What changed in this filing

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Item 1. Financial Statements

2023-08-02 compared with 2023-05-01 · 460 added, 186 removed, 1057 unchanged (38% of the section changed)

1 unchanged sentence

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended

June 30, Six Months Ended

(in millions, except per-share data) 2023 2022 2023 2022

11 unchanged sentences

Amortization of intangible assets 10 10 21 21

PARC donation 132 — 132 —

Other expenses, net 31 8 51 65

Total Costs and Expenses 1,843 1,752 3,473 3,509

Income (Loss) before Income Taxes and Equity Income 85 ( 89 )

Income tax expense (benefit) 14 ( 31 )

Loss before Income Taxes and Equity Income ( 89 ) ( 5 ) ( 4 ) ( 94 )

Income tax (benefit) expense ( 28 ) 1 ( 14 ) ( 30 )

Equity in net income of unconsolidated affiliates 1 1 1 2

Net Income (Loss) 71 ( 57 )

Net loss attributable to noncontrolling interests — ( 1 )

Net Income (Loss) Attributable to Xerox Holdings $ 71 $ ( 56 )

Basic Earnings (Loss) per Share $ 0.43 $ ( 0.38 )

Diluted Earnings (Loss) per Share $ 0.43 $ ( 0.38 )

Net (Loss) Income ( 60 ) ( 5 ) 11 ( 62 )

Net income (loss) attributable to noncontrolling interests 1 ( 1 ) 1 ( 2 )

Net (Loss) Income Attributable to Xerox Holdings $ ( 61 ) $ ( 4 ) $ 10 $ ( 60 )

Basic (Loss) Earnings per Share $ ( 0.41 ) $ ( 0.05 ) $ 0.02 $ ( 0.43 )

Diluted (Loss) Earnings per Share $ ( 0.41 ) $ ( 0.05 ) $ 0.02 $ ( 0.43 )

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1 unchanged sentence

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

Three Months Ended

June 30, Six Months Ended

(in millions) 2023 2022 2023 2022

Net Income (Loss) $ 71 $ ( 57 )

Net loss attributable to noncontrolling interests — ( 1 )

Net Income (Loss) Attributable to Xerox Holdings 71 ( 56 )

Net (Loss) Income $ ( 60 ) $ ( 5 ) $ 11 $ ( 62 )

Net income (loss) attributable to noncontrolling interests 1 ( 1 ) 1 ( 2 )

Net (Loss) Income Attributable to Xerox Holdings ( 61 ) ( 4 ) 10 ( 60 )

Other Comprehensive Income (Loss), Net (1)

Translation adjustments, net 49 ( 287 ) 141 ( 359 )

Unrealized gains (losses), net 4 ( 11 )

Unrealized losses, net ( 5 ) ( 14 ) ( 1 ) ( 25 )

Changes in defined benefit plans, net ( 27 ) 3 ( 41 ) 42

2 unchanged sentences

Other Comprehensive Income (Loss), Net Attributable to Xerox Holdings 17 ( 298 ) 100 ( 342 )

Comprehensive Income (Loss), Net 153 ( 101 )

Comprehensive loss, net attributable to noncontrolling interests ( 1 ) ( 1 )

Comprehensive Income (Loss), Net Attributable to Xerox Holdings $ 154 $ ( 100 )

Comprehensive (Loss) Income, Net ( 43 ) ( 303 ) 110 ( 404 )

Comprehensive income (loss), net attributable to noncontrolling interests 1 ( 1 ) — ( 2 )

Comprehensive (Loss) Income, Net Attributable to Xerox Holdings $ ( 44 ) $ ( 302 ) $ 110 $ ( 402 )

_____________

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share data in thousands) March 31,

(in millions, except share data in thousands) June 30,

2023 December 31,

41 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended

Six Months Ended

(in millions) 2023 2022

1 unchanged sentence

Net Income (Loss) $ 11 $ ( 62 )

Adjustments required to reconcile Net income (loss) to cash flows provided by operating activities

Adjustments required to reconcile Net income (loss) to cash flows provided by (used in) operating activities

Depreciation and amortization 126 140

Provisions 21 35

Net gain on sales of businesses and assets ( 2 ) ( 1 )

PARC donation 132 —

Stock-based compensation 28 50

3 unchanged sentences

Contributions to retirement plans ( 32 ) ( 72 )

Decrease in accounts receivable and billed portion of finance receivables 39 13

Increase in inventories ( 64 ) ( 31 )

Increase in accounts receivable and billed portion of finance receivables ( 36 ) ( 49 )

Decrease (increase) in inventories 12 ( 95 )

Increase in equipment on operating leases ( 77 ) ( 47 )

Decrease in finance receivables 407 17

Decrease (increase) in other current and long-term assets 3 ( 1 )

Decrease in other current and long-term assets 15 35

(Decrease) increase in accounts payable ( 290 ) 172

4 unchanged sentences

Other operating, net ( 11 ) ( 9 )

Net cash provided by operating activities 78 66

Net cash provided by (used in) operating activities 173 ( 19 )

Cash Flows from Investing Activities

5 unchanged sentences

Cash Flows from Financing Activities

Net proceeds from short-term debt 200 —

Proceeds from issuance of long-term debt — 754

11 unchanged sentences

XEROX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended

June 30, Six Months Ended

(in millions) 2023 2022 2023 2022

11 unchanged sentences

Amortization of intangible assets 10 10 21 21

PARC donation 132 — 132 —

Other expenses, net 31 8 51 65

Total Costs and Expenses 1,843 1,752 3,473 3,509

Income (Loss) before Income Taxes and Equity Income 85 ( 89 )

Income tax expense (benefit) 14 ( 31 )

Loss before Income Taxes and Equity Income ( 89 ) ( 5 ) ( 4 ) ( 94 )

Income tax (benefit) expense ( 28 ) 1 ( 14 ) ( 30 )

Equity in net income of unconsolidated affiliates 1 1 1 2

Net Income (Loss) 71 ( 57 )

Net loss attributable to noncontrolling interests — ( 1 )

Net Income (Loss) Attributable to Xerox $ 71 $ ( 56 )

Net (Loss) Income ( 60 ) ( 5 ) 11 ( 62 )

Net income (loss) attributable to noncontrolling interests 1 ( 1 ) 1 ( 2 )

Net (Loss) Income Attributable to Xerox $ ( 61 ) $ ( 4 ) $ 10 $ ( 60 )

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1 unchanged sentence

XEROX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

Three Months Ended

June 30, Six Months Ended

(in millions) 2023 2022 2023 2022

Net Income (Loss) $ 71 $ ( 57 )

Net loss attributable to noncontrolling interests — ( 1 )

Net Income (Loss) Attributable to Xerox 71 ( 56 )

Net (Loss) Income $ ( 60 ) $ ( 5 ) $ 11 $ ( 62 )

Net income (loss) attributable to noncontrolling interests 1 ( 1 ) 1 ( 2 )

Net (Loss) Income Attributable to Xerox ( 61 ) ( 4 ) 10 ( 60 )

Other Comprehensive Income (Loss), Net (1)

Translation adjustments, net 49 ( 287 ) 141 ( 359 )

Unrealized gains (losses), net 4 ( 11 )

Unrealized losses, net ( 5 ) ( 14 ) ( 1 ) ( 25 )

Changes in defined benefit plans, net ( 27 ) 3 ( 41 ) 42

2 unchanged sentences

Other Comprehensive Income (Loss), Net Attributable to Xerox 17 ( 298 ) 100 ( 342 )

Comprehensive Income (Loss), Net 153 ( 101 )

Comprehensive loss, net attributable to noncontrolling interests ( 1 ) ( 1 )

Comprehensive Income (Loss), Net Attributable to Xerox $ 154 $ ( 100 )

Comprehensive (Loss) Income, Net ( 43 ) ( 303 ) 110 ( 404 )

Comprehensive income (loss), net attributable to noncontrolling interests 1 ( 1 ) — ( 2 )

Comprehensive (Loss) Income, Net Attributable to Xerox $ ( 44 ) $ ( 302 ) $ 110 $ ( 402 )

_____________

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) March 31,

(in millions) June 30,

2023 December 31,

39 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended

Six Months Ended

(in millions) 2023 2022

1 unchanged sentence

Net Income (Loss) $ 11 $ ( 62 )

Adjustments required to reconcile Net income (loss) to cash flows provided by operating activities

Adjustments required to reconcile Net income (loss) to Cash flows provided by (used in) operating activities

Depreciation and amortization 126 140

Provisions 21 35

Net gain on sales of businesses and assets ( 2 ) ( 1 )

PARC donation 132 —

Stock-based compensation 28 50

3 unchanged sentences

Contributions to retirement plans ( 32 ) ( 72 )

Decrease in accounts receivable and billed portion of finance receivables 39 13

Increase in inventories ( 64 ) ( 31 )

Increase in accounts receivable and billed portion of finance receivables ( 36 ) ( 49 )

Decrease (increase) in inventories 12 ( 95 )

Increase in equipment on operating leases ( 77 ) ( 47 )

Decrease in finance receivables 407 17

Decrease (increase) in other current and long-term assets 3 ( 1 )

Decrease in other current and long-term assets 15 35

(Decrease) increase in accounts payable ( 290 ) 172

4 unchanged sentences

Other operating, net ( 11 ) ( 9 )

Net cash provided by operating activities 78 66

Net cash provided by (used in) operating activities 173 ( 19 )

Cash Flows from Investing Activities

4 unchanged sentences

Cash Flows from Financing Activities

Net proceeds from short-term debt 200 —

Proceeds from issuance of long-term debt — 754

26 unchanged sentences

Interim results of operations are not necessarily indicative of the results of the full year.

For convenience and ease of reference, we refer to the financial statement caption “Income (Loss) before Income Taxes and Equity Income” as “pre-tax income (loss)”.

For convenience and ease of reference, we refer to the financial statement caption “Loss before Income Taxes and Equity Income” as “pre-tax loss”.

Notes to the Condensed Consolidated Financial Statements reflect the activity for both Xerox Holdings and Xerox for all periods presented, unless otherwise noted.

Our Goodwill, net balance was $ 2,850 and $ 2,820 at March 31, 2023 and December 31, 2022, respectively.

Our Goodwill, net balance was $ 2,751 and $ 2,820 at June 30, 2023 and December 31, 2022, respectively.

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.

In the first quarter 2023 the Company's actual results as well as its latest projections for the full year 2023 were in line with expectations reviewed as part of our fourth quarter 2022 Goodwill qualitative assessment.

In addition, discounts rates and the Company’s market capitalization in the first quarter 2023 remained steady with the fourth quarter 2022.

Accordingly, based on our interim assessment as of March 31, 2023, we determined that we did not have a “triggering event” requiring a quantitative assessment of Goodwill.

If the Company's future performance varies from current expectations, assumptions, or estimates, including assumptions related to the continued unfavorable macro-economic trends and uncertainties, this may impact the impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.

The balance as of June 30, 2023 reflects the pre-tax write-off of $ 115 ($ 110 after-tax) of allocated Goodwill related to our donation of the Palo Alto Research Center (PARC) business during the quarter.

Refer to Note 6 - Divestiture for additional information regarding the PARC donation.

The Company's actual results for the six months ended June 30, 2023 as well as its latest projections for the full year 2023 were in line with expectations reviewed as part of our fourth quarter 2022 Goodwill qualitative assessment.

In addition, discount rates and the Company’s market capitalization in the second quarter 2023 remained steady with the first quarter 2023 and year-end 2022.

Accordingly, based on our interim assessment as of June 30, 2023, we determined that we did not have a “triggering event” requiring a quantitative assessment of Goodwill.

If the Company's future performance varies from current expectations, assumptions, or estimates, including assumptions related to current macro-economic uncertainties, this may impact the impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.

We will continue to monitor developments throughout the remainder of 2023 including updates to our forecasts as well as discount rates and our market capitalization, and an update of our assessment and related estimates may be required in the future.

52 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Primary geographical markets (1) :

7 unchanged sentences

Supplies, paper and other sales (2)

276 301 544 579

Maintenance agreements (3)

419 446 828 875

Service arrangements (4)

499 478 994 964

Rental and other 91 104 191 212

3 unchanged sentences

Direct equipment lease (5)

$ 245 $ 144 $ 475 $ 279

Distributors & resellers (6)

261 298 521 559

Customer direct 190 225 359 421

9 unchanged sentences

We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time.

Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $ 132 and $ 131 at March 31, 2023 and December 31, 2022, respectively.

The majority of the balance at March 31, 2023 will be amortized to revenue over approximately the next 30 months.

Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $ 137 and $ 131 at June 30, 2023 and December 31, 2022, respectively.

The majority of the balance at June 30, 2023 will be amortized to revenue over approximately the next 30 months.

Contract Costs:

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Incremental direct costs of obtaining a contract $ 18 $ 15 $ 34 $ 28

Amortization of incremental direct costs 16 16 32 34

The balance of deferred incremental direct costs net of accumulated amortization at March 31, 2023 and December 31, 2022 was $ 125 and $ 125 , respectively.

The balance of deferred incremental direct costs net of accumulated amortization at June 30, 2023 and December 31, 2022 was $ 127 and $ 125 , respectively.

This amount is expected to be amortized over its estimated period of benefit, which we currently estimate to be approximately four years .

2 unchanged sentences

In addition, we provide inducements to certain customers in various forms, including contractual credits, which are capitalized and amortized as a reduction of revenue over the term of the contract.

The balance of contract fulfillment costs and inducements net of accumulated amortization at March 31, 2023 and December 31, 2022 was $ 9 and $ 10 , respectively.

The related amortization was $ 0 and $ 1 for the three months ended March 31, 2023 and 2022, respectively.

The balance of contract fulfillment costs and inducements net of accumulated amortization at June 30, 2023 and December 31, 2022 was $ 7 and $ 10 , respectively.

The related amortization was $ 2 and $ 2 for the three months ended June 30, 2023 and 2022, respectively, and $ 2 and $ 3 for the six months ended June 30, 2023 and 2022, respectively.

Equipment and software used in the fulfillment of service arrangements, and where the Company retains control, are capitalized and depreciated over the shorter of their useful life or the term of the contract if an asset is contract specific.

14 unchanged sentences

These revenues are reported as part of Intersegment Revenues, which are eliminated in consolidated revenues.

The FITTLE segment provides global leasing solutions 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.

Segment revenues primarily include financing income on sales-type leases, operating lease income (including month-to-month rentals and extensions) and leasing fees.

Segment revenues also include gains/losses from the sale of finance receivables as well as related commission and servicing fees.

The FITTLE segment provides global leasing solutions and currently offers lease 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.

Segment revenues primarily include financing income on sales-type leases (including month-to-month extensions) and leasing fees.

Segment revenues also include gains/losses from the sale of finance receivables including commissions, fees on the sales of underlying equipment residuals and servicing fees.

Xerox 2023 Form 10-Q 14

2 unchanged sentences

The accounting policies that the Company uses to derive its segment results are substantially the same as those used by the Company in preparing its consolidated financial statements.

The segment results include a significant level of management estimates regarding the allocation of revenues such as finance income in bundled lease arrangements and other leasing revenues and operating lease revenues embedded in our managed services contracts as well as the allocation of expenses for shared selling and administrative services.

The segment results include a significant level of management estimates regarding the allocation of revenues such as finance income in bundled lease arrangements and other leasing revenues as well as the allocation of expenses for shared selling and administrative services.

Accordingly, the financial results for the segments may not be indicative of the results the businesses would have as on a standalone basis or what might be presented for the businesses in stand-alone financial statements.

1 unchanged sentence

The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each segment.

The FITTLE segment also includes interest expense associated with allocated debt of the Company in support of its Finance assets, while no interest expense is allocated to the Print and Other segment.

The FITTLE segment also includes interest expense associated with allocated debt of the Company in support of its Finance Receivables, while no interest expense is allocated to the Print and Other segment.

Selected financial information for our reportable segments was as follows:

Three Months Ended March 31,

Three Months Ended June 30,

2023 2022 (1)

Print and Other FITTLE Total Print and Other FITTLE Total

9 unchanged sentences

Interest expense — 34 34 — 26 26

Six Months Ended June 30,

2023 2022 (1)

Print and Other FITTLE Total Print and Other FITTLE Total

External revenue $ 3,266 $ 203 $ 3,469 $ 3,221 $ 194 $ 3,415

Intersegment revenue (2)

44 — 44 45 — 45

Total Segment revenue $ 3,310 $ 203 $ 3,513 $ 3,266 $ 194 $ 3,460

Segment profit $ 207 $ 18 $ 225 $ 18 $ 14 $ 32

Segment margin (3)

6.3 % 8.9 % 6.5 % 0.6 % 7.2 % 0.9 %

Depreciation and amortization $ 105 $ — $ 105 $ 119 $ — $ 119

Interest income — 101 101 — 105 105

Interest expense — 70 70 — 50 50

_____________

(1) Amounts for 2022 have been recasted to conform to the current year's reporting presentation.

See the Segment Reporting Change section below.

(2) Intersegment revenue is primarily commissions and other payments made by the FITTLE Segment to the Print and Other Segment for the lease of Xerox equipment placements.

(3) Segment margin based on External revenue only.

(3) Interest expense for the FITTLE Segment includes non-financing interest expense on allocated debt associated with Equipment on operating lease of $ 3 and $ 2 for the three months ended March 31, 2023 and 2022, respectively.

Xerox 2023 Form 10-Q 15

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Total reported segments $ 1,775 $ 1,769 $ 3,513 $ 3,460

Elimination of intersegment revenue ( 21 ) ( 22 ) ( 44 ) ( 45 )

Total Revenue $ 1,754 $ 1,747 $ 3,469 $ 3,415

Pre-tax Income (Loss)

2 unchanged sentences

Amortization of intangible assets ( 10 ) ( 10 ) ( 21 ) ( 21 )

PARC donation ( 132 ) — ( 132 ) —

Accelerated share vesting — ( 21 ) — ( 21 )

Other expenses, net ( 31 ) ( 8 ) ( 51 ) ( 65 )

Total Pre-tax income (loss) $ 85 $ ( 89 )

Total Pre-tax loss $ ( 89 ) $ ( 5 ) $ ( 4 ) $ ( 94 )

Depreciation and Amortization

10 unchanged sentences

Total Interest income $ 53 $ 55 $ 110 $ 109

_____________

(1) Amounts for 2022 have been recasted to conform to the current year's reporting presentation.

See the Segment Reporting Change section below.

Segment Reporting Change

During the second quarter 2023, as a result of the recent strategic shift in the Company’s approach to funding FITTLE’s growth through finance receivables funding agreements that involve the sale of lease receivables, the measures for FITTLE’s segment revenues and profits used by our CODM were recasted as follows to correspond with this change in strategy:

• The management and oversight of the equipment on operating leases portion of our financing business was transferred from the FITTLE segment to the marketing and sales groups in the Print and Other segment since the finance receivable funding agreement currently exclude the sale of operating lease arrangements.

• The allocation of shared expenses as well as commissions and other payments made by the FITTLE segment to the Print and Other segment were recasted to better reflect the operations of FITTLE in line with the change in strategic direction.

The recasting of our segment measures align with the financial information used by our CODM in evaluating our reportable segments’ performance and allocating resources.

The prior period amounts have been recasted to reflect the change in segment measures of revenue and profits.

Xerox 2023 Form 10-Q 16

The following provides the segment revenues and profits for each of the quarters of 2022 and the full-year 2022, and the first quarter 2023 periods, recasted to conform to our new segment measurements:

Q1 Q2 Q3 Q4 Full Year Q1

Segment Revenues:

Print and Other $ 1,550 $ 1,633 $ 1,641 $ 1,843 $ 6,667 $ 1,613

FITTLE 158 151 150 151 610 154

Intersegment revenue (1)

( 40 ) ( 37 ) ( 40 ) ( 53 ) ( 170 ) ( 52 )

Total External Revenue $ 1,668 $ 1,747 $ 1,751 $ 1,941 $ 7,107 $ 1,715

Print and Other $ 43 $ 40 $ 35 $ 19 $ 137 $ 23

FITTLE ( 60 ) ( 55 ) ( 52 ) ( 50 ) ( 217 ) ( 52 )

Intersegment revenue (1)

17 15 17 31 80 29

Total External Revenue $ — $ — $ — $ — $ — $ —

Print and Other $ 1,593 $ 1,673 $ 1,676 $ 1,862 $ 6,804 $ 1,636

FITTLE 98 96 98 101 393 102

Intersegment revenue (1)

( 23 ) ( 22 ) ( 23 ) ( 22 ) ( 90 ) ( 23 )

Total External Revenue $ 1,668 $ 1,747 $ 1,751 $ 1,941 $ 7,107 $ 1,715

_____________

(1) Intersegment revenue is primarily commissions and other payments made by the FITTLE Segment to the Print and Other Segment for the lease of Xerox equipment placements.

Q1 Q2 Q3 Q4 Full Year Q1

Segment Profit/(Loss):

Print and Other $ ( 20 ) $ 18 $ 57 $ 183 $ 238 $ 106

FITTLE 17 17 8 ( 5 ) 37 12

Total $ ( 3 ) $ 35 $ 65 $ 178 $ 275 $ 118

Print and Other $ 9 $ 11 $ 6 $ ( 6 ) $ 20 $ ( 6 )

FITTLE ( 9 ) ( 11 ) ( 6 ) 6 ( 20 ) 6

Total $ — $ — $ — $ — $ — $ —

Print and Other $ ( 11 ) $ 29 $ 63 $ 177 $ 258 $ 100

FITTLE 8 6 2 1 17 18

Total $ ( 3 ) $ 35 $ 65 $ 178 $ 275 $ 118

Xerox 2023 Form 10-Q 17

Note 5 – Lessor

3 unchanged sentences

Three Months Ended

Location in Statements of Income (Loss) 2023 2022

June 30, Six Months Ended

Location in Statements of (Loss) Income 2023 2022 2023 2022

Revenue from sales type leases Sales $ 245 $ 144 $ 475 $ 279

3 unchanged sentences

Total Lease income $ 350 $ 256 $ 689 $ 507

Profit at lease commencement on sales-type leases was estimated to be $ 80 and $ 44 for the three months ended March 31, 2023 and 2022, respectively.

Profit at lease commencement on sales-type leases was estimated to be $ 88 and $ 44 for the three months ended June 30, 2023 and 2022, respectively, and $ 168 and $ 88 for the six months ended June 30, 2023 and 2022, respectively.

Note 6 – Divestiture

Donation of Palo Alto Research Center (PARC)

On April 29, 2023, Xerox completed the donation of its Palo Alto Research Center (PARC) subsidiary to Stanford Research Institute International (SRI), a nonprofit research institute.

The donation enables Xerox to focus on its core businesses and prioritize growth through its business technology solutions for customers in Print, as well as Digital Services and IT Services.

The donation also allows PARC to reach its full potential through SRI’s resources and deep-tech expertise that will enable PARC to focus exclusively on the development of pioneering innovative technologies.

The majority of patents held by PARC will be retained by Xerox with a perpetual license to use those patents being provided to SRI.

Xerox, at its option, will also continue to receive certain research services from SRI.

The donation resulted in a net charge of $ 132 in the second quarter 2023, which includes allocated Goodwill of $ 115 , the carrying value of the net assets associated with PARC being donated of $ 13 , and approximately $ 4 of other costs and expenses related to the donation.

The allocation of Goodwill was based on the relative fair value of the PARC business to the total fair value for the Print and Other Segment/Reporting Unit, which it was part of prior to the donation.

The estimated fair values of the PARC business as well as the Print and Other reporting unit are based on estimates and assumptions that are considered Level 3 inputs under the fair value hierarchy.

Xerox also recorded a net income tax benefit of $ 40 related to the donation for a net after-tax loss on the donation of $ 92 .

The donation is not expected to materially impact current estimates of future projections with respect to results of operations or cash flows of the Company.

Xerox 2023 Form 10-Q 18

22 unchanged sentences

Summarized cash flow information is as follows:

Location in Statement of Cash Flows Three Months Ended

Location in Statement of Cash Flows Six Months Ended

Source/(Use) 2023 2022

15 unchanged sentences

Payments to noncontrolling interests Financing ( 2 ) ( 1 )

Investment from noncontrolling interests Financing — 5

Repurchases related to stock-based compensation - Xerox Holdings Financing ( 7 ) ( 10 )

_____________

(1) Amortization of patents is reported in Decrease (increase) in other current and long-term assets in the Condensed Consolidated Statements of Cash Flows.

(2) Amortization of customer contract costs is reported in Decrease (increase) in other current and long-term assets in the Condensed Consolidated Statements of Cash Flows.

(1) Amortization of patents is reported in Decrease in other current and long-term assets in the Condensed Consolidated Statements of Cash Flows.

(2) Amortization of customer contract costs is reported in Decrease in other current and long-term assets in the Condensed Consolidated Statements of Cash Flows.

Refer to Note 3 - Revenue - Contract Costs for additional information.

6 unchanged sentences

This program is generally available to all non-inventory vendors and suppliers.

Spending associated with this program during the three months ended March 31, 2023, totaled approximately $ 30 .

Spending associated with this program during the three and six months ended June 30, 2023 was approximately $ 30 and $ 60 , respectively.

All outstanding amounts related to the program are recorded within Accounts payable in our Condensed Consolidated Balance Sheets, and the associated payments are included in operating activities within our Condensed Consolidated Statements of Cash Flows.

The amount due to vendors and suppliers participating in this program and included in Accounts payable was approximately $ 40 as of March 31, 2023 and December 31, 2022, respectively.

The amount due to vendors and suppliers participating in this program and included in Accounts payable was approximately $ 35 and $ 40 as of June 30, 2023 and December 31, 2022, respectively.

Note 8 – Accounts Receivable, Net

12 unchanged sentences

Balance at March 31 st

Provision 6 3

Charge-offs ( 3 ) ( 2 )

Recoveries and other (1)

Balance at June 30 th

_____________

2 unchanged sentences

The allowance for uncollectible accounts receivable is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends.

Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 6.1 % at March 31, 2023 and 5.7 % at December 31, 2022.

Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 6.0 % at June 30, 2023 and 5.7 % at December 31, 2022.

Accounts Receivable Sales Arrangements

3 unchanged sentences

Under this arrangement, we sell our entire interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser.

Of the accounts receivable sold and derecognized from our balance sheet, $ 73 and $ 159 remained uncollected as of March 31, 2023 and December 31, 2022, respectively.

Of the accounts receivable sold and derecognized from our balance sheet, $ 76 and $ 159 remained uncollected as of June 30, 2023 and December 31, 2022, respectively.

Xerox 2023 Form 10-Q 20

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Accounts receivable sales (1)

$ 88 $ 120 $ 174 $ 236

(1) Losses on sales were not material.

21 unchanged sentences

The allowance for doubtful credit losses is principally determined based on an assessment of origination year and past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends.

Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.3 % at March 31, 2023 and 3.6 % at December 31, 2022.

Our finance receivable bad debt provision was a $ 12 credit in the first quarter 2023 primarily related to a reserve release in the U.S.

of approximately $ 12 due to the favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment which improved our credit position as well as a reserve release of approximately $ 5 related to the sale of finance receivables on a non-recourse basis as part of the on-going sales under the Receivable Funding Agreement - see Sales of Receivables below.

Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.7 % at June 30, 2023 and 3.6 % at December 31, 2022.

Our finance receivable bad debt provision in the first quarter 2023 was a credit of $ 12 primarily related to a reserve release in the U.S.

The bad debt provision returned to normal trends in the second quarter 2023 and was slightly higher than the prior year primarily due to increased finance lease originations.

Our allowance for doubtful finance receivables is effectively determined by geography.

14 unchanged sentences

Balance at March 31, 2023 $ 65 $ 7 $ 29 $ 101

Provision 5 1 3 9

Charge-offs ( 4 ) ( 1 ) ( 4 ) ( 9 )

Recoveries and other (2)

Balance at June 30, 2023 $ 66 $ 8 $ 29 $ 103

Balance at December 31, 2021

4 unchanged sentences

Balance at March 31, 2022 $ 78 $ 11 $ 31 $ 120

Provision — 1 3 4

Charge-offs ( 3 ) ( 1 ) ( 2 ) ( 6 )

Recoveries and other (2)

— — ( 2 ) ( 2 )

Balance at June 30, 2022 $ 75 $ 11 $ 30 $ 116

Finance receivables collectively evaluated for impairment (3)

March 31, 2023 (3)

June 30, 2023 (3)

$ 1,444 $ 244 $ 1,122 $ 2,810

March 31, 2022 (3)

June 30, 2022 (3)

$ 1,861 $ 230 $ 972 $ 3,063

2 unchanged sentences

(2) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations.

(3) Total Finance receivables exclude the allowance for credit losses of $ 101 and $ 120 at March 31, 2023 and 2022, respectively.

(3) Total Finance receivables exclude the allowance for credit losses of $ 103 and $ 116 at June 30, 2023 and 2022, respectively.

In the U.S., customers are further evaluated by class based on the type of lease origination.

18 unchanged sentences

The loss rates in this category in the normal course are generally in the range of 7 % to 10 %.

Credit quality indicators are updated at least annually, or more frequently to the extent required by economic conditions, and the credit quality of any given customer can change during the life of the portfolio.

Xerox 2023 Form 10-Q 22

Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are as follows:

March 31, 2023

June 30, 2023

2023 2022 2021 2020 2019 Prior Total

63 unchanged sentences

The aging of our billed finance receivables is as follows:

March 31, 2023

June 30, 2023

Current 31-90

18 unchanged sentences

Sales of Receivables

In December 2022, the Company entered into a Receivables Funding Agreement with an affiliate of HPS Investment Partners (the Purchaser) pursuant to which the Company agreed to offer for sale, and Purchaser agreed to purchase, certain eligible pools of finance receivables on a monthly basis in transactions structured as "true sales at law" and bankruptcy remote transfers and we have received an opinion to that effect from outside legal counsel.

Accordingly, the receivables sold were derecognized from our financial statements and the Purchaser does not have recourse back to the Company for uncollectible receivables.

The Receivables Funding Agreement 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 contemplates lease receivable sales totaling approximately $ 600 during the initial term.

Additionally, the Company will continue to service the lease receivables for a specified fee and will also be paid a commission on lease receivables sold under the Receivables Funding Agreement.

Of the finance receivables sold and derecognized from our balance sheet, $ 311 and $ 60 remained uncollected as of March 31, 2023, and December 31, 2022, respectively.

In December 2022, the Company entered into a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) pursuant to which the Company agreed to offer for sale, and HPS agreed to purchase, certain eligible pools of finance receivables on a monthly basis in transactions structured as "true sales at law" and bankruptcy remote transfers and we have received an opinion to that effect from outside legal counsel.

Accordingly, the receivables sold were derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables.

The finance receivables funding agreement has an initial term through January 31, 2024, with automatic one-year extensions thereafter, unless terminated by either the Company or HPS.

Additionally, the Company will continue to service the lease receivables for a specified fee and will also be paid a commission on lease receivables sold under the finance receivables funding agreement.

During the second quarter 2023, the finance receivables funding agreement with HPS was amended to expand the pools of finance receivables eligible for sale and to include the sale of the underlying leased equipment to HPS.

The commission paid by HPS was also accordingly amended to cover the value associated with the underlying equipment being sold to HPS.

The company will retain a first right of refusal to repurchase the underlying equipment at the end of the lease term, to the extent offered for sale by HPS at its then fair value.

The amendments were retroactive to prior sales but the adjusted impact on net proceeds and the gain/loss on prior sales was immaterial.

Of the finance receivables sold and derecognized from our balance sheet, $ 653 and $ 60 remained uncollected as of June 30, 2023, and December 31, 2022, respectively.

Xerox 2023 Form 10-Q 25

Finance receivable sales activity was as follows:

2023 December 31,

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Finance receivable sales - net proceeds (1)

$ 381 $ — $ 642 $ —

Gain on sale/Commissions (2)(3)

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$ 2 $ — $ 3 $ —

_____________

(1) Cash proceeds were reported in Net cash provided by operating activities.

(2) Recorded in Services, maintenance and rentals as Other Revenue.

Amounts include revenues associated with the sale of the underlying leased equipment.

(3) The three and six months ended June 30, 2023, includes $ 2 , respectively, of revenues associated with the sale of the underlying leased equipment and which are expected to be paid over the term of the agreements.

Secured Borrowings and Collateral

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Equipment on operating leases and similar arrangements consist of our equipment rented to customers and depreciated to estimated salvage value at the end of the lease term.

Equipment on operating leases and the related accumulated depreciation were as follows:

Equipment on operating leases and the related accumulated depreciation are as follows:

2023 December 31,

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Equipment on operating leases, net $ 259 $ 235

Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, were $ 17 and $ 15 for the three months ended March 31, 2023 and 2022, respectively.

Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, were $ 16 and $ 16 for the three months ended June 30, 2023 and 2022, respectively, and $ 33 and $ 31 for the six months ended June 30, 2023 and 2022, respectively.

Secured Borrowings and Collateral

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Operating lease expense $ 22 $ 24 $ 45 $ 49

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(1) Variable lease expense is related to our leased real estate for offices and warehouses and primarily includes labor and operational costs as well as taxes and insurance.

As of March 31, 2023, we had no operating leases that had not yet commenced.

As of June 30, 2023, we had no operating leases that were material that had not yet commenced.

Operating lease ROU assets, net and operating lease liabilities were reported in the Condensed Consolidated Balance Sheets as follows:

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Note 12 – Restructuring Programs

We engage in restructuring actions, including Project Own It, as well as other transformation efforts in order to reduce our cost structure and realign it to the changing nature of our business.

We engage in restructuring actions and other transformation efforts in order to reduce our cost structure and realign it to the changing nature of our business.

As part of our efforts to reduce costs, our restructuring actions may also include the off-shoring and/or outsourcing of certain operations, services and other functions, as well as reducing our real estate footprint.

During the three months ended March 31, 2023, we recorded net restructuring charges of $ 1 , which included $ 5 of severance costs related to headcount reductions of approximately 100 employees worldwide, and no other contractual termination costs.

During the six months ended June 30, 2023, we recorded Restructuring and related costs, net of $ 25 , which includes $ 2 of restructuring charges, $ 12 of asset impairment charges and $ 11 of related costs.

Restructuring Charges

During the six months ended June 30, 2023, we recorded net restructuring charges of $ 2 , which included $ 8 of severance costs related to headcount reductions of approximately 150 employees worldwide.

These costs were partially offset by $ 6 of net reversals, which primarily reflect changes in estimated reserves from prior period initiatives.

10 unchanged sentences

Balance at March 31, 2023 34 4 38

Provision 3 — 3

Reversals ( 2 ) — ( 2 )

Net current period charges (1)

Charges against reserve and currency ( 7 ) ( 1 ) ( 8 )

Balance at June 30, 2023 $ 28 $ 3 $ 31

_____________ _

(1) Represents net amount recognized within the Condensed Consolidated Statements of Income (Loss) for the period shown for restructuring charges.

(1) Represents net amount recognized within the Condensed Consolidated Statements of (Loss) Income for the period shown for restructuring charges.

Reversals of prior charges primarily include net changes in estimated reserves from prior period initiatives.

1 unchanged sentence

The following table summarizes the reconciliation to the Condensed Consolidated Statements of Cash Flows:

Three Months Ended

Six Months Ended

Charges against reserve and currency $ ( 14 ) $ ( 21 )

1 unchanged sentence

Restructuring cash payments $ ( 14 ) $ ( 21 )

Asset Impairment Charges

Charges associated with asset impairments represent the write-down of the related assets to their new cost basis and are recorded concurrently with the recognition of the provision.

Impairments are net of any potential sublease income or other recovery amounts.

Net asset impairment charges were immaterial for both periods presented.

Second quarter 2023 activity includes the impairment associated with the Company's sale of its Xerox Research Center of Canada (XRCC), the Canadian research division of Xerox, to Myant Capital Partners, which was completed in July 2023.

The impairment reflects the held-for-sale write down of XRCC's net long-lived assets to their fair value.

Xerox 2023 Form 10-Q 28

A summary of our restructuring-related asset impairment activity is as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Lease right of use assets (1)

$ — $ — $ — $ 1

Owned assets (1)

Asset impairments 12 1 12 2

Gain on sales of owned assets (2)

— ( 20 ) — ( 20 )

Adjustments/Reversals — — — —

Net asset impairment charge $ 12 $ ( 19 ) $ 12 $ ( 18 )

____________ _

(1) Primarily related to the exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries.

(2) Reflect gain on the sales of exited surplus facilities and land.

Related Costs

In connection with our restructuring programs, we also incurred certain related costs as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Retention related severance/bonuses (1)

$ — $ — $ 1 $ ( 2 )

Contractual severance costs — ( 1 ) — ( 1 )

Consulting and other costs (2)

Total $ 10 $ ( 1 ) $ 11 $ ( 3 )

1 unchanged sentence

(1) Includes retention related severance and bonuses for employees expected to continue working beyond their minimum retention period before termination.

The credit for the three months ended March 31, 2022 reflects a change in estimate.

Cash paid for restructuring related costs were $ 1 and $ 1 for the three months ended March 31, 2023 and 2022, respectively.

The restructuring related costs reserve was $ 12 and $ 12 at March 31, 2023 and December 31, 2022, respectively.

The balance at March 31, 2023 is expected to be paid over the next twelve months.

Xerox 2023 Form 10-Q 26

The credit for the six months ended June 30, 2022 reflects a change in estimate.

(2) Represents professional support services associated with our business transformation initiatives.

Cash paid for restructuring related costs were $ 11 and $ 2 for the six months ended June 30, 2023 and 2022, respectively.

The restructuring related costs reserve was $ 11 and $ 12 at June 30, 2023 and December 31, 2022, respectively.

The balance at June 30, 2023 is expected to be paid over the next twelve months.

Note 13 – Debt

Credit Facility

In May 2023, Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, entered into a five-year asset-based revolving credit agreement (the ABL Facility) with Citibank, N.A., as administrative and collateral agent and several participating lending banks including Citibank N.A.

The ABL Facility has an initial maturity date of May 22, 2028.

Principal is payable in full at maturity on May 22, 2028, and there are no scheduled principal payments prior to maturity.

We deferred approximately $ 7 of debt issuance costs in connection with the ABL Facility, which will be amortized over the five-year term.

Our previous $ 250 Credit Facility due July 2024 was terminated prior to entering into the ABL Facility and resulted in a debt extinguishment loss of approximately $ 1 related to the write-off of deferred debt issuance costs.

Under the ABL Facility, Xerox Corporation may borrow up to the lesser of (x) $ 300 and (y) a borrowing base calculated based on working capital amounts (Accounts receivable and Inventories) as set forth in the ABL Facility Agreement.

The ABL Facility includes an uncommitted accordion feature that allows Xerox Corporation to increase the facility by a total of up to $ 250 , subject to obtaining additional commitments from existing lenders or new lending institutions.

The ABL Facility also includes a $ 100 letter of credit subfacility.

Xerox Corporation's borrowings under the ABL Facility are supported by guarantees from Xerox Holdings Corporation and certain of Xerox Corporation's Canadian and UK subsidiaries, and by security interests in substantially all of the working capital assets of Xerox Corporation, Xerox Holdings Corporation, and such Canadian and UK subsidiaries.

At Xerox Corporations’s election, the loans under the ABL Facility will bear interest at either:

(1) a fluctuating rate per annum equal to the highest of (A) Citibank’s base rate, (B) a rate of 0.5 % in excess of the “NYFRB” rate, and (C) a rate of 1.0 % in excess of one-month Term SOFR, provided that such fluctuating rate shall not be less than 0.0 %, in each case plus an applicable margin (the loans bearing interest at such fluctuating rate, “ABR Loans”);

Xerox 2023 Form 10-Q 29

(2) the one-, three-, or six-month period or (as agreed to by the Agent and the Lenders) such other period, as selected by the Xerox Corporation, per annum Term SOFR (plus a 0.10 % credit spread adjustment), provided that such rate shall not be less than 0.0 %, plus an applicable margin (the loans bearing interest at such rate “Term SOFR Loans”).

The applicable margin for ABR Loans ranges from 0.5 % to 1.0 % depending on the Company’s average excess availability.

The applicable margin for Term SOFR Loans from 1.5 % to 2.0 % depending on the Company’s average excess availability.

At June 30, 2023, borrowings under the ABL Facility were $ 200 and no letters of credits were issued under the facility.

The $ 200 borrowing at June 30, 2023 currently bears interest at an average of 7.19 % through July 31, 2023.

If the balance remains outstanding after that date, the rate will be reset through a new borrowing under the ABL Facility.

Based on management's intent to repay the amount borrowed over the next six months and not refinance it past one year, the $ 200 is included in short-term debt in the Balance Sheet at June 30, 2023.

The ABL Facility requires the Company to comply with a fixed charge coverage ratio of 1X, as defined in the ABL Facility Agreement, measured as of the end of each fiscal quarter during which excess availability is less than an amount equal to the greater of (A) $ 22.5 and (B) 10 % of the Line Cap (the lesser of the aggregate amount of Revolving Commitments and the then-applicable Borrowing Base).

Based on the excess availability at June 30, 2023, the fixed charge coverage ratio measurement was not applicable.

The ABL Facility also contains negative covenants governing dividends, investments, indebtedness, and other matters customary for similar facilities.

As of June 30, 2023, we were in full compliance with all covenants under the ABL Facility and no Event of Default (as such term is defined in the ABL Facility) had occurred.

If an event of default occurs under the ABL Facility, the entire principal amount outstanding, together with all accrued unpaid interest and other amounts owed in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods.

Xerox Holdings Corporation/Xerox Corporation Intercompany Loan

At March 31, 2023 and December 31, 2022, the balance of the Xerox Holdings Corporation Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $ 1,496 and $ 1,496 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 10 and $ 30 , respectively.

Xerox Corporation’s interest expense included interest expense associated with this Intercompany Loan of $ 20 and $ 20 for the three months ended March 31, 2023 and 2022, respectively.

At June 30, 2023 and December 31, 2022, the balance of the Xerox Holdings Corporation Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $ 1,497 and $ 1,496 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 30 and $ 30 , respectively.

Xerox Corporation’s interest expense included interest expense associated with this Intercompany Loan of $ 19 and $ 19 for the three months ended June 30, 2023 and 2022, respectively, and $ 39 and $ 39 for the six months ended June 30, 2023 and 2022, respectively.

Secured Borrowings and Collateral

7 unchanged sentences

Conversely, the credit holders of these SPEs do not have legal recourse to the Company’s general credit.

During the second quarter 2023, we repaid the remaining balance from the December 2022 U.S.

Secured Borrowing of $ 185 early with the proceeds from the sale of the underlying secured finance receivables of approximately $ 205 .

The sale was part of the sales completed in the second quarter 2023 under finance receivables funding agreement as disclosed in Note 9 - Finance Receivables, Net - Sales of Receivables .

As a result of the early extinguishment of this debt, we incurred a loss of approximately $ 3 related to the write-off of the deferred debt issuance costs partially offset by a gain on a dedesignated swap associated with this borrowing.

Xerox 2023 Form 10-Q 30

Below are the secured assets and obligations held by subsidiaries of Xerox, which are included in our Condensed Consolidated Balance Sheets.

March 31, 2023

June 30, 2023

Finance Receivables, Net (1)

2 unchanged sentences

Expected Maturity

United States (4)

December 2022 $ 324 $ — $ 232 7.79 % 2025

January 2022 $ 401 $ — $ 277 6.52 % 2024

4 unchanged sentences

Total $ 763 $ 3 $ 526

Xerox 2023 Form 10-Q 27

December 31, 2022

3 unchanged sentences

Expected Maturity

United States (4)

December 2022 $ 370 $ — $ 247 7.43 % 2025

2 unchanged sentences

Total 1,078 5 790

Secured Borrowing - April 2022 63 — 57 5.45 % 2025

April 2022 63 — 57 5.45 % 2025

December 2022 235 — 195 3.03 % 2025

1 unchanged sentence

____________ _

(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 the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

(2) Represents the principal debt balance and excludes debt issuance costs of $ 4 and $ 5 as of March 31, 2023 and December 31, 2022, respectively.

(2) Represents the principal debt balance and excludes debt issuance costs of $ 1 and $ 5 as of June 30, 2023 and December 31, 2022, respectively.

(3) Represents the pre-hedged rate.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Interest expense (1)(2)

$ 46 $ 49 $ 96 $ 102

Interest income (3)

(1) Includes Cost of financing as well as non-financing interest expense that is included in Other expenses, net in the Condensed Consolidated Statements of Income (Loss).

(2) Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $ 20 and $ 20 for the three months ended March 31, 2023 and 2022, respectively.

(3) Includes Financing revenue as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of Income (Loss).

53 55 110 109

(1) Includes Cost of financing as well as non-financing interest expense that is included in Other expenses, net in the Condensed Consolidated Statements of (Loss) Income.

(2) Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $ 19 and $ 19 for the three months ended June 30, 2023 and 2022, respectively, and $ 39 and $ 39 for the six months ended June 30, 2023 and 2022, respectively.

(3) Includes Financing revenue as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of (Loss) Income.

Xerox 2023 Form 10-Q 31

6 unchanged sentences

The interest rate swaps convert the interest paid on certain loans to a fixed amount while the caps limit the maximum amount of interest paid.

At March 31, 2023 there were four interest rate derivatives outstanding as follows:

At June 30, 2023 there were three interest rate derivatives outstanding as follows:

Secured Borrowing Derivative Type Principal Debt (1)

3 unchanged sentences

United States Cap 75 75 2024 6.49 % 0.50 % 2

United States Cap 232 216 2025 7.79 % 4.50 % 1

Canada Swap 42 36 2025 5.86 % 2.57 % 1

2 unchanged sentences

_____________

(1) Excludes debt issuance costs of $ 4 at March 31, 2023.

No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income (Loss) for these designated cash flow hedges and all components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

(1) Excludes debt issuance costs of $ 1 at June 30, 2023.

No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of (Loss) Income for these designated cash flow hedges and all components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

A cash flow hedge of an interest rate cap with an asset value of $ 2 associated with the December 2022 U.S.

Secured Borrowing was dedesignated during second quarter 2023 as a result of the early repayment of that debt in the second quarter 2023.

The dedesignation resulted in the release of the deferred gain in Accumulated Other Comprehensive Loss and was recorded as part of the Early Extinguishment of Debt.

See Secured Borrowings and Collateral in Note 13 – Debt for additional information.

Foreign Exchange Risk Management

3 unchanged sentences

• Forecasted purchases and sales in foreign currency

At March 31, 2023 and December 31, 2022, we had outstanding forward exchange and purchased option contracts with gross notional values of $ 1,301 and $ 1,541 respectively, with terms of less than 12 months.

At March 31, 2023, approximately 87 % of the contracts mature within three months, 7 % mature in three to six months and 6 % in six to twelve months.

At June 30, 2023 and December 31, 2022, we had outstanding forward exchange and purchased option contracts with gross notional values of $ 1,285 and $ 1,541 respectively, with terms of less than 12 months.

At June 30, 2023, approximately 90 % of the contracts mature within three months, 6 % mature in three to six months and 4 % in six to twelve months.

Foreign Currency Cash Flow Hedges

We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases, sales and expenses.

No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income (Loss) for these designated cash flow hedges for all periods presented, and all components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

In addition, no amount was recorded for an underlying exposure that did not occur or was not expected to occur.

The net liability fair value of these contracts was $ 2 and $ 4 as of March 31, 2023 and December 31, 2022, respectively.

No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of (Loss) Income for these designated cash flow hedges for all periods presented, and all components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

The net liability fair value of these contracts was $ 9 and $ 4 as of June 30, 2023 and December 31, 2022, respectively.

During second quarter 2023, as a result of a change in the currency terms included in a supplier inventory contract, forecasted purchases of inventory in YEN were no longer expected.

This change resulted in several YEN/USD designated cash flow hedges, with a liability value of approximately $ 2 , being dedesignated since the underlying forecasted purchases were no longer probable.

Accordingly, the $ 2 deferred loss in Accumulated Other Comprehensive Loss was reclassified to earnings and recorded in Currency losses, net in the second quarter 2023.

Xerox 2023 Form 10-Q 32

1 unchanged sentence

The following table provides a summary of the fair value amounts of our derivative instruments:

Designation of Derivatives Balance Sheet Location March 31,

Designation of Derivatives Balance Sheet Location June 30,

2023 December 31,

4 unchanged sentences

Interest rate swap Other long-term assets 1 1

Net designated derivative assets $ 4 $ 3

Net designated derivative (liabilities) assets $ ( 5 ) $ 3

Derivatives NOT Designated as Hedging Instruments

5 unchanged sentences

Total Derivative liabilities ( 23 ) ( 11 )

Net Derivative assets $ 6 $ 15

Net Derivative (liabilities) assets $ ( 10 ) $ 15

Summary of Derivative Instruments Gains (Losses)

2 unchanged sentences

Designated Derivative Instruments Gains (Losses)

The following table provides a summary of gains (losses) on derivative instruments:

The following table provides a summary of gains (losses) on derivative instruments in cash flow hedging relationships:

Three Months Ended

(Loss) Gain on Derivative Instruments 2023 2022

Cash Flow Hedges - Foreign Exchange Forward Contracts and Options

June 30, Six Months Ended

2023 2022 2023 2022

Derivative Loss Recognized in OCI (Effective Portion)

Derivative loss reclassified from AOCL to income - Cost of sales (effective portion) ( 6 ) ( 2 )

Derivative gain reclassified from AOCL to income - Interest (effective portion) 1 —

As of March 31, 2023, no net after-tax gain or loss was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity.

Foreign exchange contracts - forwards and options $ ( 13 ) $ ( 23 ) $ ( 15 ) $ ( 38 )

Interest rate contracts — — — —

Total $ ( 13 ) $ ( 23 ) $ ( 15 ) $ ( 38 )

Location of Derivative Losses Reclassified from AOCL to Income (Effective Portion)

Cost of sales $ ( 8 ) $ ( 4 ) $ ( 14 ) $ ( 6 )

Interest expense 1 — 2 —

Total $ ( 7 ) $ ( 4 ) $ ( 12 ) $ ( 6 )

As of June 30, 2023, a net after-tax loss of $ 5 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity.

Non-Designated Derivative Instruments Gains (Losses)

3 unchanged sentences

Derivatives NOT Designated as Hedging Instruments Location of Derivative Gain (Loss) Three Months Ended

Foreign exchange contracts – forwards Other expense – Currency gains (losses), net $ ( 5 ) $ ( 9 )

Currency losses, net were $ 11 and $ 0 for three months ended March 31, 2023 and 2022, respectively.

Net currency gains and losses include the mark-to-market adjustments of the derivatives not designated as hedging instruments and the related cost of those derivatives as well as the remeasurement of foreign currency-denominated assets and liabilities and are included in Other expenses, net.

June 30, Six Months Ended

2023 2022 2023 2022

Foreign exchange contracts – forwards Other expenses, net – Currency losses, net $ ( 28 ) $ ( 14 ) $ ( 33 ) $ ( 23 )

Xerox 2023 Form 10-Q 33

Currency losses, net were $ 5 and $ 1 for the three months ended June 30, 2023 and 2022, respectively, and were $ 16 and $ 1 for six months ended June 30, 2023 and 2022, respectively.

Note 15 – Fair Value of Financial Assets and Liabilities

16 unchanged sentences

The estimated fair values of our other financial assets and liabilities were as follows:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 477 $ 477 $ 1,045 $ 1,045

14 unchanged sentences

The components of Net periodic benefit cost and other changes in plan assets and benefit obligations were as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Pension Benefits

7 unchanged sentences

Recognized net actuarial loss (gain) 4 3 4 6 ( 4 ) ( 1 )

Amortization of prior service credit — — 1 — ( 4 ) ( 4 )

Amortization of prior service cost (credit) — — 2 — ( 3 ) ( 3 )

Recognized settlement loss 7 15 — — — —

3 unchanged sentences

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):

Net actuarial (gain) loss (1)

Net actuarial loss (gain) (1)

44 ( 7 ) ( 48 ) 31 ( 5 ) —

Prior service credit — — — — — ( 23 )

Prior service cost — — 36 48 — —

Amortization of net actuarial (loss) gain ( 11 ) ( 18 ) ( 4 ) ( 6 ) 4 1

Amortization of prior service credit — — ( 1 ) — 4 4

Amortization of net prior service (cost) credit — — ( 2 ) — 3 3

Total Recognized in Other Comprehensive Income (Loss) (2)

33 ( 25 ) ( 18 ) 73 2 4

Total Recognized in Net Periodic Benefit (Credit) Cost and Other Comprehensive Income (Loss) $ ( 1 ) $ 12 $ ( 3 ) $ ( 18 ) $ 3 $ ( 28 )

Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive Income (Loss) $ 52 $ ( 1 ) $ ( 11 ) $ 61 $ ( 3 ) $ 3

Six Months Ended June 30,

Pension Benefits

Plans Non-U.S.

Plans Retiree Health

Components of Net Periodic Benefit Costs:

2023 2022 2023 2022 2023 2022

(1) The net actuarial (gain) loss for U.S.

Pension Plans primarily reflects the remeasurement of our primary U.S.

pension plans as a result of the payment of periodic settlements.

The 2022 net actuarial gain for Retiree Health plans reflects remeasurements related to the first quarter 2022 Plan Amendment for our U.S.

Service cost $ — $ 1 $ 2 $ 8 $ — $ 1

Interest cost 54 44 93 62 5 4

Expected return on plan assets ( 49 ) ( 51 ) ( 107 ) ( 114 ) — —

Recognized net actuarial loss (gain) 7 7 5 12 ( 6 ) ( 1 )

Amortization of prior service cost (credit) — — 3 — ( 7 ) ( 7 )

Recognized settlement loss 12 33 — — — —

Defined benefit plans 24 34 ( 4 ) ( 32 ) ( 8 ) ( 3 )

Defined contribution plans 9 10 10 8 n/a n/a

Net Periodic Benefit Cost (Credit) 33 44 6 ( 24 ) ( 8 ) ( 3 )

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):

Net actuarial loss (gain) (1)

37 7 ( 48 ) 31 ( 5 ) ( 7 )

Prior service cost (credit) — — 36 48 — ( 23 )

Amortization of net actuarial (loss) gain ( 19 ) ( 40 ) ( 5 ) ( 12 ) 6 1

Amortization of prior service (cost) credit — — ( 3 ) — 7 7

Total Recognized in Other Comprehensive Income (Loss) (2)

18 ( 33 ) ( 20 ) 67 8 ( 22 )

Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive Income (Loss) $ 51 $ 11 $ ( 14 ) $ 43 $ — $ ( 25 )

_____________

(1) The net actuarial loss (gain) for U.S.

Pension Plans primarily reflects (i) the remeasurement of our primary U.S.

pension plans as a result of the payment of periodic settlements and (ii) adjustments for the actuarial valuation results based on the January 1st plan census data.

net actuarial (gain) loss reflects remeasurements related to the Pension Plan amendments in the U.K.

in second quarter 2023 and 2022, respectively.

The Retiree Health plan's net actuarial gain reflects adjustments for the actuarial valuation results based on the January 1st plan census data in 2023, and remeasurements related to a Plan Amendment for our U.S.

Plan in 2022.

(2) Amounts represent the pre-tax effect included within Other Comprehensive Income (Loss).

Refer to Note 19 - Other Comprehensive Income (Loss) for related tax effects and the after-tax amounts.

Xerox 2023 Form 10-Q 35

Pension Plan Amendment

In April 2023, our U.K.

defined benefit pension plan was amended, at the sole discretion of the Plan Trustees as legally allowed, to increase the capped inflation indexation for the April 2023 pension increase award to 6.5 %.

This plan amendment resulted in an increase of approximately $ 36 (GBP 28 million) in the projected benefit obligation (PBO) for this plan (approximately 1.5 % of the plan PBO as of December 31, 2022).

The associated impacts from the required remeasurement of the plan assets and obligations for updates to discount rates, actual returns and actuarial experience as of the effective date of the amendment resulted in an actuarial gain of $ 48 (GBP 38 million).

Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements included in the 2022 Annual Report for additional information regarding our U.K.

defined benefit pension plan including its funding status as of December 31, 2022.

Contributions

The following table summarizes cash contributions to our defined benefit pension plans and retiree health benefit plans:

Three Months Ended

March 31, Year Ended

Six Months Ended

June 30, Year Ended

2023 2022 Estimated 2023

4 unchanged sentences

Total Retirement plans $ 32 $ 72 $ 105 $ 124

Approximately $ 30 of the estimated 2023 contributions are for our U.S.

tax-qualified defined benefit plans.

However, once the current actuarial valuations and projected results as of the end of the 2022 measurement year are available, actual contributions required to meet the minimum funding requirements during 2023 may change from the current estimate.

Xerox 2023 Form 10-Q 32

Approximately $ 30 of the estimated 2023 contributions for our U.S.

plans are for our tax-qualified defined benefit plans.

Note 17 – Shareholders’ Equity of Xerox Holdings

1 unchanged sentence

The shareholders' equity information presented below reflects the consolidated activity of Xerox Holdings.

Additional Paid-in Capital Treasury Stock Retained Earnings AOCL (2)

Xerox Holdings Shareholders’ Equity Non-controlling Interests Total

Balance at March 31, 2023 $ 157 $ 1,594 $ — $ 5,162 $ ( 3,454 ) $ 3,459 $ 8 $ 3,467

Comprehensive (loss) income, net — — — ( 61 ) 17 ( 44 ) 1 ( 43 )

Cash dividends declared - common (3)

— — — ( 41 ) — ( 41 ) — ( 41 )

Cash dividends declared - preferred (4)

— — — ( 3 ) — ( 3 ) — ( 3 )

Stock option and incentive plans, net — 13 — — — 13 — 13

Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 )

Balance at June 30, 2023 $ 157 $ 1,607 $ — $ 5,057 $ ( 3,437 ) $ 3,384 $ 8 $ 3,392

Xerox 2023 Form 10-Q 36

Additional Paid-in Capital Treasury Stock Retained Earnings AOCL (2)

Xerox Holdings Shareholders’ Equity Non- controlling Interests Total

Balance at March 31, 2022 $ 156 $ 1,560 $ ( 32 ) $ 5,532 $ ( 3,032 ) $ 4,184 $ 5 $ 4,189

Comprehensive loss, net — — — ( 4 ) ( 298 ) ( 302 ) ( 1 ) ( 303 )

Cash dividends declared - common (3)

— — — ( 41 ) — ( 41 ) — ( 41 )

Cash dividends declared - preferred (4)

— — — ( 3 ) — ( 3 ) — ( 3 )

Stock option and incentive plans, net 1 34 — — — 35 — 35

Cancellation of treasury stock ( 2 ) ( 30 ) 32 — — — — —

Investment from noncontrolling interests — — — — — — 5 5

Balance at June 30, 2022 $ 155 $ 1,564 $ — $ 5,484 $ ( 3,330 ) $ 3,873 $ 9 $ 3,882

Treasury Stock Retained

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Balance at December 31, 2022 $ 156 $ 1,588 $ — $ 5,136 $ ( 3,537 ) $ 3,343 $ 10 $ 3,353

Comprehensive income (loss), net — — — 71 83 154 ( 1 ) 153

Comprehensive income, net — — — 10 100 110 — 110

Cash dividends declared - common (3)

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Distributions to noncontrolling interests — — — — — — ( 2 ) ( 2 )

Balance at March 31, 2023

Balance at June 30, 2023

$ 157 $ 1,607 $ — $ 5,057 $ ( 3,437 ) $ 3,384 $ 8 $ 3,392

11 unchanged sentences

Cancellation of treasury stock ( 14 ) ( 276 ) 290 — — — — —

Investment from noncontrolling interests — — — — — — 5 5

Distributions to noncontrolling interests — — — — — — ( 1 ) ( 1 )

Balance at March 31, 2022

Balance at June 30, 2022

$ 155 $ 1,564 $ — $ 5,484 $ ( 3,330 ) $ 3,873 $ 9 $ 3,882

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(2) Refer to Note 19 - Other Comprehensive Income (Loss) for the components of AOCL.

(3) Cash dividends declared on common stock for the three months ended March 31, 2023 and 2022 were $ 0.25 per share, respectively.

(4) Cash dividends declared on preferred stock for the three months ended March 31, 2023 and 2022 were $ 20.00 per share, respectively.

(3) Cash dividends declared on common stock for the three and six months ended June 30, 2023 and 2022 were $ 0.25 per share, respectively, and $ 0.50 per share, respectively.

(4) Cash dividends declared on preferred stock for the three and six months ended June 30, 2023 and 2022 were $ 20.00 per share, respectively, and $ 40.00 per share, respectively.

Xerox 2023 Form 10-Q 37

Common Stock and Treasury Stock

4 unchanged sentences

Balance at March 31, 2023 156,958 —

Xerox 2023 Form 10-Q 33

Stock based compensation plans, net 147 —

Balance at June 30, 2023 157,105 —

Note 18 – Shareholder's Equity of Xerox

2 unchanged sentences

Xerox Shareholder's Equity Non- controlling Interests Total

Balance at March 31, 2023 $ 3,695 $ 3,455 $ ( 3,454 ) $ 3,696 $ 8 $ 3,704

Comprehensive (loss) income, net — ( 61 ) 17 ( 44 ) 1 ( 43 )

Dividends declared to parent — ( 43 ) — ( 43 ) — ( 43 )

Transfers from parent 13 — — 13 — 13

Investment from noncontrolling interests — — — — ( 1 ) ( 1 )

Balance at June 30, 2023 $ 3,708 $ 3,351 $ ( 3,437 ) $ 3,622 $ 8 $ 3,630

Additional Paid-in Capital Retained Earnings AOCL (1)

Xerox Shareholder's Equity Non-

Balance at March 31, 2022 $ 3,592 $ 3,871 $ ( 3,032 ) $ 4,431 $ 5 $ 4,436

Comprehensive loss, net — ( 4 ) ( 298 ) ( 302 ) ( 1 ) ( 303 )

Dividends declared to parent — ( 47 ) — ( 47 ) — ( 47 )

Transfers from parent 38 — — 38 — 38

Investment from noncontrolling interests — — — — 5 5

Balance at June 30, 2022

$ 3,630 $ 3,820 $ ( 3,330 ) $ 4,120 $ 9 $ 4,129

Additional Paid-in Capital Retained Earnings AOCL (1)

Xerox Shareholder's Equity Non- controlling Interests Total

Balance at December 31, 2022 $ 3,693 $ 3,427 $ ( 3,537 ) $ 3,583 $ 10 $ 3,593

Comprehensive income (loss), net — 71 83 154 ( 1 ) 153

Comprehensive income, net — 10 100 110 — 110

Dividends declared to parent — ( 86 ) — ( 86 ) — ( 86 )

1 unchanged sentence

Distributions to noncontrolling interests — — — — ( 2 ) ( 2 )

Balance at March 31, 2023

Balance at June 30, 2023

$ 3,708 $ 3,351 $ ( 3,437 ) $ 3,622 $ 8 $ 3,630

5 unchanged sentences

Transfers from parent 428 — — 428 — 428

Investment from noncontrolling interests — — — — 5 5

Distributions to noncontrolling interests — — — — ( 1 ) ( 1 )

Balance at March 31, 2022

Balance at June 30, 2022

$ 3,630 $ 3,820 $ ( 3,330 ) $ 4,120 $ 9 $ 4,129

5 unchanged sentences

Three Months Ended

Pre-tax Net of Tax Pre-tax Net of Tax

June 30, Six Months Ended

2023 2022 2023 2022

Pre-tax Net of Tax Pre-tax Net of Tax Pre-tax Net of Tax Pre-tax Net of Tax

Translation Adjustments Gains (Losses) $ 49 $ 49 $ ( 295 ) $ ( 287 ) $ 141 $ 141 $ ( 366 ) $ ( 359 )

2 unchanged sentences

Changes in cash flow hedges reclassed to earnings (1)

Net Unrealized Gains (Losses) 3 4 ( 13 ) ( 11 )

Defined Benefit Plans Gains (Losses)

Net actuarial/prior service gains 7 5 16 12

7 6 4 2 12 12 6 4

Net Unrealized Losses ( 6 ) ( 5 ) ( 19 ) ( 14 ) ( 3 ) ( 1 ) ( 32 ) ( 25 )

Defined Benefit Plans (Losses) Gains

Net actuarial/prior service losses ( 27 ) ( 20 ) ( 72 ) ( 55 ) ( 20 ) ( 15 ) ( 56 ) ( 43 )

Prior service amortization (2)

1 unchanged sentence

Actuarial loss amortization/settlement (2)

11 8 23 17 18 13 51 38

Other (losses) gains (3)

15 unchanged sentences

Xerox 2023 Form 10-Q 39

Note 19 – Earnings (Loss) per Share

Note 20 – (Loss) Earnings per Share

(shares in thousands)

The following table sets forth the computation of basic and diluted earnings (loss) per share of Xerox Holdings Corporation's common stock:

The following table sets forth the computation of basic and diluted (loss) earnings per share of Xerox Holdings Corporation's common stock:

Three Months Ended

Basic Earnings (Loss) per Share

Net Income (Loss) Attributable to Xerox Holdings $ 71 $ ( 56 )

June 30, Six Months Ended

2023 2022 2023 2022

Basic (Loss) Earnings per Share

Net (Loss) Income Attributable to Xerox Holdings $ ( 61 ) $ ( 4 ) $ 10 $ ( 60 )

Accrued dividends on preferred stock ( 3 ) ( 3 ) ( 7 ) ( 7 )

Adjusted Net income (loss) available to common shareholders $ 67 $ ( 60 )

Adjusted Net (loss) income available to common shareholders $ ( 64 ) $ ( 7 ) $ 3 $ ( 67 )

Weighted average common shares outstanding 157,009 155,170 156,817 155,897

Basic Earnings (Loss) per Share $ 0.43 $ ( 0.38 )

Diluted Earnings (Loss) per Share

Net Income (Loss) Attributable to Xerox Holdings $ 71 $ ( 56 )

Basic (Loss) Earnings per Share $ ( 0.41 ) $ ( 0.05 ) $ 0.02 $ ( 0.43 )

Diluted (Loss) Earnings per Share

Net (Loss) Income Attributable to Xerox Holdings $ ( 61 ) $ ( 4 ) $ 10 $ ( 60 )

Accrued dividends on preferred stock ( 3 ) ( 3 ) ( 7 ) ( 7 )

Adjusted Net income (loss) available to common shareholders $ 67 $ ( 60 )

Adjusted Net (loss) income available to common shareholders $ ( 64 ) $ ( 7 ) $ 3 $ ( 67 )

Weighted average common shares outstanding 157,009 155,170 156,817 155,897

4 unchanged sentences

Adjusted weighted average common shares outstanding 157,009 155,170 157,895 155,897

Diluted Earnings (Loss) per Share $ 0.43 $ ( 0.38 )

Diluted (Loss) Earnings per Share $ ( 0.41 ) $ ( 0.05 ) $ 0.02 $ ( 0.43 )

The following securities were not included in the computation of diluted earnings per share as they were either contingently issuable shares or shares that if included would have been anti-dilutive:

68 unchanged sentences

litigation is in abeyance as the Rhode Island Supreme Court prepares to hear another COVID-19 insurance coverage case against a FM affiliate with overlapping legal issues.

We have issued or provided approximately $ 238 of guarantees as of March 31, 2023 in the form of letters of credit or surety bonds issued to i) support certain insurance programs;

We have issued or provided approximately $ 236 of guarantees as of June 30, 2023 in the form of letters of credit or surety bonds issued to i) support certain insurance programs;

ii) support our obligations related to the Brazil contingencies;

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We believe that our capacity in the surety markets as well as under various credit arrangements (including our Credit Facility) is sufficient to allow us to respond to future requests for proposals that require such credit support.

Note 21 – Subsequent Event

Donation of Palo Alto Research Center (PARC)

On April 29, 2023, Xerox completed the donation of its Palo Alto Research Center (PARC) subsidiary to SRI International (SRI), a nonprofit research institute.

The donation enables Xerox to focus on its core businesses and prioritize growth through its business technology solutions for customers in Print, as well as Digital Services and IT Services.

The majority of patents held by PARC will be retained by Xerox with a perpetual license to use those patents being provided to SRI.

Xerox, at its option, will also continue to receive certain research services from SRI.

At this time, we are still evaluating the financial impact of the donation including the valuation of the business, the required allocation of goodwill and associated income tax benefit, which could result in a material non-cash loss on disposal, net of any related tax benefit.

The donation is not expected to materially impact future results of operations or cash flows of the Company.

Xerox 2023 Form 10-Q 42

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements