learning Innovation We adopt a blended technology-led learning model to drive the Xerox business and talent strategies. Learning is delivered to our staff using an appropriate modality to support professional development and build capabilities across the company, on time, and in a cost-effective manner. Our Learning and Development (L&D) function is focused on business agility and driving digital transformation across our workforce. Our employees have access to a global learning platform that includes an extensive portfolio of online courses, virtual classroom events, simulations, job aids, and other learning and development resources. Learning topics include critical job-specific information and technical upskilling, management development and professional effectiveness, productivity tools for project management, client service, negotiations, technology solutions, ethics, diversity and inclusion, and information security. As our business evolves, we will continue to leverage technology to identify new skills or capabilities required to ensure we remain competitive in the global market. Our L&D function partners with Xerox business leaders to design capability-building programs and the Xerox senior leadership champions a long-term vision to continually develop the skills of our employees. Xerox 2022 Annual Report 6 Table of Contents Total Rewards Our success depends on attracting, retaining, and motivating a highly productive, global workforce. To achieve this, we take pride in offering our employees a comprehensive Total Rewards program that includes various compensation, benefits, and work-life programs. Our programs are designed to achieve the following objectives: • Drive shareholder value : support our business strategy and culture. • Align with performance : incentivize the right behaviors – when the Company wins, our employees win. • Support our talent strategy : attract, retain and motivate a productive workforce. As with most global companies, our compensation and benefits vary based on employee eligibility, and local practices and regulations. We benchmark our programs to ensure we remain competitive with our peers and the markets we serve, and to maintain alignment with our short-term and long-term business goals. Our compensation offerings include base pay and short-term and long-term incentive programs. Our short-term programs include: a Management Incentive Plan (MIP), designed to drive Xerox’s pay for performance culture and incentivize our leaders to help Xerox achieve sustainable growth; sales compensation programs to tightly align our sales force with business goals; and a Profit Share Plan (PSP), designed to give a broad population of our employees an opportunity to share in the organization’s success. A Long-Term Incentive (LTI) equity-based program reinforces alignment of our leaders and key talent with shareholders. Our benefit offerings provide our employees with choice and flexibility to help them reach their health and financial goals. Our offerings include the following core programs: health care, wellness, retirement, paid time off, life and disability insurance, and access to voluntary benefits. Philanthropy and Community Involvement From our earliest days as a company, Xerox has demonstrated a steadfast commitment to corporate social responsibility. Our greatest goal is to facilitate employee-driven philanthropy. Together, Xerox and our employees are creating real impact and sustainable change for the greater good. In 2022, Xerox employees volunteered for approximately 24,400 hours. Our efforts are focused on four strategic areas to maximize change: • Strong vibrant communities: Xerox invests in communities where our people and clients live and work, strengthening ties with our stakeholders and embedding Xerox into the fabric of communities around the world. We encourage our people to give back to the causes they believe in, by providing employees with a day each year to volunteer at a cause of their choice. Xerox also offers a limited employee match to certain charitable organizations. • Education and workforce preparedness: Xerox supports the role of education in society - through colleges, universities, science, technology, engineering and math (STEM) education programs, and workforce development programs that prepare the next generation of leaders, inventors and scientists. • Science and technology: Xerox invests in scientific research and partnerships to serve the long-term strategic interests of the Company and our world. • Disaster relief: Xerox provides aid to our employees and their neighbors in crises during natural disasters. Governance The Corporate Governance Committee of the Board of Directors has oversight for ESG. The Committee reviews significant shareholder relations issues and environmental and CSR matters, ensuring that our actions align with our core values and citizenship priorities. The CSR Council, comprised of senior executives who manage specific CSR topic areas, has centralized oversight of the Company’s management approach, including policies, goals, strategies and actions to drive progress. The primary mission of the CSR Council is to drive strategies with a client-centric impact, across Xerox globally, to advance our legacy of leadership in corporate citizenship. Actions taken must meet our stakeholders’ expectations, including customers, employees, investors, regulators and communities worldwide. We demonstrate our Board of Directors' and executive staff's commitment to ESG as follows: • Investor outreach: Each year Xerox conducts regular outreach with our investors to facilitate candid discussions about our business and strategy. In 2022, the company hosted 25 calls and meetings with 12 different investors providing feedback about ESG reporting metrics, diversity, and executive compensation practices. We include ESG metrics in the compensation criteria for all senior management, which covers climate change, a balanced workforce, succession planning, board refreshment and workplace safety. Xerox 2022 Annual Report 7 Table of Contents • Investor Day: Xerox hosted an Investor Day Event in February 2022 - Now & Next - with our investors and analysts. During this event, Xerox executives provided an overview of the Company's strategic priorities, which included a discussion of ESG priorities such as our Roadmap to Net Zero, as well as discussed business solutions and financial services that make every day work better for clients. Annual training regarding ethics, privacy, DIB and security are required of all our employees. Additional specialized training is required for certain roles and numerous training programs are available for employees to take on their own initiative. A variety of proprietary and leading industry security features are also used to protect Xerox® devices from malicious attacks. Xerox's robust security and education market solutions were recognized by KeyPoint Intelligence with the Buyers Lab (BLI) 2021-2022 PaceSetter Awards for Worldwide Document Imaging Security for Production and Office solutions, as well as for the Education Market in North America. Xerox takes data protection very seriously. Xerox’s information security and privacy programs are designed to comply with applicable laws and regulations and are based on industry standards and best practices such as the National Institute of Technology (NIST) Cybersecurity Framework, ISO 27001. Xerox Privacy Policy notice ensures that the processing of personal data is based on the subject’s consent, as individuals have a right to withdraw or alter consent at any time for future processing. Please refer to Xerox’s privacy website at www.xerox.com/privacy for further information. (The content of our website is not incorporated by reference in this combined Form 10-K unless expressly noted.) Adherence to our policies, and procedures governing data protection, is enforced through a combination of technical and manual safeguards over our systems and facilities, disciplinary actions against employees, audit rights and other contractual rights against our vendors. Material Government Regulations Our business activities are worldwide and are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations. Currently costs incurred to comply with these governmental regulations are not material to our capital expenditures, results of operations and competitive position. Although there is no assurance that existing or future government laws and regulations applicable to our operations, services or products will not have a material adverse effect on our capital expenditures, results of operations and competitive position, we do not currently anticipate material expenditures for government regulations. However, as a result of increased government focus in the U.S. and globally, we believe that environmental and global trade regulations could potentially materially impact our business in the future. For a discussion of the risks associated with government regulations that may materially impact us, please see Risk Factors included in Item 1A of this combined Form 10-K. Marketing and Distribution We go to market with a customer-centric, market-informed and services-led approach, selling workplace products and services that support the new hybrid and distributed workforce. We sell directly to customers through our direct sales force or indirectly through distributors, independent agents, dealers, value-added resellers, systems integrators and e-commerce marketplaces. In addition, we continue to focus on broadening our footprint to sell offerings to the small and mid-sized markets primarily in the U.S., U.K. and Canada through XBS which is comprised of regional core companies that provide office technology and services, including Managed IT Services, to small and mid-sized markets clients, and through the acquisitions of dealers and IT Services providers internationally. We are structured to serve our customers globally through two primary go-to-market units: the Americas, comprised of the U.S. and Canada along with Mexico, Brazil, Central and South America; and EMEA, which includes Europe, the Middle East, Africa and India. We have an industry leading and common global delivery model that provides a consistent customer experience worldwide. We believe that this structure creates a leaner and more effective go-to-market model that streamlines our supply chain and provides our customers with best-in-class services. The Technology Agreement (TA) between FUJIFILM Business Innovation Corp. (formerly Fuji Xerox Co. Ltd, or Fuji Xerox) and Xerox was terminated on March 31, 2021. The TA included a provision that allowed Fuji Xerox continued use of the Xerox brand trademark for two years after the date of termination of the TA as it transitions to a new brand in exchange for an upfront prepaid fixed royalty of $100 million. Fuji Xerox elected to continue its use the Xerox brand trademark over the two-year period and, therefore, in April 2021, made the upfront payment due under the TA. Accordingly, we expect any potential entry by Xerox into the Fuji Xerox territory under the Xerox brand to be deferred to at least April 1, 2023. Xerox 2022 Annual Report 8 Table of Contents The product supply agreements with Fuji Xerox will continue to be effective despite the termination of the TA, and Fuji Xerox and Xerox will continue to operate as each other's product supplier under existing or new purchase/supply agreements. Competition Although we encounter competition in all areas of our business, we are the leader - or among the leaders - in our core mid-range and high-end product groups. We compete on the basis of technology, performance, price, quality, reliability, brand reputation, distribution, and customer service and support. The larger competitors in our print business include Canon, FUJIFILM Business Innovations Corp., HP Inc., Konica Minolta and Ricoh. Our brand recognition, reputation for document management expertise, innovative technology and service delivery excellence are our competitive advantages. These advantages, combined with our breadth of product offerings, global distribution channels and customer relationships, position us as a strong competitor going forward. As we continue our strategy to diversify and grow other businesses, there may be additional non-print competitors. With respect to our financing/FITTLE business, our main competitors vary considerably from equipment manufacturers with a captive leasing group to third-party independent leasing entities and financial institutions. We generally compete based on relationships with dealers and partners and by offering a better service experience. Customer Financing (FITTLE) We finance a large portion of our direct channel customer purchases of Xerox equipment through bundled lease agreements. We also provide lease financing to end-user customers who purchase Xerox equipment through our indirect channels. We compete with other third-party leasing companies with respect to the lease financing provided to these end-user customers. In both instances, financing facilitates customer acquisition of Xerox technology and enhances our value proposition, while providing Xerox a reasonable return on our investment in this business. We also provide financing solutions for non-Xerox office equipment and IT services equipment. Because our lease contracts allow customers to pay for equipment over time rather than upfront upon installation, we maintain a certain level of debt to support our investment in these lease contracts. We fund our customer financing activity through a combination of cash generated from operations, cash on hand and proceeds from capital market offerings and securitizations through secured borrowing arrangements and sales of receivables. At December 31, 2022, we had approximately $3.1 billion of finance receivables and $235 million of Equipment on operating leases, net, or Total Finance assets of approximately $3.3 billion. We maintain an assumed 7:1 leverage ratio of debt to equity as compared to our Finance assets, which results in approximately $2.9 billion of our $3.7 billion of debt being allocated to FITTLE. In December 2022, the Company entered into a Receivables Funding Agreement pursuant to which the Company agreed to offer for sale, and the purchaser agreed to purchase certain eligible pools of finance receivables on a monthly basis in transactions intended to be true sales. The Receivables Funding Agreement, which contemplates receivables sales totaling approximately $600 million, has an initial term through January 31, 2024, with automatic one-year extensions thereafter, unless terminated by either the Company or the purchaser. The Receivables Funding Agreement provides a committed funding source for FITTLE to originate and service new lease originations without incurring additional debt. Refer to "Debt and Customer Financing Activities" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K, for additional information. Manufacturing and Supply Our manufacturing and distribution facilities are located around the world. Our largest manufacturing site is in Webster, N.Y., where we produce the Xerox® iGen, Xerox® Nuvera, and Xerox® Baltoro production printing presses as well as key components and consumables for our products, such as toner. We have manufacturing operations for materials and components in Dundalk, Ireland; Wilsonville, OR; Venray, Netherlands; Ontario, Canada; and Oklahoma City, OK. We conduct sustainable manufacturing in all of these facilities. In addition, we work with various manufacturing and distribution partners. This diversification of suppliers brings flexibility and cost efficiency to our manufacturing and supply chain, a critical component in our strategic initiative to optimize operations for simplicity. FUJIFILM Business Innovation Corp. (formerly Fuji Xerox Co., Ltd.) is our largest partner with whom we maintain product sourcing agreements for specific products across our entry, mid-range and high-end portfolios. We also acquire products from various third parties to increase the breadth of our product portfolio and meet channel requirements. In addition, we outsource certain specialized manufacturing activities to partners, such as Flex Ltd. and Jabil Inc., which are global contract manufacturers with whom we have long-standing relationships. Xerox 2022 Annual Report 9 Table of Contents Our supply chain operations utilize a network of world-class logistics partners who offer warehousing and transportation services. Reverse Logistics is an integral part of our sustainability mission, and we perform these operations at our facility in Cincinnati, OH, and with a network of various partners worldwide. Refer to "Contractual Cash Obligations and Other Commercial Commitments and Contingencies" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K for additional information regarding our relationship with FUJIFILM Business Innovation Corp. International Operations The financial measures, by geographical area for 2022, 2021 and 2020, are included in Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information. See also the risk factor entitled “The international nature of our business subjects us to a number of risks, including foreign exchange and interest rate risk and unfavorable political, regulatory, and tax conditions in foreign countries.” in Part I, Item 1A Risk Factors of this combined report on Form 10-K. Seasonality Our revenues may be affected by such factors as the introduction of new products, the length of sales cycles and the seasonality of technology purchases and printing volume. These factors have historically resulted in lower revenues, operating profits and operating cash flows in the first and third quarters. Backlog Prior to 2021, backlog 1 had not been a meaningful indicator of future business prospects because a significant proportion of our revenue was fulfilled from existing inventories or within a short period of order signing. Accordingly, our level of backlog remained fairly consistent period to period. However, starting in 2021, and continuing throughout the first three quarters of 2022, we experienced an unprecedented level of supply chain disruption, in part due the effects of the COVID-19 pandemic, which only began to meaningfully ease during the fourth quarter of 2022. At December 31, 2022, our backlog of equipment and IT hardware remains elevated as compared to our historic levels and was $246 million. In 2023, we expect backlog to continue to decline through the first half of the year as supply chain conditions further normalize. _____________ (1) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT service offerings. Backlog at December 31, 2022 of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. Other Information Xerox Holdings Corporation Xerox Holdings is a New York corporation, organized in 2019 and our principal executive offices are located at 201 Merritt 7, P.O. Box 4505, Norwalk, Connecticut 06851-1056. Our telephone number is 203-849-5216. Xerox Corporation Xerox is a New York corporation, organized in 1906 and our principal executive offices are located at 201 Merritt 7, P.O. Box 4505, Norwalk, Connecticut 06851-1056. Our telephone number is 203-849-5216. Within the Investor Relations section of Xerox Holdings' website, you will find our combined Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports. We make these documents available timely after we have filed them with, or furnished them to, the U.S. Securities and Exchange Commission (the SEC). The SEC's Internet address is www.sec.gov. Our Internet address is www.xerox.com . The content of our website is not incorporated by reference in this combined Form 10-K unless expressly noted. © 2022 Xerox Corporation. All rights reserved. Xerox®, ConnectKey®, FreeFlow®, Gen3®, Xerox Nuvera®, Baltoro® and any other trademarks that are used here are trademarks of Xerox Corporation in the United States and/or other countries. Xerox 2022 Annual Report 10 Table of Contents Item 1A. Risk Factors You should carefully consider the following risk factors as well as the other information included, and risks described, in other sections of this combined Form 10-K, including under the headings “Cautionary Statement Regarding Forward-Looking Statements,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our Consolidated Financial Statements and the related notes thereto. Any of the following risks could materially and adversely affect our business, financial condition, or results of operations. The selected risks described below, however, are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, or results of operations. Summary of Risk Factors These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially from our expectations. Such factors include but are not limited to: • Global macroeconomic conditions, including inflation, currency volatility, slower growth or recession, delays or disruptions in the global supply chain, higher interest rates, and wars and other conflicts, including the current conflict between Russia and Ukraine, may adversely affect our business, financial condition, and results of operations; • If we fail to succeed in a competitive environment, including by developing new products and service offerings, simplifying our sales coverage, and preserving our existing products and market share as well as repositioning our business in the face of customer preference, technological, and other change, such as evolving return-to-office and hybrid working trends, we may be unable to retain current customers and gain new customers, and our revenues could decline; • Failure of our customers, vendors, and logistics partners to perform their contractual obligations to us may have an adverse impact on our revenue and profits; • We may be unable to attract, train, and retain key personnel, which could have a material adverse impact on our business; • Our profitability is dependent upon our ability to obtain adequate pricing for our products and services and to maintain or improve our cost structure; • Our level of indebtedness could adversely affect our financial condition and reduce our financial flexibility; • Funding requirements associated with our employee pension and retiree health benefit plans could adversely affect our financial condition; • We may suffer adverse impacts to our liquidity and results of operations if we are unable to borrow funds at attractive rates and access capital markets; • Our future revenues, costs, and results of operations could be significantly affected by changes in foreign currency exchange or interest rates, or if our hedging arrangements fail to effectively reduce our exposure to related risks; • We could incur significant fines or litigation expenses if our operations and products do not comply with applicable worldwide regulatory requirements, including environmental regulations and directives and anti-corruption laws; • Changes in foreign and domestic tax laws and other regulations, including trade protection measures such as tariffs and import/export restrictions and licensing requirements, could materially adversely affect our results of operations; • Breaches of our security systems due to cyber and malware attacks could expose us to liability, litigation, regulatory action, and damage our reputation; • Our multi-year contracts with governmental entities could be terminated prior to the end of the contract term, and civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law, which would adversely affect our results of operations and financial condition; Xerox 2022 Annual Report 11 Table of Contents • Failure to comply with U.S. and foreign laws relating to data privacy and personal information could subject us to legal actions and negatively impact our operations and reputation; • The outcome of litigation and regulatory proceedings to which we are a party could negatively impact our business; and • Laws, regulations, international agreements and other initiatives to limit greenhouse gas emissions or relating to climate change, as well as the physical effects of climate change, could adversely impact our business, results of operations, and financial condition. Company-Specific Risk Factors Our business, results of operations, cash flow, and financial condition are affected by global macroeconomic conditions. Global macroeconomic developments may affect our business and financial results in ways that are not presently known to us. Our business and financial performance depend on worldwide economic conditions and their effect on the demand for our products and services in the markets we serve. Prolonged or more severe economic weakness and uncertainty, including an economic slowdown or recession, uncertainty in markets throughout the world, and other adverse economic conditions, may among other things result in decreased demand for our products and services, logistical and inventory-related challenges, and increased difficulty with financial forecasting. Moreover, the global macroeconomy has a significant impact on interest rates, borrowing costs, and access to capital, which could increase or costs or access to liquidity, all of which could have an adverse impact on our business. We may experience foreign currency exchange and interest rate volatility in our business. Our future revenues, costs and results of operations could be significantly affected by changes in foreign currency exchange rates - particularly the Japanese yen, the euro, and the British pound. We use currency derivative contracts to hedge foreign currency-denominated assets, liabilities, and anticipated transactions. This practice is intended to mitigate or reduce volatility in the results of our foreign operations but does not completely eliminate it. We do not hedge the translation effect of international revenues and expenses that are denominated in currencies other than the U.S. dollar. Although the use of hedging transactions limits our downside risk, their use may also limit future revenues. The war in Ukraine, as well as the COVID-19 pandemic and its aftermath, have imposed operational and financial challenges and increased global economic uncertainty. With respect to Ukraine, we halted shipments to Russia and Belarus when sanctions were imposed in the first quarter of 2022. The Eurasian region, of which Ukraine is a part, in total comprised a low single digit percentage of our revenue and operating profits in 2021. As of December 31, 2022, the net assets of our Eurasian operations were approximately $15 million (approximately $25 million of total assets) and comprised approximately 0.5% of consolidated net assets. A large majority of our revenues, profits, and net assets in Eurasia were attributable to Russia. There can be no assurance that we will resume shipments to Russia and Belarus or that we will continue our operations in Eurasia, which could adversely impact our cash flows and net assets. The global supply chain has experienced and may continue to experience pronounced disruptions impacting service providers, logistics, and the flow, cost, and availability of supplies and products. Our business depends on its timely supply of equipment, services, and related products to meet the technical and volume requirements of our customers. Shortages of parts, materials, and services needed to manufacture our products, as well as delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, our suppliers’ ability to meet our demand requirements, and in turn our ability to meet our customers’ needs. Moreover, supply chain constraints may continue to increase costs of logistics and parts for our products, which costs we may not be able to pass on to our customers. We may experience further disruptions to our manufacturing operations, supply chain and/or distribution channels in the future, and these disruptions may be prolonged. If we fail to successfully develop new and existing products, technologies, and service offerings, we may be unable to retain current customers and gain new customers and our revenues would decline. We operate in an environment of significant competition, driven by rapid technological developments, changes in industry standards, and demands of customers to become more efficient. Our primary competitors are exerting increased competitive pressure in targeted areas and are entering new markets, and our emerging competitors are introducing new technologies and business models. Our competitors include large international companies, some of which have significant financial resources and compete with us globally to provide document processing products and services in each of the markets we serve. We compete primarily on the basis of technology, performance, price, quality, reliability, brand, distribution, and customer service and support. Our future success is largely dependent Xerox 2022 Annual Report 12 Table of Contents upon our ability to compete in the markets we currently serve, to promptly and effectively react to changing technologies and customer expectations, and to expand into additional market segments. To remain competitive, we must develop new services, applications and products and periodically enhance our existing offerings. If we are unable to compete successfully through existing new sales channels, including new partnerships, we could lose market share and important customers to our competitors, and such loss could materially adversely affect our results of operations and financial condition. The process of developing new high-technology products, software, services, and solutions and enhancing existing hardware and software products, services, and solutions is complex, costly, and uncertain, and any failure by us to accurately anticipate customers' changing needs and emerging technological trends could significantly harm our market share, results of operations, and financial condition. These changing market trends are also opening up new, adjacent, and ancillary markets for our products, services, and software, which requires us to accurately anticipate our customers' changing needs and emerging technological trends. Our business model requires us to commit resources before knowing whether our initiatives will result in products that are commercially successful and generate the revenues required to provide desired returns. In addition, our sales strategy requires us to simplify our coverage model and expand into adjacent markets with new products, services, and technology such as AI Workflow Assistants for Knowledge Workers, IT Services, and other workplace productivity solutions. Our ability to develop or acquire new products, services, and technologies for these adjacent markets through new or existing partners may require the investment of significant resources but may not lead to the successful development of new technologies, products, or services. We expect that revenue growth can be improved through improving the software features of our multifunction devices and leveraging a strong base in managed print services with new digital, analytics, and security features. Our digital services strategy involves developing and deploying essential products and services that address the productivity challenges of a hybrid workplace and distributed workforce. We also expect to extend our IT and digital services presence in the mid- market 1 through organic and inorganic investments. Our future success depends on our ability to make the investments and commit the necessary resources to execute on our business strategy in this highly competitive market. Despite this investment, the process of developing new products, services, and technologies is inherently complex and uncertain, and there are a number of risks to which we are subject, including the risk that our products, services, or technologies will not successfully satisfy our customers’ needs, conform to evolving preferences or technologies, or gain market acceptance, which could adversely affect our results of operations and financial condition. Our business and financial performance could suffer if we do not manage the risks associated with our services businesses properly. The success of our services business (such as our managed print services, digital services, and other workforce and IT Services solutions) depends to a significant degree on attracting, retaining, and maintaining or increasing the level of revenues from our customers. Our standard services agreements are generally renewable at a customer’s option and/or subject to cancellation rights, with or without penalties for early termination. We may not be able to retain or renew services contracts with our customers, or our customers may reduce the scope of the services they contract for. Factors that may influence contract termination, non-renewal, or reduction include business downturns, dissatisfaction with our services or products, our retirement or lack of support for our services, our customers selecting alternative technologies, and the cost of our services as compared to our competitors. We may not be able to replace the revenue and earnings from lost customers or reductions in services. Although our services agreements may include penalties for early termination, these penalties may not fully cover our investments in these businesses. In addition, the pricing and other terms of certain services agreements require us to make estimates and assumptions at the time we enter into these contracts that could differ from actual results. Any increased or unexpected costs or unanticipated delays in connection with the performance of these contracts, which may increase as services become more customized, could make these agreements less profitable or unprofitable. As a result, we may not generate the revenues, profits or cash flows we may have anticipated from our services business within the expected timelines, if at all. Our profitability is dependent upon our ability to obtain adequate pricing for our products and services and to improve our cost structure. Our success depends on our ability to obtain adequate pricing for our products and services that will provide a reasonable return to our shareholders. Changes in the market, including inflation, foreign currency exchange movements, and global supply chain disruptions due to the COVID-19 pandemic, may exert pressure on the Xerox 2022 Annual Report 13 Table of Contents margins we obtain for our products and services. Cost-reduction and pricing actions we undertake may not prove sufficient to offset the adverse impacts of such market conditions. Our ability to sustain and improve profit margins is dependent on a number of factors, including our ability to continue to improve the cost efficiency of our operations, our ability to sustain pricing increases across our portfolio of products and services in a competitive environment, the additional costs imposed by ongoing supply chain disruptions, the proportion of high-end, mid and entry-level equipment sales, and IT services equipment (product and services mix), the trend in our post-sale revenue growth and our ability to successfully complete information technology initiatives. If any of these factors adversely materialize or if we are unable to achieve and maintain productivity improvements through design efficiency, supplier and manufacturing cost improvements and information technology initiatives, our ability to offset labor cost inflation, potential materials cost increases and competitive price pressures would be impaired, all of which could materially adversely affect our results of operations and financial condition. We continually review our operations with a view towards reducing our cost structure, including reducing our employee base, exiting certain businesses and/or geographies, seeking more favorable terms in our current and future supply contracts, improving process and system efficiencies, and outsourcing some internal functions. In addition, substantial supply chain disruption caused by the COVID-19 pandemic has increased the cost of materials and components required to manufacture our products, transportation of components and products, and labor associated with all steps of the supply chain. The extent of the resultant impact on our cost structure will depend on future developments, many of which are out of our control. If we are unable to control the cost of and obtain adequate pricing for our products and services or if our cost-cutting efforts negatively impact our business, it could materially adversely affect our results of operations and financial condition. We have outsourced a significant portion of our manufacturing operations and increasingly rely on third-party manufacturers, subcontractors, and suppliers. We have outsourced a significant portion of our manufacturing operations to third parties, such as FUJIFILM Business Innovation Corp. (formerly Fuji Xerox Co., Ltd.) In the normal course of business, we regularly reevaluate our relationships with these third parties and have discussions with other third parties in order to maintain competitive tension and seek more optimal terms. There is no guarantee that such discussions will lead to better arrangements, and our existing suppliers could react negatively to any alternative arrangements we seek to negotiate with other third parties. In addition, we could incur significant costs in order to transition from one third-party manufacturing partner to another. We face the risk that our third-party manufacturing partners may not be able to develop or manufacture products satisfying all of our requirements, quickly respond to changes in customer demand, and obtain supplies and materials necessary for the manufacturing process. In addition, in the normal course of business and exacerbated by supply chain disruptions resulting from the COVID-19 pandemic, our partners may experience labor shortages and/or disruptions, transportation cost increases, materials cost increases, and/or manufacturing cost increases that could lead to higher prices for our products and/or lower reliability of our products. Further, since certain third parties to whom we have outsourced manufacturing are also our competitors in the print market, or may become competitors in the future, we could experience product disruption as a result of competitive pressures that increase the cost of the products supplied. If any of these risks were to be realized, and similar third-party manufacturing relationships could not be established and/or successfully transitioned to, we could experience supply interruptions or increases in costs that might result in our being unable to meet customer demand for our products, damage our relationships with our customers and reduce our market share, all of which could materially adversely affect our results of operations and financial condition. In addition, in our services business, we may partner with other parties, including software and hardware vendors, to provide the complex solutions required by our customers. Therefore, our ability to deliver the solutions and provide the services required by our customers is dependent on both our and our partners' ability to meet our customers' requirements and schedules. If we or our partners fail to deliver services or products as required and on time, our ability to complete the contract may be adversely affected, which may have an adverse impact on our revenue and profits. We may be unable to attract and retain key personnel while our business model undergoes significant changes. Xerox is undergoing significant changes in our business model and, accordingly, current and prospective employees may experience uncertainty about their future and may have other opportunities available to them given the Xerox 2022 Annual Report 14 Table of Contents competitive labor market. Our success is dependent, among other things, on our ability to attract, develop and retain highly qualified senior management and other key employees. Competition for key personnel is intense, and our ability to attract and retain key personnel is dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent. Our ability to do so also depends on how well we maintain a strong corporate culture and corporate brand that is attractive to employees. Hiring and training of new employees has been adversely impacted by global economic uncertainty, the tight labor market caused by low unemployment, and changes to office environments and workplace trends precipitated by COVID-19. The departure of existing key employees or the failure of potential key employees to accept employment with Xerox, despite our recruiting efforts, could have a material adverse impact on our business, financial condition, and operating results. We may not achieve the expected benefits of our restructuring and transformation plans and such plans may adversely affect our business. We engage in restructuring actions, as well as other transformation efforts, in order to reduce our cost structure, manage cash flow, achieve operating efficiencies, and align our business to fit with our plan. In addition, these actions are expected to simplify our organizational structure, upgrade our IT infrastructure and redesign our business processes. Additionally, as a result of our restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Transformation and restructuring may require a significant amount of time and focus from both management and other employees, which may divert attention from operating and growing our business. The wide-ranging nature and number of actions underway at any point in time may become difficult for the organization to satisfactorily manage and implement, as these actions may have impacts across the organization, processes and systems that are not apparent by individual project but may have unintended consequences in the aggregate. Furthermore, the expected savings associated with these initiatives may be offset to some extent by business disruption during the implementation phase as well as investments in new processes and systems until such time as the initiatives are fully implemented and stabilized. If we fail to achieve some or all of the expected benefits of restructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. As part of our efforts to streamline operations and reduce costs, we have offshored and outsourced certain of our operations, services and other functions through arrangements with third parties (e.g., TCS and HCL) and we will continue to evaluate additional offshoring or outsourcing possibilities in the future. If our outsourcing partners fail to perform their obligations in a timely manner or at satisfactory quality levels or if we are unable to attract or retain sufficient personnel with the necessary skill sets to meet our offshoring or outsourcing needs, the quality of our services, products, and operations, as well as our reputation, could suffer. In addition, much of our offshoring takes place in developing countries and as a result may also be subject to geopolitical uncertainty. Diminished service quality from offshoring and outsourcing could have an adverse material impact to our operating results due to service interruptions and negative customer reactions. Our government contracts are subject to termination rights, audits, and investigations, which, if exercised, could negatively impact our reputation and reduce our ability to compete for new contracts. A significant portion of our revenue is derived from contracts with U.S. federal, state and local governments and their agencies, as well as international governments and their agencies. Government entities typically finance projects through appropriated funds. While these projects are often planned and executed as multi-year projects, government entities usually reserve the right to change the scope of or terminate these projects for lack of approved funding and/or at their convenience. Changes in government or political developments, including budget deficits, shortfalls or uncertainties, government spending reductions (e.g., Congressional sequestration of funds under the Budget Control Act of 2011), government shutdowns, or other debt or funding constraints, could result in lower governmental sales and in our projects being reduced in price or scope or terminated altogether, which also could limit our recovery of incurred costs, reimbursable expenses and profits on work completed prior to the termination. Additionally, government agencies routinely audit government contracts. If the government finds that we charged them inappropriate pricing, we could be required to refund or reimburse the government, and there is the possibility of paying fines and penalties. If the government discovers improper or illegal activities or contractual non-compliance in the course of audits or investigations, we may be subject to various civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the government. Any resulting penalties or sanctions could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, the negative publicity that arises from findings in such audits or investigations could have an adverse effect on our Xerox 2022 Annual Report 15 Table of Contents reputation and reduce our ability to compete for new contracts and could also have a material adverse effect on our business, financial condition, results of operations and cash flow. Our ability to fund our customer financing activities at economically competitive levels depends on our ability to borrow and the cost of borrowing in the credit markets. The long-term viability and profitability of our financing business is dependent, in part, on our ability to borrow and the cost of borrowing in the credit markets. This ability and cost, in turn, is dependent on (i) our credit rating, which is currently non-investment grade according to credit rating agency assessments that are subject to periodic reviews and can change following a review and (ii) credit market volatility, which has increased as a result of the COVID-19 pandemic, the war in Ukraine, and other global macroeconomic developments. Enhanced credit market volatility has, among other things, increased the cost of borrowing and reduced access to debt and equity markets. We primarily fund our financing business through a combination of cash generated from operations, cash on hand, capital market offerings, and sales and securitizations of finance receivables. Our ability to continue to offer customer financing and be successful in the placement of equipment, software, and IT services with customers seeking to finance those transactions is largely dependent on our ability to obtain funding at a reasonable cost. If our credit rating changes, the credit market becomes more volatile, or other events occur that reduce the demand for, or our ability to provide at attractive rates, customer financing, it may adversely impact our business and results of operations. Our level of indebtedness could adversely affect our financial condition and reduce our financial flexibility. As of December 31, 2022, our total debt was $3.7 billion, which primarily consisted of $2.7 billion of Senior Unsecured Debt and $1.0 billion of Secured Borrowings. In the future, we may incur additional indebtedness for organic or inorganic growth or otherwise. Our level of indebtedness could affect our flexibility and operations in several ways, including the following: • a significant portion of our cash flows could be used to service our indebtedness; • the covenants contained in the agreements governing our outstanding indebtedness may limit our ability to borrow additional funds, dispose of assets, pay dividends, and make certain investments; • our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry; • a high level of debt would increase our vulnerability to general adverse economic and industry conditions; • a high level of debt may place us at a competitive disadvantage compared to our competitors that may be less leveraged and therefore may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; and • a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, or general corporate or other purposes. In addition, revolving borrowings under our senior secured revolving credit facility bear, and potentially other credit facilities we or our subsidiaries may enter into in the future will bear, interest at variable rates. Increases in market interest rates could lead to higher debt service requirements associated with our variable‑rate borrowings, if any. The effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings on our Credit Facility, refinancing of our existing borrowings, or the issuance of new debt. In addition to our debt service obligations, our operations require substantial expenditures on a continuing basis. Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non‑capital expenditures necessary to maintain the condition of our operating assets and properties, as well as to provide capacity for the growth of our business, depend on our financial and operating performance. We may not be able to generate sufficient cash flows to pay the interest on our debt, and future working capital borrowings or debt or equity financing may not be available to pay or refinance such debt at attractive rates or at all. We need to maintain adequate liquidity in order to meet our operating cash flow requirements, repay maturing debt and meet other financial obligations, such as payment of dividends to the extent declared by our Board of Directors. If we fail to comply with the covenants contained in our various debt agreements, it may adversely affect our liquidity, results of operations, and financial condition. Our liquidity is a function of our cash on-hand and our ability to successfully generate cash flows from a combination of efficient operations and continuing operating improvements, access to capital markets and funding from third parties, which includes securitizations and sales of our finance receivables. We believe our liquidity (including operating and other cash flows that we expect to generate) will be sufficient to meet operating requirements as they Xerox 2022 Annual Report 16 Table of Contents arise; however, our ability to maintain sufficient liquidity going forward will be subject to the general liquidity of and on-going changes in the credit markets as well as general economic, financial, competitive, legislative, regulatory, and other market factors that are beyond our control. Our $250 million Credit Facility contains quarterly financial maintenance covenants (a maximum total net leverage ratio and a minimum interest coverage ratio). Certain of the financial covenants contained in the Credit Facility also apply to some of our other debt agreements. The Credit Facility is supported by guarantees from us and the subsidiary guarantors, and by security interests in substantially all of our U.S. assets, subject to certain exceptions. The Credit Facility also imposes significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our best interest, including restrictions on our ability to: pay dividends, make other distributions in respect of, or repurchase or redeem capital stock; incur additional indebtedness and guarantee indebtedness; prepay, redeem, or repurchase certain debt; make loans, investments, and other restricted payments; sell or otherwise dispose of assets; incur liens; enter into agreements restricting our subsidiaries’ ability to pay dividends; consolidate, merge, or sell all or substantially all of our assets; make strategic acquisitions or investments; or enter into joint ventures. Failure to comply with material provisions or covenants in the Credit Facility or our other debt agreements, including our secured financing agreements in connection with our FITTLE securitization transactions and the indentures governing our outstanding notes, could have a material adverse effect on our liquidity, results of operations, and financial condition. A default under certain of our debt agreements may allow our creditors to accelerate the applicable obligations and result in the acceleration of other obligations to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Facility would permit the lenders thereunder to terminate all commitments to extend credit. Furthermore, if we were unable to repay the amounts due and payable under our Credit Facility, the lenders could proceed against the collateral granted to them to secure the obligations under the Credit Facility. If any of our creditors accelerate the repayment of applicable indebtedness, we and our subsidiaries may not have sufficient assets to repay that indebtedness. The Credit Facility terminates in July 2024. We may seek to renegotiate or replace the Credit Facility, or we may determine not to replace the Credit Facility. We may not be able to continue to incur revolving or term debt due to future market conditions or for other reasons as our existing indebtedness matures or otherwise. Our credit rating or macroeconomic conditions, including the interest rate environment, could impact our ability to continue to enter into receivables financing transactions at attractive prices or at all. Any new indebtedness, if available to us at all, may result in higher borrowing costs and may contain covenants that would place greater restrictions on how we can run our businesses and/or limit our ability to take certain actions that might otherwise be beneficial to the Company and/or its shareholders, customers, suppliers, partners, and/or lenders. Our financial condition and results of operations could be adversely affected by employee benefit-related funding requirements. We sponsor several defined benefit pension and retiree-health benefit plans throughout the world. We are required to make contributions to these plans to comply with minimum funding requirements imposed by laws governing these employee benefit plans. Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain unfunded (by design) or are under-funded. The projected benefit obligations for these benefit plans at December 31, 2022 exceeded the value of the assets of those plans by approximately $1.1 billion. The current unfunded or underfunded status of these plans is a significant factor in determining the ongoing future contributions we will be required to make to these plans. Accordingly, we expect to have additional funding requirements in future years, and we may make additional, voluntary contributions to the plans. Depending on our cash position at the time, any such funding or contributions to our defined benefit plans could impact our operating flexibility and financial position, including adversely affecting our cash flow for the quarter in which such funding or contributions are made. Weak economic conditions, including the negative impacts from the COVID-19 pandemic, and related under-performance of asset markets could also lead to increases in our funding requirements. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brand. In developing new technologies and products and maintaining our product portfolio, we rely upon patent, copyright, trademark and trade secret laws in the United States and similar laws in other countries, and a combination of confidentiality, license, assignment and other agreements with our employees, customers, suppliers and other parties, to establish and maintain our intellectual property rights in technology and products used in our operations. However, various events outside of our control may pose a threat to our intellectual property rights, as well as to our Xerox 2022 Annual Report 17 Table of Contents products and services. Effective protection of intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. Any action against our Company relating to our intellectual property rights, regardless of the outcome, could generate substantial costs and require significant involvement from our management team, which could adversely impact our results of operations and financial condition. Negative publicity generated from intellectual property disputes could also harm our reputation and brand image. The efforts we have taken to protect our intellectual property rights may not be sufficient or effective, or existing agreements may be breached. It is possible that our intellectual property rights could be infringed, misappropriated, challenged, invalidated, or circumvented, which could allow others to use our intellectual property to our competitive detriment. Further, we routinely apply for patents to protect innovative ideas in our technology, but we may not always be successful in obtaining patent grants from these applications. We also pursue registration of copyrights, trademarks, and domain names in numerous jurisdictions, but doing so may not always be successful or cost-effective. The laws of certain countries may not protect our proprietary rights to the same extent as the laws of the United States and we may be unable to protect our proprietary technology adequately against unauthorized third-party copying or use, which could adversely affect our competitive position. In addition, some of our products rely on technologies developed by third parties. We may not be able to obtain or to continue to obtain licenses and technologies from these third parties at all or on reasonable terms, or such third parties may demand cross-licenses to our intellectual property. If we fail to accurately anticipate and meet our customers' needs through the development of new products, technologies, and service offerings or if we fail to adequately protect our intellectual property rights, we could lose market share and customers to our competitors, which could materially adversely affect our results of operations and financial condition. Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, results of operations, financial condition, or stock price. There has been an increased focus from regulators and stakeholders on environmental, social, and governance (ESG) matters, including greenhouse gas emissions and climate-related risks; diversity, equity, and inclusion; responsible sourcing and supply chain; human rights and social responsibility; and corporate governance and oversight. In the European Union, the Corporate Sustainability Reporting Directive (CSRD) expands the scope of companies required to publicly report ESG-related information and defines the ESG-related information that companies are required to report in accordance with European Sustainability Reporting Standards (ESRS). Other mandatory ESG -related disclosures include the Conflict Minerals Reporting in U.S., Transparency in Supply Chain Act in California, the Modern Slavery Act in the UK, and the Law on Child Labour Due Diligence in The Netherlands. There are also a number of voluntary reporting schemes that provide a framework to report ESG-related information. In 2021 Xerox voluntarily announced its 2040 net zero goal to meet growing expectations of companies to reduce GHG emissions. Xerox recognizes these goals are subject to risks and uncertainties depending on global climate change, economic conditions, and other factors outside of our control. Xerox also recognizes transitional risks associated with changes in voluntary standards and customer preferences in connection with concerns about climate change. If Xerox is unable to offer products that are as energy efficient as our competitors, there is a risk of reduced demand for our products and reduced market share. Inability, or a perception of inability, to achieve progress toward our environmental goals could adversely impact our business or damage our reputation. Given our commitment to ESG, we actively engage external and internal stakeholders to manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in the future. These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Evolving stakeholder expectations and our efforts and ability to manage these issues, provide updates on them, and accomplish our goals, commitments, and targets present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have a material adverse impact on our business, including on our reputation and stock price. Further, there is uncertainty around the accounting standards, corporate social responsibility, and climate-related disclosures associated with emerging laws and reporting requirements and the related costs to comply with the emerging regulations. Our failure or perceived failure to achieve our ESG goals, maintain ESG practices, or comply with emerging ESG regulations that meet evolving regulatory or stakeholder expectations could harm our reputation, adversely impact our ability to attract and retain customers and talent, and expose us to increased scrutiny from the investment community and enforcement authorities. Increased focus and activism on ESG topics may hinder our access to Xerox 2022 Annual Report 18 Table of Contents capital, as investors may reconsider their capital investment as a result of their assessment of our ESG practices. Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction with regards to ESG-related issues. Damage to our reputation and loss of brand equity may cause customers and consumers to choose to stop purchasing our products and services, purchase products and services from another company or a competitor, or refuse to renew existing contracts, ultimately reducing demand for our products and services and thus have an adverse effect on our future financial results and stock price, as well as require additional resources to rebuild our reputation. Regulatory Risk Factors The international nature of our business subjects us to a number of risks, including foreign exchange and interest rate risk and unfavorable political, regulatory, and tax conditions in foreign countries. A significant portion of our revenue is generated from operations outside of the United States, and we manufacture or acquire many of our products and/or their components outside the United States. As a result of the global nature of our operations, our business performance and results of operations may be adversely affected by a number of factors, including: • uncertain global economic and political developments that may impact business conditions and demands; • global trade issues including changes in, and uncertainties with respect to, trade and export regulatory requirements, trade policies and sanctions restrictions, tariffs, and international trade disputes; • evolving positions taken by governmental agencies regarding possible national economic and/or security issues posed by the development, sale, or export of certain products and technologies; • political instability, natural disasters, regional or global health epidemics, social unrest, terrorism, acts of war or other geopolitical turmoil; • variations among, and weakness and/or changes in, local, regional, national or international laws and regulations, including contract, intellectual property, cybersecurity, data privacy, labor, tax, and import/export laws, and the interpretation and application of such laws and regulations; • challenges to effective management of a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues across multiple countries around the world; • impacts of climate change on our operations and those of our customers and suppliers; • challenges in hiring, retention, and integration of workers in multiple countries around the world; and • the increasing need for a mobile workforce to work in or travel to different regions. If our future revenues, costs, and results of operations are significantly affected by economic or political conditions abroad and we are unable to effectively hedge these risks, they could materially adversely affect our results of operations and financial condition. We operate globally and changes in tax laws could adversely affect our results. We monitor U.S. and non-U.S. tax law changes that may adversely impact our overall tax costs. From time to time, proposals have been made and/or legislation has been introduced to change tax rates, as well as related tax laws, regulations or interpretations thereof, by various jurisdictions, or to limit tax treaty benefits which, if enacted or implemented could materially increase our tax costs and/or our effective tax rate and could have a material adverse impact on our financial condition and results of operations. In the U.S., we continue to monitor the Inflation Reduction Act of 2022 enacted on August 16, 2022, including its new corporate alternative minimum tax and related regulatory developments to evaluate their potential impact on our business, tax rate and financial results. The international tax environment continues to change as a result of both coordinated actions by governments and unilateral measures designed by individual countries, both intended to tackle concerns over base erosion and profit shifting (BEPS) and perceived international tax avoidance techniques. The Organization for Economic Cooperation and Development (OECD) is issuing guidelines that are different, in some respects, than long-standing international tax principles. This includes the development of an inclusive framework that is based on a two-pillar approach. In December 2022, the EU Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a global minimum tax rate of at least 15%. As countries unilaterally amend their tax laws to adopt certain parts of the OECD guidelines, this may increase tax uncertainty and may adversely impact our income taxes. Taxation at the country, state, provincial or municipal level Xerox 2022 Annual Report 19 Table of Contents also may be subject to review and potential override by regional, federal, national, or other government authorities. In addition, we are subject to the continuous examination of our income tax returns by the United States Internal Revenue Service and other tax authorities around the world. We currently are, and expect to continue to be, subject to numerous federal, state, local and foreign taxes relating to income, sales & use, value-added (VAT), and other tax liabilities. While we have established reserves based on assumptions and estimates that we believe are reasonably sufficient to cover such liabilities, any adverse outcome of a review or audit, or changes in tax laws, could have an adverse impact on our financial position and results of operations if the reserves prove to be insufficient. We are subject to breaches of our security systems, cyber-attacks, and service interruptions, which could expose us to liability, litigation, regulatory action and damage our reputation. We have implemented security systems with the intent of maintaining and protecting our own, and our customers', clients' and suppliers' confidential information, including information related to identifiable individuals, against unauthorized access or disclosure. We have programs, processes, and technologies in place to attempt to prevent, detect, contain, respond to, and mitigate security-related threats and potential incidents. We undertake ongoing improvements to our systems, connected devices, and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards. Despite such efforts, we may be subject to breaches of our security systems resulting in unauthorized access to our facilities or information systems and the information we are trying to protect. Moreover, the risk of such attacks includes attempted breaches not only of our systems, but also those of our customers, clients and suppliers. The techniques used to obtain unauthorized access are constantly changing, are becoming increasingly more sophisticated and often are not recognized until after an exploitation of information has occurred. Therefore, we may be unable to anticipate these techniques or implement sufficient preventative measures. Threat actors regularly attempt and, from time to time, have been successful in breaching our security systems, to gain access to our information and infrastructure through various techniques, including phishing, ransomware and other targeted attacks. The Company has retained and, in the future, may retain third-party experts to assist with the containment of and response to security incidents and, in coordination with law enforcement, with the investigation of such incidents. The Company has incurred, and expects to continue to incur, costs, including to retain such third-party experts, in connection with such incidents. We may also find it necessary to make significant further investments to protect this information and our infrastructure. These investments, and costs we incur in connection with security incidents, could be material. While we do not believe cybersecurity incidents have resulted in any material impact on our business, operations or financial results or on our ability to service our customers or run our business, past and future incidents resulting in unauthorized access to our facilities or information systems, or those of our suppliers, or accidental loss or disclosure of proprietary or confidential information about us, our clients or our customers could result in, among other things, a total shutdown of our systems that would disrupt our ability to conduct business or pay vendors and employees, violations of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of investor confidence in our security measures. Additional impacts from cybersecurity incidents could include remediation costs to our customers or business partners, such as liability for stolen assets or information, repairs of system damage, and incentives for continued business; increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel and security technologies, training employees, and engaging third-party experts and consultants; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to the Company’s competitiveness, stock price, and long-term shareholder value. In addition, cybersecurity risks and data security incidents could lead to unfavorable publicity, governmental inquiry and oversight, regulatory actions by federal, state and non-U.S. governmental authorities, litigation by affected parties and possible financial obligations for damages related to the theft or misuse of such information, any of which could have a material adverse effect on our profitability and cash flow. We are subject to laws of the United States and foreign jurisdictions relating to individually identifiable information, and failure to comply with those laws could subject us to legal actions and negatively impact our operations. We receive, process, transmit and store information relating to identifiable individuals, both in our role as a technology provider and as an employer. As a result, we are subject to numerous laws and regulations in the United States (both federal and state) and foreign jurisdiction which are designed to protect individually identifiable information, and which are often subject to frequent changes and revision. The global regulatory landscape regarding the protection of personal information is evolving, and U.S. (federal and state) and foreign governments have enacted, and are considering further enacting, legislation related to privacy Xerox 2022 Annual Report 20 Table of Contents and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area. For example, the State of California adopted two laws broadly regulating businesses’ processing of personal information, the California Consumer Privacy Act of 2018 (CCPA), and the California Privacy Rights Act (CPRA). The CCPA, which went into effect January 1, 2020, defines “personal information” broadly enough to include online identifiers provided by individuals’ devices, applications, and protocols (such as IP addresses, mobile application identifiers and unique cookie identifiers) and individuals’ location data. The CCPA establishes a new privacy framework for covered businesses by, among other requirements, establishing new data privacy rights for consumers in California (including rights to deletion of and access to personal information), imposing special rules on the collection of consumer data from minors, creating new notice obligations and new limits on the “sale” of personal information, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. The CCPA also offers the possibility for a consumer to recover statutory damages for certain violations and could expose our company to additional risks of individual and class-action lawsuits even though the statute’s private right of action is limited in scope. The CPRA, which took effect on January 1, 2023, expands upon the CCPA and imposes additional notice, access, objection, limitation of use, nondiscrimination, and other obligations and restrictions with regards to the collection, use, storage and other aspects of certain data. Additionally, Virginia, Colorado, Connecticut, and Utah have each enacted their own data privacy-related laws. Like the CPRA, the Virginia Consumer Data Protection Act (VCDPA) went into effect on January 1, 2023. The Colorado Privacy Act (CPA) and Connecticut Data Privacy Act (CTDPA) both take effect on July 1, 2023, and the Utah Consumer Privacy Act (UCPA) takes effect on December 31, 2023. The VCDPA, CPA, CTDPA, and UCPA all grant individuals a range of new privacy rights and protections relating to their personal data, a concept defined broadly in each law. Further, at least twelve other states have formally introduced similar proposed statutes for legislative consideration. Each of these new laws may create additional compliance costs for us and our industry partners, though efforts taken toward compliance with other privacy laws will likely be applicable to many elements of the newly enacted state statutes. Although we have attempted to mitigate certain risks posed by these laws, we cannot predict with certainty the effect of these laws and their implementing regulations on our business. Laws governing personal data in Europe may have a similar effect on our Company. For example, the General Data Protection Regulation (GDPR) that came into force in the European Union in May 2018 enhances data protection obligations for controllers of such data and for service providers processing the data. It also provides certain rights, such as access and deletion, to the individuals about whom the personal data relates. Non-compliance with the GDPR can trigger steep fines of up to the greater of €20 million or 4% of total worldwide annual revenue. Continuing to maintain compliance with the requirements of the GDPR and other similar foreign laws, including monitoring and adjusting to rulings and interpretations that affect our approach to compliance, requires significant time, resources and expense, as will the effort to monitor whether additional changes to our business practices and our backend configuration are needed, all of which may increase operating costs, or limit our ability to operate or expand our business. We are or may become subject to similar laws related to data protection in other jurisdictions, such as the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada, and the General Data Protection Law (LGDP) in Brazil. These laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or features of our systems and services. If so, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited. Changes to existing laws, introduction of new laws in this area, or failure to comply with existing laws that are applicable to us may subject us to, among other things, additional costs or changes to our business practices, liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to obtain and process information and allegations by our customers and clients that we have not performed our contractual obligations, any of which may have a material adverse effect on our profitability and cash flow. Tariffs or other restrictions on foreign imports could negatively impact our financial performance. Our business, results of operations and financial condition may be negatively impacted by a potential increase in the cost of our products as a result of new or incremental trade protection measures, such as increased import tariffs or import or export restrictions; restrictions put in place as a result of the COVID-19 pandemic; or, the revocation or material modification of trade agreements. Changes in U.S. and international trade policy and resultant retaliatory countermeasures, including imposition of increased tariffs, quotas, or duties by affected countries and trading partners are difficult to predict and may adversely affect our business. The U.S. government has and could in the future impose trade barriers including tariffs, quotas, duties, or other restrictions on foreign imports, or restrictions Xerox 2022 Annual Report 21 Table of Contents on U.S. exports. The implementation of a border tax, tariff or higher customs duties on our products manufactured abroad or components that we import into the U.S., or any potential corresponding actions by other countries in which we do business, could negatively impact our financial performance. Existing or future laws, regulations, court orders or other public- or private-sector initiatives to limit greenhouse gas emissions or relating to climate change may reduce demand for our products and services, and the physical effects of climate change could damage our assets or facilities, adversely impacting our business, results of operations, and financial condition. Continuing political and social attention to the issue of climate change has led to existing and proposed international agreements as well as national, state, local, and foreign legislative, regulatory and procurement initiatives directed at requiring companies to disclose and limit greenhouse gas emissions in the countries, states, and territories in which we operate. Laws, regulatory actions, international agreements, and other initiatives to address concerns about climate change and greenhouse gas emissions could negatively impact our business, results of operations, and financial condition, including, among other things, by limiting the availability of our products, increasing the cost to obtain or sell those products, and increasing our reporting and disclosure expenses. For example, on March 21, 2022, the SEC released its Proposed Rules to Enhance and Standardize Climate-Related Disclosures for Investors, which, if adopted as a final rule, would require companies to include certain climate-related disclosures in their registration statements and periodic reports, including disclosure of their direct and indirect greenhouse gas emissions. In Europe, the European Union Corporate Sustainability Reporting Directive, which went into effect on January 5, 2023, requires companies to report on the impact of corporate activities on the environment and society and requires the audit of such reported information. Though the ultimate impact of these and similar initiatives is not yet fully known, compliance with such proposed or newly adopted disclosure initiatives may incur significant costs. Further, the implementation of certain international agreements, including the Paris Agreement, which the United States rejoined on February 19, 2021, the Europe Climate Law, and other existing or future regulatory mandates, may adversely affect the demand for our products and services, impose taxes on us or our customers, require us or our customers to reduce greenhouse gas emissions from our products or operations, or accelerate the obsolescence of our products or services. Given an increased focus by our customers, investors, and other stakeholders on climate change and sustainability, Xerox also recognizes transitional risks associated with changes in voluntary standards and customer preferences in connection with such concerns. If Xerox is unable to offer products that are as energy efficient as our competitors, there is a risk of reduced demand for our products and reduced market share. Inability, or a perception of inability, to achieve progress toward our environmental goals could adversely impact our business or damage our reputation, adversely impact our ability to attract and retain customers and talent, incur action by activist shareholders, and expose us to increased scrutiny from the investment community and enforcement authorities. Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on climate change-related issues. Damage to our reputation may reduce demand for our products and services and thus have an adverse effect on our future financial results and our stock price, as well as require additional resources to rebuild our reputation. Like all organizations, we and our partners and suppliers also may be subject to physical risks associated with climate change, such as increased severity and frequency of extreme weather events and more frequent short-term business disruptions as a result of severe weather such as flooding, storms, droughts, fires, snowstorms and other climatic events, which could impair our ability to effectively deliver products and services to our customers or to keep our operating costs aligned with expectations or cause destruction to our assets or facilities. While we carry insurance coverage standard within our industry to protect us against many of these risks, the potential physical effects of climate change are uncertain, and we may not carry adequate coverage to protect all of our assets or facilities from climate-related events. If any of these risks were realized, we could experience interruptions in supply or increases in costs that might result in our being unable to meet customer demand for our products and services, damage our relationships with our customers and reduce our market share, all of which could adversely affect our results of operations and financial condition. Our operations and our products are subject to environmental regulations in each of the jurisdictions in which we conduct our business and sell our products. Various countries and jurisdictions have adopted, or are expected to adopt, restrictions on the types and amounts of chemicals that may be present in electronic equipment or other items that we use or sell. Ongoing research and review of chemicals used in our products could lead to further restriction of common chemicals in office equipment and supplies. In the European Union, we are subject to “REACH” Regulation (Registration, Evaluation, Authorization and Restriction of Chemicals), a broad initiative that Xerox 2022 Annual Report 22 Table of Contents requires parties throughout the supply chain to register, assess and disclose information regarding many chemicals in their products. Depending on the types, applications, forms and uses of chemical substances in various products, REACH and similar regulatory programs in other jurisdictions could lead to restrictions and/or bans on certain chemical usage. In the United States, the Toxics Substances Control Act (TSCA) was revised in 2016, which authorizes the U.S. Environmental Protection Agency to regulate and screen all chemicals produced or imported into the United States. Xerox continues its efforts toward monitoring and evaluating the applicability of these and numerous other regulatory initiatives in a continuous effort to develop and enable compliance strategies. As these and similar initiatives and programs become regulatory requirements throughout the world and/or are adopted as public or private procurement requirements, we must comply. Failure to comply could result in the company being subject to potential liability and facing market access limitations that could have a material adverse effect on our operations and financial condition. Other potentially relevant regulatory initiatives throughout the world include various efforts to limit energy use in product manufacturing and other environment-related programs impacting products and operations, such as those associated with climate change accords, agreements and regulations. For example, the European Union's Energy-Related Products Directive (ERP) has led to the adoption of “implementing measures” or "voluntary agreements" that require certain classes of products to achieve certain design and/or performance standards, in connection with energy use and potentially other environmental parameters and impacts. A number of our products are already required to comply with ERP requirements and further regulations are being developed by the EU authorities. The EU Circular Economy Action Plan (CEAP) introduced legislative and non-legislative measures focusing on how products are designed, promoting circular economy processes, encouraging sustainable consumption, and ensuring waste is prevented. The implementation of the CEAP is expected to impact the materials used, including chemicals and plastics, in products that are placed in the EU market. Environmentally driven procurement requirements also voluntarily adopted by customers in the marketplace (e.g., U.S. EPA EnergyStar, EPEAT, and EU Green Public Procurement) are constantly evolving and becoming more stringent, presenting further market access challenges if our products fail to comply. Various countries and jurisdictions have adopted or are expected to adopt requirements clarifying manufacturer roles and responsibilities related to the recovery of products that were placed on the market and remediation of by-products of the manufacturing process. For example, jurisdictions have adopted or are expected to adopt, programs that make producers of electrical goods, including computers and printers, responsible for certain labeling, collection, recycling, treatment and disposal of these recovered products. If we are unable to collect, recycle, treat and dispose of our products in a cost-effective manner and in accordance with applicable requirements, it could materially adversely affect our results of operations and financial condition. Further, Xerox is party to, or otherwise involved in, proceedings in a limited number of locations brought by U.S. or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), known as "Superfund," or state laws, in which the primary relief sought is the cost of past and/or future remediation. The nature of financial exposure depends on a variety of factors including changes in laws, known contamination, and discovered contamination that was previously unknown. General Risk Factors Our business, results of operations and financial condition may be negatively impacted by legal and regulatory matters. We have various contingent liabilities that are not reflected on our balance sheet, including those arising as a result of being involved in a variety of claims, lawsuits, investigations, and proceedings including as discussed in Note 20 - Contingencies and Litigation in the Consolidated Financial Statements. Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual or materially increase an existing accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts above any existing accruals, it could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. Due to the international scope of our operations, we are subject to a complex system of commercial and trade regulations around the world. With respect to the war in Ukraine, in the first quarter 2022, we halted shipments to Russia and Belarus when sanctions were imposed. Recent years have seen an increase in the development and enforcement of laws regarding trade compliance and anti-corruption, such as the U.S. Foreign Corrupt Practices Act and similar laws from other countries. Our numerous foreign subsidiaries, affiliates and joint venture partners are governed by laws, rules and business practices that differ from those of the U.S. The activities of these entities may not comply with U.S. or foreign laws or business practices or our Code of Business Conduct. Violations of these Xerox 2022 Annual Report 23 Table of Contents laws may result in severe criminal or civil sanctions, could disrupt our business, and result in an adverse effect on our reputation, business and results of operations or financial condition. We cannot predict the nature, scope or effect of future regulatory requirements to which our operations might be subject, our compliance with such requirements, or the manner in which existing laws might be administered or interpreted. Our failure to maintain an adequate system of internal control over financial reporting, could adversely affect our ability to accurately report our results. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in our internal control over financial reporting that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and deter and detect any material fraud. If we cannot provide reliable financial reports or prevent material fraud, our reputation and operating results would be harmed. We maintained effective internal control over financial reporting as of December 31, 2022, as further described in Part II “Item 9A—Controls and Procedures.” Our efforts to develop and maintain our internal controls and to remediate any material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective controls, or difficulties encountered in their implementation, including those related to acquired businesses, or other effective improvement of our internal controls could harm our operating results. Ineffective internal controls could also cause investors to lose confidence in our reported financial information. Xerox 2022 Annual Report 24 Table of Contents Item 1B. Unresolved Staff Comments None Item 2. Properties We own several manufacturing, engineering and research facilities, and lease other facilities. Our principal manufacturing and engineering facilities are located in New York, California, Oklahoma, Oregon, Canada, Ireland, and the Netherlands. Our principal research facilities are located in California, New York, and Canada. Our Corporate Headquarters is a leased facility located in Norwalk, Connecticut. In 2022, we owned or leased facilities globally which include general offices, sales offices, service locations, data centers, call centers, manufacturing facilities, warehouses and distribution centers. The size of our property portfolio at December 31, 2022 was approximately 10.9 million square feet, which was comprised of 308 leased facilities and 14 owned properties with 63 buildings (of which 45 are located on our Webster, New York campus). We occupied approximately 8.9 million square feet, 1.7 million square feet were surplus, and approximately 264 thousand square feet was sublet to third parties. It is our opinion that our properties have been well maintained, are in sound operating condition and contain all the necessary equipment and facilities to perform their functions. Our properties are primarily managed by and in support of the Print and Other segment. The Financing (FITTLE) segment does share in the use of certain facilities for which they are allocated occupancy costs. We believe that our current facilities are suitable and adequate for our current businesses. Refer to Note 11 - Lessee, in the Consolidated Financial Statements, for additional information regarding our leased assets. Item 3. Legal Proceedings Refer to the information set forth under Note 20 - Contingencies and Litigation in the Consolidated Financial Statements - Litigation Against the Company. We are also engaged in numerous other legal actions arising in the ordinary course of our business (for example, proceedings relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights), and while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows. Item 4. Mine Safety Disclosures Not applicable. Xerox 2022 Annual Report 25 Table of Contents Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Corporate Information Stock Exchange Information Xerox Holdings Corporation's common stock (XRX) is listed on the Nasdaq Global Select Market. There is no established public trading market for Xerox Corporation's common stock, as all of the outstanding Xerox common stock is held solely by Xerox Holdings. Common Shareholders of Record As of December 31, 2022, Xerox Holdings Corporation had approximately 19,952 shareholders of record. Dividends For additional information regarding dividends, refer to Item 8 - Financial Statements and Supplementary Data, Xerox Holdings Corporation Statement of Shareholders' Equity, which is incorporated herein by reference. Performance Graph Total Return to Shareholders Year Ended December 31, (Includes reinvestment of dividends) 2017 2018 2019 2020 2021 2022 Xerox Holdings Corporation $ 100.00 $ 70.61 $ 135.76 $ 90.13 $ 91.92 $ 63.13 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P 500 Information Technology Index 100.00 99.71 149.86 215.63 290.08 208.30 _____________ Source: Standard & Poor's Investment Services Notes: Graph assumes $100 invested on December 31, 2017 in Xerox Holdings, the S&P 500 Index and the S&P 500 Information Technology Index, respectively, and assumes dividends are reinvested. Xerox 2022 Annual Report 26 Table of Contents Sales Of Unregistered Securities During the Quarter Ended December 31, 2022 There were no unregistered sales of securities for the quarter ended December 31, 2022. Issuer Purchases of Equity Securities During the Quarter Ended December 31, 2022 There were no repurchases of Xerox Holdings Corporation's Common Stock for the quarter ended December 31, 2022 pursuant to share repurchase programs authorized by Xerox Holdings' Board of Directors. Of the $500 million of share repurchase authority previously granted by the board, exclusive of fees and expenses, approximately $500 million has been used through December 31, 2022. Repurchases Related to Stock Compensation Programs (1) : Total Number of Shares Purchased Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1 through 31 15,712 $ 13.12 n/a n/a November 1 through 30 — — n/a n/a December 1 through 31 110,325 15.75 n/a n/a Total 126,037 _____________ (1) These repurchases are made under a provision in our restricted stock compensation programs for the indirect repurchase of shares through a net-settlement feature upon the vesting of shares in order to satisfy minimum statutory tax-withholding requirements. (2) Exclusive of fees and expenses. Item 6. [Reserved] Information pertaining to Item 6 is not presented in accordance with amendments to Item 301 of Regulation S-K. Xerox 2022 Annual Report 27 Table of Contents Item 7. 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,” or 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. Throughout this combined Form 10-K, references are made to various notes in the Consolidated Financial Statements which appear in Part II, Item 8 of this combined Form 10-K, 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 Xerox Ventures LLC, which was established in 2021 solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies. Xerox Ventures LLC had investments of approximately $21 million and $8 million at December 31, 2022 and 2021, respectively. Due to its immaterial impact to earnings and the balance sheet, and for ease of discussion, Xerox Ventures LLC's results are included within the following discussion. Executive Overview 2022 was a challenging year as revenue and profitability were impacted by an uncertain and unpredictable macroeconomic environment, which included increasing inflation and higher interest rates, supply chain challenges, currency disruption and a war in Ukraine. These challenges, and particularly the effects of supply chain constraints on product availability and logistics costs, had an overall negative impact on the Company's results, primarily through the first three quarters of 2022. The supply chain constraints began to ease late in the third quarter of 2022, resulting in revenue growth in fourth quarter 2022 in actual and constant currency 1 for the first time since the second quarter of 2021. That growth reflected strong demand for our products and services and improved product supply and mix. Total revenue for full year 2022 of $7.1 billion increased 1.0% and included a 2.6-percentage point benefit from acquisitions, partially offset by a 3.8-percentage point adverse impact from currency. Total revenues also reflected a 1.3-percentage point adverse impact from halting sales to Russia. However, fourth quarter 2022 total revenue increased 9.2% as compared to fourth quarter 2021 and included a 3.3-percentage point benefit from acquisitions, partially offset by a 4.7-percentage point adverse impact from currency. As a result of a strong fourth quarter, our backlog 2 , including equipment and IT Hardware, declined 43% sequentially to $246 million. Our backlog remains elevated as compared to historic levels but is expected to decline through the first half of 2023 as supply chain conditions further normalize. ______________ (1) See "Currency Impact" section for description of constant currency. (2) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT service offerings. Backlog at December 31, 2022 of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. 2023 Outlook We expect total Revenue in 2023 to be flat to down low-single-digits in constant currency 1 . We expect demand for our portfolio of products and services to remain resilient amid a challenging macroeconomic environment, particularly for our most material and profitable A3 office devices, and also expect Contractual Print Services 2 – our largest contributor to Post sale revenue to remain steady. Although we have not yet experienced a meaningful pullback in demand for our products or services due to macroeconomic pressure, our revenue outlook does account for potential deterioration in macroeconomic conditions. If economic conditions were to degrade further, we believe the most likely effect would be delays in equipment purchases or service implementations, rather than cancellation of orders, and difficulty implementing future price increases. Offsetting these risks are the steady nature of our contractual post-sale business and the counter-cyclicality of our IT and digital services, for which demand is expected to increase as IT budgets are rationalized. In 2023, we expect both pre-tax and adjusted 3 operating income and margin to increase over 2022 levels, driven by recently enacted and expected price and cost actions, as well as lower logistics costs. We also expect 2023 Xerox 2022 Annual Report 28 Table of Contents Operating cash flows to be approximately $550 million, which reflects the expected benefits from our Financing (FITTLE) segment’s Receivables Funding Agreement (See Strategic Priorities below and also Note 8 - Finance Receivables, Net for additional information regarding this agreement). Capital expenditures are expected to be approximately $50 million. Finally, our capital allocation policy of returning at least 50% of free cash flow 4 to shareholders remains unchanged. _____________ (1) See "Currency Impact" section for description of constant currency. (2) Represents revenues from service, maintenance and rentals. (3) Refer to the "Non-GAAP Financial Measures" section for an explanation of this non-GAAP financial measure. (4) Free cash flow is Net cash provided by operating activities less Capital expenditures. Goodwill Impairment Our earnings for full year 2022 include an after-tax noncash Goodwill impairment charge recorded in the third quarter of $395 million ($412 million pre-tax) or $2.54 per share. Our results through the first three quarters of the year, as well as internal forecasts for future periods, indicated that the Company was likely to have a slower than expected recovery from the impacts of the COVID-19 pandemic and supply chain issues experienced over the past few years. As a result of these impacts, the Company identified a greater risk to our previous outlooks and estimates, at least in the near-term. These impacts, combined with higher market interest rates in the third quarter 2022 and the resulting effect on valuation discount rates, negatively impacted the Company’s valuation, for purposes of estimating Goodwill, resulting in the Goodwill impairment charge for the third quarter 2022. Our earnings for the fourth quarter and full year 2021 include an after-tax noncash Goodwill impairment charge of $750 million ($781 million pre-tax) or $4.38 per share and $4.08 per share, respectively. This charge largely reflected the impact that the economic disruption caused by the COVID-19 pandemic had on the Xerox print business. Refer to the Application of Critical Accounting Policies section of the MD&A as well as Note 1 - Basis of Presentation in the Consolidated Financial Statements for additional information regarding our Goodwill impairments. Russia-Ukraine Conflict With respect to the war in Ukraine, in the first quarter 2022, we halted shipments to Russia and Belarus when sanctions were imposed. The Eurasian region in total comprised a low single digit percentage of our revenue and operating profits in 2021. As of December 31, 2022, the net assets of our Eurasian operations were approximately $15 million (approximately $25 million of total assets) and comprised approximately 0.5% of consolidated net assets. A large majority of our revenues, profits, and net assets in Eurasia were attributable to Russia. At all times from the imposition of sanctions through the date of the filing of this Form 10-K, we have been compliant with sanctions and government restrictions. Reportable Segment Change During the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE) - 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, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments. Refer to Reportable Segments section of the MD&A and Note 4 – Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information regarding our segments. Business Overview With annual revenues of approximately $7.1 billion, we remain a leading global provider of digital print technology and related services, software and solutions. Our primary offerings span four main areas: Workplace Solutions, Production Solutions, Xerox Services and FITTLE. • Workplace Solutions includes two strategic product groups, Entry and Mid-Range, much of which share common solutions, apps and ConnectKey® software. Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as the supplies and associated technical services and the financing of those products through FITTLE (captured as post sale revenue). • Production Solutions are designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements. Our broad portfolio of presses and solutions provides full-color, on-demand printing of a wide range of applications. Xerox 2022 Annual Report 29 Table of Contents • Xerox Services includes a continuum of solutions and services that helps our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. Our primary offerings in this area are Managed Print Services (MPS), Capture & Content Services (CCS) and Customer Engagement Services (CES) as well as IT Services. CCS and CES encompass a range of Digital Services that leverage our software capabilities in Workflow Automation, Personalization and Communication Software, Content Management Solutions, and Digitization Services. • FITTLE is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment through bundled lease agreements, lease financing to end-user customers who purchase Xerox and non-Xerox equipment through our indirect channels and leasing solutions for OEMs of print and non-print related office equipment and IT services equipment. Headquartered in Norwalk, Connecticut, with approximately 20,500 employees, Xerox serves customers globally in North America, Central and South America, Brazil, Europe, Eurasia, the Middle East, Africa and India. We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized markets businesses to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations. Our business does not depend upon a single customer or a few customers, the loss of which, individually or collectively, would have a material adverse effect on our business. In 2022, approximately 45% of our revenue was generated outside the United States. Strategic Priorities Our top 2023 priorities are Customer Success, Profitability and Shareholder Returns; and we expect these priorities to form the foundation for how we will deliver sustainable growth in profits over the long-term. • Customer Success : We will take measures to make it easier to do business with Xerox by employing a holistic, client-centric approach to delivering essential products and services that address the productivity challenges of a hybrid workplace and distributed workforce. The COVID-19 pandemic has accelerated the transformation of the workplace into a more flexible, hybrid environment. In response, we continue to invest in innovation to bolster and diversify our portfolio of offerings for hybrid workplace environments, including investments in Workflow Central and Digital Services such as Capture & Content and Customer Engagement Services, which enable work to flow seamlessly between the office and home. By focusing our sales efforts on providing solutions closely aligned to clients’ needs, rather than products, we believe we can grow our revenue while improving customer outcomes. • Focus on Profitability: We plan to implement a more flexible cost base and operating model to expand margins and direct investments towards margin-accretive growth opportunities with nearer-term returns. Project Own It delivered approximately $2.2 billion of gross cost savings from 2018 to 2022, and the behaviors and processes instilled by this program remain a priority. Just as we will focus on making it easier to do business with Xerox, we will look to make it easier to do business within Xerox by investing in processes that drive incremental organizational efficiencies and enable the types of collaboration required to offer holistic solutions for our clients. • Shareholder Returns: We will manage the business with the aim of optimizing free cash flow generation and return at least 50% of free cash flow to shareholders. We expect to focus on driving higher profits, but we also remain focused on generating more cash flow per profit dollar. In 2022, FITTLE entered into a Receivables Funding Agreement that we expect to improve Xerox’s cash flow profile while continuing to support FITTLE’s growth and we also intend to concentrate on inventory efficiency, which we expect to improve as supply chain conditions normalize. In December 2022, the Company entered into a Receivables Funding Agreement pursuant to which the Company agreed to offer for sale, and the purchaser agreed to purchase certain eligible pools of finance receivables on a monthly basis in transactions intended to be true sales. The Receivables Funding Agreement, which contemplates receivables sales totaling approximately $600 million, has an initial term until January 31, 2024, with automatic one-year extensions thereafter, unless terminated by either the Company or the purchaser. The Receivables Funding Agreement provides a committed funding source for FITTLE to originate and service new lease originations without incurring additional debt. _____________ (1) Free cash flow is Net cash provided by operating activities less Capital expenditures. Post-sale Based Business Model In 2022, 77% of our total revenue was post-sale-based, which primarily reflects contracted services, equipment maintenance, supplies and financing. These revenue streams generally follow equipment placements and provide some stability to our revenue and cash flows. Key indicators of future post sale revenue include installs of printers and multifunction devices, the number and type of machines in the field (MIF), page volumes and the type and Xerox 2022 Annual Report 30 Table of Contents nature of related software and ancillary services provided to customers - e.g., digital services. Post sale revenue also includes transactional IT hardware sales and implementation services revenues, which is a growing part of our business as a result of recent acquisitions. Project Own It During the second half of 2018, we initiated a transformation project - Project Own It - centered on creating a more effective organization to enhance our focus on our customers and our partners, instill a culture of continuous improvement and improve our financial results through on-going cost reductions and savings. The primary goal of this project was to improve productivity by driving end-to-end transformation of our processes and systems to improve effectiveness and to reduce costs. Key opportunities under Project Own It included establishing more effective shared service centers, rationalizing our IT infrastructure, reducing our real estate footprint, and improving our supply chain management and the productivity of our supplier base. Since its inception through the end of 2022, we estimate total savings from Project Own It were approximately $2.2 billion. We incurred Restructuring and related costs, net of $65 million for the year ended December 31, 2022, primarily related to costs incurred to implement initiatives under our business transformation projects including Project Own It. Refer to Restructuring and Related Costs, Net section of the MD&A and Note 13 - Restructuring Programs in the Consolidated Financial Statements for additional information. Financial Overview Total revenue of $7.1 billion in 2022 increased 1.0% and included a 2.6-percentage point benefit from acquisitions, partially offset by a 3.8-percentage point adverse impact from currency as well as a 1.3-percentage point adverse impact from halting sales to Russia. 2022 total revenue reflected an increase in Post sale revenue of 0.5%, which included a 3.4-percentage point benefit from acquisitions, partially offset by a 3.7-percentage point adverse impact from currency. Post sale revenue reflected increased IT services revenues, which benefited from the recent acquisition of Powerland, as well as higher consumables revenues including from paper and supplies, partially offset by lower financing revenue. Equipment sales revenue increased 2.7% and included a 3.9-percentage point adverse impact from currency, reflecting higher demand for our products and improvement in product availability as supply chain constraints began to ease late in the third quarter and particularly in the fourth quarter of 2022. Net (loss) income attributable to Xerox Holdings was as follows: Year Ended December 31, B/(W) (in millions) 2022 2021 2020 2022 2021 Net (loss) income attributable to Xerox Holdings $ (322) $ (455) $ 192 $ 133 $ (647) Adjusted (1) Net income attributable to Xerox Holdings 189 293 313 (104) (20) Net loss attributable to Xerox Holdings for 2022 of $(322) million improved by $133 million as compared to Net loss attributable to Xerox Holdings of $(455) million in 2021. Both periods reflect the impact of an after-tax noncash Goodwill impairment charge - $395 million ($412 million pre-tax) in 2022 versus $750 million ($781 million pre-tax) in 2021. Net loss attributable to Xerox Holdings for 2022 also reflected a lower gross margin due to unfavorable product and services mix, higher freight costs associated with product supply constraints, as well as higher Other expense, net due to an increase in non-service retirement-related costs and a $33 million charge associated with the termination of a product supply agreement (which was net of an $8 million previously recorded accrual), higher Selling, administrative and general expenses due to higher stock compensation expense and bad debt expense, higher Restructuring and related costs, net, and a lower Income tax benefit. These negative impacts were partially offset by lower Amortization of intangible assets. Adjusted 1 net income attributable to Xerox Holdings for 2022 of $189 million decreased $104 million as compared to 2021 primarily reflecting a lower gross margin due to unfavorable product and services mix, and higher freight costs associated with product supply constraints, as well as higher Income tax expense and Selling, administrative and general expenses, reflecting bad debt reserve releases of approximately $31 million in the prior year. These negative impacts were partially offset by lower Other expenses, net, reflecting higher gains on sales of businesses and assets and a refund of excess employer contributions to a defined contribution plan for one of our Latin American subsidiaries, as well as lower Research, development and engineering expense. _____________ (1) Refer to the "Non-GAAP Financial Measures" section for an explanation of this non-GAAP financial measure. Xerox 2022 Annual Report 31 Table of Contents A summary of our segment information is as follows: Year Ended December 31, % Change % of Total (in millions) 2022 2021 2020 2022 2021 2022 2021 Revenue Print and Other $ 6,667 $ 6,548 $ 6,489 1.8 % 0.9 % 94 % 93 % Financing (FITTLE) 610 695 744 (12.2) % (6.6) % 8 % 10 % Intersegment Elimination (1) (170) (205) (211) (17.1) % (2.8) % (2) % (3) % Total Revenue $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 100 % 100 % Profit Print and Other $ 238 $ 293 $ 461 (18.8) % (36.4) % 87 % 78 % Financing (FITTLE) 37 82 3 (54.9) % NM 13 % 22 % Total Profit $ 275 $ 375 $ 464 (26.7) % (19.2) % 100 % 100 % _____________ (1) Reflects revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements . NM - change is not meaningful. Cash from operating activities was $159 million in 2022 as compared to $629 million in 2021. The decrease was primarily related to lower cash flow from earnings as well as higher working capital 1 , higher net finance receivables originations and lower proceeds from royalties. The decrease was also attributed to a $41 million one-time payment associated with the termination of a product supply agreement. These negative impacts were partially offset by lower contributions to retirement plans, and payments for restructurings. Cash from operating activities also includes $60 million received in connection with the sale of finance receivables in the fourth quarter 2022 under a Receivables Funding Agreement. Cash used in investing activities of Xerox Holdings was $78 million in 2022, reflecting capital expenditures of $57 million, acquisitions of $93 million and $13 million of noncontrolling investments as part of our corporate venture capital fund, which were partially offset by proceeds of $87 million from the sale of surplus assets including buildings and land in the U.S., as well as non-core business assets. Cash used in financing activities of Xerox Holdings was $822 million in 2022, reflecting payments of $714 million on existing secured financing arrangements, $300 million on Senior Notes that matured in 2022 and $700 million for the partial early redemption of our 2023 Senior Notes, which was partially offset by proceeds of $1,193 million on new secured financing arrangements, as well as dividend payments of $174 million and $113 million for repurchases of our Common Stock. _____________ (1) Working capital, net reflects Accounts receivable, net, Inventories and Accounts payable. 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 and 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. Approximately 45% of our consolidated revenues are derived from operations outside of the U.S. where the U.S. Dollar is normally not the functional currency. As a result, foreign currency translation had a 3.8-percentage point adverse impact on revenue in 2022 and a 1.6-percentage point favorable impact on revenue in 2021. Xerox 2022 Annual Report 32 Table of Contents Application of Critical Accounting Policies In preparing our Consolidated Financial Statements and accounting for the underlying transactions and balances, we apply various accounting policies. Senior management has discussed the development and selection of the critical accounting policies, estimates and related disclosures included herein with the Audit Committee of the Xerox Holdings Board of Directors. We consider the policies discussed below as critical to understanding our Consolidated Financial Statements, as their application places the most significant demands on management's judgment, since financial reporting results rely on estimates of the effects of matters that are inherently uncertain. In instances where different estimates could have reasonably been used, we disclosed the impact of these different estimates on our operations. In certain instances, such as revenue recognition for leases, the accounting rules are prescriptive; therefore, it would not have been possible to reasonably use different estimates. Changes in assumptions and estimates are reflected in the period in which they occur. The impact of such changes could be material to our results of operations and financial condition in any quarterly or annual period. Specific risks associated with these critical accounting policies are discussed throughout the MD&A, where such policies affect our reported and expected financial results. For a detailed discussion of the application of these and other accounting policies, refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in the Consolidated Financial Statements. Revenue Recognition Application of the various accounting principles in GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates including ASC Topic 606 - Revenue from Contracts with Customers and ASC Topic 842 Leases . Refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in the Consolidated Financial Statements for additional information regarding our revenue recognition and lease revenue recognition policies . Complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. Specifically, the revenue related to the following areas involves significant judgments and estimates: Bundled Lease Arrangements : We sell our equipment direct to end customers under bundled lease arrangements, which typically include the equipment, service, supplies and a financing component for which the customer pays a single negotiated fixed minimum monthly payment for all elements over the contractual lease term. These arrangements also typically include an incremental, variable component for page volumes in excess of the contractual page volume minimums, which are often expressed in terms of price-per-image or page. Lease deliverables include the equipment and financing, while the non-lease deliverables generally consist of the services, which include supplies. Sales made under bundled lease arrangements directly to end customers comprise 44% or $708 million of our equipment sales revenue. Revenues under these bundled lease arrangements are allocated considering the relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement. The allocation of revenue among the elements – equipment vs. post sale (service, supplies and financing) – has remained fairly consistent at approximately 25% and 75%, respectively, over the past three years. Sales to Distributors and Resellers : We utilize distributors and resellers to sell many of our products, supplies and parts to end-user customers. Sales to distributors and resellers are generally recognized as revenue when products are shipped to such distributors and resellers. Distributors and resellers participate in various discount, rebate, price-support, cooperative marketing and other programs, and we record provisions and allowances for these programs as a reduction to revenue when the sales occur. Similarly, we also record estimates for sales returns and other discounts and allowances when the sales occur. We consider various factors, including a review of specific transactions and programs, historical experience and market and economic conditions when calculating these provisions and allowances. Total sales of equipment, supplies and parts to distributors and resellers were $1,222 million for the year ended December 31, 2022 and provisions, and allowances recorded on these sales were approximately 28% of the associated gross revenues. Allowance for Doubtful Accounts and Credit Losses The allowance for doubtful accounts and credit losses is based on an assessment of historical collection experience as well as consideration of current and future economic conditions and changes in our customer-specific collection trends. Our methodology includes an expected loss model that incorporates an assessment of current and future economic conditions. We recorded bad debt provisions of $43 million, $7 million and $116 million in Selling, administrative and general (SAG) expenses in our Consolidated Statements of (Loss) Income for the three years ended December 31, 2022, 2021 and 2020, respectively. The reserves, as a percentage of trade and finance receivables, were 4.1% at December 31, 2022, as compared to 4.3% and 4.8% at December 31, 2021 and 2020, respectively. We continue to Xerox 2022 Annual Report 33 Table of Contents assess our receivables portfolio in light of the current macroeconomic environment and its impact on our estimation of the adequacy of the allowance for doubtful accounts. The bad debt provision and related reserve was elevated in 2020 principally due to the impact of the COVID-19 pandemic on our customers. In assessing the level of provision and related reserve for 2020, we critically assessed current and forecasted economic conditions from the COVID-19 pandemic at the time to ensure we objectively included those expected impacts in the determination of our reserve. That assessment resulted in the recognition of a $60 million incremental bad debt provision in the first quarter 2020. In 2021 we recorded approximately $31 million of bad debt reversals reflecting improvements in the macroeconomic environment in 2021 as well as lower write-offs as a result of the COVID-19 pandemic. The bad debt provision in 2022 is more in-line with historical trends but the reserve as a percentage of our trade and finance receivables balance remains elevated to cover expected losses that may result from future macroeconomic conditions including higher inflation and interest rates. During the five-year period ended December 31, 2022, our reserve for doubtful accounts ranged from 3.0% to 4.8% of gross receivables. Holding all assumptions constant, a 0.5-percentage point increase or decrease in the reserve from the December 31, 2022 rate of 4.1% would change the 2022 provision by approximately $21 million. Refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies, Note 7 - Accounts Receivable, Net and Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding our policy with respect to the Allowance for Doubtful Accounts and Credit Losses. Pension Plan Assumptions We sponsor defined benefit pension plans in various forms in several countries covering employees who meet eligibility requirements. Where legally possible, we have amended our major defined benefit pension plans to freeze current benefits and eliminate benefit accruals for future service, including our primary U.S. defined benefit plan for salaried employees, the Canadian Salary Pension Plan and the U.K. Final Salary Pension Plan. In certain Non-U.S. plans, we are required to continue to consider salary increases and inflation in determining the benefit obligation related to prior service. Our pension plan in the Netherlands for past service was changed to a Collective Defined Contribution (CDC) plan. From a Company risk perspective, this plan operates just like a defined contribution plan as the Company is only responsible for a contribution for annual benefit accruals under 5-year agreements. Although the Company risk has been mitigated, under U.S. GAAP this plan does not meet the definition of a defined contribution plan and therefore is accounted for as a defined benefit plan. Several statistical and other factors that attempt to anticipate future events are used in calculating the expense, liability and asset values related to our defined benefit pension plans. These factors include assumptions we make about the expected return on plan assets, discount rate, lump-sum settlement rates, the rate of future compensation increases and mortality. Differences between these assumptions and actual experiences are reported as net actuarial gains and losses and are subject to amortization to net periodic benefit cost over future periods. Cumulative net actuarial losses for our defined benefit pension plans of $1.9 billion as of December 31, 2022 increased by $210 million from December 31, 2021, primarily due to losses on plan assets as compared to expected returns as a result of the impact of higher interest rates on the fair value of our fixed income investments, which are the majority of our plan assets, as well as negative equity market returns. This negative impact was only partially offset by a decrease in the Projected Benefit Obligation (PBO) due to higher discount rates, the recognition of actuarial losses through amortization and U.S. settlement losses as well as currency. The total actuarial loss at December 31, 2022 is subject to offsetting gains or losses in the future due to both changes in actuarial assumptions and future experience and will be recognized in future periods through amortization or settlement losses. We used a consolidated weighted average expected rate of return on plan assets of 3.9% for 2022, 3.9% for 2021 and 4.1% for 2020, on a worldwide basis. During 2022, the actual return on plan assets was a loss of $(2,595) million as compared to an expected return of $155 million, with the difference largely due to losses on fixed income investments as a result of increasing interest rates as well as negative equity market returns. When estimating the 2023 expected rate of return, in addition to assessing recent performance, we considered the historical returns earned on plan assets, the rates of return expected in the future, particularly in light of current economic conditions, and our investment strategy and mix with respect to the plans' assets. The weighted average expected rate of return on plan assets we will use in 2023 is 5.2% with the increase from 2022 largely due to higher interest yields on fixed income investments and the expectation of higher equity returns considering current valuations. Another significant assumption affecting our defined benefit pension obligations and the net periodic benefit cost is the rate that we use to discount our future anticipated benefit obligations. In the U.S. and the U.K., which comprise approximately 75% of our PBO, we consider yield curves derived from Moody's Aa or better rated Corporate Bonds Xerox 2022 Annual Report 34 Table of Contents and U.K. Corporate bonds rated AA by at least one of the main ratings agencies, respectively, in the determination of the appropriate discount rate assumptions. The consolidated weighted average discount rate we used to measure our pension obligations as of December 31, 2022 and to calculate our 2023 expense was 4.7%; the rate used to calculate our obligations as of December 31, 2021 and our 2022 expense was 2.1%. The increase reflects higher interest rates in both the U.S. and non-U.S. regions. Holding all other assumptions constant, the following table summarizes the estimated impacts of a 0.25% change in the discount rate and a 0.25% change in the expected return on plan assets: Discount Rate Expected Return (in millions) 0.25% Increase 0.25% Decrease 0.25% Increase 0.25% Decrease Increase/(Decrease) 2023 Projected net periodic pension cost $ (2) $ 1 $ (15) $ (15) Projected benefit obligation as of December 31, 2022 (265) 255 N/A N/A One of the most significant elements of our net periodic defined benefit pension plan expense is settlement losses. Our primary domestic plans allow participants the option of settling their vested benefits through the receipt of a lump-sum payment. We recognize the losses associated with these settlements immediately upon the settlement of the vested benefits. Settlement accounting requires us to recognize a pro-rata portion of the aggregate unamortized net actuarial losses upon settlement. As noted above, cumulative unamortized net actuarial losses were $1.9 billion at December 31, 2022, of which the U.S. primary domestic plans, with a lump-sum feature, represented approximately $600 million. The pro-rata factor is computed as the percentage reduction in the projected benefit obligation due to the settlement of a participant ' s vested benefit. Settlement accounting is only applied when the event of settlement occurs - i.e., the lump-sum payment is made. Since settlement is dependent on an employee's decision and election, the level of settlements and the associated losses can fluctuate significantly from period to period. During the three years ended December 31, 2022, 2021 and 2020, U.S. plan settlements were approximately $240 million, $300 million and $220 million, respectively, and the associated settlement losses on those plan settlements were $56 million, $54 million and $53 million, respectively. In 2023, we estimate approximately $200 million of plan settlements and settlement losses of approximately $55 million. The following is a summary of our benefit plan costs for the three years ended December 31, 2022, 2021 and 2020, as well as estimated amounts for 2023: Estimated Actual (in millions) 2023 2022 2021 2020 Defined benefit pension plans (1) $ (10) $ (47) $ (64) $ 5 U.S. settlement losses 55 56 54 53 Defined contribution plans (2) 35 37 18 19 Retiree health benefit plans (3) (15) (3) (55) (63) Total Benefit Plan Expense $ 65 $ 43 $ (47) $ 14 _____________ (1) Excludes U.S. settlement losses. (2) The increase in 2022 reflects the Company's decision to resume the 2022 employer matching contribution to our U.S. based 401(k) savings plans for salaried employees previously suspended in 2021 and 2020. (3) The 2018 U.S. Retiree Health Plan amendment was fully amortized by December 31, 2021. The following is a summary of our benefit plan funding for the three years ended December 31, 2022, 2021 and 2020, as well as estimated amounts for 2023: Estimated Actual (in millions) 2023 2022 2021 2020 U.S. Defined benefit pension plans $ 50 $ 24 $ 24 $ 35 Non-U.S. Defined benefit pension plans 25 81 111 104 Defined contribution plans (1) 35 17 18 19 Retiree health benefit plans 25 19 25 25 Total Benefit Plan Funding $ 135 $ 141 $ 178 $ 183 _____________ (1) The difference between the 2022 funded amount and the 2022 expense of $20 million is due to contributions for our U.S. based 401(k) savings plans for salaried employees being expensed in 2022 as earned and contributed in January of 2023. Xerox 2022 Annual Report 35 Table of Contents The 2022 U.S. Defined benefit plans contributions did not include any contributions for our domestic tax-qualified defined benefit plans because none were required to meet the minimum funding requirements. Approximately $25 million of estimated contributions are included in 2023 for our U.S. tax-qualified defined benefit plans. However, once the January 1, 2023 actuarial valuations and projected results as of the end of the 2023 measurement year are available, actual contributions required to meet minimum funding requirements will be determined and finalized and may change from the current estimate. In addition, the decrease in non-U.S. Defined benefit pension plan contributions in 2023 is due to further contributions to our U.K. defined benefit pension plan not being required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees. Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding defined benefit pension plan assumptions, expense and funding. Income Taxes We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments are required in determining the consolidated provision for income taxes. Our provision is based on nonrecurring events as well as recurring factors, including the taxation of foreign income. In addition, our provision will change based on discrete or other nonrecurring events such as audit settlements, tax law changes, changes in valuation allowances, etc., that may not be predictable. We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and the amounts reported in our Consolidated Balance Sheets, as well as operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. We apply judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding the valuation allowance against our deferred tax assets. Our valuation allowance increased (decreased) through income tax expense by approximately $7 million, $(9) million and $25 million for the years ended December 31, 2022, 2021 and 2020, respectively. There were other increases (decreases) to our valuation allowance, including the effects of currency, of $2 million, $(30) million and $(28) million for the years ended December 31, 2022, 2021 and 2020, respectively. These did not affect income tax expense in total as there was a corresponding adjustment to Deferred tax assets or Other comprehensive income. The following is a summary of gross deferred tax assets and the related valuation allowances for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (in millions) 2022 2021 2020 Gross deferred tax assets $ 1,138 $ 1,062 $ 1,379 Valuation allowance (366) (357) (396) Net deferred tax assets $ 772 $ 705 $ 983 We are subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, we may incur additional tax expense based upon our assessment of the more-likely-than-not outcomes of such matters. In addition, when applicable, we adjust the previously recorded tax expense to reflect examination results. Our ongoing assessments of the more-likely-than-not outcomes of the examinations and related tax positions require judgment and can materially increase or decrease our effective tax rate, as well as impact our operating results. Unrecognized tax benefits were $110 million, $107 million and $115 million at December 31, 2022, 2021 and 2020, respectively. Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding deferred income taxes and unrecognized tax benefits. Xerox 2022 Annual Report 36 Table of Contents Business Combinations and Goodwill We allocate the fair value of purchase consideration to tangible assets, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to Goodwill. The allocation of the purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates can include, but are not limited to, future expected cash flows of acquired customers, development of new offerings, acquired technology and trade names from a market participant perspective, as well as estimates of useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable and when appropriate, include assistance from independent third-party valuation firms. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to Goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Refer to Note 6 - Acquisitions and Investments in the Consolidated Financial Statements for additional information regarding the allocation of the purchase price consideration for our acquisitions. Our Goodwill, net balance was $2.8 billion at December 31, 2022. We assess Goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently on an interim basis if we believe indicators of impairment exist. The application of an interim or the annual Goodwill impairment test begins with the identification of reporting units, which requires judgment. During the first quarter 2022, the Company made a change to its operating and reportable segments from one operating/reportable segment - Printing - to two operating/reportable segments - Print and Other, and Financing (FITTLE). As a result of the new operating and reportable segments, we also reassessed our reporting units for the evaluation of Goodwill. Prior to this change, we determined that we had one operating/reportable segment and one reporting unit for Goodwill assessment purposes. Our reassessment during the first quarter of 2022 determined that, we had two operating/reportable segments and two reporting units – Print and Other, and Financing (FITTLE) for Goodwill assessment purposes. The process of evaluating the potential impairment of Goodwill is highly subjective and requires significant judgment. Our review of impairment starts with an assessment of qualitative factors to determine whether events or circumstances lead to a determination that it is more-likely-than-not that the fair value of the Company is less than the net book value. Our qualitative assessment of the recoverability of Goodwill, whether performed annually or based on specific events or circumstances, considers various macroeconomic, industry-specific and company-specific factors. These factors include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization below our net book value. After assessing the totality of events and circumstances, if we determine that it is not more-likely-than-not that the fair value of the Company is less than its net book value, no further assessment is performed. If we determine that it is more-likely-than-not that the fair value of the Company is less than net book value or if we elect to bypass the qualitative assessment, we proceed to a quantitative assessment or test of Goodwill. If a quantitative assessment of Goodwill is required, the determination of the fair value of the Company will involve the use of significant estimates and assumptions. Our quantitative Goodwill impairment test uses both the income approach and the market approach to estimate fair value. The income approach is based on the discounted cash flow method that uses the Company's estimates of forecasted future financial performance including revenues, gross margins, operating expenses, and taxes, as well as working capital and capital asset requirements. These estimates are developed as part of our long-term planning process based on assumed market segment growth rates and our assumed market segment share, estimated costs based on historical data and various internal estimates. Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risks unique to the subject cash flows. When performing our market approach, we rely specifically on the guideline public company method. Our guideline public company method incorporates revenues and earnings multiples from publicly traded companies with operations and other characteristics similar to our entity. The selected multiples consider our entity's growth, profitability, size and risk relative to those of the selected publicly traded companies. During 2022, we had events and conditions in the first quarter and third quarter that required an interim assessment of Goodwill. Xerox 2022 Annual Report 37 Table of Contents First Quarter 2022 - Change in Segments As a result of the change in reporting units, effective January 1, 2022, we estimated the fair value of our new reporting units and, based on an assessment of the relative fair values of our new reporting units after the change, we determined that no Goodwill was allocable to the Financing (FITTLE) segment. This determination was largely based on the fact that at this stage in the stand-up of the Financing (FITTLE) business, its separate valuation is constrained and limited because the operation is significantly integrated with the Print and Other segment and is primarily an extension or enabler to facilitate the sale of the Company’s products. The change in reporting units was also considered a triggering event indicating a test for Goodwill impairment was required as of January 1, 2022 before and after the change in reporting units. The Company performed those impairment tests, which did not result in the identification of an impairment loss as of January 1, 2022. As a result of our impairment charge in the fourth quarter 2021, we elected to bypass the qualitative impairment test and proceed to the quantitative test for the assessment of the recoverability of our Goodwill balance effective January 1, 2022 before and after the change in segments. In estimating the fair value of our single reporting unit before the change in segments, our analysis reflected a 75/25 allocation between the income and market approach, respectively, and the application of a discount rate applied to our projected cash flows of approximately 7.50%. The weighting between the income and market approach was consistent with our assessment in the fourth quarter 2021. The applied discount rate was 25 basis points lower than the rate applied in the fourth quarter 2021 assessment largely due to changes in market inputs with respect to the Cost of Equity as well as a slightly higher Cost of Debt weighting, which carries a lower cost. We believe that the discount rate applied was reasonable based on the estimated capital costs of applicable market participants and an appropriate company-specific risk premium that reflected current market and industry conditions. In estimating the fair value of our reporting unit with Goodwill after the change in segments (Print and Other), our analysis likewise reflected a 75/25 allocation between the income and market approach, respectively, but the discount rate applied to our projected cash flows was increased to approximately 8.75%. The increase in the discount rate was largely due to an increase in the company-specific risk premium to balance the overall Company valuation and to reflect an increased risk to Print and Other as a result of the removal of a portion of the steadier annuity financing revenues to the Financing (FITTLE) reporting unit. As with the assessment before the segment change, we believed that the discount rate applied was reasonable based on the estimated capital costs of applicable market participants and an appropriate company-specific risk premium that reflected current market and industry conditions. Based on our forecast model at the time, which we believed reflected the inherent uncertainty of the future, we estimated that the excess of fair value over carrying value for the reporting unit with Goodwill ranged between 15% and 20% as of January 1, 2022. Third Quarter 2022 - Goodwill Impairment In the first nine months of 2022, the Company continued to encounter operational challenges due to unfavorable product and services mix associated with supply chain constraints as well as the impacts of unfavorable macroeconomic conditions including inflationary pressure on product and labor costs, geopolitical uncertainty in Europe and the continued impacts from the COVID-19 recovery. Additionally, higher interest rates continued to put downward pressure on the Company’s valuation. Although operating results were expected to improve, they were expected to be below previous forecasts from the beginning of the year and would continue to be pressured as result of these unfavorable macroeconomic conditions. As a result of these negative financial impacts as well as a sustained market capitalization below our book value, in the third quarter 2022 we determined there was a triggering event requiring an interim quantitative assessment of Goodwill. After completing our interim impairment test, we concluded that the estimated fair value of the Print and Other reporting unit (the only reporting unit with Goodwill) had declined below its carrying value and we recognized an after-tax non-cash impairment charge of $395 million ($412 million pre-tax) related to our Goodwill in the third quarter 2022. In estimating the fair value of the Print and Other reporting unit, our analysis reflected a 75/25 allocation between the income and market approach, respectively, and the application of a discount rate applied to our projected cash flows of approximately 10.75%. The weighting between the income and market approach was consistent with our assessment in the fourth quarter 2021 as well as the first quarter 2022. The applied discount rate was 200 basis points higher than the rate applied in the first quarter 2022 assessment primarily due to higher market interest rates. We believe that the discount rate applied was reasonable based on the estimated capital costs of applicable market participants and an appropriate company-specific risk premium that reflected current market and industry conditions. Xerox 2022 Annual Report 38 Table of Contents In performing our quantitative assessment for the third quarter 2022, the Company believes it made reasonable estimates based on the facts and circumstances that were available as of the reporting date. However, the assessment of fair value includes assumptions that are subject to risk and uncertainty. Estimated forecasts are dependent on subjective factors including the timing and amount of future cash flows and the discount rate. If the Company's future performance varies from our expectations, assumptions, or estimates, including those assumptions relating to the supply chain constraints, interest rates, inflationary pressure on product and labor costs, geopolitical uncertainty in Europe, or the continued impacts from the COVID-19 recovery, this may impact the impairment analysis and could reduce the underlying cash flows and result in a decline in fair value that may trigger future impairment charges. 2022 Annual Impairment Summary Consistent with our policy for an annual review, we also assessed Goodwill in the fourth quarter 2022. As a result of the quantitative assessment of Goodwill in the third quarter 2022, we performed our annual Goodwill assessment in the fourth quarter 2022 qualitatively. After completing this qualitative impairment review, we concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit is higher than its carrying amount and that it is not necessary to perform a quantitative Goodwill impairment test. Our qualitative review indicated that fourth quarter 2022 actual results as well as our latest full year 2023 projections are in line with the projections used in our third quarter 2022 quantitative impairment test, which we believed appropriately addressed macroeconomic uncertainties and challenges. In addition, discounts rates as well as the Company’s market capitalization in the fourth quarter 2022 remained steady with the third quarter 2022. We will continue to monitor developments throughout 2023, including updates to our forecasts as well as our market capitalization, and discounts rates to determine if an interim assessment of Goodwill is required. Refer to Note 12 - Goodwill, Net and Intangible Assets, Net in the Consolidated Financial Statements for additional information regarding Goodwill. Xerox 2022 Annual Report 39 Table of Contents Revenue Results Summary Total Revenue Revenue for the three years ended December 31, 2022, 2021 and 2020 was as follows: Revenue % Change CC % Change % of Total Revenue (in millions) 2022 2021 2020 2022 2021 2022 2021 2022 2021 2020 Equipment sales $ 1,624 $ 1,581 $ 1,564 2.7 % 1.1 % 6.6 % (0.4) % 23 % 22 % 22 % Post sale revenue 5,483 5,457 5,458 0.5 % — % 4.2 % (1.7) % 77 % 78 % 78 % Total Revenue $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 4.8 % (1.4) % 100 % 100 % 100 % Reconciliation to Consolidated Statements of (Loss) Income: Sales $ 2,800 $ 2,582 $ 2,449 8.4 % 5.4 % 12.2 % 3.9 % Less: Supplies, paper and other sales (1,176) (1,001) (885) 17.5 % 13.1 % 21.0 % 11.5 % Equipment sales $ 1,624 $ 1,581 $ 1,564 2.7 % 1.1 % 6.6 % (0.4) % Services, maintenance and rentals $ 4,100 $ 4,235 $ 4,347 (3.2) % (2.6) % 0.6 % (4.3) % Add: Supplies, paper and other sales 1,176 1,001 885 17.5 % 13.1 % 21.0 % 11.5 % Add: Financing 207 221 226 (6.3) % (2.2) % (2.9) % (4.1) % Post sale revenue $ 5,483 $ 5,457 $ 5,458 0.5 % — % 4.2 % (1.7) % Segments Print and Other $ 6,667 $ 6,548 $ 6,489 1.8 % 0.9 % 94 % 93 % 92 % Financing (FITTLE) 610 695 744 (12.2) % (6.6) % 8 % 10 % 11 % Intersegment elimination (170) (205) (211) (17.1) % (2.8) % (2) % (3) % (3) % Total Revenue (1) $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 100 % 100 % 100 % Americas $ 4,638 $ 4,432 $ 4,589 4.6 % (3.4) % 5.1 % (4.1) % 65 % 63 % 65 % EMEA 2,291 2,434 2,246 (5.9) % 8.4 % 4.1 % 4.6 % 32 % 35 % 32 % Other 178 172 187 3.5 % (8.0) % 3.5 % (8.0) % 3 % 2 % 3 % Total Revenue (2) $ 7,107 $ 7,038 $ 7,022 1.0 % 0.2 % 4.8 % (1.4) % 100 % 100 % 100 % _____________ CC - See "Currency Impact" section for description of constant currency. (1) Refer to the "Reportable Segments" section. (2) Refer to the "Geographic Sales Channels" section. Revenue 2022 was a challenging year. Our results were impacted by an uncertain and unpredictable macroeconomic environment, which included surging inflation and higher interest rates, supply chain challenges, currency disruption and a war in Ukraine. Despite these challenges, total revenue increased 1.0% for the year ended December 31, 2022 and included a 2.6-percentage point benefit from acquisitions, which was partially offset by a 3.8-percentage point adverse impact from currency. The increase in revenue reflected growth in equipment sales revenue, due to stable demand and improved product supply availability, particularly in the last third of the year. Post sale revenue also improved, primarily reflecting the impact from acquisitions as well as growth in IT and digital service revenue and increased paper and supplies sales. Contractual Print Services 1 , our largest and most stable contributor to post sale revenue, grew low single digits at constant currency 2 , including the benefit of recent acquisitions. Total revenue increased 0.2% for the year ended December 31, 2021 as compared to the prior year, including a 1.6-percentage point favorable impact from currency, and an approximate 0.5-percentage point favorable impact from 2021 and 2020 acquisitions. Revenue reflected global product supply and logistics constraints which limited our ability to fulfill orders and drove an increase in our order backlog 3 in the second half of the year. The COVID-19 pandemic also affected our revenues by limiting office occupancy; however, the progress of vaccinations and the gradual reopening of workplaces resulted in higher year-over-year page volumes for most of the year. Geographically, revenue in our Americas region increased 4.6% for the year ended December 31, 2022, as compared to the prior year, including a 0.5-percentage point adverse impact from currency, primarily reflecting the benefits of recent acquisitions and growth in equipment sales and consumables, such as paper and supplies. Revenues in our Americas region for the year ended December 31, 2021 declined 3.4%, as compared to the prior year, including a 0.7-percentage point favorable impact from currency, primarily attributed to our North American Xerox 2022 Annual Report 40 Table of Contents operations, which were more significantly impacted by shipping and logistics constraints which were further amplified by labor shortages within the North American transportation industry. Revenue in our EMEA operations decreased 5.9% for the year ended December 31, 2022, as compared to the prior year, with a 10.0-percentage point adverse impact from currency. Absent the adverse impact from currency, revenue increased, driven by strength in equipment sales, reflecting better product availability, and the benefits of recent acquisitions. Revenue in our EMEA operations increased 8.4% for the year ended December 31, 2021, as compared to the prior year, including a 3.8-percentage point favorable impact from currency. ______________ (1) Reflects revenues from service, maintenance and rentals. (2) See "Currency Impact" section for description of constant currency. (3) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT service offerings. Backlog at December 31, 2022 of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. Total revenues included 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 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 transactional IT hardware sales and implementation services. For the year ended December 31, 2022, Post sale revenue increased 0.5% as compared to the prior year and included a 3.4-percentage point benefit from acquisitions, which was partially offset by a 3.7-percentage point adverse impact from currency. For the year ended December 31, 2021, Post sale revenue was flat as compared to the prior year with a 1.7-percentage point favorable impact from currency. Post sale revenue is comprised of the following: Services, maintenance and rentals revenue includes maintenance revenue (including bundled supplies), document services revenue from our Xerox Services offerings and rentals. • For the year ended December 31, 2022, these revenues decreased 3.2% as compared to the prior year period, including a 3.8-percentage point adverse impact from currency. The increase at constant currency 1 was primarily due to increases in contracted price per page and the acquisition of Go Inspire during the third quarter 2022. Contractual Print Services 2 grew modestly compared to 2021, including benefits of Go Inspire, despite a slower-than expected return of employees to offices and ongoing macroeconomic concerns. These benefits were partially offset by the impact of lower royalty revenues from FUJIFILM Business Innovation Corp. (formerly Fuji Xerox Co., Ltd.), lower third-party leasing commissions (resulting from higher FITTLE lease penetration of our XBS operations), and slightly lower page volumes. • For the year ended December 31, 2021, these revenues decreased 2.6% as compared to the prior year, including a 1.7-percentage point favorable impact from currency. The decline at constant currency 1 reflected the impact of lower royalty revenue and lower third-party financing commissions (resulting from higher FITTLE lease penetration of our XBS operations), as well as a lower net population of devices, and a higher mix of services with lower per-page revenues, partially offset by modestly higher page volumes corresponding with the gradual reopening of workplaces, and higher IT revenues, driven by higher demand for our offerings, partially offset by IT hardware product constraints. Supplies, paper and other sales includes unbundled supplies, IT services and other sales. • For the year ended December 31, 2022, these revenues increased 17.5% as compared to the prior year, including a 3.5-percentage point adverse impact from currency. The increase at constant currency 1 primarily reflected higher IT Services revenues, which included revenues from the recent acquisition of Powerland as well as higher paper and supplies revenues driven by higher channel demand. • For the year ended December 31, 2021, these revenues increased 13.1% as compared to the prior year, including a 1.6-percentage point favorable impact from currency. This increase at constant currency 1 primarily reflected higher supplies and paper revenues consistent with the gradual reopening of workplaces, which drove higher demand. We also saw a marginal improvement in inventories carried by channel partners, as confidence in the recovery continued to moderately improve. Paper revenue increased $18 million in 2021 as compared to 2020. Xerox 2022 Annual Report 41 Table of Contents Financing revenue is generated from financed equipment sale transactions. • For the year ended December 31, 2022, Financing revenue decreased 6.3% as compared to the prior year, including a 3.4-percentage point adverse impact from currency. The decline at constant currency 1 reflected a lower average finance receivables balance, due to a decrease in equipment sales in prior periods and declines in Xerox channel originations, due primarily to supply constraints, as well as lower interest rates due to an increase in indirect originations. These declines were partially offset by an increase in originations from third-party dealers and non-Xerox equipment providers as compared to the prior year. • For the year ended December 31, 2021, Financing revenue decreased 2.2% as compared to the prior year, including a 1.9-percentage point favorable impact from currency. The decline at constant currency 1 reflected a lower finance receivables balance due to the run-off of our lease portfolio, lower equipment sales in prior periods and the impact of lower equipment sales in the second half of 2021. However, lease originations increased in 2021 as compared to the prior year, primarily as a result of higher FITTLE lease penetration from our XBS sales unit. _____________ (1) See "Currency Impact" section for description of constant currency. (2) Includes revenues from service, maintenance and rentals. Equipment sales revenue Equipment sales revenue increased 2.7% for the year ended December 31, 2022 as compared to the prior year, including a 3.9-percentage point adverse impact from currency. The increase at constant currency 1 reflected higher demand and improvement in product availability, primarily in the last third of the year, as well as higher prices and a more favorable product and geography mix relative to the prior year. Backlog 2 declined meaningfully on a year-over-year basis exiting 2022 but remained above pre-pandemic levels. Equipment sales revenue increased across all product categories (entry, mid-range, and high-end), led by strength in mid-range. For the year ended December 31, 2021, Equipment sales revenue increased 1.1% as compared to the prior year, including a 1.5-percentage point favorable impact from currency. The decrease at constant currency 1 in Equipment sales revenue in 2021 reflected the significant adverse impact of product supply constraints (consistent with market-wide shortages of computer chips and resins) and global freight disruptions, which were further amplified by labor shortages within the transportation industry. Demand increased during the year as businesses reopened, resulting in a backlog 2 of orders at the end of 2021 that was nearly 150% higher than the prior year and higher than pre-pandemic levels. The supply chain disruption most significantly impacted the availability of our mid-range and high-end devices, causing a negative mix impact on total Equipment sales revenue. Equipment sales revenue increased in EMEA, as the impact of supply chain disruptions was offset by higher demand from our indirect channels serving the Small and mid-sized markets, and from large government deals (in Europe and certain developing market regions). Equipment sales revenue decreased in our Americas operations as shipping and logistics disruptions were more prevalent in the U.S. than other markets. See Segment Review - Print and Other below for additional discussion on Equipment sales revenue. Geographic Sales Channels We also operate a matrix organization that includes a geographic focus that is primarily organized from a sales perspective on the basis of “go-to-market” (GTM) sales channels as follows: • Americas , which includes our sales channels in the U.S. and Canada, as well as Mexico, Brazil and Central and South America. • EMEA , which includes our sales channels in Europe, the Middle East, Africa and India. • Other , primarily includes royalties and licensing revenue. These GTM sales channels are structured to serve a range of customers for our products and services, including financing. Accordingly, we will continue to provide information, primarily revenue related, with respect to our principal GTM sales channels. _____________ (1) See "Currency Impact" section for description of constant currency. (2) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT service offerings. Backlog at December 31, 2022 of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. Xerox 2022 Annual Report 42 Table of Contents Costs, Expenses and Other Income Summary of Key Financial Ratios The following is a summary of our key financial ratios used to assess our performance: Year Ended December 31, (in millions) 2022 2021 2020 2022 B/(W) 2021 B/(W) Gross Profit $ 2,318 $ 2,403 $ 2,626 $ (85) $ (223) RD&E 304 310 311 6 1 SAG 1,760 1,718 1,851 (42) 133 Equipment Gross Margin 25.1 % 24.2 % 27.4 % 0.9 pts. (3.2) pts. Post sale Gross Margin 34.9 % 37.0 % 40.3 % (2.1) pts. (3.3) pts. Total Gross Margin 32.6 % 34.1 % 37.4 % (1.5) pts. (3.3) pts. RD&E as a % of Revenue 4.3 % 4.4 % 4.4 % 0.1 pts. — pts. SAG as a % of Revenue 24.8 % 24.4 % 26.4 % (0.4) pts. 2.0 pts. Pre-tax (Loss) Income (1) $ (328) $ (475) $ 252 $ 147 $ (727) Pre-tax (Loss) Income Margin (1) (4.6) % (6.7) % 3.6 % 2.1 pts. (10.3) pts. Adjusted (2) Operating Profit $ 275 $ 375 $ 464 $ (100) $ (89) Adjusted (2) Operating Margin 3.9 % 5.3 % 6.6 % (1.4) pts. (1.3) pts. _____________ (1) 2022 and 2021 include a pre-tax non-cash Goodwill impairment charges of $412 million and $781 million, respectively. (2) Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure. Pre-tax (Loss) Income Margin Pre-tax (loss) income margin includes Restructuring and related costs, net, the Amortization of intangible assets, Transaction and related costs, net and Other expenses, net, all of which are separately discussed in subsequent sections. Adjusted 1 Operating margin, discussed below, excludes these items. 2022 and 2021 Adjusted 1 Operating margin also excludes the non-cash Goodwill impairment charge of $412 million ($395 million after-tax) and $781 million ($750 million after-tax), respectively. Pre-tax loss margin for the year ended December 31, 2022 of (4.6)% was a 2.1-percentage point increase from the pre-tax loss margin of (6.7)% in 2021. Both periods include the impact of a pre-tax non-cash Goodwill impairment charge - $412 million in 2022 or 5.8% versus $781 million in 2021 or 11.1%; a decrease of 5.3%. The decrease in the Goodwill impairment charge impact was partially offset by the impact of lower Adjusted 1 Operating margin (see Adjusted 1 Operating Margin discussion below), of 1.4-percentage points, increased Restructuring and related costs, net, and Selling, administrative and general expenses (SAG) due to higher stock compensation and bad debt expense. Other expenses, net, also were higher primarily due to increased non-service retirement costs and a $33 million charge associated with the termination of a product supply agreement. Pre-tax loss margin for the year ended December 31, 2021 of (6.7)% decreased 10.3-percentage points compared to 2020. The decrease primarily reflected the pre-tax non-cash Goodwill impairment charge of $781 million, and the impact of lower Adjusted 1 Operating margin (see Adjusted 1 Operating Margin discussion below), of 1.3-percentage points, partially offset by lower Restructuring and related costs, net, Transaction and related costs, net and Other expenses, net. Adjusted 1 Operating Margin Adjusted 1 operating margin for the year ended December 31, 2022 of 3.9% decreased 1.4-percentage points as compared to 2021. The decrease is primarily due to lower gross margin, reflecting the negative impact of supply chain disruption, which caused an unfavorable mix of equipment and services revenue due to product constraints and higher product costs, partially offset by improved logistics costs. The decrease also reflects investments to support future growth, as well as the adverse impacts from higher bad debt expense, the cessation of sales to Russia, and lower royalty revenues from FUJIFILM Business Innovation Corp. These negative impacts were partially offset by higher revenues, favorable currency benefits, and productivity and cost savings associated with our Project Own It transformation actions. Adjusted 1 operating margin for the year ended December 31, 2021 of 5.3% decreased 1.3-percentage points as compared to 2020. The decrease primarily reflects an approximate 1.5-percentage point negative impact of supply chain disruptions, including higher shipping and logistics costs, and an unfavorable mix of equipment revenue due Xerox 2022 Annual Report 43 Table of Contents to product constraints, as well as a negative 0.4-percentage points from lower royalty revenue from FUJIFILM Business Innovation Corp. Adjusted 1 Operating margin also reflected an approximate 1.1-percentage point negative impact of lower savings from temporary government assistance and furlough measures, and an approximate 0.7-percentage point unfavorable impact from lower third-party lease commissions and incremental costs associated with investments to support future growth. These unfavorable factors were partially offset by an approximate 1.5-percentage point favorable impact from lower bad debt expense due to a higher provision in the prior year, reflecting the expected impact to our trade and finance receivable portfolio from the COVID-19 pandemic. Additionally, cost and expense reductions associated with our Project Own It transformation actions favorably impacted Adjusted 1 Operating margin. _____________ (1) Refer to Operating (Loss) Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section. Gross Margin Total gross margin for the year ended December 31, 2022 of 32.6% decreased 1.5-percentage points compared to 2021, primarily reflecting approximately 0.9-percentage points associated with the adverse impacts of higher supply chain costs and capacity restrictions as well as unfavorable product and service mix. In addition, gross margin was negatively impacted by lower third-party financing commissions, lower royalty revenue, benefits from temporary government assistance and furlough measures in the prior year, and investments to support future growth. These negative impacts were partially offset by favorable currency and productivity and cost savings associated with Project Own It transformation actions. Total gross margin for the year ended December 31, 2021 of 34.1% decreased 3.3-percentage points compared to 2020, reflecting unfavorable impacts of approximately 1.5-percentage points associated with supply chain costs and capacity restrictions (including significantly higher freight and shipping costs and constrained availability of higher margin equipment) and 0.8-percentage points associated with investments to support future growth. The remainder of the decline reflects the impact of lower savings from temporary government assistance and furlough measures, lower royalty revenue from FUJIFILM Business Innovation Corp. and higher mix of services with lower per-page revenues. These headwinds were partially offset by the cost savings from our Project Own It transformation actions. Equipment gross margin for the year ended December 31, 2022 of 25.1% increased 0.9-percentage points compared to 2021, primarily reflecting the benefits of price increases, lower freight costs, and favorable mix of products, partially offset by the impact of continued product supply constraints and higher product costs. Equipment gross margin for the year ended December 31, 2021 of 24.2% decreased 3.2-percentage points compared to 2020, primarily reflecting the impact of higher transportation costs and an unfavorable mix of growth in low-end devices associated with product supply constraints, partially offset by higher revenues and favorable transaction currency. Post sale gross margin for the year ended December 31, 2022 of 34.9% decreased 2.1-percentage points compared to 2021, reflecting higher parts costs associated with supply chain disruption, the impacts of recent acquisitions, benefits from temporary government assistance in the prior year, a competitive price environment, and lower royalty revenues and third-party financing commissions. A higher mix of IT services revenues also contributed to the decrease in margins. These negative impacts were partially offset by favorable currency as well as productivity and cost savings associated with Project Own It transformation actions. Post sale gross margin for the year ended December 31, 2021 of 37.0% decreased 3.3-percentage points compared to 2020, reflecting lower savings from temporary government assistance and furlough measures, lower royalty revenues and third-party lease commissions and a higher mix of services with lower per-page revenues, partially offset by restructuring savings associated with Project Own It transformation actions. Research, Development and Engineering Expenses (RD&E) Year Ended December 31, Change (in millions) 2022 2021 2020 2022 2021 R&D $ 246 $ 251 $ 257 $ (5) $ (6) Sustaining engineering 58 59 54 (1) 5 Total RD&E Expenses $ 304 $ 310 $ 311 $ (6) $ (1) RD&E of $304 million and 4.3% as a percentage of revenue for the year ended December 31, 2022 decreased $6 million and 0.1-percentage points, respectively, from 2021, primarily due to investment prioritization and rationalization as well as cost savings from restructuring and productivity actions. Spending in innovation areas was Xerox 2022 Annual Report 44 Table of Contents lower in the fourth quarter 2022 reflecting the decision to scale back activities in PARC and to spin out or shut down certain other businesses and activities. RD&E as a percentage of revenue for the year ended December 31, 2021 of 4.4% was flat compared to 2020. RD&E of $310 million for the year ended December 31, 2021, decreased $1 million from 2020 primarily reflecting savings from restructuring and productivity as well as benefits from the timing of program development cycles, partially offset by investments in our innovation portfolio. Selling, Administrative and General Expenses (SAG) SAG as a percentage of revenue of 24.8% increased 0.4-percentage points for the year ended December 31, 2022 compared to 2021 primarily due to higher administrative and bad debt expenses, partially offset by lower selling expenses as a result of the favorable impact from currency as well as productivity and cost savings associated with our Project Own It transformation actions, and the impact of higher revenues. SAG expenses of $1,760 million for the year ended December 31, 2022 were $42 million higher than 2021, primarily reflecting higher bad debt expense due to the prior year reserve releases and higher stock compensation expense of $21 million. The higher stock compensation expense was primarily due to the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO. The increase was also due to acquisitions, investments in FITTLE, as well as benefits from temporary government assistance in the prior year. These actions were partially offset by lower sales and marketing expenses resulting from lower sales volumes in the first half of 2022, and productivity and cost savings associated with our Project Own It transformation actions, as well as the favorable impact from currency. Our bad debt expense for the year ended December 31, 2022 of $43 million increased $36 million as compared to the prior year period, primarily due to prior year reserve releases of approximately $31 million as well as increased provisions as a result of current macroeconomic conditions. We believe our current reserve position remains sufficient to cover expected losses that may result from future macroeconomic conditions including higher inflation and interest rates. We continue to monitor developments in 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. SAG as a percentage of revenue of 24.4% decreased 2.0-percentage points for the year ended December 31, 2021 compared to 2020 primarily as a result of an approximate 1.5-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 as well as bad debt reversals in the current year. The remaining decrease was primarily due to the impact of lower selling 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 employee benefit programs). SAG expenses of $1,718 million for the year ended December 31, 2021 were $133 million lower than 2020, 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), partially offset by an approximate $30 million adverse impact from translation currency, higher compensation related accruals (corresponding with higher expected operating results) and other investments in the business to support future growth, as well as the impact of lower benefits from temporary government assistance and furlough measures and higher legal expenses and expenses from prior year acquisitions. Bad debt expense for the year ended December 31, 2021 of $7 million decreased $109 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 primarily on our finance receivable portfolio from the COVID-19 pandemic, while 2021 reflected finance receivable reserve reductions of approximately $31 million and lower reserves for trade receivables. The 2021 reductions in our finance and trade reserves reflected improvements in the macroeconomic environment as well as lower write-offs. Xerox 2022 Annual Report 45 Table of Contents Restructuring and Related Costs, Net We incurred restructuring and related costs, net of $65 million, $38 million and $93 million for the three years ended December 31, 2022, 2021 and 2020, respectively. 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: Year Ended December 31, (in millions) 2022 2021 2020 Restructuring and severance costs (1) $ 74 $ 30 $ 107 Asset impairments - leased right-of-use assets (2) 2 3 4 Asset impairments - owned assets (2) 15 12 2 Other contractual termination costs (3) 3 3 3 Other charges/credits (4) (32) (21) (29) Restructuring and asset impairment costs 62 27 87 Retention-related severance/bonuses (5) — 6 4 Contractual severance costs (6) 3 1 (2) Consulting and other costs (7) — 4 4 Total $ 65 $ 38 $ 93 _____________ (1) Reflects gross headcount reductions of approximately 1,940, 525 and 2,000 employees worldwide for the years ended December 31, 2022, 2021 and 2020, respectively. (2) Primarily related to the exit and abandonment of leased and owned facilities, net of any potential sublease income and other recoveries. 2022 owned assets impairments also reflect approximately $5 million associated with the write-off of internal-use software assets due to the shutdown of certain innovation activities. (3) Primarily includes additional costs incurred upon the exit from our facilities including decommissioning costs and associated contractual termination costs. (4) Reflects net gains on the sale of owned land and facilities of $22 million and $4 million for the year ended December 31, 2022 and 2021, respectively, as well as 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 retention period before termination. (6) Primarily reflects severance and other related costs we are contractually required to pay in connection with employees transferred or terminated as part of a shared service arrangement entered into with third party providers. The reversals in 2020 reflect a change in estimates. (7) Represents professional support services associated with our business transformation initiatives. 2022 actions impacted several functional areas, with approximately 40% focused on gross margin improvements and approximately 55% focused on SAG reductions, and the remainder focused on RD&E optimizations. We expect 2023 pre-tax savings of approximately $57 million from our 2022 restructuring actions. 2021 actions impacted several functional areas, with approximately 25% focused on gross margin improvements and approximately 70% focused on SAG reductions, and the remainder focused on RD&E optimizations. The implementation of our Project Own It initiatives as well as other business transformation initiatives is expected to continue to deliver significant cost savings in 2023. While many initiatives are underway and have yet to yield the full transformation benefits expected upon their completion, the changes implemented thus far have improved our cost structure and are beginning to yield longer-term benefits. However, expected savings associated with these initiatives may be offset to some extent by business disruption during the implementation phase as well as investments in new processes and systems until the initiatives are fully implemented and stabilized. Restructuring Summary The restructuring reserve balance as of December 31, 2022, for all programs, was $55 million, of which $51 million is expected to be paid over the next twelve months. Refer to Note 13 - Restructuring Programs in the Consolidated Financial Statements for additional information regarding our restructuring programs. Amortization of Intangible Assets Amortization of intangible assets for the three years ended December 31, 2022 , 2021 and 2020 was $42 million, $55 million and $56 million, respectively. The decreased level of amortization in 2022 was primarily related to the write-off of certain XBS tradenames in prior years as part of our continued efforts to realign and consolidate this sales unit as part of Project Own It, partially offset by intangible amortization related to our recent acquisitions of Powerland and Go Inspire. Refer to Note 6 - Acquisitions and Investments and Note 12 - Goodwill, Net and Intangible Assets, Net in the Consolidated Financial Statements for additional information regarding our intangible assets. Xerox 2022 Annual Report 46 Table of Contents 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 2022 or 2021, respectively, as compared to $18 million in 2020. Transaction and related costs, net in 2020 primarily related to legal and other professional costs associated with the terminated proposal to acquire HP Inc. in early 2020. Worldwide Employment Worldwide employment was approximately 20,500 as of December 31, 2022, a decrease of approximately 2,800 from December 31, 2021. The reduction in headcount resulted from net attrition (attrition net of gross hires), restructuring, as well as the impact of organizational changes including employee transfers associated with shared services arrangements. Other Expenses, Net Year Ended December 31, (in millions) 2022 2021 2020 Non-financing interest expense $ 91 $ 96 $ 94 Interest income (11) (4) (14) Non-service retirement-related costs (12) (89) (29) Gains on sales of businesses and assets (56) (40) (30) Currency losses, net 13 7 3 Loss on early extinguishment of debt 5 — 26 Litigation matters 4 2 (1) Contract termination costs 33 — 3 Excess contribution refund (16) — — Tax indemnification from Conduent — — (9) All other expenses, net 12 4 2 Other expenses, net $ 63 $ (24) $ 45 Non-financing interest expense Non-financing interest expense for the year ended December 31, 2022 of $91 million was $5 million lower than 2021. When non-financing interest expense is combined with financing interest expense (Cost of financing), total interest expense of $199 million decreased by $8 million from the prior year period primarily reflecting a lower average debt balance offset slightly by higher average interest rates. Non-financing interest expense for the year ended December 31, 2021 of $96 million was $2 million higher than 2020. When non-financing interest expense is combined with financing interest expense (Cost of financing), total interest expense of $207 million decreased by $8 million from the prior year period primarily reflecting a lower average debt balance. NOTE : For the years ended December 31, 2022, 2021 and 2020, both Xerox Holdings and Xerox reported total interest expense of $199 million, $207 million and $215 million, respectively, however, the amount reported by Xerox includes $80 million, $80 million and $32 million, respectively, of interest expense to Xerox Holdings on an Intercompany Loan. The Intercompany Loan represents a loan to Xerox of the net proceeds Xerox Holdings Corporation received from its Senior Notes, which was used to repay existing debt of Xerox Corporation. Xerox's interest expense on the Intercompany Loan matches the interest expense recognized by Xerox Holdings on its Senior Notes. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding the Xerox Holdings Corporation/Xerox Corporation Intercompany Loan, our debt activity and information regarding the allocation of interest expense. Interest Income Interest income for the year ended December 31, 2022 was $7 million higher than 2021 primarily due to higher interest rates, partially offset by a lower cash balance, while interest income for the year ended December 31, 2021 was $10 million lower than 2020 primarily due to lower interest rates and a lower cash balance. Xerox 2022 Annual Report 47 Table of Contents Non-service retirement-related costs Non-service retirement-related costs increased $77 million for the year ended December 31, 2022 as compared to 2021 primarily driven by an increase in interest costs due to higher discount rates as well as negative asset returns on certain plan assets. Non-service retirement-related costs decreased $60 million for the year ended December 31, 2021 as compared to 2020 primarily driven by lower discount rates and higher expected returns on plan assets due to higher asset balances. NOTE: Service retirement-related costs, which are included in operating expenses, were $18 million, $24 million and $24 million for December 31, 2022, 2021 and 2020, respectively. Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs. Gains on sales of businesses and assets Gains on sales of businesses and assets increased $16 million and $10 million for the years ended December 31, 2022 and 2021, respectively, as compared to the respective prior year periods, primarily due to higher sales of non-core surplus business assets in both periods. Currency losses, net Currency losses, net of $13 million in 2022 were $6 million higher than 2021 primarily due to increased volatility in the global exchange rates, particularly in our Eurasia and Middle East operations, which could not be fully hedged. Refer to Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information regarding our foreign currency derivatives. Loss on early extinguishment of debt During 2022, we recorded a loss of $1 million related to the write-off of deferred debt issuance costs as a result of the reduction in the Company's Credit Facility from $500 million to $250 million and $4 million related to the early redemption of $700 million of the $1 billion of Xerox Corporation's 4.625% Senior Notes due March 2023. During fourth quarter 2020 we recorded a $26 million loss associated with the early extinguishment of $1,062 million of the Senior Notes due May 2021. The net loss included the payment of a redemption premium of $24 million as well as the write-off of unamortized debt issuance costs and other debt carrying value adjustments. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our Senior Notes and Credit Facility. Contract termination costs For the year ended December 31, 2022, we recorded contract termination costs of $33 million ($25 million after-tax) associated with the early termination of a product supply agreement. The charge primarily reflects the payment of the contractual cancellation fee plus interest and related legal fees. For the year ended December 31, 2020, we recorded contract termination costs of $3 million which was an adjustment to a net $31 million accrual recorded in 2018 and adjusted in 2019 related to a penalty from the early termination of an IT services arrangement in 2018. The adjustment reflected changes in the estimate regarding the expected amount due under a minimum purchase commitment in the agreement. The commitment was settled in 2020 for approximately $34 million. Excess Contribution Refund In the second quarter 2022, we received a refund of $16 million, which reflects the return of excess employer contributions to a defined contribution plan for one of our Latin American subsidiaries as a result of employee forfeitures. The excess contributions accumulated over the past 20 plus years. Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding our defined contribution plans. Tax indemnification from Conduent The credit of $9 million in 2020, represents an indemnification payment received from Conduent as part of the settlement of pre-separation unrecognized tax positions related to Conduent when included in our consolidated return. The equal and offsetting charge to this receipt is recorded in Income tax expense, as part of our obligation to pay the taxing authorities. Xerox 2022 Annual Report 48 Table of Contents Income Taxes The 2022 effective tax rate was 0.9% and was lower than the U.S. federal statutory tax rate of 21% primarily due to the non-deductibility of the Goodwill impairment charge and the tax expense associated with changes in elections made to certain tax positions for recently filed returns, which were only partially offset by benefits from additional tax incentives and the geographical mix of earnings. On an adjusted 1 basis, the 2022 effective tax rate was 21.8% and was higher than the U.S. federal statutory tax rate of 21% primarily due to tax expense associated with changes in elections made to certain tax positions for recently filed returns, offset by benefits from additional tax incentives. The 2021 effective tax rate was 3.6%. On an adjusted 1 basis, the 2021 effective tax rate was 6.5%. Both rates were lower than the U.S. statutory tax rate of 21% primarily due to the benefits from tax law changes, additional incentives as a result of changes in elections made with the filed tax returns, the decrease in deferred tax valuation allowances as well as the remeasurement of uncertain tax positions. The reported effective tax rate also reflected the non-deductibility of the Goodwill impairment charge, while the adjusted 1 effective tax rate also reflects partial offsets for the geographical mix of earnings. The 2020 effective tax rate was 25.4%. On an adjusted 1 basis, the 2020 effective tax rate was 26.3%. These rates were higher than the U.S. statutory tax rate of 21% primarily due to state taxes, non-deductible items on lower pre-tax income and an increase in deferred tax asset valuation allowances partially offset by the impact from various tax law changes. Xerox operations are widely dispersed. However, no one country outside of the U.S. is a significant factor in determining our overall effective tax rate. The tax impact from these non-U.S. operations on our full-year effective tax rate for 2022 was (0.1)%. Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding the geographic mix of income before taxes and the related impacts on our effective tax rate. 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 Investments in Affiliates, at Equity largely consist of several minor investments in entities in the Middle East region. Equity in net income of unconsolidated affiliates was $3 million, $3 million, and $4 million for the three years ended December 31, 2022, 2021 and 2020, respectively. Net (Loss) Income Net loss attributable to Xerox Holdings for the year ended December 31, 2022 was $(322) million, or $(2.15) per diluted share, which includes an after-tax Goodwill impairment charge of $395 million (pre-tax charge of $412 million) or ($2.54) per share. On an adjusted 1 basis, Net income attributable to Xerox Holdings was $189 million, or $1.12 per diluted share. Net loss attributable to Xerox Holdings for the year ended December 31, 2021 was $(455) million, or $(2.56) per diluted share, which includes an after-tax Goodwill impairment charge of $750 million (pre-tax charge of $781 million) or ($4.08) per share. On an adjusted 1 basis, Net income attributable to Xerox Holdings was $293 million, or $1.51 per diluted share. Net income attributable to Xerox Holdings for the year ended December 31, 2020 was $192 million, or $0.84 per diluted share. On an adjusted 1 basis, Net income attributable to Xerox Holdings was $313 million, or $1.41 per diluted share. Refer to Note 25 - (Loss) Earnings per Share in the Consolidated Financial Statements, for additional information regarding the calculation of basic and diluted earnings per share. _____________ (1) Refer to the Net (Loss) Income and EPS reconciliation table in the "Non-GAAP Financial Measures" section. Xerox 2022 Annual Report 49 Table of Contents Other Comprehensive (Loss) Income Other comprehensive loss attributable to Xerox was $(549) million in 2022 and included the following: i) $377 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S. Dollar during 2022; ii) $171 million of net losses from the changes in defined benefit plans primarily due to actuarial losses as a result of negative asset returns, partially offset by the positive impact of currency and the amortization of actuarial losses and settlement losses; and iii) $2 million in unrealized losses, net. Other comprehensive income attributable to Xerox was $344 million in 2021 and included the following: i) $489 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, as well as the favorable impact of currency; ii) $141 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S. Dollar during 2021; and iii) $4 million in unrealized losses, net. Other comprehensive income attributable to Xerox was $314 million in 2020 and included the following: i) net translation adjustment gains of $241 million reflecting the strengthening of our major foreign currencies against the U.S. Dollar during 2020; ii) $69 million of net gains from changes in defined benefit plans primarily reflecting net actuarial gains due to actual returns in excess of expected returns offsetting the impacts from lower discount rates as well as the amortization or recognition through settlement losses of accumulated losses from AOCL. These impacts were partially offset by other losses, primarily due to unfavorable currency; and iii) $4 million in unrealized gains, net. Refer to our discussion of Pension Plan Assumptions in the Application of Critical Accounting Policies section of the MD&A as well as Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding changes in our defined benefit plans. Refer to Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information regarding our foreign currency derivatives and associated unrealized gains and losses. Recent Accounting Pronouncements Refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in the Consolidated Financial Statements for a description of recent accounting pronouncements including the respective dates of adoption and the effects on results of operations and financial conditions. Xerox 2022 Annual Report 50 Table of Contents 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 Financing (FITTLE) . Refer to Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information regarding our reportable segments. Segment Review Year Ended December 31, (in millions) External Revenue Intersegment Revenue (1) Total Segment Revenue % of Total Revenue Segment Profit Segment Margin (2) 2022 Print and Other $ 6,509 $ 158 $ 6,667 92 % $ 238 3.7 % Financing (FITTLE) 598 12 610 8 % 37 6.2 % Total $ 7,107 $ 170 $ 7,277 100 % $ 275 3.9 % 2021 Print and Other $ 6,355 $ 193 $ 6,548 90 % $ 293 4.6 % Financing (FITTLE) 683 12 695 10 % 82 12.0 % Total $ 7,038 $ 205 $ 7,243 100 % $ 375 5.3 % 2020 Print and Other $ 6,290 $ 199 $ 6,489 90 % $ 461 7.3 % Financing (FITTLE) 732 12 744 10 % 3 0.4 % Total $ 7,022 $ 211 $ 7,233 100 % $ 464 6.6 % _____________ (1) Intersegment revenue is primarily commissions and other payments made by the Financing (FITTLE) Segment to the Print and Other Segment for the lease of Xerox equipment placements. (2) Segment margin based on external revenue only. Print and Other Print and Other includes the design, development and sale of document management systems, solutions and services as well as associated technology offerings including IT and software products and services. Revenue Year Ended December 31, % Change (in millions) 2022 2021 2020 2022 2021 Equipment sales $ 1,602 $ 1,554 $ 1,541 3.1% 0.8% Post sale revenue 4,907 4,801 4,749 2.2% 1.1% Intersegment revenue (1) 158 193 199 (18.1)% (3.0)% Total Print and Other Revenue $ 6,667 $ 6,548 $ 6,489 1.8% 0.9% _____________ (1) Reflects revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements. Print and Other revenue increased 1.8% for the year ended December 31, 2022, as compared to 2021, primarily due to higher Post sale revenue as well as higher Equipment sales. Print and Other revenue increased 0.9% for the year ended December 31, 2021, as compared to 2020, primarily due to higher Post sale revenue. Print and Other segment revenue results included the following: Equipment Sales Revenue • For the year ended December 31, 2022, Equipment sales revenue increased 3.1% as compared to 2021, reflecting higher demand, primarily for our Mid-range products, and improvement in product availability in both the Americas and EMEA regions. Backlog 1 declined meaningfully on a year-over-year basis, but remained above pre-pandemic levels. • For the year ended December 31, 2021, Equipment sales revenue increased 0.8% as compared to 2020, primarily reflecting higher revenue from EMEA, as the impact of supply chain disruptions was offset by higher demand from our indirect channels serving the small and mid-sized markets, and from large Xerox 2022 Annual Report 51 Table of Contents government deals (in Europe and certain developing market regions). These revenues were partially offset by the adverse impact of product supply constraints (consistent with market-wide shortages of computer chips and resins) and global freight disruptions, which were further amplified by labor shortages within the transportation industry, as well as lower revenues from our Americas operations as shipping and logistics disruptions were more prevalent in the U.S. than other markets. ______________ (1) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT service offerings. Backlog at December 31, 2022 of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. Post Sale Revenue • For the year ended December 31, 2022, Post sale revenue increased by 2.2% as compared to 2021 primarily driven by growth in our IT Services business, including our recent acquisition of Powerland as well as growth in supplies and paper revenue and Contractual Print Services 1 , which includes the acquisition of Go Inspire. These increases were partially offset by the adverse impacts from currency, lower royalty income and third-party leasing commissions as compared to 2021. • For the year ended December 31, 2021, Post sale revenue increased 1.1% as compared to 2020 primarily driven by higher supplies and paper revenues as well as modestly higher page volumes consistent with the gradual reopening of workplaces and higher IT revenues. The positive impacts were partially offset by lower royalty revenue as well as a lower net population of devices. _____________ (1) Represents revenues from service, maintenance and rentals. Detail by product group is shown below: Revenue % Change CC % Change % of Equipment Revenue (in millions) 2022 2021 2020 2022 2021 2022 2021 2022 2021 2020 Entry $ 280 $ 282 $ 228 (0.7)% 23.7% 3.6% 22.2% 17% 18% 14% Mid-range 1,030 972 986 6.0% (1.4)% 9.7% (2.9)% 64% 62% 63% High-end 295 304 325 (3.0)% (6.5)% 0.8% (7.7)% 18% 19% 21% Other 19 23 25 (17.4)% (8.0)% (17.4)% (8.0)% 1% 1% 2% Equipment sales (1)(2) $ 1,624 $ 1,581 $ 1,564 2.7% 1.1% 6.6% (0.4)% 100% 100% 100% _____________ CC - See "Currency Impact" section for description of constant currency. (1) Refer to the Products and Offerings Definitions section. (2) Includes equipment sales related to the Financing (FITTLE) segment of $22 million, $27 million and $23 million for the three years ended December 31, 2022, 2021 and 2020 respectively. The change at constant currency 1 reflected the following: Entry • For the year ended December 31, 2022, the increase, as compared to 2021, was driven by growth in color devices, and overall price increases, partially offset by the impacts of supply constraints, which most significantly affected our black-and-white devices, and lower sales in the developing regions of EMEA, including lower sales associated with halting shipments to Russia. • For the year ended December 31, 2021, the increase, as compared to 2020, was driven by higher demand for our lower-end printers and MFPs through our indirect channels primarily in EMEA as well as in the Americas, which included markedly higher installs related to government deals in the developing regions of EMEA. We also saw higher demand for entry devices associated with hybrid work environments. 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 • For the year ended December 31, 2022, the increase, as compared to 2021, was primarily driven by improved product availability, price increases, and a more favorable product mix toward color devices in both the Americas and EMEA regions. • For the year ended December 31, 2021, the decrease, as compared to 2020, was primarily driven by the significant impact of global product supply constraints and freight disruptions that had a more severe effect on our U.S. operations. These negative impacts were partially offset by higher demand consistent with the gradual reopening of workplaces, as compared to business shutdowns that reduced purchases of office devices in the prior year. Xerox 2022 Annual Report 52 Table of Contents High-end • For the year ended December 31, 2022, the increase, as compared to 2021, was primarily driven by a favorable mix toward color devices, higher sales in our channels in the U.S. and Canada and increased product availability, partially offset by lower sales of mono devices and lower sales in the developing regions of EMEA, as well as the impact of global product supply constraints and freight disruptions. • For the year ended December 31, 2021, the decrease, as compared to 2020, primarily reflected the impact of global product supply constraints and freight disruptions, resulting in lower sales of color systems in the U.S., as well as lower sales of larger color production engines, which continued to be depressed as a result of our customers' delayed capital investment decisions. These negative impacts were partially offset by improvement in sales of devices in the lower-end of the range and to customers in the small and mid-sized markets, as well as higher sales of black-and-white systems corresponding with our customers' refresh cycles. _____________ (1) See "Currency Impact" section for description of constant currency. Total Installs Installs reflect only new placements of devices (i.e., this 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 our XBS sales unit. Detail by product group (see Products and Offerings Definitions ) is shown below. Installs for the year ended December 31, 2022 were: Entry • 37% increase in color multifunction devices reflecting higher demand for devices at the lower end of the portfolio and increased product availability, primarily in the EMEA region. • 34% decrease in black-and-white multifunction devices primarily due to higher prior year installs in the developing regions of EMEA associated with work-from-home demand, resulting from the COVID-19 pandemic, and halting shipments to Russia, as well as ongoing product constraints. Mid-Range • 9% increase in mid-range color installs primarily in EMEA, reflecting higher installs of our recently launched new-generation of ConnectKey multi-function printers, as well as increased installs of our PrimeLink entry-production color devices in the fourth quarter of 2022. • 13% decrease in black-and-white installs, primarily in the developing regions of EMEA, reflecting the impact of freight disruption and product supply constraints. High-End • 3% decrease in color installs, primarily in EMEA, reflecting the impact of global product constraints and freight disruptions, partially offset by higher installations of our Baltoro cut-sheet inkjet devices. • 15% decrease in black-and-white systems, primarily in the Americas region, reflecting the impact of global product constraints and freight disruptions. Installs for the year ended December 31, 2021 were: Entry • 7% increase in color multifunction devices reflecting higher installs of color personal devices at the low-end of the portfolio and higher installs of ConnectKey devices through our indirect channels in EMEA and North America. • 36% increase in black-and-white multifunction devices reflecting higher activity from low-end devices through indirect channels in developing regions in EMEA, which included large order government deals, and in the Americas. Mid-Range (1) • 8% increase in mid-range color installs primarily in EMEA, reflecting higher installs of our recently launched new-generation of ConnectKey multi-function printers, as well as our PrimeLink entry-production color devices. Xerox 2022 Annual Report 53 Table of Contents • 7% increase in mid-range black-and-white installs reflecting higher installs of our recently launched new generation of ConnectKey multi-function devices, as well as our PrimeLink entry production black-and-white devices. High-End (1) • 12% increase in high-end color installs reflecting primarily growth from our lower-end Versant devices as well as our Iridesse and iGen production systems. • 19% increase in high-end black-and-white systems reflecting higher installs of our Nuvera devices primarily related to cyclical account refreshes in the U.S and EMEA. _____________ (1) Mid-range and High-end color installations exclude FUJIFILM Business Innovation Corp. digital front-end sales; including FUJIFILM Business Innovation Corp. digital front-end sales, Mid-range color devices increased 8% for the year ended December 31, 2021, while High-end color systems increased 12% for the year ended December 31, 2021. Product and Offerings Definitions Our Equipment sale product groupings are as follows: • “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 lower 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 Margin Print and Other segment margin of 3.7% for the year ended December 31, 2022 decreased 0.9-percentage points as compared to 2021. The decrease is primarily due to lower segment gross profit, which includes the impacts of higher freight and production costs associated with product supply constraints, as well as the benefits from temporary government assistance and furlough measures in the prior year, and lower royalty revenues and third-party leasing commissions, partially offset by higher revenues, lower selling expense, reduced RD&E, and productivity and cost savings associated with Project Own It transformation actions. Print and Other segment margin of 4.6% for the year ended December 31, 2021 decreased 2.7-percentage points as compared to 2020. The decrease is primarily due to lower segment gross profit, which reflects the negative impact of supply chain disruptions, including higher shipping and logistics costs and an unfavorable mix of equipment revenue due to product constraints, as well as lower royalty revenue and lower savings from temporary government assistance and furlough measures. These unfavorable factors were partially offset by lower bad debt expense due to a higher provision in the prior year, as well as cost and expense reductions associated with our Project Own It transformation actions. Xerox 2022 Annual Report 54 Table of Contents Financing (FITTLE) Financing (FITTLE) represents a global financing solutions business, primarily enabling the sale of our equipment and services. Revenue Year Ended December 31, (in millions) 2022 2021 2020 % Change % Change Equipment sales $ 22 $ 27 $ 23 (18.5)% 17.4% Financing 207 221 226 (6.3)% (2.2)% Other Post sale revenue (1) 369 435 483 (15.2)% (9.9)% Intersegment revenue (2) 12 12 12 —% —% Total Financing (FITTLE) Revenue $ 610 $ 695 $ 744 (12.2)% (6.6)% _____________ (1) Other Post sale revenue includes operating lease/rental revenues as well as lease renewal and fee income. (2) Reflects revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements. Financing (FITTLE) revenue decreased 12.2% for the year ended December 31, 2022, as compared to 2021, and decreased 6.6% for the year ended December 31, 2021 as compared to 2020. The decrease in revenue for both years was primarily due to lower Other Post sale revenue. Financing (FITTLE) segment revenues included the following: Equipment Sales • For the year ended December 31, 2022, revenue from used equipment sales decreased 18.5%, as compared to 2021, primarily due to reduced end of lease equipment inventory. • For the year ended December 31, 2021, used equipment sales revenue increased 17.4%, as compared to 2020, primarily due to a rebound in economic activity. Financing Revenue • For the year ended December 31, 2022, Financing revenue decreased 6.3%, as compared to 2021, due to a lower average finance receivables balance, as collections continue to outpace originations, and lower Print and Other equipment sales in prior periods. Originations have been impacted by the global product supply constraints and freight disruptions. • For the year ended December 31, 2021, Financing revenue decreased 2.2%, as compared to 2020, primarily reflecting a lower finance receivables balance due to the run-off of our lease portfolio and lower equipment sales in prior periods, as well as the impact of lower equipment sales in the second half of 2021. However, lease originations increased in 2021 as compared to the prior year, primarily as a result of higher lease penetration from our XBS sales unit. Other Post sale revenue • For the year ended December 31, 2022, Other Post sale revenue decreased 15.2%, as compared to 2021, primarily due to a decline in operating lease rental income, which is consistent with lower equipment installs. • For the year ended December 31, 2021, Other Post sale revenue decreased 9.9%, as compared to 2020, primarily due to a decline in operating lease rental income, which is consistent with lower equipment installs. Segment Margin Financing (FITTLE) segment margin of 6.2% for the year ended December 31, 2022 decreased 5.8-percentage points, as compared to 2021, primarily due to lower revenues, higher bad debt expense, including reserve releases of approximately $31 million in 2021, and incremental costs associated with standing up the business, including the Receivables Funding Agreement, partially offset by a reduction in commissions paid to equipment suppliers (primarily the Print and Other segment). Financing (FITTLE) segment margin of 12.0% for the year ended December 31, 2021 increased 11.6-percentage points, as compared to 2020, primarily due to the release of COVID-19 related reserves and improved economic activity in 2021 driving up activity-based revenues. Xerox 2022 Annual Report 55 Table of Contents Capital Resources and Liquidity Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations. Additional liquidity is also provided through access to the financial capital markets and a committed revolving credit facility, as well as through secured borrowings on our finance receivable balances and the sales and assignment of finance lease receivables. 2022 was a challenging year as revenue and profitability were impacted by an uncertain and unpredictable macroeconomic environment, which included increasing supply chain challenges through the third quarter of 2022, amongst other challenges. However, we believe we have sufficient liquidity to manage the business. The following is a summary of our liquidity position: • As of December 31, 2022, total cash, cash equivalents and restricted cash were $1,139 million and apart from restricted cash of $94 million, was readily accessible for use. • Total debt at December 31, 2022 was $3,726 million of which $2,920 million is allocated to and supports the Company's finance assets. The remaining debt of $806 million is attributable to the core business. Debt consists of senior unsecured bonds and secured borrowings through the securitization of finance assets. The Company has a balanced bond maturity ladder over the next few years and expects to repay the remaining $300 million of debt maturing this year in March 2023 with cash on hand. • During 2022, we entered into four new secured borrowing arrangements in support of our financing business increasing our secured debt borrowings to $1,042 million at December 31, 2022, from $561 million at December 31, 2021. In addition, we entered into a $600 million lease receivables sale agreement that provides a committed funding arrangement for new financed lease originations through the sale of those receivables to a third-party funder (Refer to Note 8 - Finance Receivables, Net for additional information regarding this agreement). • As of December 31, 2022, there were no borrowings or letters of credit outstanding under our $250 million Credit Facility and we were in full compliance with the covenants and other provisions of the Credit Facility. • We expect Operating cash flows to be approximately $550 million in 2023, reflecting the benefits of FITTLE's Receivables Funding Agreement. Additionally, we expect that capital expenditures will be approximately $50 million. Cash Flow Analysis The following summarizes our cash flows for the three years ended December 31, 2022, 2021 and 2020, as reported in our Consolidated Statements of Cash Flows in the accompanying Consolidated Financial Statements: Year Ended December 31, Change (in millions) 2022 2021 2020 2022 2021 Net cash provided by operating activities $ 159 $ 629 $ 548 $ (470) $ 81 Net cash used in investing activities (78) (85) (246) 7 161 Net cash used in financing activities (822) (1,310) (416) 488 (894) Effect of exchange rate changes on cash, cash equivalents and restricted cash (29) (16) 10 (13) (26) Decrease in cash, cash equivalents and restricted cash (770) (782) (104) 12 (678) Cash, cash equivalents and restricted cash at beginning of year 1,909 2,691 2,795 (782) (104) Cash, Cash Equivalents and Restricted Cash at End of Year $ 1,139 $ 1,909 $ 2,691 $ (770) $ (782) Cash Flows from Operating Activities Net cash provided by operating activities was $159 million for the year ended December 31, 2022. The $470 million decrease in operating cash from 2021 was primarily due to the following: • $151 million decrease in pre-tax income before depreciation and amortization, provisions, gains on sales of businesses and assets, stock-based compensation, Goodwill impairment, Restructuring and related costs, net and non-service retirement-related costs. • $231 million decrease due to higher inventory levels in anticipation of increased sales activity in the first half of 2023 as the Company continues to work down its backlog and manage continued supply chain challenges. • $144 million decrease due to a current year increase in net finance receivables of $161 million reflecting improved equipment sale activity and the financing business growth strategy offset by lower equipment on operating leases of $17 million. The $161 million use of cash in 2022 is net of $60 million received in connection with the sale of finance receivables in the fourth quarter 2022 under a Receivables Funding Agreement. Refer to Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables. Xerox 2022 Annual Report 56 Table of Contents • $146 million decrease primarily due to lower royalty income as the prior year includes receipts of an upfront prepaid fixed royalty from Fuji Xerox (now known as FUJIFILM Business Innovation Corp.) of $100 million for their continued use of the Xerox brand trademark after the termination of our technology agreement with them and $46 million of royalty payments under the technology agreement prior to its termination. • $89 million decrease from accounts receivable primarily due to higher revenues partially offset by the timing of collections. • $160 million increase from accounts payable primarily due to the timing of supplier and vendor payments and higher spending as compared to the prior year. • $36 million increase from lower contributions to retirement plans primarily as a result of a $30 million decrease in required contributions to our non-U.S. plans, particularly the U.K. pension plan, as well as a $6 million decrease in retiree-health contributions. • $25 million increase from accrued compensation primarily related to the year-over-year timing of payments. • $24 million increase primarily due to lower payments associated with restructuring and related costs as a result of the timing of actions. Net cash provided by operating activities was $629 million for the year ended December 31, 2021. The $81 million increase in operating cash from 2020 was primarily due to the following: • $203 million decrease in pre-tax income before depreciation and amortization, provisions, Goodwill impairment, restructuring and related costs, net and non-service retirement-related costs. • $241 million increase from accounts payable primarily due to higher spending as compared to the prior year and the timing of supplier and vendor payments. • $222 million increase from inventory primarily due to significant cash usage in 2020 as inventory levels increased because of lower demand resulting from the COVID-19 pandemic. • $136 million increase in other current and long-term liabilities, reflecting higher accruals from the increased level of operations as compared to the prior year. • $86 million increase from accrued compensation primarily related to higher employee incentive accruals and year-over-year timing of employee incentive payments. • $57 million net increase primarily due to the receipt of an upfront prepaid fixed royalty from Fuji Xerox of $100 million for their continued use of the Xerox brand trademark subsequent to the termination of our technology agreement with them. • $22 million increase primarily due to lower payments for restructuring and related costs. • $328 million decrease from accounts receivable primarily due to a lower year-over-year decline in revenues as well as the timing of collections. • $163 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 $78 million for the year ended December 31, 2022. The $7 million decrease in the use of cash from 2021 was primarily due to the following: • $28 million decrease from the sales of surplus buildings and land in 2022 of $25 million in the U.S and $7 million in Europe as compared to $4 million in the U.S. in the prior year. • $11 million decrease reflecting lower capital expenditures. • $10 million decrease from the sales of non-core business assets of $48 million in 2022 as compared to $38 million in the prior year. • $40 million increase from acquisitions. • Other investing, net of Xerox Holdings includes $13 million of noncontrolling investments as part of our corporate venture capital fund for 2022 as compared to $8 million in the prior year. Net cash used in investing activities was $85 million for the year ended December 31, 2021. The $161 million change in cash from 2020 was primarily due to the following: • $150 million change due to three acquisitions completed in the current year for $53 million as compared to five acquisitions in the prior year for $203 million. • $11 million increase due to proceeds from the sales of non-core business assets of $38 million in the current year as compared to $27 million in the prior year. • Other investing, net of Xerox Holdings includes $8 million of noncontrolling investments as part of our corporate venture capital fund. Xerox 2022 Annual Report 57 Table of Contents Cash Flows from Financing Activities Net cash used in financing activities for Xerox Holdings was $822 million for the year ended December 31, 2022. The $488 million decrease in the use of cash from 2021 was primarily due to the following: • $775 million decrease due to lower share repurchases in the current year. • $32 million decrease due to lower common stock dividends due to lower outstanding shares. • $321 million increase from net debt activity. 2022 reflects proceeds of $1,193 million on secured financing arrangements offset by payments of $714 million, $300 million on maturing 2022 Senior Notes and $703 million for the early partial redemption of 2023 Senior Notes, which includes a premium payment of $3 million. 2021 reflects payments of $518 million on secured financing arrangements and $1 million of deferred debt issuance costs offset by proceeds of $311 million on a new secured financing arrangement. • Other financing, net includes receipts for noncontrolling investments of $6 million in 2022 as compared to $15 million in the prior year. Net cash used in financing activities for Xerox was $835 million for the year ended December 31, 2022. 2022 reflects proceeds of $1,193 million on secured financing arrangements offset by payments of $714 million, $300 million on maturing 2022 Senior Notes and $703 million for the early partial redemption of 2023 Senior Notes, which includes a premium payment of $3 million. 2021 reflects payments of $518 million on secured financing arrangements and $1 million of deferred debt issuance costs offset by proceeds of $311 million on a new secured financing arrangement. Distributions to Xerox Holdings were $312 million and were primarily used to fund Xerox Holdings' continuing dividends to shareholders and share repurchases. Xerox's distributions to the parent are expected to continue with those distributions primarily being used by Xerox Holdings to fund dividends and share repurchases. Net cash used in financing activities for Xerox Holdings was $1,310 million for the year ended December 31, 2021. The $894 million increase in the use of cash from 2020 was primarily due to the following: • $588 million increase due to share repurchases in the current year of $888 million compared to share repurchases in the prior year of $300 million. • $341 million increase from net debt activity. 2021 reflects payments of $518 million on secured financing arrangements and $1 million of deferred debt issuance costs offset by proceeds of $311 million on a new secured financing arrangement. 2020 reflects payments of $2,137 million on Senior Notes, $73 million for secured financing arrangements and $16 million of deferred debt issuance costs offset by proceeds of $1,507 million from a Senior Notes offering and $840 million from secured financing arrangements. • $24 million decrease due to lower common stock dividends due to lower outstanding shares. • Other financing, net includes receipts for noncontrolling investments of $5 million in Eloque, a joint venture for the remote monitoring of critical infrastructure assets and $10 million in CareAR Holdings LLC. Net cash used in financing activities for Xerox was $1,318 million for the year ended December 31, 2021. 2021 reflects payments of $518 million on secured financing arrangements and $1 million of deferred debt issuance costs offset by proceeds of $311 million on a new secured financing arrangement. 2020 reflects payments of $2,137 million on Senior Notes, $73 million for secured financing arrangements and $3 million of deferred debt issuance costs offset by proceeds of $840 million from secured financing arrangements. Distributions to Xerox Holdings were $1,120 million and were primarily used to fund Xerox Holdings continuing dividends to shareholders and share repurchases. Xerox's distributions to the parent are expected to continue with those distributions primarily being used by Xerox Holdings to fund dividends and share repurchases. Cash, Cash Equivalents and Restricted Cash Refer to Note 14 - Supplementary Financial Information in the 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 leases have remaining terms of up to twelve years and a variety of renewal and/or termination options. As of December 31, 2022 and 2021, total operating lease liabilities were $229 million and $283 million, respectively. Refer to Note 11 - Lessee in the Consolidated Financial Statements for additional information regarding our right-of-use (ROU) assets and lease obligations associated with our operating leases. Xerox 2022 Annual Report 58 Table of Contents Debt and Customer Financing Activities The following summarizes our total debt: December 31, (in millions) 2022 2021 Xerox Holdings Corporation $ 1,500 $ 1,500 Xerox Corporation 1,200 2,200 Xerox - Other Subsidiaries (1) 1,042 561 Subtotal - Principal debt balance 3,742 4,261 Debt issuance costs Xerox Holdings Corporation (9) (11) Xerox Corporation (4) (6) Xerox - Other Subsidiaries (1) (5) (1) Subtotal - Debt issuance costs (18) (18) Net unamortized premium 2 3 Total Debt $ 3,726 $ 4,246 _____________ (1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of finance receivables. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity. Finance Assets and Related Debt We provide lease equipment financing to our customers. Our lease contracts permit customers to pay for equipment over time rather than at the date of installation. Our investment in these contracts is reflected in total finance assets, net. We primarily fund our customer financing activity through cash generated from operations, cash on hand, sales and securitizations of finance receivables and proceeds from capital markets offerings. We have arrangements, in certain international countries where third-party leasing companies or financial institutions independently provide lease financing directly to our customers, on a non-recourse basis to Xerox. In these arrangements, we sell and transfer title of the equipment to these entities. Generally, we have no continuing ownership rights in the equipment subsequent to its sale; therefore, the unrelated third-party finance receivable and debt are not included in our Consolidated Financial Statements. The following represents our total finance assets, net associated with our lease and finance operations: December 31, (in millions) 2022 2021 Total finance receivables, net (1) $ 3,102 $ 3,070 Equipment on operating leases, net 235 253 Total Finance assets, net (2) $ 3,337 $ 3,323 ____________ (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 Consolidated Balance Sheets. (2) The change from December 31, 2021 includes a decrease of $92 million due to currency. 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 receivables, 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. Approximately 40% of our Total Finance assets, net balance at December 31, 2022 includes indirect lease financing primarily provided to end-user customers who purchased Xerox and non-Xerox equipment sold through distributors, resellers and dealers. Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt: December 31, (in millions) 2022 2021 Finance receivables debt (1) $ 2,714 $ 2,687 Equipment on operating leases debt 206 221 Financing debt 2,920 2,908 Core debt 806 1,338 Total Debt $ 3,726 $ 4,246 _____________ (1) Finance receivables debt is the basis for our calculation of “Cost of financing” expense in the Consolidated Statements of (Loss) Income. Xerox 2022 Annual Report 59 Table of Contents At December 31, 2022, leverage was assessed against the total debt of Xerox Holdings Corporation and Xerox Corporation since the debt held by Xerox Holdings Corporation is guaranteed by Xerox Corporation and the funds from that borrowing were contributed in full by Xerox Holdings Corporation to Xerox Corporation. In 2023, we expect to continue leveraging our finance assets on a total debt basis at an assumed 7:1 ratio of debt to equity. Capital Market/Debt Activity During 2022 we received $1,193 million from new secured financing arrangements and paid $714 million on existing secured financing arrangements, which included $248 million associated with the early extinguishment of an existing arrangement that was funded through a new secured financing arrangement. We also repaid $1,000 million of Senior Notes in 2022 with $700 million related to the early payment of our $1,000 million Senior Notes due in March 2023. As a result of the downgrade of our debt ratings in February 2022 by one of the rating agencies, the coupon rate on our Senior Notes due 2023 increased by 0.25% to 4.625% effective March 15, 2022. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity, as well as our secured financing arrangements. Financial Instruments Refer to Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information. Sales of Accounts Receivable The net impact from the sales of accounts receivable on reported net cash flows is summarized below: Year Ended December 31, (in millions) 2022 2021 2020 Estimated increase (decrease) to net cash flows (1) $ 67 $ (26) $ (41) _____________ (1) Represents the difference between current and prior year accounts receivable sales adjusted for the effects of currency. Refer to Note 7 - Accounts Receivable, Net in the Consolidated Financial Statements for additional information regarding our accounts receivable sales arrangements. Share Repurchase Programs - Treasury Stock In October 2021, the Xerox Holdings Corporation's Board of Directors authorized a $500 million share repurchase program (exclusive of any commissions and other transaction fees and costs related thereto). During 2022, Xerox Holdings Corporation repurchased 5.2 million shares of our common stock for an aggregate cost of $113 million, including fees. There is no remaining authorization at December 31, 2022. During 2021, Xerox Holdings Corporation repurchased 40.2 million shares of our common stock for an aggregate cost of approximately $888 million, including fees. During 2020, Xerox Holdings Corporation repurchased 15.6 million shares of our common stock for an aggregate cost of $300 million, including fees. Refer to Note 22 - Shareholders' Equity in the Consolidated Financial Statements for additional information regarding our share repurchase program. Dividends Aggregate dividends of $159 million, $181 million and $209 million were declared on common stock in 2022, 2021 and 2020, respectively. The decrease in dividends since 2020 primarily reflects lower shares of common stock outstanding as a result of our share repurchase programs. Aggregate dividends of $14 million were declared on preferred stock in 2022, 2021 and 2020, respectively. Xerox 2022 Annual Report 60 Table of Contents 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 in line with historical and projected cash flows and are spread over the next five years as follows: (in millions) Xerox Holdings Corporation Xerox Corporation Xerox - Other Subsidiaries (1) Total 2023 - Q1 $ — $ 300 $ 147 $ 447 2023 - Q2 — — 146 146 2023 - Q3 — — 139 139 2023 - Q4 — — 130 130 2024 — 300 368 668 2025 750 — 112 862 2026 — — — — 2027 — — — — 2028 and thereafter 750 600 — 1,350 Total $ 1,500 $ 1,200 $ 1,042 $ 3,742 _____________ (1) Represents subsidiaries of Xerox Corporation. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt. Contractual Cash Obligations and Other Commercial Commitments and Contingencies At December 31, 2022, we had the following contractual cash obligations and other commercial commitments and contingencies: (in millions) 2023 2024 2025 2026 2027 Thereafter Total debt (1) $ 862 $ 668 $ 862 $ — $ — $ 1,350 Interest on debt (1) 177 145 126 87 78 396 Minimum operating lease commitments (2) 86 54 38 32 17 30 Defined benefit pension plans 75 — — — — — Retiree health payments 25 21 20 18 17 68 Estimated Purchase Commitments: FUJIFILM Business Innovation Corp. (3) 1,175 — — — — — Flex (4) 115 — — — — — HCL (5) 230 188 185 46 — — TCS (6) 66 38 33 31 20 — Other (7) 117 47 31 11 1 — Total $ 2,928 $ 1,161 $ 1,295 $ 225 $ 133 $ 1,844 _____________ (1) Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding debt and interest on debt. (2) Refer to Note 11 – Lessee in the Consolidated Financial Statements for additional information related to minimum operating lease commitments. (3) FUJIFILM Business Innovation Corp.: The amount included in the table reflects our estimate of purchases over the next year and is not a contractual commitment. (4) Flex: We outsource certain manufacturing activities to Flex. The amount included in the table reflects our estimate of purchases over the next year and is not a contractual commitment. In the past two years, actual purchases from Flex averaged approximately $127 million per year. (5) HCL: Shared services arrangement with HCL Technologies. (6) TCS: Shared services arrangement with Tata Consulting Services. (7) Other purchase commitments: We enter into other purchase commitments with vendors in the ordinary course of business. Our policy with respect to all purchase commitments is to record losses, if any, when they are probable and reasonably estimable. We currently do not have, nor do we anticipate, material loss contracts. Pension and Retiree Health Benefit Plans We sponsor defined benefit pension plans and retiree health plans that require periodic cash contributions. Our 2022 cash contributions for these plans were $105 million for our defined benefit pension plans and $19 million for our retiree health plans. In 2023, based on current actuarial calculations, we expect to make contributions of approximately $75 million to our worldwide defined benefit pension plans and $25 million to our retiree health benefit plans. Approximately $25 million Xerox 2022 Annual Report 61 Table of Contents of estimated contributions are included in 2023 for our U.S. tax-qualified defined benefit plans. However, once the January 1, 2023 actuarial valuations and projected results as of the end of the 2023 measurement year are available, actual contributions required to meet minimum funding requirements will be determined and finalized and may change from the current estimate. In addition, non-U.S. Defined benefit pension plan contributions in 2023 do not include further contributions to our U.K. defined benefit pension plan since none are required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees. Contributions to our defined benefit pension plans in subsequent years will depend on a number of factors, including the investment performance of plan assets and discount rates as well as potential legislative and plan changes. Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain unfunded (by design) or are under-funded. The projected benefit obligations for these benefit plans at December 31, 2022 exceeded the fair value of the assets of those plans by $1,142 million, which is a decrease of $192 million from the balance at December 31, 2021, of $1,334 million. The decrease is largely due to increased discount rates and the resultant decrease in projected benefit obligations. Cash contributions to our retiree health plans are made each year to cover medical claims costs incurred during the year. The amounts reported in the above table as retiree health payments represent our estimate of future benefit payments. Our retiree health benefit plans are non-funded and are primarily related to domestic operations. The unfunded balance of our retiree health plans of $209 million at December 31, 2022 decreased $94 million from the balance at December 31, 2021, primarily due to increased discount rates, benefit payments and plan amendments to our U.S. Retiree Health plan, which further reduced future benefits and the benefit obligation. Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding contributions to our defined benefit pension and retiree health plans. FUJIFILM Business Innovation Corp. We purchased products, including parts and supplies, from FUJIFILM Business Innovation Corp. totaling $1,175 million, $966 million and $1,077 million in 2022, 2021 and 2020, respectively. Our product supply agreements with FUJIFILM Business Innovation Corp. are designed to support the entire product lifecycle, end-to-end, including the availability of spare parts, consumables and technical support throughout the time such products are with our customers. Our purchase orders under such agreements are made in the normal course of business and typically have a lead time of three months. Shared Services Arrangements 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. The shared services arrangement with HCL includes a remaining aggregate spending commitment of approximately $649 million over the next 4 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. 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 and accounting organization. The shared services arrangement with TCS includes a remaining aggregate spending commitment of approximately $188 million over the next 5 years. We can terminate the arrangement subject to payment of termination fees that decline over the term. We incurred net charges of $220 million, $207 million and $185 million for the three years ended December 31, 2022, 2021, and 2020, respectively, related to these shared services arrangements. The cost has been allocated to the various functional expense lines in the Consolidated Statements of (Loss) Income based on an assessment of the nature and amount of the costs incurred for the various transferred functions. Brazil Contingencies Our Brazilian operations have received or been the subject of numerous governmental assessments related to indirect and other taxes. These tax matters principally relate to claims for taxes on the internal transfer of inventory, municipal service taxes on rentals and gross revenue taxes. We are disputing these tax matters and intend to vigorously defend our positions. Based on the opinion of legal counsel and current reserves for those matters deemed probable of loss, we do not believe that the ultimate resolution of these matters will materially impact our results of operations, financial position or cash flows. Refer to Note 20 - Contingencies and Litigation in the Consolidated Financial Statements for additional information regarding our Brazil Contingencies. Xerox 2022 Annual Report 62 Table of Contents Other Contingencies and Commitments As more fully discussed in Note 20 - Contingencies and Litigation in the Consolidated Financial Statements, we are involved in a variety of claims, lawsuits, investigations and proceedings concerning: securities law; governmental entity contracting, servicing and procurement law; intellectual property law; environmental law; employment law; the Employee Retirement Income Security Act (ERISA); and other laws and regulations. In addition, guarantees, indemnifications and claims may arise during the ordinary course of business from relationships with suppliers, customers and non-consolidated affiliates. Nonperformance under a contract including a guarantee, indemnification or claim could trigger an obligation of the Company. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Should developments in any of these areas cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, financial position and cash flows in the period or periods in which such change in determination, judgment or settlement occurs. Unrecognized Tax Benefits As of December 31, 2022, we had $110 million of unrecognized tax benefits. This represents the tax benefits associated with various tax positions taken, or expected to be taken, on domestic and foreign tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution. The resolution or settlement of these tax positions with the taxing authorities is at various stages and, therefore, we are unable to make a reliable estimate of the eventual cash flows by period that may be required to settle these matters. In addition, certain of these matters may not require cash settlement due to the existence of credit and net operating loss carryforwards, as well as other offsets, including the indirect benefit from other taxing jurisdictions that may be available. Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding unrecognized tax benefits. Off-Balance Sheet Arrangements We may occasionally utilize off-balance sheet arrangements in our operations (as defined by the SEC Financial Reporting Release 67 (FRR-67), “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations”). We enter into the following arrangements that have off-balance sheet elements: • We have a facility in Europe where we sell certain accounts receivables on a recurring basis. Refer to Note 7 - Accounts Receivable, Net in the Consolidated Financial Statements for further information regarding accounts receivable sales. • During 2022, the Company entered into a Master Agreement for the Sale and Assignment of Lease Receivables that establishes a committed sale and purchase facility pursuant to which the Company agreed to offer for sale certain eligible pools of finance receivables relating to equipment leases on a monthly basis in transactions intended to be true sales. In December 2022, the Company sold approximately $60 million in principal balances of lease receivables under this agreement and will continue to service those receivables for which we will earn a servicing fee. Refer to Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for further information regarding this arrangement. As of December 31, 2022, we do not believe we have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. In addition, see the preceding table for the Company's contractual cash obligations and other commercial commitments and contingencies and Note 20 - Contingencies and Litigation in the Consolidated Financial Statements for additional information regarding contingencies, guarantees, indemnifications and warranty liabilities. Xerox 2022 Annual Report 63 Table of Contents 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 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 (Loss) Income and Earnings per share ( Adjusted 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 is 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 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 Xerox 2022 Annual Report 64 Table of Contents excluding these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis. Discrete, unusual or infrequent items: We excluded the following items given their discrete, unusual or infrequent nature and their impact on our results for the period: • Non-cash Goodwill impairment charge • Contract termination costs • Accelerated share vesting - stock compensation expense associated with the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO • Losses on early extinguishment of debt 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 the Currency Impact section in the MD&A for a discussion of this measure and its use in our analysis of revenue growth. Net (Loss) Income and EPS reconciliation Year Ended December 31, 2022 2021 2020 (in millions, except per share amounts) Net (Loss) Income EPS Net (Loss) Income EPS Net Income EPS Reported (1) $ (322) $ (2.15) $ (455) $ (2.56) $ 192 $ 0.84 Adjustments: Goodwill impairment 412 781 — Restructuring and related costs, net 65 38 93 Amortization of intangible assets 42 55 56 Non-service retirement-related costs (12) (89) (29) Transaction and related costs, net — — 18 Contract termination costs 33 — 3 Accelerated share vesting 21 — — Loss on early extinguishment of debt 5 — 26 Income tax on adjustments (2) (55) (37) (46) Adjusted $ 189 $ 1.12 $ 293 $ 1.51 $ 313 $ 1.41 Dividends on preferred stock used in adjusted EPS calculation (3) $ 14 $ 14 $ 14 Weighted average shares for adjusted EPS (3) 157 185 211 Estimated fully diluted shares at December 31, 2022 (4) 165 _____________ (1) Net (loss) income and EPS attributable to Xerox Holdings. (2) Refer to Effective Tax Rate reconciliation. (3) 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. (4) Represents common shares outstanding at December 31, 2022, plus potential dilutive common shares used for the calculation of adjusted diluted earnings per share for the year ended December 31, 2022. The amount includes shares associated with Xerox Holdings Corporation's Series A convertible preferred stock. Xerox 2022 Annual Report 65 Table of Contents Effective Tax Rate reconciliation Year Ended December 31, 2022 2021 2020 (in millions) Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax Income Income Tax Expense Effective Tax Rate Reported (1) $ (328) $ (3) 0.9 % $ (475) $ (17) 3.6 % $ 252 $ 64 25.4 % Goodwill impairment (2) 412 17 781 31 — — Non-GAAP Adjustments (2) 154 38 4 6 167 46 Adjusted (3) $ 238 $ 52 21.8 % $ 310 $ 20 6.5 % $ 419 $ 110 26.3 % _____________ (1) Pre-tax (Loss) Income and Income tax (benefit) expense. (2) Refer to Net (Loss) 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 (Loss) Income under ASC 740, which employs an annual effective tax rate method to the results. Operating (Loss) Income and Margin reconciliation Year Ended December 31, 2022 2021 2020 (in millions) (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin Profit Revenue Margin Reported (1) $ (328) $ 7,107 (4.6) % $ (475) $ 7,038 (6.7) % $ 252 $ 7,022 3.6 % Adjustments: Goodwill impairment 412 781 — Restructuring and related costs, net 65 38 93 Amortization of intangible assets 42 55 56 Transaction and related costs, net — — 18 Accelerated share vesting 21 — — Other expenses, net (2) 63 (24) 45 Adjusted $ 275 $ 7,107 3.9 % $ 375 $ 7,038 5.3 % $ 464 $ 7,022 6.6 % _____________ (1) Pre-tax (Loss) Income. (2) Includes non-service retirement-related costs. Xerox 2022 Annual Report 66 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Financial Risk Management We are exposed to market risk from changes in 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 utilized derivative financial instruments to hedge economic exposures, as well as reduce earnings and cash flow volatility resulting from shifts in market rates. Recent market events have not caused 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 16 - Financial Instruments in the Consolidated Financial Statements for additional discussion on our financial risk management. Foreign Exchange Risk Management Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates at December 31, 2022, it would not significantly change the value of foreign currency-denominated assets and liabilities as all material currency asset and liability exposures were economically hedged as of December 31, 2022. A 10% appreciation or depreciation of the U.S. Dollar against all currencies from the quoted foreign currency exchange rates at December 31, 2022 would have an impact on our cumulative translation adjustment portion of equity of approximately $320 million. The net amount invested in foreign subsidiaries and affiliates, primarily Xerox Limited and Xerox Canada Inc. and translated into U.S. Dollars using the year-end exchange rates, was approximately $3.2 billion at December 31, 2022. Interest Rate Risk Management The consolidated average interest rate associated with our total debt for 2022, 2021 and 2020 approximated 5.3%, 4.8%, and 4.8%, respectively. Interest expense includes the impact of our interest rate derivatives. Nearly all of our customer-financing assets earn fixed rates of interest. The interest rates on a significant portion of the Company's term debt are fixed. As of December 31, 2022, of our total principal debt of $3,742 million, a total of $1,042 million of secured borrowings carried variable interest rates, of which $847 million has a variable interest rate based on SOFR/CDOR plus a spread and the remaining $195 million has a variable interest rate based on the financial institution's cost of funds plus a spread. The fair market values of our fixed-rate financial instruments are sensitive to changes in interest rates. At December 31, 2022, a 10% increase in market interest rates would reduce the fair values of such financial instruments by approximately $85 million. As of December 31, 2022, of $1,042 million of secured borrowings, $623 million are hedged to a fixed rate through the use of Interest rate caps and swaps. A 10% change in the yield curve, representing 20 - 30 basis points, will increase the derivative mark-to-market from $7 million to $9 million. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our interest expense and our secured borrowings. Item 8. Financial Statements and Supplementary Data Xerox 2022 Annual Report 67 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Xerox Holdings Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Xerox Holdings Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of (loss) income, of comprehensive (loss) income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Xerox 2022 Annual Report 68 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Realizability of Deferred Tax Assets - U.S. Foreign Tax Credit Carryforwards As described in Note 19 to the consolidated financial statements, the Company has recorded $772 million of deferred tax assets, net of a valuation allowance of $366 million, as of December 31, 2022 , which includes U.S. foreign tax credit carryforwards with a limited life. Management records the estimated future tax effects of temporary differences between the tax bases of assets and amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. Management applied judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances, in particular the realizability of U.S. foreign tax credit carryforwards with a limited life. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, management considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets related to the U.S. foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management in assessing the realizability of deferred tax assets related to the Company's U.S. foreign tax credit carryforwards with a limited life; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income; (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the realizability of deferred tax assets, including controls over projected future taxable income. These procedures also included, among others, evaluating management’s assessment of the realizability of deferred tax assets related to the Company's U.S. foreign tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income. Evaluating management’s assumptions related to projected future taxable income involved evaluating whether the assumptions were reasonable by considering historical profitability as well as other audit evidence related to management’s forecasts. Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s application of income tax law in determining projected future taxable income and the assessment of the realizability of deferred tax assets related to the Company's U.S. foreign tax credit carryforwards with a limited life. Interim Goodwill Impairment Assessment - Print and Other Reporting Unit As described in Notes 1, 2 and 12 to the consolidated financial statements, the Company has recorded $2,820 million of goodwill as of December 31, 2022 which is allocated to the Print and Other reporting unit. Management assesses goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. If the fair value exceeds the carrying value, goodwill is not considered impaired. If the carrying value exceeds the fair value, goodwill is considered impaired and management would recognize an impairment loss for the excess. In a quantitative impairment test, management assesses goodwill by comparing the carrying amount of the entity to its fair value, and the fair value of the entity is determined by using a weighted combination of an income approach and a market approach. In the third quarter 2022, management determined there was a triggering event requiring an interim quantitative assessment of goodwill. After completing the interim impairment test, management concluded that the estimated fair value of the Print and Other reporting unit had declined below its carrying value and Xerox 2022 Annual Report 69 Table of Contents recognized an after-tax non-cash impairment charge of $395 million ($412 million pre-tax) in the third quarter 2022. As disclosed by management, the income approach is based on the discounted cash flow method that uses management's estimates of forecasted future financial performance including revenues, gross margins, operating expenses, and taxes. Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risks unique to the subject cash flows. The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Print and Other reporting unit is a critical audit matter are (i) the significant judgment by management in developing the fair value estimate of the Print and Other reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow method and significant assumptions related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s interim goodwill impairment assessment, including controls over the valuation of the Print and Other reporting unit and the controls over the development of the significant assumptions used in developing the fair value estimate. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Print and Other reporting unit; (ii) evaluating the appropriateness of the discounted cash flow method; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method; and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate. Evaluating management’s assumptions related to forecasted revenues, gross margins, operating expenses, and taxes involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Print and Other reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow method and the reasonableness of the discount rate significant assumption. /s/ PricewaterhouseCoopers LLP Stamford, Connecticut February 23, 2023 We have served as the Company’s or its predecessor's auditor since 2001. Xerox 2022 Annual Report 70 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholder of Xerox Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Xerox Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of (loss) income, of comprehensive (loss) income, of shareholder's equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also i ncluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over finan ci al reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Xerox 2022 Annual Report 71 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Realizability of Deferred Tax Assets - U.S. Foreign Tax Credit Carryforwards As described in Note 19 to the consolidated financial statements, the Company has recorded $772 million of deferred tax assets, net of a valuation allowance of $366 million, as of December 31, 2022 , which includes U.S. foreign tax credit carryforwards with a limited life. Management records the estimated future tax effects of temporary differences between the tax bases of assets and amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. Management applied judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances, in particular the realizability of U.S. foreign tax credit carryforwards with a limited life. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, management considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The principal considerations for our determination that performing procedures relating to the realizability of deferred tax assets related to the U.S. foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management in assessing the realizability of deferred tax assets related to the Company's U.S. foreign tax credit carryforwards with a limited life; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s significant assumptions related to projected future taxable income; (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the realizability of deferred tax assets, including controls over projected future taxable income. These procedures also included, among others, evaluating management’s assessment of the realizability of deferred tax assets related to the Company's U.S. foreign tax credit carryforwards with a limited life, including evaluating the reasonableness of the assumptions related to projected future taxable income. Evaluating management’s assumptions related to projected future taxable income involved evaluating whether the assumptions were reasonable by considering historical profitability as well as other audit evidence related to management’s forecasts. Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s application of income tax law in determining projected future taxable income and the assessment of the realizability of deferred tax assets related to the Company's U.S. foreign tax credit carryforwards with a limited life. Interim Goodwill Impairment Assessment - Print and Other Reporting Unit As described in Notes 1, 2 and 12 to the consolidated financial statements, the Company has recorded $2,820 million of goodwill as of December 31, 2022 which is allocated to the Print and Other reporting unit. Management assesses goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. If the fair value exceeds the carrying value, goodwill is not considered impaired. If the carrying value exceeds the fair value, goodwill is considered impaired and management would recognize an impairment loss for the excess. In a quantitative impairment test, management assesses goodwill by comparing the carrying amount of the entity to its fair value, and the fair value of the entity is determined by using a weighted combination of an income approach and a market approach. In the third quarter 2022, management determined there was a triggering event requiring an interim quantitative assessment of goodwill. After completing the interim impairment test, management Xerox 2022 Annual Report 72 Table of Contents concluded that the estimated fair value of the Print and Other reporting unit had declined below its carrying value and recognized an after-tax non-cash impairment charge of $395 million ($412 million pre-tax) in the third quarter 2022. As disclosed by management, the income approach is based on the discounted cash flow method that uses management’s estimates of forecasted future financial performance including revenues, gross margins, operating expenses, and taxes. Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risks unique to the subject cash flows. The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Print and Other reporting unit is a critical audit matter are (i) the significant judgment by management in developing the fair value estimate of the Print and Other reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow method and significant assumptions related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s interim goodwill impairment assessment, including controls over the valuation of the Print and Other reporting unit and the controls over the development of the significant assumptions used in developing the fair value estimate. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Print and Other reporting unit; (ii) evaluating the appropriateness of the discounted cash flow method; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method; and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenues, gross margins, operating expenses, and taxes, and the discount rate. Evaluating management’s assumptions related to forecasted revenues, gross margins, operating expenses, and taxes involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Print and Other reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow method and the reasonableness of the discount rate significant assumption. /s/ PricewaterhouseCoopers LLP Stamford, Connecticut February 23, 2023 We have served as the Company’s auditor since 2001. Xerox 2022 Annual Report 73 Table of Contents Xerox Holdings Corporation Reports of Management Management's Responsibility for Financial Statements The management of Xerox Holdings Corporation is responsible for the integrity and objectivity of all information presented in this annual report. The Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management's best estimates and judgments. Management believes the Consolidated Financial Statements fairly reflect the form and substance of transactions and that the financial statements fairly represent Xerox Holdings Corporation's financial position and results of operations. The Audit Committee of the Xerox Holdings Corporation Board of Directors, which is composed solely of independent directors, meets regularly with the independent auditors, PricewaterhouseCoopers LLP, the internal auditors and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors and internal auditors have free access to the Audit Committee. Management's Report on Internal Control Over Financial Reporting The management of Xerox Holdings Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive, financial and accounting officers, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control - Integrated Framework (2013) ” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the above evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2022. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein. /s/ S TEVEN J. B ANDROWCZAK /s/ X AVIER H EISS /s/ M IRLANDA G ECAJ Chief Executive Officer Chief Financial Officer Chief Accounting Officer Xerox 2022 Annual Report 74 Table of Contents Xerox Corporation Reports of Management Management's Responsibility for Financial Statements The management of Xerox Corporation is responsible for the integrity and objectivity of all information presented in this annual report. The Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management's best estimates and judgments. Management believes the Consolidated Financial Statements fairly reflect the form and substance of transactions and that the financial statements fairly represent Xerox Corporation's financial position and results of operations. The Audit Committee of the Xerox Holdings Corporation Board of Directors, which is composed solely of independent directors, meets regularly with the independent auditors, PricewaterhouseCoopers LLP, the internal auditors and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors and internal auditors have free access to the Audit Committee. Management's Report on Internal Control Over Financial Reporting The management of Xerox Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive, financial and accounting officers, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control - Integrated Framework (2013) ” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the above evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2022. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein. /s/ S TEVEN J. B ANDROWCZAK /s/ X AVIER H EISS /s/ M IRLANDA G ECAJ Chief Executive Officer Chief Financial Officer Chief Accounting Officer Xerox 2022 Annual Report 75 Table of Contents Xerox Holdings Corporation Consolidated Statements of (Loss) Income Year Ended December 31, (in millions, except per-share data) 2022 2021 2020 Revenues Sales $ 2,800 $ 2,582 $ 2,449 Services, maintenance and rentals 4,100 4,235 4,347 Financing 207 221 226 Total Revenues 7,107 7,038 7,022 Costs and Expenses Cost of sales 2,002 1,862 1,742 Cost of services, maintenance and rentals 2,679 2,662 2,533 Cost of financing 108 111 121 Research, development and engineering expenses 304 310 311 Selling, administrative and general expenses 1,760 1,718 1,851 Goodwill impairment 412 781 — Restructuring and related costs, net 65 38 93 Amortization of intangible assets 42 55 56 Transaction and related costs, net — — 18 Other expenses, net 63 ( 24 ) 45 Total Costs and Expenses 7,435 7,513 6,770 (Loss) Income before Income Taxes and Equity Income ( 328 ) ( 475 ) 252 Income tax (benefit) expense ( 3 ) ( 17 ) 64 Equity in net income of unconsolidated affiliates 3 3 4 Net (Loss) Income ( 322 ) ( 455 ) 192 Less: Net Income attributable to noncontrolling interests — — — Net (Loss) Income Attributable to Xerox Holdings $ ( 322 ) $ ( 455 ) $ 192 Basic (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.85 Diluted (Loss) Earnings per Share $ ( 2.15 ) $ ( 2.56 ) $ 0.84 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 76 Table of Contents Xerox Holdings Corporation Consolidated Statements of Comprehensive (Loss) Income Year Ended December 31, (in millions) 2022 2021 2020 Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192 Less: Net Income attributable to noncontrolling interests — — — Net (Loss) Income Attributable to Xerox Holdings ( 322 ) ( 455 ) 192 Other Comprehensive (Loss) Income, Net (1) Translation adjustments, net ( 377 ) ( 141 ) 241 Unrealized (losses) gains, net ( 2 ) ( 4 ) 4 Changes in defined benefit plans, net ( 171 ) 489 69 Other Comprehensive (Loss) Income, Net ( 550 ) 344 314 Less: Other comprehensive loss, net attributable to noncontrolling interests ( 1 ) — — Other Comprehensive (Loss) Income, Net Attributable to Xerox Holdings ( 549 ) 344 314 Comprehensive (Loss) Income, Net ( 872 ) ( 111 ) 506 Less: Comprehensive loss, net attributable to noncontrolling interests ( 1 ) — — Comprehensive (Loss) Income, Net Attributable to Xerox Holdings $ ( 871 ) $ ( 111 ) $ 506 _____________ (1) Refer to Note 24 - Other Comprehensive (Loss) Income for gross components of Other Comprehensive (Loss) Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects. . The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 77 Table of Contents Xerox Holdings Corporation Consolidated Balance Sheets December 31, (in millions, except share data in thousands) 2022 2021 Assets Cash and cash equivalents $ 1,045 $ 1,840 Accounts receivable (net of allowance of $ 52 and $ 58 , respectively) 857 818 Billed portion of finance receivables (net of allowance of $ 4 and $ 4 , respectively) 93 94 Finance receivables, net 1,061 1,042 Inventories 797 696 Other current assets 254 211 Total current assets 4,107 4,701 Finance receivables due after one year (net of allowance of $ 113 and $ 114 , respectively) 1,948 1,934 Equipment on operating leases, net 235 253 Land, buildings and equipment, net 320 358 Intangible assets, net 208 211 Goodwill, net 2,820 3,287 Deferred tax assets 582 519 Other long-term assets 1,323 1,960 Total Assets $ 11,543 $ 13,223 Liabilities and Equity Short-term debt and current portion of long-term debt $ 860 $ 650 Accounts payable 1,331 1,069 Accrued compensation and benefits costs 258 239 Accrued expenses and other current liabilities 881 871 Total current liabilities 3,330 2,829 Long-term debt 2,866 3,596 Pension and other benefit liabilities 1,175 1,373 Post-retirement medical benefits 184 277 Other long-term liabilities 411 481 Total Liabilities 7,966 8,556 Commitments and Contingencies (See Note 20) Noncontrolling Interests (See Note 6) 10 10 Convertible Preferred Stock 214 214 Common stock 156 168 Additional paid-in capital 1,588 1,802 Treasury stock, at cost — ( 177 ) Retained earnings 5,136 5,631 Accumulated other comprehensive loss ( 3,537 ) ( 2,988 ) Xerox Holdings shareholders’ equity 3,343 4,436 Noncontrolling interests 10 7 Total Equity 3,353 4,443 Total Liabilities and Equity $ 11,543 $ 13,223 Shares of common stock issued 155,781 168,069 Treasury stock — ( 8,675 ) Shares of Common Stock Outstanding 155,781 159,394 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 78 Table of Contents Xerox Holdings Corporation Consolidated Statements of Cash Flows Year Ended December 31, (in millions) 2022 2021 2020 Cash Flows from Operating Activities Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192 Adjustments required to reconcile Net (loss) income to Cash flows provided by operating activities Depreciation and amortization 270 327 368 Provisions 65 46 147 Deferred tax (benefit) expense ( 27 ) ( 89 ) 34 Net gain on sales of businesses and assets ( 56 ) ( 40 ) ( 30 ) Stock-based compensation 75 54 42 Goodwill impairment 412 781 — Restructuring and asset impairment charges 62 27 87 Payments for restructurings ( 52 ) ( 72 ) ( 81 ) Non-service retirement-related costs (1) ( 12 ) ( 89 ) ( 29 ) Contributions to retirement plans (1) ( 124 ) ( 160 ) ( 164 ) (Increase) decrease in accounts receivable and billed portion of finance receivables ( 48 ) 41 369 (Increase) decrease in inventories ( 143 ) 88 ( 134 ) Increase in equipment on operating leases ( 112 ) ( 129 ) ( 118 ) (Increase) decrease in finance receivables ( 141 ) 20 183 Decrease in other current and long-term assets 27 68 8 Increase (decrease) in accounts payable 278 118 ( 123 ) Increase (decrease) in accrued compensation (1) 34 9 ( 77 ) Increase (decrease) in other current and long-term liabilities 9 89 ( 165 ) Net change in income tax assets and liabilities ( 27 ) 10 ( 2 ) Net change in derivative assets and liabilities ( 22 ) 2 1 Other operating, net 13 ( 17 ) 40 Net cash provided by operating activities 159 629 548 Cash Flows from Investing Activities Cost of additions to land, buildings, equipment and software ( 57 ) ( 68 ) ( 74 ) Proceeds from sales of businesses and assets 87 44 30 Acquisitions, net of cash acquired ( 93 ) ( 53 ) ( 203 ) Other investing, net ( 15 ) ( 8 ) 1 Net cash used in investing activities ( 78 ) ( 85 ) ( 246 ) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 1,194 311 2,359 Payments on long-term debt ( 1,723 ) ( 519 ) ( 2,226 ) Dividends ( 174 ) ( 206 ) ( 230 ) Payments to acquire treasury stock, including fees ( 113 ) ( 888 ) ( 300 ) Other financing, net ( 6 ) ( 8 ) ( 19 ) Net cash used in financing activities ( 822 ) ( 1,310 ) ( 416 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 29 ) ( 16 ) 10 Decrease in cash, cash equivalents and restricted cash ( 770 ) ( 782 ) ( 104 ) Cash, cash equivalents and restricted cash at beginning of year 1,909 2,691 2,795 Cash, Cash Equivalents and Restricted Cash at End of Year $ 1,139 $ 1,909 $ 2,691 _____________ (1) Captions were changed in 2022 to reflect the inclusion of expense and contributions for our Retiree Health plans, which were previously reported as part of the Increase (decrease) in accrued compensation. There was no change to Net cash provided by operating activities as a result of the reclassification. Prior year amounts have been revised to conform to this presentation. Refer to Note 18 - Employee Benefit Plans for additional information. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 79 Table of Contents Xerox Holdings Corporation Consolidated Statements of Shareholders' Equity (in millions) Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings AOCL (1) Xerox Holdings Shareholders’ Equity Non- controlling Interests Total Equity Balance at December 31, 2019 $ 215 $ 2,782 $ ( 76 ) $ 6,312 $ ( 3,646 ) $ 5,587 $ 7 $ 5,594 Comprehensive income, net — — — 192 314 506 — 506 Cash dividends declared-common (2) — — — ( 209 ) — ( 209 ) — ( 209 ) Cash dividends declared-preferred (3) — — — ( 14 ) — ( 14 ) — ( 14 ) Stock option and incentive plans, net 1 21 — — — 22 — 22 Payments to acquire treasury stock, including fees — — ( 300 ) — — ( 300 ) — ( 300 ) Cancellation of treasury stock ( 18 ) ( 358 ) 376 — — — — — Distributions to noncontrolling interests — — — — — — ( 3 ) ( 3 ) Balance at December 31, 2020 $ 198 $ 2,445 $ — $ 6,281 $ ( 3,332 ) $ 5,592 $ 4 $ 5,596 Comprehensive (loss) income, net — — — ( 455 ) 344 ( 111 ) — ( 111 ) Cash dividends declared-common (2) — — — ( 181 ) — ( 181 ) — ( 181 ) Cash dividends declared-preferred (3) — — — ( 14 ) — ( 14 ) — ( 14 ) Stock option and incentive plans, net 2 35 — — — 37 — 37 Payments to acquire treasury stock, including fees — — ( 888 ) — — ( 888 ) — ( 888 ) Cancellation of treasury stock ( 32 ) ( 679 ) 711 — — — — — Investment from noncontrolling interests — 1 — — — 1 4 5 Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 ) Balance at December 31, 2021 $ 168 $ 1,802 $ ( 177 ) $ 5,631 $ ( 2,988 ) $ 4,436 $ 7 $ 4,443 Comprehensive loss, net — — — ( 322 ) ( 549 ) ( 871 ) ( 1 ) ( 872 ) Cash dividends declared-common (2) — — — ( 159 ) — ( 159 ) — ( 159 ) Cash dividends declared-preferred (3) — — — ( 14 ) — ( 14 ) — ( 14 ) Stock option and incentive plans, net 2 62 — — — 64 — 64 Payments to acquire treasury stock, including fees — — ( 113 ) — — ( 113 ) — ( 113 ) Cancellation of treasury stock ( 14 ) ( 276 ) 290 — — — — — Investment from noncontrolling interests — — — — — — 5 5 Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 ) Balance at December 31, 2022 $ 156 $ 1,588 $ — $ 5,136 $ ( 3,537 ) $ 3,343 $ 10 $ 3,353 _____________ (1) AOCL - Accumulated other comprehensive loss. (2) Cash dividends declared on common stock for 2022, 2021 and 2020 were $ 0.25 per share on a quarterly basis and $ 1.00 per share on an annual basis. (3) Cash dividends declared on preferred stock for 2022, 2021 and 2020 were $ 20 per share on a quarterly basis and $ 80 per share on an annual basis. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 80 Table of Contents Xerox Corporation Consolidated Statements of (Loss) Income Year Ended December 31, (in millions) 2022 2021 2020 Revenues Sales $ 2,800 $ 2,582 $ 2,449 Services, maintenance and rentals 4,100 4,235 4,347 Financing 207 221 226 Total Revenues 7,107 7,038 7,022 Costs and Expenses Cost of sales 2,002 1,862 1,742 Cost of services, maintenance and rentals 2,679 2,662 2,533 Cost of financing 108 111 121 Research, development and engineering expenses 304 310 311 Selling, administrative and general expenses 1,760 1,718 1,851 Goodwill impairment 412 781 — Restructuring and related costs, net 65 38 93 Amortization of intangible assets 42 55 56 Transaction and related costs, net — — 18 Other expenses, net 63 ( 24 ) 45 Total Costs and Expenses 7,435 7,513 6,770 (Loss) Income before Income Taxes and Equity Income ( 328 ) ( 475 ) 252 Income tax (benefit) expense ( 3 ) ( 17 ) 64 Equity in net income of unconsolidated affiliates 3 3 4 Net (Loss) Income ( 322 ) ( 455 ) 192 Less: Net Income attributable to noncontrolling interests — — — Net (Loss) Income Attributable to Xerox $ ( 322 ) $ ( 455 ) $ 192 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 81 Table of Contents Xerox Corporation Consolidated Statements of Comprehensive (Loss) Income Year Ended December 31, (in millions) 2022 2021 2020 Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192 Less: Net Income attributable to noncontrolling interests — — — Net (Loss) Income Attributable to Xerox ( 322 ) ( 455 ) 192 Other Comprehensive (Loss) Income, Net (1) Translation adjustments, net ( 377 ) ( 141 ) 241 Unrealized (losses) gains, net ( 2 ) ( 4 ) 4 Changes in defined benefit plans, net ( 171 ) 489 69 Other Comprehensive (Loss) Income, Net ( 550 ) 344 314 Less: Other comprehensive loss, net attributable to noncontrolling interests ( 1 ) — — Other Comprehensive (Loss) Income, Net Attributable to Xerox ( 549 ) 344 314 Comprehensive (Loss) Income, Net ( 872 ) ( 111 ) 506 Less: Comprehensive loss, net attributable to noncontrolling interests ( 1 ) — — Comprehensive (Loss) Income, Net Attributable to Xerox $ ( 871 ) $ ( 111 ) $ 506 _____________ (1) Refer to Note 24 - Other Comprehensive (Loss) Income for gross components of Other Comprehensive (Loss) Income, reclassification adjustments out of Accumulated Other Comprehensive Loss and related tax effects. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 82 Table of Contents Xerox Corporation Consolidated Balance Sheets December 31, (in millions) 2022 2021 Assets Cash and cash equivalents $ 1,045 $ 1,840 Accounts receivable (net of allowance of $ 52 and $ 58 , respectively) 857 818 Billed portion of finance receivables (net of allowance of $ 4 and $ 4 , respectively) 93 94 Finance receivables, net 1,061 1,042 Inventories 797 696 Other current assets 254 211 Total current assets 4,107 4,701 Finance receivables due after one year (net of allowance of $ 113 and $ 114 , respectively) 1,948 1,934 Equipment on operating leases, net 235 253 Land, buildings and equipment, net 320 358 Intangible assets, net 208 211 Goodwill, net 2,820 3,287 Deferred tax assets 582 519 Other long-term assets 1,302 1,952 Total Assets $ 11,522 $ 13,215 Liabilities and Equity Short-term debt and current portion of long-term debt $ 860 $ 650 Accounts payable 1,331 1,069 Accrued compensation and benefits costs 258 239 Accrued expenses and other current liabilities 834 823 Total current liabilities 3,283 2,781 Long-term debt 1,370 2,102 Related party debt 1,496 1,494 Pension and other benefit liabilities 1,175 1,373 Post-retirement medical benefits 184 277 Other long-term liabilities 411 481 Total Liabilities 7,919 8,508 Commitments and Contingencies (See Note 20) Noncontrolling Interests (See Note 6) 10 10 Additional paid-in capital 3,693 3,202 Retained earnings 3,427 4,476 Accumulated other comprehensive loss ( 3,537 ) ( 2,988 ) Xerox shareholder's equity 3,583 4,690 Noncontrolling interests 10 7 Total Equity 3,593 4,697 Total Liabilities and Equity $ 11,522 $ 13,215 The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 83 Table of Contents Xerox Corporation Consolidated Statements of Cash Flows Year Ended December 31, (in millions) 2022 2021 2020 Cash Flows from Operating Activities Net (Loss) Income $ ( 322 ) $ ( 455 ) $ 192 Adjustments required to reconcile Net (loss) income to Cash flows provided by operating activities Depreciation and amortization 270 327 368 Provisions 65 46 147 Deferred tax (benefit) expense ( 27 ) ( 89 ) 34 Net gain on sales of businesses and assets ( 56 ) ( 40 ) ( 30 ) Stock-based compensation 75 54 42 Goodwill impairment 412 781 — Restructuring and asset impairment charges 62 27 87 Payments for restructurings ( 52 ) ( 72 ) ( 81 ) Non-service retirement-related costs (1) ( 12 ) ( 89 ) ( 29 ) Contributions to retirement plans (1) ( 124 ) ( 160 ) ( 164 ) (Increase) decrease in accounts receivable and billed portion of finance receivables ( 48 ) 41 369 (Increase) decrease in inventories ( 143 ) 88 ( 134 ) Increase in equipment on operating leases ( 112 ) ( 129 ) ( 118 ) (Increase) decrease in finance receivables ( 141 ) 20 183 Decrease in other current and long-term assets 27 68 8 Increase (decrease) in accounts payable 278 118 ( 123 ) Increase (decrease) in accrued compensation (1) 34 9 ( 77 ) Increase (decrease) in other current and long-term liabilities 9 89 ( 165 ) Net change in income tax assets and liabilities ( 27 ) 10 ( 2 ) Net change in derivative assets and liabilities ( 22 ) 2 1 Other operating, net 13 ( 17 ) 40 Net cash provided by operating activities 159 629 548 Cash Flows from Investing Activities Cost of additions to land, buildings, equipment and software ( 57 ) ( 68 ) ( 74 ) Proceeds from sales of businesses and assets 87 44 30 Acquisitions, net of cash acquired ( 93 ) ( 53 ) ( 203 ) Other investing, net ( 2 ) — 1 Net cash used in investing activities ( 65 ) ( 77 ) ( 246 ) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 1,194 311 852 Payments on long-term debt ( 1,723 ) ( 519 ) ( 2,213 ) Contributions from parent — — 1,494 Distributions to parent ( 312 ) ( 1,120 ) ( 549 ) Other financing, net 6 10 — Net cash used in financing activities ( 835 ) ( 1,318 ) ( 416 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 29 ) ( 16 ) 10 Decrease in cash, cash equivalents and restricted cash ( 770 ) ( 782 ) ( 104 ) Cash, cash equivalents and restricted cash at beginning of year 1,909 2,691 2,795 Cash, Cash Equivalents and Restricted Cash at End of Year $ 1,139 $ 1,909 $ 2,691 _____________ (1) Captions were changed in 2022 to reflect the inclusion of expense and contributions for our Retiree Health plans, which were previously reported as part of the Increase (decrease) in accrued compensation. There was no change to Net cash provided by operating activities as a result of the reclassification. Prior year amounts have been revised to conform to this presentation. Refer to Note 18 - Employee Benefit Plans for additional information. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 84 Table of Contents Xerox Corporation Consolidated Statements of Shareholder's Equity (in millions) Additional Paid-in Capital Retained Earnings AOCL (1) Xerox Shareholder's Equity Non- controlling Interests Total Equity Balance at December 31, 2019 $ 3,266 $ 6,247 $ ( 3,646 ) $ 5,867 $ 7 $ 5,874 Comprehensive income, net — 192 314 506 — 506 Dividends declared to parent — ( 605 ) — ( 605 ) — ( 605 ) Capital contributions from parent (2) 1,494 — — 1,494 — 1,494 Transfers from parent 128 — — 128 — 128 Distributions to noncontrolling interests — — — — ( 3 ) ( 3 ) Balance at December 31, 2020 $ 4,888 $ 5,834 $ ( 3,332 ) $ 7,390 $ 4 $ 7,394 Comprehensive (loss) income, net — ( 455 ) 344 ( 111 ) — ( 111 ) Dividends declared to parent — ( 903 ) — ( 903 ) — ( 903 ) Intercompany loan capitalization (3) ( 1,494 ) — — ( 1,494 ) — ( 1,494 ) Transfers to parent ( 193 ) — — ( 193 ) — ( 193 ) Investment from noncontrolling interests 1 — — 1 4 5 Distributions to noncontrolling interests — — — — ( 1 ) ( 1 ) Balance at December 31, 2021 $ 3,202 $ 4,476 $ ( 2,988 ) $ 4,690 $ 7 $ 4,697 Comprehensive loss, net — ( 322 ) ( 549 ) ( 871 ) ( 1 ) ( 872 ) Dividends declared to parent — ( 727 ) — ( 727 ) — ( 727 ) Transfers from parent 491 — — 491 — 491 Investment from noncontrolling interests — — — — 5 5 Distributions to noncontrolling interests — — — — ( 1 ) ( 1 ) Balance at December 31, 2022 $ 3,693 $ 3,427 $ ( 3,537 ) $ 3,583 $ 10 $ 3,593 _____________ (1) AOCL - Accumulated other comprehensive loss. (2) Primarily represents the contribution by Xerox Holdings Corporation of aggregate net debt proceeds received from its Senior Notes offerings in the third quarter of 2020 to Xerox Corporation. Refer to Note 15 - Debt for additional information regarding the Senior Notes offerings. (3) Refer to Note 15 - Debt for information regarding capitalization of balance to Intercompany Loan with Xerox Holdings Corporation. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2022 Annual Report 85 Table of Contents Xerox Holdings Corporation Xerox Corporation Notes to Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) Note 1 – Basis of Presentation 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. The accompanying Consolidated Financial Statements and footnotes represent the respective consolidated results and financial results of Xerox Holdings and Xerox and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise. This is a combined report of Xerox Holdings and Xerox, which includes separate Consolidated Financial Statements for each registrant. The accompanying Consolidated Financial Statements of both Xerox Holdings and Xerox have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Notes to the Consolidated Financial Statements reflect the activity for both Xerox Holdings and Xerox for all periods presented, unless otherwise noted. Description of Business Currently, Xerox Holdings' primary direct operating subsidiary is Xerox and therefore Xerox represents nearly all of Xerox Holdings' operations. Xerox is a global enterprise for document management solutions. We provide advanced document technology, services, software and genuine Xerox supplies for a range of customers including small and mid-sized businesses, large enterprises, governments and graphic communications providers, and for our partners who serve them. Xerox serves customers globally in North America, Central and South America, Brazil, Europe, Eurasia, the Middle East, Africa and India. Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which was established in 2021 solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies. The investments are normally equity or equity-linked and for less than 20% ownership. Since the investments normally do not have readily determinable fair values, they are accounted for under the measurement alternative per ASC Topic 321-10-35-2. Xerox Ventures LLC had investments of approximately $ 21 and $ 8 at December 31, 2022 and 2021, respectively. Basis of Consolidation All significant intercompany accounts and transactions have been eliminated. Investments in business entities in which we do not have control, but we have the ability to exercise significant influence over operating and financial policies (generally 20 % to 50 % ownership) are accounted for using the equity method of accounting. Operating results of acquired businesses are included in the Consolidated Statements of (Loss) Income from the date of acquisition. We consolidate variable interest entities if we are deemed to be the primary beneficiary of the entity. Operating results for variable interest entities in which we are determined to be the primary beneficiary are included in the Consolidated Statements of (Loss) Income from the date such determination is made. For convenience and ease of reference, we refer to the financial statement caption “(Loss) Income before Income Taxes and Equity Income” as “pre-tax (loss) income” throughout the Notes to the Consolidated Financial Statements. Segments During the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE) - 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, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments. Refer to Note 4 - Segment and Geographic Reporting for additional information regarding this change. Xerox 2022 Annual Report 86 Table of Contents Goodwill We assess Goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment Evaluation - 2022 During 2022, we had events and conditions in the first quarter and third quarter that required an interim assessment of Goodwill. During the first quarter 2022 the Company made a change to its operating and reportable segments from one operating/reportable segment - Printing - to two operating/reportable segments - Print and Other, and Financing (FITTLE). As a result of the new operating and reportable segments, we also reassessed our reporting units for the evaluation of Goodwill. Prior to this change, we determined that we had one operating/reportable segment and one reporting unit for Goodwill assessment purposes. Our reassessment during the first quarter of 2022 determined that, we had two operating/reportable segments and two reporting units – Print and Other, and Financing (FITTLE) for Goodwill assessment purposes. As a result of the change in reporting units, effective January 1, 2022, we estimated the fair value of our new reporting units and, based on an assessment of the relative fair values of our new reporting units after the change, we determined that no Goodwill was allocable to the Financing (FITTLE) segment. This determination was largely based on the fact that at this stage in the stand-up of the Financing (FITTLE) business, its separate valuation is constrained and limited because the operation is significantly integrated with the Print and Other segment and is primarily an extension or enabler to facilitate the sale of the Company’s products. The change in reporting units was also considered a triggering event indicating a test for Goodwill impairment was required as of January 1, 2022 before and after the change in reporting units. The Company performed those impairment tests, which did not result in the identification of an impairment loss as of January 1, 2022. In 2022, the Company continued to encounter operational challenges due to unfavorable product and services mix associated with supply chain constraints as well the impacts of unfavorable macroeconomic conditions including inflationary pressure on product and labor costs, geopolitical uncertainty in Europe and the continued impacts from the COVID-19 recovery. Additionally, higher interest rates continued to put downward pressure on the Company’s valuation. As a result of these negative financial impacts and a sustained market capitalization below our book value, in the third quarter 2022 we determined there was a triggering event requiring an interim quantitative assessment of Goodwill. After completing our interim impairment test, we concluded that the estimated fair value of the Print and Other reporting unit (the only reporting unit with Goodwill) had declined below its carrying value and we recognized an after-tax non-cash impairment charge of $ 395 ($ 412 pre-tax) related to our Goodwill in the third quarter 2022. The estimated fair value of the Print and Other reporting unit is based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy. Consistent with our policy for an annual review, we also assessed Goodwill in the fourth quarter 2022. As a result of the quantitative assessment of Goodwill in the third quarter 2022, we performed our annual Goodwill assessment in the fourth quarter 2022 qualitatively. After completing this qualitative impairment review, we concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit is higher than its carrying amount and that it is not necessary to perform a quantitative Goodwill impairment test. Impairment Evaluation - 2021 The COVID-19 pandemic continued to have a significant effect on the Company’s operations impacting revenues, expenses, cash flows and market capitalization in 2021. As a result of these impacts on our future operating results, as well as a sustained market capitalization below book value, we elected to utilize a quantitative model for the assessment of the recoverability of our Goodwill balance for our annual fourth quarter 2021 impairment test. After completing our annual impairment test, we concluded that the fair value of the Company - our single reporting unit in 2021 - had declined below its carrying value. As a result, we recognized an after-tax non-cash impairment charge of $ 750 ($ 781 pre-tax) related to our Goodwill for the year ended December 31, 2021. The estimated fair value of our single reporting unit is based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy. Use of Estimates The preparation of our Consolidated Financial Statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be predicted with certainty; accordingly, our accounting estimates Xerox 2022 Annual Report 87 Table of Contents require the exercise of judgment. The accounting estimates used in the preparation of our Consolidated Financial Statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Our estimates are based on management's best available information including current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. In the ordinary course of accounting for the items discussed above, we make changes in estimates as appropriate and as we become aware of new or revised circumstances surrounding those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements and in Management's Discussion and Analysis of Financial Condition and Results of Operations. Note 2 – Recent Accounting Pronouncements and Summary of Significant Accounting Policies New Accounting Standards and Accounting Changes Xerox Holdings and Xerox consider the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). The ASUs listed below apply to both registrants. Except for the Accounting Standard Updates (ASUs) discussed below, the new ASUs issued by the FASB during the last two years did not have any significant impact on the Company. Accounting Standard Updates to be Adopted: Liabilities In September 2022, the FASB issued ASU 2022-04 , Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding are effective for all interim and annual periods of our fiscal year beginning on January 1, 2023. The new standard’s requirement to disclose a rollforward of obligations outstanding will be effective for our fiscal year beginning on January 1, 2024. Since this standard primarily relates to new disclosure, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods. Financial Instruments In March 2022, the FASB issued ASU 2022-02 , Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures - Gross Write-offs. The amendments in this update eliminate the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables. The disclosure of current-period gross write-offs by year of origination is applicable for financing receivables and net investments in leases that are within the scope of ASC 326-20 , Financial Instruments - Credit Losses - Measured at Amortized Cost . This update is effective for our fiscal year beginning on January 1, 2023. The provisions of this amendment are to be applied on a prospective basis. We are currently evaluating the impact of the adoption of this standard on the Company's consolidated financial statements and related disclosures. Since this standard primarily relates to new disclosure, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods. Reference Rate Reform In March 2020, the FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), Scope, which provided clarification to ASU 2020-04. These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022. In December 2022, the FASB issued ASU 2022-06 , Reference Rate Reform (Topic 848), Deferral of the Xerox 2022 Annual Report 88 Table of Contents Sunset Date of Topic 848, which defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. There has been no material impact to date as a result of adopting these ASUs on reference rate reform. However, we continue to evaluate potential future impacts that may result from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows. Accounting Standard Updates Recently Adopted: Government Assistance In November 2021, the FASB issued ASU 2021-10 , Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. The update increases the transparency surrounding government assistance by requiring disclosure of 1) the types of assistance received, 2) an entity’s accounting for the assistance, and 3) the effect of the assistance on the entity’s financial statements. We adopted this update effective for our fiscal year beginning January 1, 2022. The impact of adoption was not material to our Consolidated Financial Statements. Impacts on future periods will depend on the amounts of government assistance received. Prior to the COVID-19 pandemic, the amounts of government assistance the Company received were not material and since the update is limited to increased disclosures, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods. Refer to Note 14 - Supplementary Financial Information - Government Assistance - for additional information. Business Combinations In October 2021, the FASB issued ASU 2021-08 , Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. We early adopted this update effective for our fiscal year beginning January 1, 2022. The impact of adopting the new standard will depend on the magnitude of future acquisitions. The standard will not impact contract assets or liabilities acquired in business combinations that occurred prior to the adoption date and the adoption has not had a material impact on acquisitions made year to date. Debt In August 2020, the FASB issued ASU 2020-06 , Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). This update simplified the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amended the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and required the application of the if-converted method for calculating diluted earnings per share. We adopted this update effective for our fiscal year beginning January 1, 2022. The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures. Income Taxes In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which was intended to simplify various aspects related to accounting for income taxes . ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted this update effective for our fiscal year beginning January 1, 2021. The adoption did not have a material impact on our results of operations, financial position, cash flows or disclosures. Leases In April 2020, the FASB staff issued a question and answer (Q&A) document on the application of lease accounting guidance related to lease concessions provided as a result of the economic disruption caused by the COVID-19 pandemic (Topic 842 Q&A). Topic 842 Q&A provides interpretive guidance allowing companies the option to account for lease concessions related to the COVID-19 pandemic consistent with how those concessions would be accounted for under ASU 2016-02, Leases (Topic 842) as though enforceable rights and obligations for those concessions existed at the beginning of the contract (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). This interpretive guidance was issued in order to reduce the Xerox 2022 Annual Report 89 Table of Contents costs and complexities of applying lease modification accounting under Topic 842 to leases impacted by the effects of the COVID-19 pandemic. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We have elected to apply the interpretive guidance provided in Topic 842 Q&A to rent concessions related to the COVID-19 pandemic provided as a Lessor to our customers and as received as a Lessee. The impact of this Q&A both as a Lessor or Lessee was not material to our financial condition, results of operations, cash flows or related disclosures. Financial Instruments - Credit Losses On January 1, 2020, we adopted ASU 2016-13 , Financial Instruments Credit Losses - Measurement of Credit Losses on Financial Instruments. This update was issued by the FASB in June 2016, with additional updates and amendments being issued in 2018, 2019 and 2020 and requires measurement and recognition of expected credit losses for financial assets on an expected loss model rather than an incurred loss model. The update impacted financial assets including net investment in leases that are not accounted for at fair value through Net Income. The adoption of ASU 2016-13 primarily impacted the estimation of our Allowance for doubtful accounts for Accounts Receivable and Finance Receivables. The impact recorded on our initial adoption of ASU 2016-13 was not material as our previous methodology for assessing the adequacy of our Allowance for doubtful accounts for Finance Receivables, the larger component of our receivable reserves, incorporated an expected loss model and the methodology for both allowances included an assessment of current economic conditions. Refer to Note 7 - Accounts Receivable, Net and Note 8 - Finance Receivables, Net for additional discussion regarding the impacts from the adoption of this update during the first quarter 2020. Intangibles - Internal-Use Software On January 1, 2020, we adopted ASU 2018-15 , Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This update was issued by the FASB in August 2018 and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The update provides criteria for determining which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The capitalized implementation costs are required to be expensed over the term of the hosting arrangement. The update also clarifies the presentation requirements for reporting such costs in the entity’s financial statements. The adoption of ASU 2018-15 did not have a material impact on our financial condition, results of operations, cash flows or related disclosures as we had previously capitalized these implementation costs and such amounts were not material. Other Updates The FASB also issued the following Accounting Standards Updates, which have not had, and are not expected to have, a material impact on our financial condition, results of operations, cash flows or related disclosures upon adoption. • Fair Value Measurement: ASU 2022-03 , Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This update is effective for our fiscal year beginning January 1, 2024. • Derivatives and Hedging: ASU 2022-01 , Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method. This update is effective for our fiscal year beginning January 1, 2023. • Equity Instruments: ASU 2021-04 , Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options). This update was effective for our fiscal year beginning January 1, 2022. • Leases: ASU 2021-05 , Leases - Certain Lease Payments with Variable Lease Payments (ASC 842). This update was effective for our fiscal year beginning January 1, 2022. • Investments: ASU 2020-01 , Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) . This update was effective for our fiscal year beginning January 1, 2021. • Compensation - Stock Compensation and Revenue from Contracts with Customers: ASU 2019-08 , (Topic 718) and (Topic 606) Codification Improvements - Share-Based Consideration Payable to a Customer. This update was effective for our fiscal year beginning January 1, 2020. Xerox 2022 Annual Report 90 Table of Contents Summary of Accounting Policies Revenue Recognition We generate revenue through the sale of equipment and supplies and by providing maintenance and printing services. Revenue is measured based on the consideration specified in a contract with a customer and is recognized when we satisfy a performance obligation by transferring control of a product to a customer or in the period the customer benefits from the service. With the exception of our sales-type lease arrangements, our invoices to the customer, which normally have short-term payment terms, are typically aligned to the transfer of goods or as services are rendered to our customers and therefore in most cases, we recognize revenue based on our right to invoice customers. As a result of the application of this practical expedient for the substantial portion of our revenue, the disclosure of the value of unsatisfied performance obligations for our services is not required. Significant judgments primarily include the identification of performance obligations in our Document management services arrangements as well as the pattern of delivery for those services. More specifically, revenue related to our products and services is generally recognized as follows: Equipment: Revenues from the sale of equipment directly to end-user customers, including those from sales-type leases (see below), are recognized when obligations under the terms of a contract with our customer are satisfied and control has been transferred to the customer. For equipment placements that require us to install the product at the customer location, revenue is normally recognized when the equipment has been delivered and installed at the customer location. Sales of customer installable products are recognized upon shipment or receipt by the customer according to the customer's shipping terms. Revenue from the equipment performance obligation also includes certain analyst training services performed in connection with the installation or delivery of the equipment . Maintenance services: We provide maintenance agreements on our equipment that include service and supplies for which the customer may pay a base minimum plus a price-per-page charge for usage. In arrangements that include minimums, those minimums are normally set below the customer’s estimated page volumes and are not considered substantive. These agreements are sold as part of a bundled lease arrangement or through distributors and resellers. We normally account for these maintenance agreements as a single performance obligation for printing services being delivered in a series with delivery being measured by usage as billed to the customer. Accordingly, revenue on these types of agreements is normally recognized as billed to the customer over the term of the agreements based on page volumes. A substantial portion of our products are sold with full service maintenance agreements, accordingly, other than the product warranty obligations associated with certain of our entry level products, we do not have any significant warranty obligations, including any obligations under customer satisfaction programs. Print outsourcing services: Revenues associated with our print outsourcing services are generally recognized as the printing services are rendered, which is generally on the basis of the number of images produced. Revenues on unit-price contracts are recognized at the contractual selling prices as work is completed by the customer. We account for these arrangements as a single performance obligation for printing services being delivered in a series with delivery being measured by usage as billed to the customer . Our services contracts may also include the sale or lease of equipment and software. In these instances, we follow the policies noted for Equipment or Software Revenues and separately report the revenue associated with these performance obligations. Certain document management services arrangements may also include an embedded lease of equipment. In these instances, the revenues associated with the lease are recognized in accordance with the requirements for lease accounting. Sales to distributors and resellers: We utilize distributors and resellers to sell our equipment, supplies and maintenance services to end-user customers. We refer to our distributor and reseller network as our two-tier distribution model. Revenues on sales to distributors and resellers are generally recognized when products are shipped to such distributors and resellers. However, revenue is only recognized when the distributor or reseller has economic substance apart from the Company such that collectability is probable and we have no further obligations related to bringing about the resale, delivery or installation of the product that would impact transfer of control. Revenues associated with maintenance agreements sold through distributors and resellers to end-user customers are recognized in a consistent manner for maintenance services. Revenue that may be subject to a reversal of revenue due to contractual terms or uncertainties is not recorded as revenue until the contractual provisions lapse or the uncertainties are resolved. Distributors and resellers participate in various rebate, price-protection, cooperative marketing and other programs. We estimate the variable consideration associated with these programs and record those amounts as a reduction to Xerox 2022 Annual Report 91 Table of Contents revenue when sales occur. Similarly, we account for our estimates of sales returns and other allowances when sales occur based on our historical experience. In certain instances, we may provide lease financing to end-user customers who purchased equipment we sold to distributors or resellers. We are not obligated to provide financing and we compete with other third-party leasing companies with respect to the lease financing provided to these end-user customers. Software: Most of our equipment has both software and non-software components that function together to deliver the equipment's essential functionality and therefore they are accounted for together as part of Equipment sales revenues. Software accessories sold in connection with our Equipment sales, as well as free-standing software sales, are accounted for as separate performance obligations if determined to be material in relation to the overall arrangement. Revenue from software is not a significant component of our Total revenues. Supplies: Supplies revenue is recognized upon transfer of control to the customer, generally upon utilization or shipment to the