10 unchanged sentences
In January of 2023, all Xerox Ventures LLC investments were transferred and are held by Xerox Ventures Fund I, LLC, a subsidiary of Xerox Ventures LLC.
−Removed: Xerox Ventures Fund I, LLC had investments of approximately $24 million at June 30, 2023.
+Added: Xerox Ventures Fund I, LLC had investments of approximately $24 million at September 30, 2023.
Due to its immaterial nature, and for ease of discussion, Xerox Ventures LLC's results are included within the following discussion.
7 unchanged sentences
Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.
−Removed: In the second quarter 2023, resilient demand and balanced execution drove another quarter of growth in revenue, profits, and cash flow.
−Removed: Recent improvements in financial performance are driven by an intense focus on our three strategic priorities, which includes a focus on delivering client success through products and services that address the productivity challenges of today’s hybrid workplace.
−Removed: Equipment sales revenue of $420 million in the second quarter 2023 increased 14.8% in actual currency and 14.3% in constant currency 1 as compared to the prior year period, reflecting stable demand and improved product availability, particularly in the Americas, and for our higher margin A3 devices.
−Removed: As expected, backlog 2 returned to normalized levels and since we do not expect changes in backlog 2 to materially affect results going forward, we will no longer provide detailed backlog 2 information.
−Removed: Consistent with recent quarters, revenue growth outpaced equipment installations due to favorable mix and pricing.
−Removed: Post-sale revenue of $1.3 billion in the second quarter 2023 declined 3.4% in actual currency as compared to the prior year period and 3.2% in constant currency 1 .
−Removed: The decrease was driven primarily by non-contractual items, including lower IT hardware and paper sales, lower finance income and the cessation of Fuji royalties, partially offset by gains and commissions on sales of finance receivables.
−Removed: Pre-tax loss increased year-over-year driven by a net pre-tax charge of $132 million related to the donation of our Palo Alto Research Center (PARC), partially offset by continued cost reduction actions, supply chain-related cost improvements and higher revenues.
−Removed: Adjusted 1 operating income, which excludes the PARC donation, was also higher year-over-year as a result of these impacts.
−Removed: These benefits were partially offset by currency, the cessation of Fuji royalty income, and higher bad debt and employee compensation expenses.
−Removed: We continue to expect to deliver low to mid-single digit gross operating cost efficiencies for the year.
+Added: In the third quarter 2023, earnings and cash flow grew despite a decline in revenue, evidencing an ability to manage profitability amid fluctuations in revenue through strategic initiatives, cost efficiency actions and productivity.
+Added: The decline in revenue for the third quarter 2023 reflects declines in certain transactional low-margin post-sale revenue categories, as well as declines in revenue associated with strategic actions put in place to simplify our business, partially offset by a stable demand for our products and services.
+Added: Equipment sales of $386 million in the third quarter 2023 declined 1.0% in actual currency, or 2.1% in constant currency 1 , primarily due to the prior year reduction in backlog 2 .
+Added: Consistent with recent quarters, revenue trends outpaced equipment installation activity, due to favorable product and geographic mix, as well as higher prices.
+Added: This was particularly true with our A3 products, which experienced unfavorable geographic mix effects in the prior year due to backlog 2 reductions in EMEA.
+Added: Entry A4 installations were lower again this quarter, due to the ongoing normalization of work-from-home trends.
+Added: Post sale revenue of $1,266 million declined 7.0% in actual currency or 9.0% in constant currency 1 .
+Added: Post sale declines were primarily driven by reductions in transactional items, most notably a significant decline in lower-margin paper sales and IT endpoint devices.
+Added: Post sale revenue was further impacted by the termination of Fuji royalty income and specific strategic actions, resulting in lower financing and PARC revenue.
+Added: Pre-tax income increased year-over-year primarily due to the Goodwill impairment charge in the prior year period and lower RD&E expenses, Other expenses, net and Restructuring and related costs, net.
+Added: Adjusted 1 operating income was up slightly year-over-year as the effects of lower revenue and gross profit, along with higher incentive compensation and bad debt expenses, were offset by ongoing operating efficiencies and pricing actions.
Xerox 2023 Form 10-Q 47
Segment Reporting Change
−Removed: During the second quarter of 2023, the Company recasted FITTLE’s segment revenues and profits measures to reflect the recent strategic shift in the Company’s approach to funding FITTLE’s growth through finance receivable funding agreements that involve the sale of lease receivables.
+Added: During the second quarter of 2023, the Company recast FITTLE’s segment revenues and profits measures to reflect the recent strategic shift in the Company’s approach to funding FITTLE through finance receivable funding agreements that involve the sale of lease receivables.
Refer to Note 4 - Segment Reporting in the Condensed Consolidated Financial Statements for additional information regarding this reporting change.
6 unchanged sentences
It includes printing devices as well as IT hardware associated with our IT services offerings.
−Removed: Second Quarter 2023 Review
−Removed: Total revenue of $1.75 billion for second quarter 2023 increased 0.4% from second quarter 2022, which included a 1.2-percentage point benefit from an acquisition, partially offset by a 0.1-percentage point adverse impact from currency.
−Removed: Total revenue reflected a decrease of 3.4% in Post sale revenue, which included a 1.5-percentage point benefit from an acquisition, partially offset by a 0.2-percentage point negative impact from currency.
−Removed: Equipment sales revenue increased 14.8%, which included a 0.5-percentage point benefit impact from currency.
−Removed: Total revenue of $3.47 billion for the six months ended June 30, 2023 increased 1.6% as compared to the prior year period, including a 1.7-percentage point benefit from acquisitions, partially offset by a 1.3-percentage point adverse impact from currency.
−Removed: Total revenue for the six months ended June 30, 2023 reflected a decrease of 2.8% in Post sale revenue, which included a 2.1-percentage point benefit from acquisitions, partially offset by a 1.4-percentage point adverse impact from currency, and an increase of 19.3% in Equipment sales revenue, which included a 0.9-percentage point adverse impact from currency.
−Removed: Net (loss) income attributable to Xerox Holdings and adjusted 1 Net income attributable to Xerox Holdings were as follows:
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Third Quarter 2023 Review
+Added: Total revenue of $1.65 billion for third quarter 2023 decreased 5.7% from third quarter 2022, which included a 1.7-percentage point benefit from currency.
+Added: Total revenue of $5.12 billion for the nine months ended September 30, 2023 decreased 0.9% as compared to the prior year period, which included a 0.3-percentage point adverse impact from currency, as well as a 1.1-percentage point benefit from an acquisition.
+Added: Net income (loss) attributable to Xerox Holdings and adjusted 1 Net income attributable to Xerox Holdings were as follows:
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 B/(W) 2023 2022 B/(W)
−Removed: Net (Loss) Income Attributable to Xerox Holdings $ (61) $ (4) $ (57) $ 10 $ (60) $ 70
+Added: Net Income (Loss) Attributable to Xerox Holdings $ 49 $ (383) $ 432 $ 59 $ (443) $ 502
Adjusted (1) Net income attributable to Xerox Holdings
2 unchanged sentences
(1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure.
−Removed: Second quarter 2023 Net (loss) attributable to Xerox Holdings was $(61) million as compared to the second quarter 2022 Net (loss) attributable to Xerox Holdings of $(4) million.
−Removed: The increased loss primarily reflects the after-tax PARC donation charge of $92 million ($132 million pre-tax), as well as higher Restructuring and related costs, net, and higher Other expenses, net.
−Removed: These negative impacts were partially offset by higher revenue and gross margin, which include the impact of lower supply chain-related costs, as well as a lower rate of investments in new businesses, lower Selling, administrative and general expenses, and lower Income tax expense.
−Removed: Second quarter 2023 Adjusted 1 Net income attributable to Xerox Holdings of $72 million increased $48 million as compared to the prior year period, primarily reflecting higher gross margin, which include a favorable mix, and the impact of lower supply chain-related costs, a lower rate of investments in new businesses, and higher revenues.
−Removed: These benefits were partially offset by higher Income tax expense.
−Removed: Net income attributable to Xerox Holdings for the six months ended June 30, 2023 was $10 million as compared to a Net (loss) attributable to Xerox Holdings of $(60) million in the prior year period.
−Removed: The increase in Net Income primarily reflects higher revenue and gross margin, which include the impact of lower supply chain-related costs, and lower Selling, administrative and general expenses, as well as a lower rate of investments in new businesses, and lower Other expenses, net, all of which were partially offset by the after-tax PARC donation charge of $92 million ($132 million pre-tax), as well as higher Restructuring and related costs, net, and Income tax expense.
−Removed: A djusted 1 Net income attributable to Xerox Holdings for the six months ended June 30, 2023 of $154 million increased $144 million as compared to the prior year period, primarily reflecting higher revenues and gross margin, which include the impact of lower supply chain-related costs, as well as lower Selling, administrative and general
−Removed: Xerox 2023 Form 10-Q 44
−Removed: expenses, and a lower rate of investments in new businesses.
−Removed: These benefits were partially offset by higher Income tax expense.
+Added: Third quarter 2023 Net income attributable to Xerox Holdings was $49 million as compared to the third quarter 2022 Net (loss) attributable to Xerox Holdings of $(383) million.
+Added: The increase in Net Income is primarily due to the Goodwill impairment charge in the prior year period, as well as lower RD&E expenses, Other expenses, net, and Restructuring and related costs, net.
+Added: These favorable impacts were partially offset by lower revenue and gross profit, as well as higher Income tax expense.
+Added: Third quarter 2023 Adjusted 1 Net income attributable to Xerox Holdings of $77 million increased $44 million as compared to the prior year period, primarily reflecting lower RD&E expenses, Other expenses, net and Income tax expense.
+Added: These favorable impacts were partially offset by lower revenue and gross profit.
+Added: Net income attributable to Xerox Holdings for the nine months ended September 30, 2023 was $59 million as compared to a Net (loss) attributable to Xerox Holdings of $(443) million in the prior year period.
+Added: The increase in Net Income is primarily due to the Goodwill impairment charge in the prior year period, as well as higher gross profit, which includes the impact of lower supply chain-related costs, lower Selling, administrative and general expenses, lower RD&E expenses, and lower Other expenses, net.
+Added: These favorable impacts were partially offset by the after-tax PARC donation charge of $92 million ($132 million pre-tax) in the second quarter 2023, as well as lower revenues and higher Income tax expense.
+Added: A djusted 1 Net income attributable to Xerox Holdings for the nine months ended September 30, 2023 of $231 million increased $188 million as compared to the prior year period, primarily reflecting higher gross profit, which includes the impact of lower supply chain-related costs, as well as lower Selling, administrative and general expenses, RD&E expenses, and Other expenses, net.
+Added: These favorable impacts were partially offset by lower revenue and higher Income tax expense.
____________________________
(1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure.
+Added: Xerox 2023 Form 10-Q 48
A summary of our segments - Print and Other and Financing (FITTLE) - is as follows:
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 % Change 2023 2022 % Change
4 unchanged sentences
Total Revenue $ 1,652 $ 1,751 (5.7) % $ 5,121 $ 5,166 (0.9) %
−Removed: Print and Other $ 107 $ 29 nm $ 207 $ 18 nm
+Added: Print and Other $ 64 $ 63 1.6 % $ 271 $ 81 nm
4 2 nm 22 16 37.5 %
−Removed: Total Profit $ 107 $ 35 nm $ 225 $ 32 nm
+Added: Total Profit $ 68 $ 65 4.6 % $ 293 $ 97 nm
____________________________
1 unchanged sentence
nm - Change is not meaningful.
−Removed: Cash flows from operating activities during the six months ended June 30, 2023 was a source of $173 million and increased $192 million as compared to the prior year period, primarily related to higher net income as well as proceeds of approximately $630 million from the on-going sales of finance receivables under the finance receivables funding agreement, partially offset by higher finance receivable originations, and an increased use of cash for working capital 1 .
−Removed: Cash used in investing activities during the six months ended June 30, 2023 was $22 million primarily reflecting capital expenditures of $15 million and acquisitions of $7 million.
−Removed: Cash used in financing activities during the six months ended June 30, 2023 was $725 million primarily due to net debt payments of $626 million reflecting $300 million for Senior Notes that matured in 2023, and payments of $519 million on existing secured financing arrangements, which includes the early repayment of $185 million on a U.S.
−Removed: secured borrowing, partially offset by net proceeds of $193 million from the new Asset Based Loan Facility (ABL).
−Removed: The remaining use of cash was dividend payments of $88 million.
+Added: Cash flows from operating activities during the nine months ended September 30, 2023 was a source of $297 million and increased $324 million as compared to the prior year period, primarily related to higher net income as well as proceeds of approximately $850 million from the on-going sales of finance receivables under the finance receivables funding agreement, partially offset by higher finance receivable originations, and an increased use of cash for working capital 1 .
+Added: Cash provided by investing activities during the nine months ended September 30, 2023 was $3 million, primarily reflecting gains from sales of non-core surplus business assets of $40 million, partially offset by capital expenditures of $27 million and acquisitions of $7 million.
+Added: Cash used in financing activities during the nine months ended September 30, 2023 was $819 million primarily reflecting $544 million of share repurchases, as well as net debt payments of $131 million.
+Added: Net debt payments include payments of $644 million on existing secured financing arrangements, which includes the early repayment of $185 million on a U.S.
+Added: secured borrowing, and $300 million for Senior Notes that matured in 2023.
+Added: These payments were partially offset by net proceeds of $549 million from the Bridge Loan Facility, which was used to fund the share repurchase, net proceeds of $213 million from the new Asset Based Loan Facility (ABL), and net proceeds of $52 million from the refinance of our Canadian securitization.
+Added: The remaining use of cash was for dividend payments of $131 million.
____________________________
(1) Working capital, net reflects Accounts receivable, Billed portion of finance receivables, Inventories and Accounts payable.
−Removed: We continue to expect total Revenue to be flat to down low-single-digits in constant currency 1 in 2023, which reflects a stable demand environment with a contingency for macroeconomic uncertainty.
−Removed: In the past three months, the macroeconomic outlook has improved, as has momentum in signings for our services.
−Removed: As a result, we now expect full-year revenue to be at the upper end of our expected range.
−Removed: Due to better-than-expected profitability in the first half of 2023, reflecting a stronger-than-expected realization of operating efficiencies and revenue mix, we expect pre-tax and adjusted 1 operating income and margin to increase over 2022 levels, with a slightly higher increase expected for adjusted 1 operating margin.
−Removed: Lastly, we have increased our expectations for Operating cash flows and now expect them to be at least $650 million, which is an increase from our original expectation of at least $550 million.
−Removed: The increase reflects an improvement in expected operating income and incremental sales of finance receivables.
−Removed: We continue to expect capital expenditures to be approximately $50 million.
−Removed: Our capital allocation policy of returning at least 50% of free cash flow 2 to shareholders remains unchanged.
+Added: We continue to expect total Revenue to be flat to down low-single-digits in constant currency 1 for full-year 2023.
+Added: There continues to be momentum in demand for our products and services in the Americas, particularly for our faster-growing Digital Services.
+Added: However, during third quarter 2023 there has been a mild softening of demand in our European markets, reflecting weaker macroeconomic conditions.
+Added: As a result, revenue is expected to come in at the lower end of the expected range.
+Added: The Company expects a difficult equipment sales revenue comparison in the fourth quarter 2023 due to the significant prior year reduction in backlog 2 .
+Added: Further, the headwinds affecting post sale revenue in third quarter 2023 are expected to persist in fourth quarter 2023.
+Added: Due to better-than-expected profitability, reflecting the successful implementation of ongoing cost efficiency programs and a focus on generating profitable revenue, we expect full-year 2023 pre-tax and adjusted 1 operating income and margin to increase over 2022 levels, with a slightly higher increase expected for adjusted 1 operating margin.
+Added: Lastly, we continue to expect Operating cash flows to be at least $650 million and capital expenditures to be approximately $50 million.
____________________________
(1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure.
−Removed: (2) Free cash flow is Net cash provided by operating activities less capital expenditures.
+Added: (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.
+Added: It includes printing devices as well as IT hardware associated with our IT services offerings.
Xerox 2023 Form 10-Q 49
1 unchanged sentence
Three Months Ended
−Removed: June 30, Six Months Ended
−Removed: June 30, % of Total Revenue
+Added: September 30, Nine Months Ended
+Added: September 30, % of Total Revenue
(in millions) 2023 2022 % Change CC % Change 2023 2022 % Change CC % Change 2023 2022
2 unchanged sentences
Total Revenue $ 1,652 $ 1,751 (5.7) % (7.4) % $ 5,121 $ 5,166 (0.9) % (0.6) % 100 % 100 %
−Removed: Reconciliation to Condensed Consolidated Statements of (Loss) Income:
+Added: Reconciliation to Condensed Consolidated Statements of Income (Loss):
Sales $ 644 $ 690 (6.7) % (8.5) % $ 1,999 $ 1,949 2.6 % 2.4 %
23 unchanged sentences
(3) Refer to the "Geographic Sales Channels" section, for definitions.
−Removed: Second quarter 2023 total revenue increased 0.4% as compared to second quarter 2022, which included a 1.2-percentage point benefit from an acquisition, partially offset by a 0.1-percentage point adverse impact from currency.
−Removed: The increase in constant currency 1 revenue is attributable to growth in equipment sales revenue, reflecting a stable demand environment, improved product supply, recent pricing actions, and a favorable mix.
−Removed: Post sale revenue decreased at constant currency 1 primarily due to lower paper sales, IT hardware revenue declines, lower finance income, and the cessation of Fuji royalty income and PARC revenue.
−Removed: Contractual print services revenue 2 was down slightly, due to a reduction in our serviced fleet, partially offset by growth in digital services, including the benefits of a recent acquisition and price increases.
−Removed: Total revenue for the six months ended June 30, 2023 increased 1.6%, including a 1.7-percentage point benefit from acquisitions, partially offset by a 1.3-percentage point adverse impact from currency.
−Removed: The increase in constant currency 1 revenue is attributable to growth in equipment sales revenue, reflecting a stable demand environment, improved product supply, recent pricing actions, and a favorable mix.
−Removed: Post sale revenue for the six months ended June 30, 2023 decreased at constant currency 1 , primarily due to lower paper sales, IT hardware revenue declines, lower finance income, and the cessation of Fuji royalty income and PARC revenue.
−Removed: Contractual print services revenue 2 increased due to growth in IT and digital services revenue, which included the benefits of an acquisition, partially offset by a reduction in our serviced fleet.
+Added: Third quarter 2023 total revenue decreased 5.7% as compared to third quarter 2022, and included a 1.7-percentage point benefit from currency.
+Added: The decrease in equipment sales revenue at constant currency 1 was primarily attributable to EMEA backlog reductions in the prior year quarter.
+Added: This impact was partially offset by recent pricing actions and a favorable product and geographic mix.
+Added: Post sale revenue decreased at constant currency 1 due to the decline of lower-margin paper sales and IT endpoint device revenue, lower finance income, the termination of Fuji royalty income and PARC revenue.
+Added: Contractual print services 2 declined modestly, primarily due to lower service revenue from our economically-sensitive Production customers, and was partially offset by Digital and Managed IT Services revenue growth.
+Added: Total revenue for the nine months ended September 30, 2023 decreased 0.9%, and included a 0.3-percentage point adverse impact from currency, as well as a 1.1-percentage point benefit from an acquisition.
+Added: The decrease at constant currency 1 revenue is attributable to a decrease in Post sale revenue due to the decline in lower-margin paper sales and IT hardware revenue, lower finance income, and the termination of Fuji royalty income and PARC revenue.
+Added: Contractual print services revenue 2 declined modestly, primarily due to lower service revenue from our economically-sensitive Production customers, and was partially offset by Digital and Managed IT Services revenue growth, which included the benefits of an acquisition.
+Added: Growth in Equipment sales revenue, partially offset the decline in Post sale revenue, reflecting a stable demand environment, improved product supply, recent pricing actions, and a favorable mix.
Xerox 2023 Form 10-Q 50
−Removed: Geographically, revenue increased 0.3% in our Americas region as compared to second quarter 2022, and included a 0.4-percentage point adverse impact from currency, and for the six months ended June 30, 2023, revenue increased 2.1% as compared to the prior year period, and included a 0.5-percentage point adverse impact from currency.
−Removed: The increase in our Americas region in both periods, as compared to their respective prior year periods, was due to higher equipment sales resulting from increased product availability, offset by lower post sale revenue.
−Removed: The increase for the six months ended June 30, 2023 also benefited from a recent acquisition.
−Removed: Revenue in our EMEA operations increased 3.4%, as compared to second quarter 2022 and included a 0.3-percentage point benefit from currency, and for the six months ended June 30, 2023, revenue increased 1.9%, including a 3.3-percentage point adverse impact from currency.
−Removed: On a constant currency 1 basis, revenue in our EMEA region increased 3.1% and 5.2% for the three and six months ended June 30, 2023, respectively, as compared to the respective prior year periods, driven by strength in equipment sales revenue and the benefits from a recent acquisition.
−Removed: Total revenue for the three and six months ended June 30, 2023 reflected the following:
+Added: Geographically, third quarter 2023 revenue decreased 3.2% in the Americas as compared to third quarter 2022, and included a 0.4-percentage point benefit from currency.
+Added: The decrease at constant currency 1 reflected lower post sale revenue, due to the decline in paper sales, finance income, and Contractual print services revenue 2 , partially offset by higher equipment sales revenue.
+Added: The increase in equipment sales in the Americas is due to increased product availability as compared to third quarter 2022.
+Added: Revenue in EMEA operations decreased 7.2%, as compared to third quarter 2022 and included a 4.9-percentage point benefit from currency.
+Added: On a constant currency 1 basis, revenue decreased 12.1% driven by lower equipment sales, primarily due to prior year backlog reductions, as well as lower post sale revenue due to a significant decline in paper sales.
+Added: Revenue in the Americas increased 0.3% for the nine months ended September 30, 2023, as compared to the prior year period, and included a 0.2-percentage point adverse impact from currency.
+Added: The increase in the Americas, as compared to the prior year period, was due to higher equipment sales revenue resulting from increased product availability, which was partially offset by lower post sale revenue.
+Added: Revenue in EMEA operations decreased 1.2% for the nine months ended September 30, 2023 as compared to the prior year period, and included a 0.5-percentage point adverse impact from currency.
+Added: On a constant currency 1 basis, revenue in EMEA operations decreased 0.7% for the nine months ended September 30, 2023, as compared to the prior year period, driven by lower equipment sales revenue, due to prior year backlog reductions, which was partially offset by higher post sale revenue.
+Added: The increase in post sale revenue primarily reflected the benefits of a recent acquisition, partially offset by lower paper sales.
+Added: Total revenue for the three and nine months ended September 30, 2023 reflected the following:
Post sale revenue
−Removed: Post sale revenue primarily reflects revenues from contractual print services 2 , supplies and financing.
+Added: Post sale revenue reflects revenues from contractual print services 2 , 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.
−Removed: Post sale revenue also includes transactional IT hardware sales and other IT services, as well as gains and commissions on the sale of finance receivables.
−Removed: For the three months ended June 30, 2023, Post sale revenue decreased 3.4% as compared to second quarter 2022, and included a 1.5-percentage point benefit from an acquisition, and a 0.2-percentage point adverse impact from currency.
−Removed: Post sale revenue decreased 2.8% for the six months ended June 30, 2023 as compared to the prior year period and included a 2.1-percentage point benefit from acquisitions, and a 1.4-percentage point adverse impact from currency.
+Added: Post sale revenue also includes transactional IT hardware sales and other Managed IT services, as well as gains and commissions, and servicing revenue on the sale of finance receivables.
+Added: For the three months ended September 30, 2023, Post sale revenue decreased 7.0% as compared to third quarter 2022, including a 2.0-percentage point benefit from currency.
+Added: Post sale revenue decreased 4.2% for the nine months ended September 30, 2023 as compared to the prior year period, which included a 1.4-percentage point benefit from an acquisition, partially offset by a 0.3-percentage point adverse impact from currency.
Post sale revenue reflected the following:
• Services, maintenance and rentals revenue includes maintenance revenue (including bundled supplies), print and digital services revenue from our Services offerings, rentals and other revenues.
−Removed: ◦ For the three months ended June 30, 2023, these revenues decreased 1.8% as compared to second quarter 2022, including a 0.2-percentage point adverse impact from currency.
−Removed: The decline in constant currency 1 was due to the cessation of Fuji royalty income and PARC revenue.
−Removed: Contractual print services 2 revenue was down slightly as compared to second quarter 2022, with growth in digital services, including the benefits of a recent acquisition, and benefits of price increases which were offset by a slight reduction in our serviced fleet.
−Removed: These impacts were partially offset by the acquisition of Go Inspire and gains and commissions on sales of finance receivables.
−Removed: ◦ For the six months ended June 30, 2023, these revenues decreased 1.9% as compared to the prior year period, including a 1.8-percentage point adverse impact from currency.
−Removed: The decline in constant currency 1 was due to the cessation of Fuji royalty income and PARC revenue.
−Removed: These impacts were partially offset by gains and commissions on sales of finance receivables and revenue growth in contractual print services 2 .
−Removed: Growth in contractual print services 2 revenue included growth in digital services, the benefits of a recent acquisition and price increases, which were partially offset by a slight reduction in our serviced fleet.
−Removed: • Supplies, paper and other sales revenue includes unbundled supplies, IT services and other sales.
−Removed: ◦ For the three months ended June 30, 2023, these revenues decreased 8.3% as compared to second quarter 2022, including a 0.2-percentage point benefit from currency, and primarily reflected lower paper sales and IT hardware revenue, partially offset by higher sales of supplies.
−Removed: ◦ For the six months ended June 30, 2023, these revenues decreased 6.0% as compared to the prior year period, including a 0.4-percentage point adverse impact from currency and primarily reflected lower IT hardware revenue and paper sales, partially offset by higher sales of supplies.
−Removed: • Financing revenue is generated from direct and indirect financed Xerox equipment sale transactions and third-party equipment placements.
−Removed: For the three months ended June 30, 2023, these revenues decreased 5.8% as compared to second quarter 2022, including a 1.8-percentage point adverse impact from currency.
−Removed: Financing revenue for the six months ended June 30, 2023 decreased 3.8%, including a 2.0-percentage point adverse impact from currency.
−Removed: The decline at constant currency 1 for both the three and six months ended June 30, 2023, respectively, primarily reflects a reduction of the average finance receivables in the quarter and year-to-date periods as a result of the sales of finance receivables in 2023 and the fourth quarter 2022.
−Removed: Finance receivables are approximately $250 million lower in June of 2023 as compared to June of 2022.
+Added: ◦ For the three months ended September 30, 2023, these revenues decreased 4.8% as compared to third quarter 2022, including a 1.6-percentage point benefit from currency.
+Added: The decline in constant currency 1 was due in part to the termination of Fuji royalty income and PARC revenue.
+Added: Contractual print services 2 revenue decreased as compared to third quarter 2022, reflecting declines in Production equipment print services, which were partially offset by revenue growth in Digital and Managed IT Services and price increases, as well as gains and commissions, and servicing revenue on sales of finance receivables.
+Added: ◦ For the nine months ended September 30, 2023, these revenues decreased 2.8% as compared to the prior year period, including a 0.6-percentage point adverse impact from currency.
+Added: The decline in constant currency 1 was due in part to the termination of Fuji royalty income and PARC revenue.
+Added: Contractual print services 2 revenue decreased modestly as compared to the prior year period, reflecting declines in Production equipment print services.
+Added: These declines were partially offset by revenue growth in Digital and Managed IT Services, which includes the benefits of a recent acquisition, and price increases, as well as gains and commissions, and servicing revenue on sales of finance receivables.
+Added: • Supplies, paper and other sales revenue includes unbundled supplies, IT hardware and other sales.
+Added: For the three months ended September 30, 2023, these revenues decreased 14.0% as compared to third quarter 2022, including a 2.7-percentage point benefit from currency.
+Added: Supplies, paper and other sales for the nine months ended September 30, 2023 decreased 8.8% as compared to the prior year period, including a 0.6-percentage point benefit from currency.
+Added: The respective decline at constant currency 1 for both the three and nine months ended September 30, 2023, primarily reflected lower paper sales, as well as IT hardware, particularly endpoint devices, and unbundled supplies revenue.
Xerox 2023 Form 10-Q 51
+Added: • Financing revenue is generated from direct and indirect financing of Xerox equipment.
+Added: For the three months ended September 30, 2023, these revenues decreased 9.8% as compared to third quarter 2022, including a 3.7-percentage point benefit from currency.
+Added: Financing revenue for the nine months ended September 30, 2023 decreased 5.8% as compared to the prior year period, including a 0.2-percentage point adverse impact from currency.
+Added: The decline at constant currency 1 for both the three and nine months ended September 30, 2023, respectively, reflects a reduction of the average finance receivables balance in the quarter and year-to-date periods as a result of the sales of finance receivables in 2023 and the fourth quarter 2022 to HPS Investment Partners (HPS).
+Added: Finance receivables are approximately $300 million lower in September of 2023 as compared to September of 2022.
Equipment sales revenue
−Removed: Equipment sales revenue increased 14.8% for the three months ended June 30, 2023 as compared to the second quarter 2022, including a 0.5-percentage point benefit from currency, and Equipment sales revenue for the six months ended June 30, 2023 increased 19.3%, including a 0.9-percentage point adverse impact from currency.
−Removed: The increase for both the three and six months ended June 30, 2023 reflects improvement in product availability, particularly in the Americas region, and for our higher margin mid-range and high-end devices, as well as recent pricing actions.
−Removed: Entry device installs were down for both the three and six months ended June 30, 2023, as compared to their respective prior year periods, due to the ongoing normalization of work-from-home trends.
+Added: Equipment sales revenue decreased 1.0% for the three months ended September 30, 2023 as compared to the third quarter 2022, including a 1.1-percentage point benefit from currency.
+Added: The decrease in constant currency 1 reflects the significant reduction in backlog, primarily in EMEA operations, in the third quarter 2022 as compared to the third quarter 2023.
+Added: The decrease in revenue was driven by the Entry product group, primarily in EMEA operations, mostly offset by growth in higher-margin mid-range and high-end devices, in the Americas region, as well as recent pricing actions and stable demand conditions.
+Added: Entry device revenues were down as compared to the prior year period due to the ongoing normalization of work-from-home trends.
+Added: For the nine months ended September 30, 2023 Equipment sales revenue increased 11.9%, including a 0.2-percentage point adverse impact from currency.
+Added: The increase in constant currency 1 reflects improvement in product availability for higher-margin mid-range and high-end devices, in the Americas region, as well as recent pricing actions and stable demand conditions.
+Added: These increases were partially offset by lower revenue from the Entry product group, primarily in EMEA operations, as compared to the prior year period, due to the ongoing normalization of work-from-home trends.
See Segment Review - Print and Other below for additional discussion on Equipment sales revenue.
14 unchanged sentences
The following is a summary of key financial ratios used to assess our performance:
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 B/(W) 2023 2022 B/(W)
12 unchanged sentences
24.5 % 25.8 % 1.3 pts.
−Removed: Pre-tax (Loss) $ (89) $ (5) $ (84) $ (4) $ (94) $ 90
−Removed: Pre-tax (Loss) Margin (5.1) % (0.3) % (4.8) pts.
+Added: Pre-tax Income (Loss) $ 63 $ (380) $ 443 $ 59 $ (474) $ 533
+Added: Pre-tax Income (Loss) Margin 3.8 % (21.7) % 25.5 pts.
1.2 % (9.2) % 10.4 pts.
5 unchanged sentences
(1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure.
−Removed: Pre-tax (Loss) Margin
−Removed: Second quarter 2023 pre-tax (loss) margin of (5.1)% increased (4.8)-percentage points as compared to second quarter 2022 pre-tax (loss) margin of (0.3)%.
−Removed: The increase was primarily due to the PARC donation charge which had a 7.6-percentage point adverse impact on pre-tax margin, as well as higher Restructuring and related costs, net, and Other expenses, net.
−Removed: These negative impacts were partially offset by multiple items which resulted in higher adjusted 1 operating margin (see below).
−Removed: Pre-tax (loss) margin for the six months ended June 30, 2023 of (0.1)% decreased 2.7-percentage points as compared to the prior year period pre-tax (loss) margin of (2.8)%.
−Removed: The decrease in the pre-tax loss margin was primarily due to multiple items which resulted in higher adjusted 1 operating margin (see below), as well as lower Other expenses, net.
−Removed: These favorable impacts were partially offset by the PARC donation charge which had a 3.8-percentage point adverse impact on pre-tax margin, as well as higher Restructuring and related costs, net.
+Added: Pre-tax Income (Loss) Margin
+Added: Third quarter 2023 pre-tax income margin of 3.8% increased 25.5-percentage points as compared to third quarter 2022 pre-tax (loss) margin of (21.7)%.
+Added: The increase was primarily due to the Goodwill impairment charge in the prior year period and lower RD&E expenses, Other expenses, net, and Restructuring and related costs, net.
+Added: These favorable impacts were partially offset by lower revenue and gross profit.
+Added: Pre-tax income margin for the nine months ended September 30, 2023 of 1.2% increased 10.4-percentage points as compared to the prior year period pre-tax (loss) margin of (9.2)%.
+Added: The improvement in the pre-tax margin was primarily due to the Goodwill impairment charge in the prior year, as well as multiple items which resulted in higher adjusted 1 operating margin (see below), and lower Other expenses, net and Restructuring and related costs, net.
+Added: These favorable impacts were partially offset by the PARC donation charge which had a 2.6-percentage point adverse impact on pre-tax margin, and lower revenue.
Adjusted 1 Operating Margin
−Removed: Second quarter 2023 adjusted 1 operating income margin of 6.1% increased by 4.1-percentage points as compared to second quarter 2022, primarily reflecting higher gross margin, which includes the impacts of lower supply chain-related costs, as well as the benefits from pricing and cost and productivity actions, and higher revenue.
−Removed: Partially offsetting these benefits were unfavorable currency, the cessation of Fuji royalty income, and higher bad debt and employee compensation expenses.
−Removed: Adjusted 1 operating margin for the six months ended June 30, 2023 of 6.5% increased by 5.6-percentage points as compared to the prior year period, primarily reflecting higher revenue and gross margin, which includes the impacts of lower supply chain-related costs, lower RD&E expense, and lower Selling, administrative and general expenses, due primarily to reserve releases, as well as the benefits from pricing and cost and productivity actions.
−Removed: Partially offsetting these benefits were unfavorable currency, the cessation of Fuji royalty income, and higher employee compensation expenses.
+Added: Third quarter 2023 adjusted 1 operating income margin of 4.1% increased by 0.4-percentage points as compared to third quarter 2022, reflecting higher gross margin, the strategic decision to donate PARC and shutdown certain other PARC-related activities, as well as the benefits from pricing and cost and productivity actions.
+Added: These favorable impacts were partially offset by lower revenue, which includes the termination of Fuji royalty income, and higher incentive compensation expense.
+Added: Adjusted 1 operating margin income for the nine months ended September 30, 2023 of 5.7% increased by 3.8-percentage points as compared to the prior year period, primarily reflecting higher gross margin, which includes the impacts of lower supply chain-related costs, lower RD&E expense, and Selling, administrative and general expenses, due primarily to reserve releases in the first quarter of 2023 partially offset by higher incentive compensation expense, as well as the benefits from pricing and cost and productivity actions.
+Added: Partially offsetting these benefits was lower revenue, which includes the termination of Fuji royalty income.
______________
(1) Refer to the Adjusted Operating Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section.
−Removed: Second quarter 2023 gross margin of 34.0% increased by 2.1-percentage points as compared to second quarter 2022, reflecting improved product and channel mix, lower supply chain-related costs, benefits associated with recent pricing and cost and productivity actions, as well as higher revenue.
−Removed: These impacts were partially offset by unfavorable currency and the cessation of Fuji royalties.
+Added: Third quarter 2023 gross margin of 32.4% increased by 0.6-percentage points as compared to third quarter 2022, reflecting the benefits associated with recent pricing and cost and productivity actions, as well as gains and commissions, and servicing revenues on sales of finance receivables.
+Added: These favorable impacts were partially offset by lower revenue, which includes the termination of Fuji royalty income, and lost revenues associated with the donation of PARC.
Xerox 2023 Form 10-Q 53
−Removed: Gross margin for the six months ended June 30, 2023 of 34.2% increased by 2.4-percentage points as compared to the prior year period, reflecting lower supply chain-related costs, improved product and channel mix, benefits associated with recent pricing and cost and productivity actions, as well as higher revenue, including gains and commissions on sales of finance receivables.
−Removed: These impacts were partially offset by the cessation of Fuji royalties and unfavorable currency.
−Removed: Second quarter 2023 equipment gross margin of 35.2% increased by 11.7-percentage points as compared to second quarter 2022, primarily reflecting higher revenue, a favorable product and channel mix, lower supply chain-related costs, as well as the benefits associated with recent pricing actions.
−Removed: These impacts were partially offset by unfavorable currency.
−Removed: Equipment gross margin for the six months ended June 30, 2023 of 35.8% increased by 13.7-percentage points as compared to the prior year period, primarily reflecting higher revenue, a favorable product and channel mix, lower supply chain-related costs and pricing benefits.
−Removed: Second quarter 2023 Post sale gross margin of 33.6% decreased by 0.5-percentage points as compared to second quarter 2022, reflecting lower revenue, the cessation of Fuji royalties, a slight reduction in our serviced fleet and unfavorable currency.
−Removed: Financing margin also declined due to higher interest costs.
−Removed: These impacts were partially offset by lower supply chain-related costs and benefits associated with pricing and cost and productivity actions, as well as gains and commissions on sales of finance receivables.
−Removed: Post sale gross margin for the six months ended June 30, 2023 of 33.7% decreased by 0.5-percentage points as compared to the prior year period, reflecting lower revenue, the cessation of Fuji royalties, a reduction in our serviced fleet and unfavorable currency.
−Removed: Financing margin also declined due to higher interest costs.
−Removed: These impacts were partially offset by lower supply chain-related costs and benefits associated with pricing actions and cost and productivity actions, as well as gains and commissions on sales of finance receivables.
+Added: Gross margin for the nine months ended September 30, 2023 of 33.6% increased by 1.8-percentage points as compared to the prior year period, reflecting lower supply chain-related costs, the benefits associated with recent pricing and cost and productivity actions, as well as gains and commissions, and servicing revenues on sales of finance receivables.
+Added: These favorable impacts were partially offset by lower revenue, which includes the termination of Fuji royalty income, and lost revenue associated with the donation of PARC.
+Added: Third quarter 2023 equipment gross margin of 31.0% increased by 10.0-percentage points as compared to third quarter 2022, reflecting a favorable product and channel mix, as well as the benefits associated with recent pricing actions.
+Added: These favorable impacts were slightly offset by lower revenue and higher transportation costs.
+Added: Equipment gross margin for the nine months ended September 30, 2023 of 34.3% increased by 12.6-percentage points as compared to the prior year period, reflecting higher revenue, a favorable product and channel mix, lower supply chain-related costs, and the benefits associated with recent pricing actions.
+Added: Third quarter 2023 Post sale gross margin of 32.9% decreased by 2.0-percentage points as compared to third quarter 2022, reflecting lower activity, the termination of Fuji royalty income, and lower financing margin.
+Added: Financing margin decreased primarily due to higher interest costs.
+Added: These impacts were partially offset by the benefits associated with cost and productivity actions, as well as gains and commissions, and servicing revenue on sales of finance receivables.
+Added: Post sale gross margin for the nine months ended September 30, 2023 of 33.4% decreased by 1.1-percentage points as compared to the prior year period, reflecting lower revenue, which includes the termination of Fuji royalty income and lost revenues associated with the donation of PARC, as well as lower financing margin.
+Added: Financing margin decreased primarily due to higher interest costs.
+Added: These impacts were partially offset by the benefits associated cost and productivity actions, and lower supply chain-related costs as well as gains and commissions, and servicing revenues on sales of finance receivables.
Research, Development and Engineering Expenses (RD&E)
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(in millions) 2023 2022 Change 2023 2022 Change
2 unchanged sentences
Total RD&E Expenses $ 52 $ 73 $ (21) $ 173 $ 235 $ (62)
−Removed: Second quarter 2023 RD&E as a percentage of revenue of 3.2% decreased by 1.6-percentage points as compared to second quarter 2022, primarily due to the strategic decision to donate our PARC subsidiary, and the impact of higher revenues.
−Removed: RD&E as a percentage of revenue for the six months ended June 30, 2023 of 3.5% decreased by 1.2-percentage points as compared to the prior year period, primarily due to the strategic decision to donate our PARC subsidiary, as well as a lower rate of investments in new businesses, including the spin-off of Innovation businesses, and higher revenues.
−Removed: RD&E of $57 million decreased $27 million as compared to second quarter 2022, primarily driven by lower spending in our innovation portfolio due to the strategic decision to donate our PARC subsidiary, and the exit from other certain PARC-related activities, as well as modest savings from restructuring and productivity actions.
−Removed: RD&E for the six months ended June 30, 2023 of $121 million decreased $41 million as compared to the prior year period, primarily driven by lower spending in our innovation portfolio due to the strategic decision to donate our PARC subsidiary, and the exit from other certain PARC-related activities, as well as savings from restructuring and productivity actions.
−Removed: The lower spending in innovation for both the three and the six months ended June 30, 2023, as compared to their respective prior year periods, reflects decisions to provide greater focus and financial flexibility to pursue growth opportunities adjacent to our core operations within Print, Digital and IT Services.
−Removed: Xerox 2023 Form 10-Q 50
+Added: Third quarter 2023 RD&E as a percentage of revenue of 3.1% decreased by 1.1-percentage points as compared to third quarter 2022, due to the lower rate of investments, as a result of the strategic decision to donate PARC.
+Added: RD&E as a percentage of revenue for the nine months ended September 30, 2023 of 3.4% decreased by 1.1-percentage points as compared to the prior year period, primarily due to the strategic decision to donate PARC, including the spin-off of Innovation businesses and the shutdown of certain other PARC-related activities, as well as a lower rate of investments in new businesses.
+Added: RD&E of $52 million decreased $21 million as compared to third quarter 2022.
+Added: For the nine months ended September 30, 2023 RD&E of $173 million decreased $62 million as compared to the prior year period.
+Added: The decrease, as compared to the respective prior year periods, was primarily driven by lower spending in our innovation portfolio due to the strategic decision to donate PARC, including the spin-off of Innovation businesses, and the shutdown of certain other PARC-related activities, as well as modest savings from restructuring and productivity actions.
+Added: The lower spending in innovation for both the three and the nine months ended September 30, 2023, as compared to their respective prior year periods, reflects decisions which provide greater focus and financial flexibility to pursue growth opportunities adjacent to our core operations within Print, Digital and Managed IT services.
Selling, Administrative and General Expenses (SAG)
−Removed: Second quarter 2023 SAG as a percentage of revenue of 24.7% decreased by 1.6-percentage points as compared to second quarter 2022, primarily due to lower selling and administrative expenses, partially offset by higher bad debt expense, as well as the impact of higher revenues.
−Removed: Second quarter 2023 SAG of $433 million decreased by $26 million as compared to second quarter 2022, primarily reflecting stock compensation expense of $21 million 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 in the second quarter 2022.
−Removed: Additionally, SAG benefited from productivity and cost savings, including savings related to the strategic decision to donate our PARC subsidiary.
−Removed: These benefits were partially offset by higher bad debt and compensation expenses.
−Removed: SAG as a percentage of revenue for the six months ended June 30, 2023 of 24.2% decreased by 2.6-percentage points as compared to the prior year period, primarily due to lower selling and administrative expenses and higher revenues, as well as a 0.5 percentage-point favorable impact from lower bad debt expense.
−Removed: SAG for the six months ended June 30, 2023 of $840 million decreased by $74 million as compared to the prior year period, primarily reflecting stock compensation expense of $21 million 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 in the second quarter 2022.
−Removed: Additionally, SAG benefited from productivity and cost savings, including savings related to the strategic decision to donate our PARC subsidiary, as well as lower labor costs associated with a higher-than-expected number of open positions, lower bad debt expense and the favorable impact of currency.
−Removed: These benefits were partially offset by higher marketing and compensation expenses, as well as the impact of an acquisition.
−Removed: Our bad debt provision for the three months ended June 30, 2023 of $15 million increased $8 million as compared to second quarter 2022, primarily due to increased sales revenues and higher originations of finance receivables not subject to sale under the finance receivables funding agreement.
−Removed: Our bad debt provision for six months ended June 30, 2023 of $7 million, decreased by $15 million as compared to the prior year period, primarily related to the first quarter 2023 reserve releases of approximately $12 million due to the favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment which improved our credit position, and approximately $5 million related to the sale of finance receivables on a non-recourse basis as part of the on-going finance receivables funding agreement.
+Added: Third quarter 2023 SAG as a percentage of revenue of 25.2% increased by 1.3-percentage points as compared to third quarter 2022, due to lower revenues, as well as higher selling and bad debt expenses.
+Added: These impacts were partially offset by lower administrative expense.
+Added: Third quarter 2023 SAG of $416 million decreased by $2 million as compared to third quarter 2022, primarily reflecting productivity and cost savings, including savings related to the strategic decision to donate PARC, and lower litigation costs.
+Added: These benefits were partially offset by higher incentive compensation expense, unfavorable currency, and bad debt expense.
+Added: Xerox 2023 Form 10-Q 54
+Added: SAG as a percentage of revenue for the nine months ended September 30, 2023 of 24.5% decreased by 1.3-percentage points as compared to the prior year period, due to lower administrative and selling expenses, as well as a 0.2 percentage-point favorable impact from lower bad debt expense.
+Added: These favorable impacts were partially offset by lower revenues.
+Added: SAG for the nine months ended September 30, 2023 of $1,256 million decreased by $76 million as compared to the prior year period, primarily reflecting stock compensation expense of $21 million 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 in the second quarter 2022.
+Added: Additionally, SAG benefited from productivity and cost savings, including savings related to the strategic decision to donate PARC, as well as lower labor costs associated with a higher-than-expected number of open positions, lower bad debt expense, lower supply chain-related costs, lower litigation costs, and the favorable impact of currency.
+Added: These benefits were partially offset by higher incentive compensation expense and marketing expenses, as well as the impact of an acquisition.
+Added: The bad debt provision for the third quarter 2022 of $10 million increased $3 million as compared to the third quarter 2022 primarily due to i ncreased provisions for accounts receivables as a result of favorable adjustments in the prior year and the timing of aged write-offs.
+Added: The bad debt provision for nine months ended September 30, 2023 of $17 million, decreased by $12 million as compared to the prior year period.
+Added: The decrease reflects the first quarter 2023 reserve release of approximately $12 million as a result of a favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment that improved our credit position, and the benefits related to the sale of finance receivables on a non-recourse basis as part of the on-going finance receivables funding agreement.
We believe our current reserve position remains sufficient to cover expected future losses that may result from current and future macro-economic 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.
−Removed: On a trailing twelve-month basis (TTM), bad debt expense was approximately 1.0% of total receivables (excluding the reserve releases in the first quarter 2023).
+Added: On a trailing twelve-month basis (TTM), bad debt expense was approximately 1.0% of total receivables (excluding the reserve release in the first quarter 2023).
Refer to Note 8 - Accounts Receivable, Net and Note 9 - Finance Receivables, Net in the Condensed Consolidated Financial Statements for additional information regarding our bad debt provision.
Restructuring and Related Costs, Net
−Removed: We incurred Restructuring and related costs, net of $23 million for the second quarter 2023, as compared to $1 million for second quarter 2022, and $25 million for the six months ended June 30, 2023, as compared to $19 million in the prior year period.
−Removed: These costs were primarily related to the implementation of initiatives under our business transformation projects in order to reduce our cost structure and realign it to the changing nature of our business.
−Removed: Second quarter 2023 actions impacted several functional areas, with approximately 50% focused on SAG reductions and approximately 50% focused on RD&E optimization.
−Removed: Second quarter 2022 actions impacted several functional areas, with approximately 40% focused on gross margin improvements, approximately 55% focused on SAG reductions, and the remainder focused on RD&E optimization.
−Removed: The Restructuring and related costs, net reserve balance for all programs as of June 30, 2023 was $42 million, of which $38 million is expected to be paid over the next twelve months.
+Added: We incurred Restructuring and related costs, net of $10 million for the third quarter 2023, as compared to $22 million for third quarter 2022, and $35 million for the nine months ended September 30, 2023, as compared to $41 million in the prior year period.
+Added: These costs were primarily related to the implementation of initiatives under our business transformation projects to reduce and realign our cost structure to the changing nature of our business.
+Added: Third quarter 2023 activity includes impairment associated with the Company's sale of its Russian subsidiary, which was completed in October 2023.
+Added: Third quarter 2023 actions impacted several functional areas, with approximately 80% focused on SAG reductions and approximately 20% focused on gross margin improvements.
+Added: Third quarter 2022 actions impacted several functional areas, with approximately 75% focused on gross margin improvements, approximately 20% focused on SAG reductions, and the remainder focused on RD&E optimization.
+Added: The Restructuring and related costs, net reserve balance for all programs as of September 30, 2023 was $33 million, of which $32 million is expected to be paid over the next twelve months.
Refer to Note 12 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.
−Removed: Xerox 2023 Form 10-Q 51
Worldwide Employment
−Removed: Worldwide employment was approximately 20,300 as of June 30, 2023, a decrease of approximately 200 from December 31, 2022.
+Added: Worldwide employment was approximately 20,100 as of September 30, 2023, a decrease of approximately 400 from December 31, 2022.
The decrease resulted from net attrition (attrition net of gross hires) and restructuring.
+Added: Xerox 2023 Form 10-Q 55
Other Expenses, Net
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(in millions) 2023 2022 2023 2022
2 unchanged sentences
Non-service retirement-related costs 4 (7) 14 (18)
+Added: Gains on sales of businesses and assets (35) (16) (37) (17)
Currency losses, net 6 1 22 2
+Added: Tax indemnification - Conduent (7) — (7) —
Loss on early extinguishment of debt — — 3 4
4 unchanged sentences
Non-Financing Interest Expense
−Removed: Second quarter 2023 non-financing interest expense of $12 million was $11 million lower than second quarter 2022.
−Removed: The decrease was primarily related to lower non-financing debt as a result of the repayment of Senior Notes in 2022 and the first quarter 2023.
−Removed: When non-financing interest is combined with financing interest expense (Cost of financing), total interest expense of $46 million decreased by $3 million as compared to second quarter 2022, primarily reflecting a lower average debt balance, partially offset by higher average interest rates.
−Removed: Non-financing interest expense for the six months ended June 30, 2023 of $26 million was $26 million lower than the prior year period.
−Removed: The decrease was primarily related to lower non-financing debt as a result of the repayment of Senior Notes in 2022 and the first quarter 2023.
−Removed: When combined with financing interest expense (Cost of financing), total interest expense of $96 million decreased by $6 million from the prior year period primarily reflecting a lower average debt balance, partially offset by higher average interest rates.
+Added: Third quarter 2023 non-financing interest expense of $14 million was $7 million lower than third quarter 2022.
+Added: The decrease was related to lower non-financing debt as a result of the repayment of Senior Notes in 2022 and the first quarter 2023.
+Added: When non-financing interest is combined with financing interest expense (Cost of financing), total interest expense of $44 million decreased by $5 million as compared to third quarter 2022, reflecting a lower average debt balance, partially offset by higher average interest rates.
+Added: Non-financing interest expense for the nine months ended September 30, 2023 of $40 million was $33 million lower than the prior year period.
+Added: The decrease was related to lower non-financing debt as a result of the repayment of Senior Notes in 2022 and the first quarter 2023.
+Added: When non-financing interest is combined with financing interest expense (Cost of financing), total interest expense of $140 million decreased by $11 million from the prior year period reflecting a lower average debt balance, partially offset by higher average interest rates.
Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity and interest expense.
Interest Income
−Removed: Second quarter 2023 interest income increased $1 million as compared to the second quarter 2022, while interest income for the six months ended June 30, 2023 increased $5 million as compared to the prior year period, primarily due to higher interest rates, partially offset by a lower cash balance.
+Added: Third quarter 2023 interest income decreased $1 million as compared to the third quarter 2022, while interest income for the nine months ended September 30, 2023 increased $4 million as compared to the prior year period, primarily due to higher interest rates, partially offset by a lower cash balance.
Non-Service Retirement-Related Costs
−Removed: Non-service retirement-related costs were $15 million and $21 million higher for the three and six months ended June 30, 2023, respectively, as compared to their respective prior year periods.
−Removed: The increases reflect higher interest cost driven by higher discount rates, as well as a decrease in the expected return on plan assets due to lower plan asset values.
−Removed: These negative impacts were partially offset by lower settlement losses.
−Removed: Service retirement-related costs, which are included in operating expenses, were $1 million and $6 million for the three months ended June 30, 2023 and 2022, respectively, and $2 million and $10 million for the six months ended June 30, 2023 and 2022, respectively.
+Added: Non-service retirement-related costs were $11 million and $32 million higher for the three and nine months ended September 30, 2023, respectively, as compared to their respective prior year periods.
+Added: The increases reflect higher interest cost associated with higher discount rates, partially offset by lower settlement losses.
+Added: The increase in non-service retirement-related costs for the nine months ended September 30, 2023 as compared to the prior year period, also reflected a decrease in the expected return on plan assets due to lower plan asset values
+Added: Service retirement-related costs, which are included in operating expenses, were $2 million and $4 million for the three months ended September 30, 2023 and 2022, respectively, and $4 million and $14 million for the nine months ended September 30, 2023 and 2022, respectively.
The decrease in both periods is primarily due to the transition of our pension plan in the Netherlands to a Defined Contribution Plan for future service at the end of 2022.
Refer to Note 16 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.
+Added: Gains on sales of businesses and assets
+Added: Gains on sales of businesses and assets were $19 million and $20 million higher for the three and nine months ended September 30, 2023, respectively, as compared to their respective prior year periods.
+Added: The gains in both 2023 and 2022 reflect the sales of non-core surplus business assets.
Currency Losses, Net
−Removed: Second quarter 2023 currency losses, net were $4 million higher than second quarter 2022, while currency losses, net for the six months ended June 30, 2023 increased $15 million as compared to the prior year period.
−Removed: The increase for both periods as compared to their prior year respective periods was primarily due to increased volatility in the global exchange rates, particularly in our Russia and Middle East operations, which could not be fully hedged.
+Added: Third quarter 2023 currency losses, net were $5 million higher than third quarter 2022, while currency losses, net for the nine months ended September 30, 2023 increased $20 million as compared to the prior year period.
Xerox 2023 Form 10-Q 56
−Removed: Second quarter 2023 currency losses, net also reflect losses associated with the discontinuance of hedging relationships for certain YEN-based currency cash flow hedges.
−Removed: Contract Termination Costs
−Removed: Contract termination costs for the six months ended June 30, 2022 reflects a $33 million charge ($25 million after-tax) associated with the termination of a product supply agreement.
−Removed: The charge primarily reflects the payment of the contractual cancellation fee plus interest and related legal fees.
+Added: increase for both periods as compared to their prior year respective periods was due to continued volatility in the global exchange rates, particularly in developing markets, and the cost of hedging.
+Added: Currency losses, net for the nine months ended September 30, 2023 also reflect losses associated with the discontinuance of hedging relationships for certain YEN-based currency cash flow hedges in the second quarter 2023.
+Added: Tax indemnification - Conduent
+Added: Third quarter 2023 credit represents the reversal of a payable to Conduent of an IRS refund Xerox was expected to receive with the settlement of a pre-separation unrecognized tax position.
+Added: The matter was resolved during the third quarter 2023 and both the receivable from the IRS and the payable to Conduent were no longer required.
+Added: The reversal of the offsetting IRS refund receivable is recorded as a charge in Income tax expense.
Loss on Early Extinguishment of Debt
−Removed: In the second quarter 2023, we recorded a loss of $3 million related to the early repayment on secured borrowings and the termination of our $250 million Credit Facility prior to entering into our new 5-year Asset Based Lending Facility (ABL).
+Added: In the second quarter 2023, we recorded a loss of $3 million related to the early repayment on secured borrowings and the termination of our $250 million Credit Facility prior to entering into the new 5-year Asset Based Lending Facility (ABL).
In the second quarter 2022, we recorded a loss of $4 million related to the early redemption of $350 million of the $1 billion of Xerox Corporation 4.625% Senior Notes due March 2023.
Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.
+Added: Contract Termination Costs
+Added: Contract termination costs for the nine months ended September 30, 2022 reflects a $33 million charge ($25 million after-tax) associated with the termination of a product supply agreement.
+Added: The charge reflects the payment of the contractual cancellation fee plus interest, and related legal fees.
Excess Contributions Refund
−Removed: 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.
+Added: 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 a certain Latin American subsidiary as a result of employee forfeitures.
The excess contributions accumulated over the past 20 plus years.
−Removed: Second quarter 2023 effective tax rate was a 31.5% tax benefit and includes the loss on the PARC donation as well as the associated tax benefits.
−Removed: Excluding this impact, the effective tax rate was a 27.9% tax expense, which is higher than the U.S.
−Removed: federal statutory tax rate of 21%, primarily due to the tax impacts associated with restructuring and asset impairment charges and the geographical mix of earnings.
−Removed: On an adjusted 1 basis, second quarter 2023 effective tax rate was 20.0%, which is lower than the U.S.
−Removed: federal statutory tax rate of 21% primarily due to tax benefits from the change in tax filing positions and the redetermination of certain unrecognized tax positions of approximately 10%, which were offset by the geographical mix of earnings.
−Removed: Second quarter 2022 effective tax rate was (20.0)% and included tax expense associated with the non-deductible accelerated share vestings offset by additional tax incentives.
−Removed: On an adjusted 1 basis, second quarter 2022 effective tax rate was 18.5%.
−Removed: The adjusted 1 effective tax rate was lower than the U.S.
−Removed: federal statutory tax rate of 21% primarily due to benefits from additional tax incentives offset by the geographical mix of earnings.
−Removed: The effective tax rate for the six months ended June 30, 2023 was a 350.0% tax benefit and includes the loss on the PARC donation as well as the associated tax benefits.
−Removed: Excluding this impact, the effective tax rate was a 20.3% tax expense, which is lower than the U.S.
−Removed: federal statutory tax rate of 21% primarily due to the tax benefits from the redetermination of certain unrecognized tax positions and the change in the tax filing positions predominately offset by the tax impacts associated with restructuring and asset impairment charges and the geographical mix of earnings.
−Removed: On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2023 was 17.6%.
+Added: Third quarter 2023 effective tax rate was 23.8% which was higher than the U.S.
+Added: federal statutory tax rate of 21%, primarily due to geographical mix of earnings, partially offset by tax benefits due to the redetermination of certain unrecognized tax positions upon the conclusion of several audits, and the remeasurement of deferred tax assets.
+Added: On an adjusted 1 basis, third quarter 2023 effective tax rate was 7.3%, which is lower than the U.S.
+Added: federal statutory tax rate of 21%, primarily due to a tax rate benefit of approximately 15% related to the redetermination of certain unrecognized tax positions upon the conclusion of several audits, as well as the remeasurement of deferred tax assets, partially offset by the geographical mix of earnings.
+Added: Third quarter 2022 effective tax rate was (0.8)% and included tax impacts associated with the non-cash Goodwill impairment charge.
+Added: On an adjusted 1 basis, third quarter 2022 effective tax rate was 42.1%.
+Added: The adjusted 1 effective tax rate was higher than the U.S.
+Added: federal statutory tax rate of 21% primarily due to changes in elections made to certain tax positions for recently filed returns as well as the geographical mix of earnings, combined with lower adjusted pre-tax income.
+Added: The effective tax rate for the nine months ended September 30, 2023 was 1.7% and includes the loss on the PARC donation as well as the associated tax benefits.
+Added: Excluding this impact, the effective tax rate was 21.5%.
+Added: On an adjusted 1 basis, the effective tax rate for the nine months ended September 30, 2023 was 14.5%.
The adjusted 1 effective tax rate was lower than the U.S.
−Removed: federal statutory tax rate of 21% primarily due to tax benefits from the redetermination of certain unrecognized tax positions and the change in tax filing positions, partially offset by the geographical mix of earnings.
−Removed: The effective tax rate for the six months ended June 30, 2022 was 31.9% and included benefits from additional tax incentives as well as a change in our indefinite reinvestment tax liability due to a recent acquisition offset by the non-deductible accelerated share vestings.
−Removed: On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2022 was 185.7%.
+Added: federal statutory tax rate of 21% primarily due to a tax rate benefit of approximately 7% related to the redetermination of certain unrecognized tax positions upon the conclusion of several audits, as well as the change in tax filing positions and the remeasurement of deferred tax assets, partially offset by the geographical mix of earnings.
+Added: The effective tax rate for the nine months ended September 30, 2022 was 5.7% and included tax expense associated with the non-cash Goodwill impairment charge, changes in elections made to certain tax positions for recently filed returns, and the non-deductible accelerated share vestings, according to the terms of an award agreement, in connection with the passing of Xerox Holding's former CEO, offset by benefits from additional tax incentives, a change in our indefinite reinvestment tax liability due to a recent acquisition and the geographical mix of earnings.
+Added: On an adjusted 1 basis, the effective tax rate for the nine months ended September 30, 2022 was 22.0%.
The adjusted 1 effective tax rate was higher than the U.S.
−Removed: federal statutory tax rate of 21% primarily due to benefits from additional tax incentives and a change in our indefinite reinvestment tax liability due to a recent acquisition as well as the geographical mix of earnings.
−Removed: Our effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income.
−Removed: In addition, our effective tax rate will change based on discrete or other nonrecurring events that may not be predictable.
+Added: 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
+Added: Xerox 2023 Form 10-Q 57
+Added: benefits from additional tax incentives and a change in our indefinite reinvestment tax liability due to a recent acquisition.
+Added: The effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income.
+Added: In addition, the effective tax rate will change based on discrete or other nonrecurring events that may not be predictable.
_____________
(1) Refer to the Adjusted Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section.
−Removed: Xerox 2023 Form 10-Q 53
Equity in Net Income of Unconsolidated Affiliates
Investment in Affiliates, at Equity largely consists of several minor investments in entities in the Middle East region.
−Removed: Equity in net income of unconsolidated affiliates for the three and six months ended June 30, 2023 was relatively flat as compared to their respective prior year periods.
−Removed: Net (Loss) Income
−Removed: Second quarter 2023 Net (Loss) Attributable to Xerox Holdings was $(61) million, or $(0.41) per diluted share, which included the after-tax PARC donation charge of $92 million ($132 million pre-tax), or $0.58 per diluted share.
+Added: Equity in net income of unconsolidated affiliates for the three and nine months ended September 30, 2023 was relatively flat as compared to their respective prior year periods.
+Added: Net Income (Loss)
+Added: Third quarter 2023 Net Income Attributable to Xerox Holdings was $49 million, or $0.28 per diluted share.
On an adjusted 1 basis, Net Income Attributable to Xerox Holdings was $77 million, or $0.46 per diluted share.
−Removed: Second quarter 2022 Net (Loss) Attributable to Xerox Holdings was $(4) million, or $(0.05) per diluted share.
+Added: Third quarter 2022 Net (Loss) Attributable to Xerox Holdings was $(383) million, or $(2.48) per diluted share, which included an after-tax non-cash Goodwill impairment charge of $395 million ($412 million pre-tax), or $2.54 per share.
On an adjusted 1 basis, Net Income Attributable to Xerox Holdings was $33 million, or $0.19 per diluted share.
−Removed: Net Income Attributable to Xerox Holdings for the six months ended June 30, 2023 was $10 million, or $0.02 per diluted share, which included the after-tax PARC donation charge of $92 million ($132 million pre-tax), or $0.58 per diluted share.
+Added: Net Income Attributable to Xerox Holdings for the nine months ended September 30, 2023 was $59 million, or $0.30 per diluted share, which included the after-tax PARC donation charge of $92 million ($132 million pre-tax), or $0.58 per diluted share.
On an adjusted 1 basis, Net Income Attributable to Xerox Holdings was $231 million, or $1.39 per diluted share.
−Removed: Net (Loss) Attributable to Xerox Holdings for the six months ended June 30, 2022 was $(60) million, or $(0.43) per diluted share.
+Added: Net (Loss) Attributable to Xerox Holdings for the nine months ended September 30, 2022 was $(443) million, or $(2.91) per diluted share, which included an after-tax non-cash Goodwill impairment charge of $395 million ($412 million pre-tax), or a $2.54 per share.
On an adjusted 1 basis, Net Income Attributable to Xerox Holdings was $43 million, or $0.21 per diluted share.
−Removed: Refer to Note 20 - (Loss) Earnings per Share in the Condensed Consolidated Financial Statements for additional information regarding the calculation of basic and diluted earnings per share.
+Added: Refer to Note 20 - Earnings (Loss) per Share in the Condensed Consolidated Financial Statements for additional information regarding the calculation of basic and diluted earnings per share.
_____________
(1) Refer to the Adjusted Net Income and EPS reconciliation table in the "Non-GAAP Financial Measures" section.
−Removed: Other Comprehensive Income (Loss)
−Removed: Second quarter 2023 Other Comprehensive Income, Net Attributable to Xerox Holdings was $17 million and included the following:
−Removed: i) net translation adjustment gains of $49 million reflecting the strengthening of most of our major foreign currencies against the U.S.
+Added: Other Comprehensive (Loss) Income
+Added: Third quarter 2023 Other Comprehensive Loss, Net Attributable to Xerox Holdings was $67 million and included the following:
+Added: i) net translation adjustment losses of $122 million reflecting the weakening of our major foreign currencies against the U.S.
Dollar during the quarter;
−Removed: ii) $5 million of net unrealized losses;
−Removed: and iii) $27 million of net losses from the changes in defined benefit plans primarily due to plan remeasurements and the adverse impact of currency, partially offset by amortization of actuarial losses.
−Removed: This compares to Other Comprehensive Loss, Net Attributable to Xerox Holdings of $298 million for the second quarter 2022, which reflected the following:
+Added: ii) $55 million of net gains from the changes in defined benefit plans primarily due to net actuarial gains, the positive impact of currency, and the amortization of actuarial losses;
+Added: and iii) $1 million of net unrealized gains.
+Added: This compares to Other Comprehensive Loss, Net Attributable to Xerox Holdings of $217 million for the third quarter 2022, which included the following:
i) net translation adjustment losses of $277 million reflecting the weakening of our major foreign currencies against the U.S.
Dollar during the quarter;
−Removed: ii) $14 million of net unrealized losses primarily due to the weakening of the Yen during the quarter and the associated impact on our Yen based forward exchange contracts hedging forecasted purchases;
−Removed: and iii) $3 million of net gains from the changes in defined benefit plans primarily due to the positive impact of currency as well as the amortization of actuarial losses and settlement losses, which were partially offset by a UK pension plan amendment and remeasurement.
−Removed: Other Comprehensive Income, Net Attributable to Xerox Holdings for the six months ended June 30, 2023 was $100 million and included the following:
+Added: ii) $54 million of net gains from the changes in defined benefit plans primarily due to the positive impact of currency as well as the amortization of actuarial losses and settlement losses;
+Added: and iii) $6 million of net unrealized gains.
+Added: Other Comprehensive Income, Net Attributable to Xerox Holdings for the nine months ended September 30, 2023 was $33 million and included the following:
i) net translation adjustment gains of $19 million reflecting the strengthening of most of our major foreign currencies against the U.S.
−Removed: ii) $1 million of net unrealized losses;
−Removed: and iii) $41 million of net losses from the changes in defined benefit plans primarily due to the adverse impact of currency and plan remeasurements, partially offset by amortization of actuarial losses and settlement losses.
−Removed: This compares to Other Comprehensive Loss, Net Attributable to Xerox Holdings for the six months ended June 30, 2022 of $342 million, which reflected the following:
+Added: and ii) $14 million of net gains from the changes in defined benefit plans primarily due to net actuarial gains as well as the amortization of actuarial losses, partially offset by the adverse impact of currency and plan remeasurements.
+Added: This compares to Other Comprehensive Loss, Net Attributable to Xerox Holdings for the nine months ended September 30, 2022 of $559 million, which included the following:
i) net translation adjustment losses of $636 million reflecting the weakening of our major foreign currencies against the U.S.
2 unchanged sentences
retiree-health plan amendment and the amortization of actuarial losses and settlement losses, which were partially offset by a UK pension plan amendment and remeasurement.
−Removed: Refer to Note 19 - Other Comprehensive Income (Loss) in the Condensed Consolidated Financial Statements for the components of Other Comprehensive Income (Loss), Note 14 - Financial Instruments in the Condensed Consolidated Financial Statements for additional information regarding unrealized gains (losses), net, and Note 16 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding net changes in our defined benefit plans.
Xerox 2023 Form 10-Q 58
+Added: Refer to Note 19 - Other Comprehensive (Loss) Income in the Condensed Consolidated Financial Statements for the components of Other Comprehensive (Loss) Income, Note 14 - Financial Instruments in the Condensed Consolidated Financial Statements for additional information regarding unrealized gains (losses), net, and Note 16 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding net changes in our defined benefit plans.
Reportable Segments
3 unchanged sentences
Segment Review
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in millions) External Revenue Intersegment Revenue (1)
6 unchanged sentences
Total $ 1,751 $ 23 $ 1,774 100 % $ 65 3.7 %
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
(in millions) External Revenue Intersegment Revenue (1)
8 unchanged sentences
(2) Segment margin based on external revenue only.
+Added: Xerox 2023 Form 10-Q 59
Print and Other
1 unchanged sentence
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(in millions) 2023 2022 %
7 unchanged sentences
(1) Reflects revenue, primarily commissions and other payments, made by the FITTLE segment to the Print and Other segment for the lease of Xerox equipment placements.
−Removed: Xerox 2023 Form 10-Q 55
−Removed: Second quarter 2023 Print and Other segment revenue increased 0.1% as compared to second quarter 2022, and Print and Other revenue increased 1.3% for the six months ended June 30, 2023 as compared to the prior year period.
−Removed: The increase for both the three and six months ended June 30, 2023 was driven primarily by Equipment sales revenue growth, partially offset by lower Post sale revenue, as compared to their respective prior year periods.
+Added: Third quarter 2023 Print and Other segment revenue decreased 6.0% as compared to third quarter 2022, and Print and Other segment revenue decreased 1.2% for the nine months ended September 30, 2023 as compared to the prior year period.
+Added: The decrease for both the three and nine months ended September 30, 2023 was driven by lower Post sale revenue, as compared to their respective prior year periods.
Print and Other segment revenues included the following:
−Removed: Equipment sales revenue increased 14.7% during the second quarter 2023 as compared to second quarter 2022, and Equipment sales revenue increased 19.3% for the six months ended June 30, 2023 as compared to the prior year period.
−Removed: The increase for the three and six months ended June 30, 2023 as compared to their respective prior year periods was due to improvement in product availability, particularly in our Americas operations, and for our higher margin mid-range and high-end devices, as well as recent pricing actions.
−Removed: Post sale revenue decreased 4.0% during the second quarter 2023 as compared to second quarter 2022, primarily due to lower paper sales, IT hardware revenue declines, and the cessation of Fuji royalty income and PARC revenue.
−Removed: Contractual print services revenue 1 was down slightly in constant currency 2 , as growth in digital services, including the benefits of a recent acquisition, and the benefits of price increases were offset by a slight reduction in our serviced fleet.
−Removed: Post sale revenue decreased 3.3% for the six months ended June 30, 2023 as compared to the prior year period primarily due to lower paper sales, IT hardware revenue declines, and the cessation of Fuji royalty income and PARC revenue.
−Removed: Contractual print services revenue 1 increased in constant currency 2 , due to improvement in IT and Digital Services revenue, which included the benefits of an acquisition, partially offset by a reduction in our serviced fleet.
+Added: Equipment sales revenue decreased 0.8% during the third quarter 2023 as compared to third quarter 2022, driven by the Entry product group, primarily in EMEA operations, which was partially offset by growth in higher-margin mid-range and high-end devices in the Americas, as well as recent pricing actions.
+Added: Equipment sales revenue increased 12.0% for the nine months ended September 30, 2023 as compared to the prior year period, driven by improvement in product availability, for higher-margin mid-range and high-end devices in the Americas, as well as recent pricing actions and stable demand conditions, both of which were partially offset by lower revenue from the Entry product group, primarily in EMEA operations, due to the ongoing normalization of work-from-home trends.
+Added: Post sale revenue decreased 7.6% during the third quarter 2023 as compared to third quarter 2022, due to lower paper, supplies, and IT endpoint devices revenue, as well as the termination of Fuji royalty income and PARC revenue.
+Added: Contractual print services revenue 1 decreased as compared to third quarter 2022, primarily due to lower service revenue from our economically-sensitive Production customers.
+Added: These impacts were partially offset by growth in Digital and Managed IT services revenue, price increases, as well as gains and commissions, and servicing revenue on sales of finance receivables.
+Added: Post sale revenue decreased 4.7% for the nine months ended September 30, 2023 as compared to the prior year period due to lower paper, IT endpoint devices, and supplies revenues, as well as the termination of Fuji royalty income and PARC revenue.
+Added: Contractual print services revenue 1 decreased as compared to the prior year period, primarily due to lower service revenue from our economically-sensitive Production customers.
+Added: These declines were partially offset by revenue growth in Digital and Managed IT Services, which includes the benefits of a recent acquisition, and price increases, as well as gains and commissions, and servicing revenue on sales of finance receivables.
_____________
(1) Includes revenues from Services, maintenance and rentals.
−Removed: (2) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure.
+Added: Xerox 2023 Form 10-Q 60
Detail by product group is shown below.
Three Months Ended
−Removed: June 30, Six Months Ended
−Removed: June 30, % of Equipment Sales
+Added: September 30, Nine Months Ended
+Added: September 30, % of Equipment Sales
(in millions) 2023 2022 %
9 unchanged sentences
(1) Refer to the Products and Offerings Definitions section.
−Removed: (2) Includes equipment sales related to the FITTLE segment of $6 million and $5 million for the three months ended June 30, 2023 and 2022, respectively, and $12 million and $10 million for the six months ended June 30, 2023 and 2022, respectively.
+Added: (2) Includes equipment sales related to the FITTLE segment of $5 million and $6 million for the three months ended September 30, 2023 and 2022, respectively, and $17 million and $16 million for the nine months ended September 30, 2023 and 2022, respectively.
The change at constant currency 1 reflected the following:
−Removed: • Entry - The decrease for the three and six months ended June 30, 2023 as compared to their respective prior year periods was driven by a shift towards black-and-white devices across all regions.
−Removed: • Mid-range - The increase for the three and six months ended June 30, 2023 as compared to their respective prior year periods was driven by our higher margin A3 devices, primarily in our Americas operations, improved product availability, and price increases.
−Removed: • High-end - The i ncrease for the three months ended June 30, 2023 was driven by Entry Production Mid where installs increased 24% as compared to second quarter 2022, due to higher supply and increased demand.
−Removed: Additionally, iGen placement s more than tripled in the second quarter 2023 as compared to the prior year period, primarily in the Americas, with improved supply supporting orders in backlog.
−Removed: The increase for the six months ended June 30, 2023 as compared to the prior year period was driven by higher revenue and higher installs of both Entry Production Color devices and iGens, due to improved product availability, as well as benefits from price increases.
+Added: • Entry - The decrease for the three and nine months ended September 30, 2023 as compared to their respective prior year periods was driven by the on-going normalization of work-from-home trends.
+Added: • Mid-range - The increase for the three months ended September 30, 2023 as compared to the third quarter 2022 was driven by growth in the Americas, supported by increased product availability, partially offset by declines in EMEA, reflecting backlog reductions in the prior year.
+Added: The increase for the nine months ended September 30, 2023 as compared to the prior year period was driven by higher margin A3 devices due to improved product availability, primarily in the Americas, and price increases, both of which were partially offset by declines in EMEA, which reflected backlog reductions in the prior year.
+Added: • High-end - The increase for the three months ended September 30, 2023 was driven by growth in the Americas, which was offset by declines in EMEA.
+Added: The increase for the nine months ended September 30, 2023 as compared to the prior year period was driven by revenue growth in the Americas, as well as higher revenue and higher installs of both Entry Production Color devices and iGens, due to improved product availability, and benefits from price increases and Xerox’s complete offering of software, services and technology.
_____________
(1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure.
−Removed: Xerox 2023 Form 10-Q 56
Total Installs
3 unchanged sentences
Detail by product group (see Products and Offerings Definitions ) is shown below.
−Removed: Installs for the three months ended June 30, 2023 as compared to prior year period reflect the following:
−Removed: • 43% decrease in entry color installs primarily due to declines in entry color printers and A4 Color multi-function printers (MFPs).
−Removed: • 5% decrease in entry black-and-white installs driven by declines in A4 mono MFPs, partially offset by higher entry mono printer installs.
−Removed: • 21% increase in mid-range color installs, driven by A3 color MFPs, reflecting increased product availability.
−Removed: • 16% increase in mid-range black-and-white installs, driven by A3 mono MFPs, reflecting increased product availability.
−Removed: • 8% increase in high-end color installs reflecting higher demand for iGen and Entry Production Color Mid devices, primarily in our Americas region.
−Removed: • 8% decrease in high-end black-and-white installs reflecting macroeconomic pressures in EMEA and a competitive market for high end cut sheet devices.
−Removed: Installs for the six months ended June 30, 2023 as compared to prior year period reflect the following:
−Removed: • 28% decrease in entry color installs reflecting declines in entry color printers and A4 Color MFPs, primarily in our EMEA region.
−Removed: • 3% decrease in entry black-and-white installs primarily driven by declines in A4 mono MFPs, partially offset by higher entry mono printer installs, and increased product availability.
−Removed: • 23% increase in mid-range color installs, driven by A3 color MFPs, reflecting increased product availability.
−Removed: • 61% increase in mid-range black-and-white installs, driven by A3 mono MFPs, primarily in our Americas region, as well as increased product availability.
−Removed: • 38% increase in high-end color installs reflecting higher demand for iGen and Entry Production Color Mid devices, primarily in our Americas region.
−Removed: • 16% decrease in high-end black-and-white installs reflecting lower demand, primarily in our Americas region.
+Added: Installs for the three months ended September 30, 2023 as compared to prior year period reflect the following:
+Added: • 52% decrease in entry color installs primarily due to a softer demand associated with the ongoing normalization of work-from-home trends.
+Added: • 28% decrease in entry black-and-white installs driven by EMEA markets, mostly across multi-function printers.
+Added: • 18% decrease in mid-range color installs, driven by a decline in EMEA channels, partially offset by growth in the Americas.
+Added: • 10% decrease in mid-range black-and-white installs, driven by a decline in EMEA channels, partially offset by growth in the Americas.
+Added: • 15% increase in high-end color installs reflecting strong demand for Versant products, primarily in the Americas.
+Added: • 16% decrease in high-end black-and-white installs reflecting a decline for Nuvera and Baltoro products in EMEA.
+Added: Xerox 2023 Form 10-Q 61
+Added: Installs for the nine months ended September 30, 2023 as compared to prior year period reflect the following:
+Added: • 37% decrease in entry color installs driven by declines in entry color printers and A4 Color MFPs, associated with the ongoing normalization of work-from-home trends, primarily in EMEA.
+Added: • 12% decrease in entry black-and-white installs driven by declines in A4 mono MFPs, primarily in EMEA, which was partially offset by higher entry mono printer installs.
+Added: • 7% increase in mid-range color installs, driven by A3 color MFPs, reflecting increased product availability in the Americas.
+Added: • 31% increase in mid-range black-and-white installs, driven by A3 mono MFPs, reflecting increased product availability primarily in the Americas.
+Added: • 30% increase in high-end color installs reflecting higher demand for iGen and Versant products, primarily in the Americas.
+Added: • 16% decrease in high-end black-and-white installs reflecting a decline for Nuvera.
_____________
6 unchanged sentences
Segment Margin
−Removed: Print and Other segment margin of 6.5% for the three months ended June 30, 2023 increased by 4.7-percentage points as compared to second quarter 2022 primarily due to lower supply chain-related costs, lower RD&E expense,
+Added: Print and Other segment margin of 4.1% for the three months ended September 30, 2023 increased by 0.3-percentage points as compared to third quarter 2022, primarily due to lower supply chain-related costs, lower RD&E expense, and benefits of cost and productivity savings.
+Added: These positive impacts were partially offset by higher selling and bad debt expenses.
+Added: Print and Other segment margin of 5.6% for the nine months ended September 30, 2023 increased 3.9-percentage points as compared to the prior year period primarily due to higher profit margin, which includes lower supply chain-related costs, lower RD&E expense, and lower Selling, administrative and general expenses, which reflect the benefits of cost and productivity savings.
+Added: These positive impacts were partially offset by higher bad debt expense.
Xerox 2023 Form 10-Q 62
−Removed: and lower selling and administrative expenses, which reflect the benefits of cost and productivity savings, as well as higher revenue.
−Removed: This activity was partially offset by higher bad debt expense.
−Removed: Print and Other segment margin of 6.3% for the six months ended June 30, 2023 increased 5.7-percentage points as compared to the prior year period primarily due to lower supply chain-related costs, lower RD&E expense, and lower Selling, administrative and general expenses, which reflect the benefits of cost and productivity savings and lower bad debt expense, as well as higher revenue.
−Removed: This activity was partially offset by higher Restructuring and related costs, net.
FITTLE represents a global financing solutions business, primarily enabling the sale of our equipment and services.
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
(in millions) 2023 2022 %
7 unchanged sentences
(1) Other Post sale revenue includes lease renewal and fee income.
−Removed: Second quarter 2023 FITTLE segment revenue increased 5.2% as compared to second quarter 2022, and for the six months ended June 30, 2023 segment revenue increased 4.6% as compared to the prior year period.
+Added: Third quarter 2023 FITTLE segment revenue was flat as compared to third quarter 2022, while for the nine months ended September 30, 2023 segment revenue increased 3.1% as compared to the prior year period.
FITTLE segment revenue included the following:
−Removed: Financing revenue is generated from direct and indirect financed Xerox equipment sale transactions and third-party equipment placements.
−Removed: For the three months ended June 30, 2023, these revenues decreased 5.8% as compared to second quarter 2022, including a 1.8-percentage point adverse impact from currency.
−Removed: Financing revenue for the six months ended June 30, 2023 decreased 3.8%, including a 2.0-percentage point adverse impact from currency.
−Removed: The decline at constant currency 1 for both the three and six months ended June 30, 2023, respectively, reflects a reduction of the average finance receivables in the quarter and year-to-date periods as a result of the sales of finance receivables in 2023 and the fourth quarter 2022.
−Removed: Finance receivables are approximately $250 million lower in June of 2023 as compared to June of 2022.
−Removed: Other Post sale revenue increased 17.9% for the three months ended June 30, 2023 as compared to second quarter 2022, and increased 13.9% for the six months ended June 30, 2023 as compared to the prior year period.
−Removed: The increase in both periods is due to revenue from sales of finance receivables under our finance receivables funding agreement, which was $11 million and $14 million for the three and six months ended June 30, 2023.
+Added: Financing revenue is generated from direct and indirect financed Xerox equipment sale transactions.
+Added: For the three months ended September 30, 2023, these revenues decreased 9.8% as compared to third quarter 2022, including a 3.7-percentage point benefit from currency.
+Added: Financing revenue for the nine months ended September 30, 2023 decreased 5.8% as compared to the prior year period, including a 0.2-percentage point adverse impact from currency.
+Added: The decline at constant currency 1 for both the three and nine months ended September 30, 2023, respectively, reflects a reduction of the average finance receivables balance in the quarter and year-to-date periods as a result of the sales of finance receivables in 2023 and the fourth quarter 2022 to HPS.
+Added: Finance receivables are approximately $300 million lower in September of 2023 as compared to September of 2022.
+Added: Other Post sale revenue increased 14.6% for the three months ended September 30, 2023 as compared to third quarter 2022, and increased 14.2% for the nine months ended September 30, 2023 as compared to the prior year period.
+Added: The increase for both the three and nine months ended September 30, 2023, respectively, is due to higher commissions and servicing revenue on increased sales of finance receivables under our finance receivables funding agreement, which was $7 million and $21 million for the three and nine months ended September 30, 2023, respectively.
_____________
1 unchanged sentence
Segment Margin
−Removed: FITTLE segment margin of 0.0% for the three months ended June 30, 2023 decreased 6.3-percentage points as compared to second quarter 2022 due to higher strategic investment costs, and higher interest costs, partially offset by the benefits of the finance receivables funding agreement.
−Removed: FITTLE segment margin of 8.9% for the six months ended June 30, 2023 increased 1.7-percentage points as compared to the prior year period driven by higher revenue reflecting the benefits of the finance receivables funding agreement, and lower bad debt expense, partially offset by higher strategic investment costs, and higher interest costs.
+Added: FITTLE segment margin of 4.1% for the three months ended September 30, 2023 increased 2.1-percentage points as compared to third quarter 2022 primarily reflecting lower bad debt expense as a result of sales of receivables without recourse through our receivable funding arrangements, as well as lower intersegment commissions.
+Added: FITTLE segment margin of 7.3% for the nine months ended September 30, 2023 increased 1.8-percentage points as compared to the prior year period driven by higher revenue reflecting higher commissions and servicing revenue on increased sales of finance receivables under our finance receivables funding agreement, as well as lower bad debt expense.
+Added: These favorable impacts were partially offset by higher strategic investment costs, and higher interest costs.
+Added: We expect further improvements to bad debt expense going forward as our finance receivable balances decline as a result of increased sales of receivables.
Xerox 2023 Form 10-Q 63
1 unchanged sentence
The following is a summary of our liquidity position:
−Removed: • As of June 30, 2023 and December 31, 2022, total cash, cash equivalents and restricted cash were $569 million and $1,139 million, respectively, and apart from restricted cash of $92 million and $94 million at June 30, 2023 and December 31, 2022, respectively, was readily accessible for use.
−Removed: The decrease in total cash, cash equivalents and restricted cash of $570 million primarily reflects payments on long-term debt of $826 million and dividend payments to shareholders of $88 million, which were partially offset by net proceeds of $193 million from the new asset-based revolving credit agreement (the ABL Facility) , and net cash flows from operations of $173 million.
−Removed: Net cash flows from operations included a $390 million benefit from a decrease in finance receivables, which reflected the sale of approximately $630 million of finance receivables under the finance receivables funding agreement, partially offset by new originations.
−Removed: • Total debt at June 30, 2023 was $3,116 million, of which $2,595 million is allocated to and supports the Company's finance assets.
−Removed: The remaining debt of $521 million is attributable to the non-financing business and declined from $806 million at December 31, 2022.
−Removed: Debt consists of Senior Unsecured Notes, secured borrowings through the securitization of finance assets, and borrowings under our new ABL Facility (see below).
−Removed: Approximately $300 million of our Senior Unsecured Note borrowings are due in within the next twelve months.
+Added: • As of September 30, 2023 and December 31, 2022, total cash, cash equivalents and restricted cash were $617 million and $1,139 million, respectively, and apart from restricted cash of $85 million and $94 million at September 30, 2023 and December 31, 2022, respectively, was readily accessible for use.
+Added: The decrease in total cash, cash equivalents and restricted cash of $522 million primarily reflects an $819 million financing use of cash, which was partially offset by operating cash flows of $297 million.
+Added: • Total debt at September 30, 2023 was $3,609 million, of which $2,492 million is allocated to and supports the Company's finance assets.
+Added: The remaining debt of $1,117 million is attributable to the non-financing business and increased from $806 million at December 31, 2022.
+Added: Debt consists of Senior Unsecured Notes, secured borrowings through the securitization of finance assets, borrowings under the new ABL Facility and borrowings under a loan facility used to fund the repurchase of shares from Carl C.
+Added: Icahn and certain of his affiliates.
+Added: $300 million of Senior Unsecured Note borrowings are due within the next twelve months.
• In May 2023, we entered into a five-year senior secured revolving credit facility of up to $300 million (the ABL Facility).
Our previous $250 million Credit Facility due July 2024 was terminated prior to entering into the ABL Facility.
−Removed: As of June 30, 2023, there were $200 million of borrowings under the ABL Facility, which are reported as short-term borrowings based on management's intent to repay this balance within the next six months.
+Added: As of September 30, 2023, there were $220 million of borrowings under the ABL Facility, which are reported as short-term borrowings based on management's intent to repay this balance by the end of 2023.
There were no letters of credit outstanding under this facility and we were in full compliance with the covenants and other provisions of the ABL Facility.
−Removed: • We have increased our expectations for Operating cash flows and now expect them to be at least $650 million, which is an increase from our original expectation of at least $550 million.
−Removed: The increase reflects an improvement in expected operating income and incremental sales of finance receivables.
−Removed: We continue to expect capital expenditures to be approximately $50 million.
+Added: • In September 2023, we entered into a five-year $555 million loan facility (the Loan Facility), which was fully drawn at September 30, 2023 to finance the $542 million repurchase of approximately 34 million shares of the Company’s common stock from Carl C.
+Added: Icahn and certain of his affiliates pursuant to the terms of a related purchase agreement.
+Added: Although the Loan Facility has a final maturity date of September 28, 2028, Xerox anticipates refinancing amounts borrowed under the Loan Facility with a new financing instrument in the near term.
+Added: • We expect Operating cash flows for 2023 to be at least $650 million and we continue to expect capital expenditures to be approximately $50 million.
Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.
1 unchanged sentence
The following summarizes our cash, cash equivalents and restricted cash:
−Removed: Six Months Ended
−Removed: June 30, Change
+Added: Nine Months Ended
+Added: September 30, Change
(in millions) 2023 2022
Net cash provided by (used in) operating activities $ 297 $ (27) $ 324
−Removed: Net cash used in investing activities (22) (62) 40
+Added: Net cash provided by (used in) investing activities 3 (95) 98
Net cash used in financing activities (819) (755) (64)
4 unchanged sentences
Cash Flows from Operating Activities
−Removed: Net cash provided by operating activities was $173 million for the six months ended June 30, 2023.
+Added: Net cash provided by operating activities was $297 million for the nine months ended September 30, 2023.
The $324 million increase in operating cash from the prior year period was primarily due to the following:
−Removed: • $199 million increase in pre-tax income before depreciation and amortization, provisions, PARC donation, stock-based compensation, restructuring and related costs and non-service retirement-related costs.
+Added: • $209 million increase in pre-tax income before depreciation and amortization, provisions, gain on sales of businesses and assets, PARC donation, stock-based compensation, goodwill impairment, restructuring and related costs and non-service retirement-related costs.
• $500 million increase from finance receivables reflecting the sale of approximately $850 million of finance receivables under the finance receivables funding agreement partially offset by higher originations from increased equipment sales.
−Removed: Refer to Note 9 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables.
+Added: Refer to Note 9 - Finance Receivables, Net i n the Condensed Consolidated Financial Statements for additional information regarding the sale of finance receivables.
• $186 million increase due to lower inventory reflecting increased sales of equipment and supplies.
−Removed: • $43 million increase from lower net tax payments.
−Removed: • $40 million increase from lower contributions to our retirement plans primarily due to further contributions to our U.K.
−Removed: defined benefit pension plan not being required in 2023.
Xerox 2023 Form 10-Q 64
+Added: • $31 million increase from lower contributions to our retirement plans primarily due to additional contributions to our U.K.
+Added: defined benefit pension plan not being required in 2023.
+Added: • $29 million increase from lower net tax payments.
• $488 million decrease from accounts payable primarily due to the timing of supplier and vendor payments and lower year-over-year spending.
2 unchanged sentences
Cash Flows from Investing Activities
−Removed: Net cash used in investing activities was $22 million for the six months ended June 30, 2023.
−Removed: The $40 million decrease in the use of cash from the prior year period was primarily due to the following:
−Removed: • $45 million decrease reflecting fewer acquisitions in 2023.
−Removed: • $14 million decrease reflecting lower capital expenditures.
−Removed: • $25 million increase primarily due to the sale of surplus buildings and land in the U.S.
−Removed: in the prior year.
+Added: Net cash provided by investing activities was $3 million for the nine months ended September 30, 2023.
+Added: The $98 million increase in cash from the prior year period was primarily due to the following:
+Added: • $86 million increase reflecting fewer acquisitions in 2023.
+Added: • $12 million increase reflecting lower capital expenditures.
Cash Flows from Financing Activities
−Removed: Net cash used in financing activities was $725 million for the six months ended June 30, 2023.
+Added: Net cash used in financing activities was $819 million for the nine months ended September 30, 2023.
The $64 million increase in the use of cash from the prior year period was primarily due to the following:
−Removed: • $247 million increase from net debt activity.
−Removed: 2023 reflects payments of $300 million on Senior Notes and $519 million on secured financing arrangements offset by net proceeds of $193 million from the new ABL Facility, which includes a debt issuance cost payment of $7 million.
+Added: • $431 million increase due to the share repurchase agreement with Icahn and Affiliated Parties for $544 million in 2023 compared to $113 million of share repurchases in the prior year under the Company’s open-market share repurchase program.
+Added: • $374 million decrease from net debt activity.
+Added: 2023 reflects net proceeds of $549 million from the Loan Facility, used to fund the share repurchase, and $213 million from the ABL Facility, which include debt issuance costs payments of $6 million and $7 million, respectively, and net proceeds of $52 million from the refinance of our Canadian secured loan.
+Added: These borrowings were offset by payments of $644 million on secured financing arrangements and $300 million on Senior Notes.
The $644 million of payments on secured financing arrangements includes the early repayment of $185 million U.S.
1 unchanged sentence
2022 reflects proceeds of $753 million on secured financing arrangements offset by payments of $600 million, $300 million on maturing 2022 Senior Notes and $353 million for the early redemption of 2023 Senior Notes, which includes a premium payment of $3 million.
−Removed: • $113 million decrease due to no share repurchases in the current year.
−Removed: Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.
+Added: Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity and Note 17 – Shareholders’ Equity of Xerox Holdings in the Condensed Consolidated Financial Statements for additional information regarding the Icahn share repurchase.
Cash, Cash Equivalents and Restricted Cash
3 unchanged sentences
Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations.
−Removed: Our leases have remaining terms of up to twelve years and a variety of renewal and/or termination options.
−Removed: As of June 30, 2023 and December 31, 2022, total operating lease liabilities were $203 million and $229 million, respectively.
+Added: Our leases have remaining terms of up to eleven years and a variety of renewal and/or termination options.
+Added: As of September 30, 2023 and December 31, 2022, total operating lease liabilities were $190 million and $229 million, respectively.
Refer to Note 11 - Lessee in the Condensed Consolidated Financial Statements for additional information regarding our leases accounted for under lessee accounting.
2 unchanged sentences
The following summarizes our debt:
−Removed: (in millions) June 30, 2023 December 31, 2022
+Added: (in millions) September 30, 2023 December 31, 2022
Xerox Holdings Corporation $ 1,500 $ 1,500
14 unchanged sentences
The following represents our total finance assets, net associated with our lease and finance operations:
−Removed: (in millions) June 30, 2023 December 31, 2022
+Added: (in millions) September 30, 2023 December 31, 2022
Total finance receivables, net (1)
5 unchanged sentences
(1) Includes (i) Billed portion of finance receivables, net, (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets.
−Removed: (2) The change from December 31, 2022 includes an increase of $36 million due to currency.
+Added: (2) The change from December 31, 2022 includes a decrease of $4 million due to currency.
Our lease contracts permit customers to pay for equipment over time rather than at the date of installation;
2 unchanged sentences
Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt:
−Removed: (in millions) June 30, 2023 December 31, 2022
+Added: (in millions) September 30, 2023 December 31, 2022
Finance receivables debt (1)
5 unchanged sentences
__________________
−Removed: (1) Finance receivables debt is the basis for our calculation of "Cost of financing" expense in the Condensed Consolidated Statements of (Loss) Income.
+Added: (1) Finance receivables debt is the basis for our calculation of "Cost of financing" expense in the Condensed Consolidated Statements of Income (Loss).
+Added: Sale of Finance Receivables
+Added: 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.
+Added: Accordingly, the receivables sold were derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables.
+Added: 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.
+Added: The effect of these transactions has accordingly reduced financing debt as funding for new finance receivable originations is through the direct sale to HPS.
Xerox 2023 Form 10-Q 66
−Removed: Sales of Accounts Receivable
−Removed: Activity related to sales of accounts receivable is as follows:
−Removed: Six Months Ended
−Removed: (in millions) 2023 2022
−Removed: Estimated decrease to net operating cash flows (1)
−Removed: $ (84) $ (10)
−Removed: _____________
−Removed: (1) Represents the difference between current and prior period accounts receivable sales adjusted for the effects of currency.
−Removed: Refer to Note 8 - Accounts Receivable, Net in the Condensed Consolidated Financial Statements for additional information regarding our accounts receivable sales arrangements.
+Added: Third Party Leasing Programs
+Added: In the third quarter 2023, the Company entered into an agreement with PEAC Solutions (a subsidiary of HPS) that named PEAC as the provider of certain leasing and financial services programs for non-Xerox equipment in the U.S.
+Added: network of independent dealers and resellers.
+Added: Prior to this arrangement Xerox's FITTLE business provided leasing directly to end-user customers who purchased Xerox and non-Xerox equipment sold through independent dealers and resellers.
+Added: Xerox's FITTLE business will return to a captive lessor as the Company focuses on core capabilities and offerings including print, IT and digital services.
+Added: Xerox's FITTLE business will continue to offer leasing for Xerox hardware, software, and solutions.
+Added: The effect of this arrangement will accordingly reduce future lease originations and associated financing debt.
Liquidity and Financial Flexibility
3 unchanged sentences
2023 Q4 $ — $ 220 $ 106 $ 326
−Removed: 2023 Q4 — — 105 105
2024 — 300 285 585
7 unchanged sentences
Treasury Stock
−Removed: Xerox Holdings Corporation made no repurchases of its Common Stock in second quarter 2023.
+Added: Xerox Holdings Corporation made no open-market repurchases of its Common Stock in third quarter 2023.
+Added: On September 28, 2023, Xerox Holdings Corporation entered into a share purchase agreement (the Purchase Agreement) with Carl C.
+Added: Icahn and certain of his affiliates (Icahn Parties) pursuant to which the Company agreed to purchase an aggregate of approximately 34 million shares of the Company’s common stock for an aggregate purchase price of approximately $542 million, exclusive of fees and expenses.
+Added: Refer to Note 17 – Shareholders’ Equity of Xerox Holdings in the Condensed Consolidated Financial Statements for additional information regarding the share purchase.
Xerox 2023 Form 10-Q 67
4 unchanged sentences
We enter into limited types of derivative contracts, including interest rate swap agreements, interest rate caps, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage interest rate and foreign currency exposures.
−Removed: Our primary foreign currency market exposures include the Japanese Yen, Euro and U.K.
−Removed: Pound Sterling.
+Added: Our primary foreign currency market exposures include the Euro, U.K.
+Added: Pound Sterling and Japanese Yen.
The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency exchange rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures.
51 unchanged sentences
We exclude these item(s), when applicable, given their discrete, unusual or infrequent nature and their impact on the comparability of our results for the period to prior periods and future expected trends.
+Added: • Goodwill impairment
• Contract termination costs - product supply
2 unchanged sentences
• Loss on early extinguishment of debt
+Added: • Tax indemnification - Conduent
Adjusted Operating Income and Margin
−Removed: We calculate and utilize adjusted operating income (loss) and margin measures by adjusting our reported pre-tax income (loss) and margin amounts.
−Removed: In addition to the costs and expenses noted above as adjustments for our adjusted earnings measures, adjusted operating income (loss) 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.
+Added: We calculate and utilize adjusted operating income and margin measures by adjusting our reported pre-tax income (loss) and margin amounts.
+Added: 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.
2 unchanged sentences
Adjusted Net Income and EPS reconciliation:
−Removed: Three Months Ended June 30, Six Months Ended June 30,
+Added: Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
−Removed: (in millions, except per share amounts) Net (Loss) Income Diluted EPS Net (Loss) Income Diluted EPS Net Income Diluted EPS Net (Loss) Income Diluted EPS
+Added: (in millions, except per share amounts) Net Income Diluted EPS Net (Loss) Income Diluted EPS Net Income Diluted EPS Net (Loss) Income Diluted EPS
$ 49 $ 0.28 $ (383) $ (2.48) $ 59 $ 0.30 $ (443) $ (2.91)
+Added: Goodwill impairment — 412 — 412
Restructuring and related costs, net 10 22 35 41
5 unchanged sentences
Loss on early extinguishment of debt — — 3 4
+Added: Tax indemnification - Conduent (7) — (7) —
Income tax on PARC donation (2)
−Removed: (40) — (40) —
Income tax on adjustments (excluding PARC donation) (2)
5 unchanged sentences
159 157 158 157
−Removed: Fully diluted shares at June 30, 2023 (4)
+Added: Fully diluted shares at September 30, 2023 (4)
____________________________
−Removed: (1) Net (Loss) Income and EPS attributable to Xerox Holdings.
+Added: (1) Net Income (Loss) and EPS attributable to Xerox Holdings.
+Added: Net loss and EPS for the three and nine months ended September 30, 2022 includes an after-tax non-cash Goodwill impairment charge of $395 million or $2.54 per share, respectively.
(2) Refer to Adjusted 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 our Series A convertible preferred stock.
−Removed: (4) Reflects common shares outstanding at June 30, 2023, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the second quarter 2023.
−Removed: The amount excludes shares associated with our Series A convertible preferred stock, which were anti-dilutive for the second quarter 2023.
+Added: (4) Reflects common shares outstanding at September 30, 2023, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the third quarter 2023.
+Added: Excludes shares associated with our Series A convertible preferred stock, which were anti-dilutive for the third quarter 2023.
Xerox 2023 Form 10-Q 70
Adjusted Effective Tax Rate reconciliation:
−Removed: Three Months Ended June 30,
−Removed: (in millions) Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective
+Added: Three Months Ended September 30,
+Added: (in millions) Pre-Tax Income Income Tax Expense Effective
Tax Rate Pre-Tax (Loss) Income Income Tax Expense Effective
$ 63 $ 15 23.8 % $ (380) $ 3 (0.8) %
−Removed: PARC donation (2)
+Added: Goodwill impairment — — 412 17
Non-GAAP Adjustments (2)
$ 82 $ 6 7.3 % $ 57 $ 24 42.1 %
−Removed: Six Months Ended June 30,
−Removed: (in millions) Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective
−Removed: Tax Rate Pre-Tax (Loss) Income Tax (Benefit) Effective
+Added: Nine Months Ended September 30,
+Added: (in millions) Pre-Tax Income Income Tax Expense Effective
+Added: Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective
$ 59 $ 1 1.7 % $ (474) $ (27) 5.7 %
+Added: Goodwill impairment — — 412 17
PARC donation (2)
2 unchanged sentences
$ 269 $ 39 14.5 % $ 50 $ 11 22.0 %
−Removed: (1) Pre-tax (loss) and Income tax (benefit) expense.
+Added: ____________________________
+Added: (1) Pre-tax income (loss) and Income tax expense (benefit).
(2) Refer to Adjusted Net Income and EPS reconciliation for details.
−Removed: (3) The tax impact on Adjusted Pre-tax income (loss) is calculated under the same accounting principles applied to the Reported Pre-tax (loss) under ASC 740, which employs an annual effective tax rate method to the results.
+Added: (3) The tax impact on Adjusted Pre-tax income is calculated under the same accounting principles applied to the Reported Pre-tax income (loss) under ASC 740, which employs an annual effective tax rate method to the results.
Adjusted Operating Income and Margin reconciliation:
−Removed: Three Months Ended June 30,
−Removed: (in millions) (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin
+Added: Three Months Ended September 30,
+Added: (in millions) Profit Revenue Margin (Loss) Profit Revenue Margin
$ 63 $ 1,652 3.8 % $ (380) $ 1,751 (21.7) %
+Added: Goodwill impairment — 412
Restructuring and related costs, net 10 22
Amortization of intangible assets 12 10
−Removed: PARC donation 132 —
−Removed: Accelerated share vesting — 21
Other expenses, net (17) 1
Adjusted $ 68 $ 1,652 4.1 % $ 65 $ 1,751 3.7 %
−Removed: Six Months Ended June 30,
−Removed: (in millions) (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin
+Added: Nine Months Ended September 30,
+Added: (in millions) Profit Revenue Margin (Loss) Profit Revenue Margin
$ 59 $ 5,121 1.2 % $ (474) $ 5,166 (9.2) %
+Added: Goodwill impairment — 412
Restructuring and related costs, net 35 41
5 unchanged sentences
____________________________
−Removed: (1) Pre-tax (loss).
+Added: (1) Pre-tax income (loss).
Xerox 2023 Form 10-Q 71
2 unchanged sentences
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.