What changed in this filing

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Item 1. Business

2024-02-23 compared with 2023-02-23 · 143 added, 222 removed, 169 unchanged (68% of the section changed)

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Recent Changes and Developments

In 2022, we made progress in our efforts to monetize or improve and broaden the financial profile of two of the businesses we stood up in 2021:

FITTLE (formerly known as Xerox Financial Services) and Innovation (PARC).

FITTLE focused its strategy in 2022 to broaden its portfolio of financed assets to include growth opportunities independent of Xerox equipment and services, such as the expansion of its dealer relationships to include an increasing number of non-Xerox dealers, leveraging its existing dealer relationships to finance a wider breadth of products and forming relationships with new vendors.

In 2022, FITTLE’s non-captive (i.e., indirect) originations grew more than 20%.

In December, FITTLE entered into a receivables funding solution (the Receivables Funding Agreement) with an affiliate of HPS Investment Partners to sell pools of future lease receivables, primarily covering U.S.

direct leases (including leases originated through XBS) through January 2024.

The Receivables Funding Agreement, which anticipates sales of approximately $600 million in 2023, represents a strategic shift in the Company’s approach to funding FITTLE’s growth, allowing FITTLE to focus on being an asset-light, best-in-class provider and servicer of equipment leases while freeing up Xerox’s operating cash.

We also spun out two businesses incubated at PARC:

Mojave, an energy efficient HVAC technology development business, and Novity, an industrial predictive maintenance business.

Both companies were spun out as separate, independent businesses, with Xerox continuing to hold a noncontrolling minority share.

The transactions allow Xerox to preserve free cash flow as Mojave and Novity invest for growth, all while maintaining the opportunity to realize value from their future success.

Due to recent adverse changes in macroeconomic and other operating conditions, we have recently taken a more focused approach to the way in which we allocate R&D spending, placing greater emphasis on margin-accretive growth opportunities with near-term returns.

In 2022, we took actions to reduce and reallocate R&D spend toward projects and partnerships that augment our existing strengths and opportunities within Print, IT Services and Digital Services.

As a result, we paused growth investments at Elem, our 3D printing business, we exited our infrastructure-monitoring joint venture, Eloque, and rationalized spending at PARC’s research facilities.

2023 was the first full year of our Reinvention, which is expected to transform the way we operate, strengthening our core business and improving our financial flexibility so we can invest in solutions, initiatives, and capabilities that will position Xerox as a leading services-led, software-enabled technology solutions provider and deliver long-term, sustainable growth.

In January 2024, we announced a significant reorganization of our business, including the adoption of a business unit-led operating model, a greater focus on partner-led distribution and the establishment of a Global Business Services (GBS) organization to enable enterprise-wide efficiencies and productivity gains.

These changes are expected to both strengthen our core business and position us to capture new, ancillary revenue opportunities over time.

Reinvention is expected to deliver $300 million of annual net adjusted 1 operating income improvement above 2023 levels through 2026, and we expect to achieve more than one-third of that improvement in 2024, due in large part to organizational cost savings associated with the restructuring action that was announced in January 2024.

Operating profit improvement will be driven by three concurrent efforts over the next three years:

• Operating Model Simplification

– Continuous, tech-driven operating efficiencies enabled by GBS.

• Geographic and Offering Simplification:

– Replace direct to end-customer with partner-led distribution model in current markets with lower levels of profitability;

– Narrowed product and service offering focus to areas where we have strategic differentiation.

• Reposition for Growth:

– Tactical investments in Digital and IT Services, driving expanded services penetration among existing and new clients.

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(1) Refer to the "Non-GAAP Financial Measures" section for an explanation of this non-GAAP financial measure.

Divestitures and Other Strategic Changes

We divested certain businesses that are non-core to Print, Digital and IT Services, including PARC, Xerox Research Center of Canada (XRCC), and Elem, our 3D printing business.

We expanded our partnership with PEAC Solutions, an affiliate of HPS Investment Partners, allowing FITTLE to focus exclusively on financial solutions that support the direct sales of Xerox equipment and services.

We also reduced our presence in certain non-strategic markets with lower levels of profitability, such as paper and certain types of IT hardware.

Strategic Priorities

Our long-term strategic objective is to grow the share of our customer's technology spending as well as the Total Addressable Market (TAM) through expanded penetration of existing solutions and the development of new, data-driven solutions.

We believe Xerox’s globally recognizable brand, our deep understanding of clients’ industries and businesses and client trust have afforded us a path to win in IT and digital services – markets where we already have leading solutions and where we are actively investing to develop more.

We believe Xerox’s globally recognizable brand, our deep understanding of clients’ industries and businesses, and clients' trust have afforded us a path to win in IT and Digital Services – markets where we already have leading solutions and where we are actively investing to develop more.

Our strategic priorities for 2024 are:

Customer Success, Focus on Profitability and Shareholder Returns.

Customer Success:

We will take measures to make it easier to do business with Xerox by employing a holistic, client-centric approach to delivering essential products and services that address the productivity challenges of a hybrid workplace and distributed workforce.

The COVID-19 pandemic has accelerated the transformation of the workplace into a more flexible, hybrid environment.

In response, we continue to invest in innovation to bolster and diversify our portfolio of offerings for hybrid workplace environments, including investments in Workflow Central and Digital Services such as Capture & Content and Customer Engagement Services, which enable work to flow seamlessly between the office and home.

By focusing our sales efforts on providing solutions closely aligned to clients’ needs, rather than products, we believe we can grow our revenue while improving customer outcomes.

Strengthen Core Businesses, Structural Cost Improvements, and Balanced Capital Allocation.

Xerox 2023 Annual Report 1

Focus on Profitability:

We plan to implement a more flexible cost base and operating model to expand margins and direct investments towards margin-accretive growth opportunities with nearer-term returns.

Project Own It delivered approximately $2.2 billion of gross cost savings from 2018 to 2022, and the behaviors and processes instilled by this program remain a priority.

Just as we will focus on making it easier to do business with Xerox, we will look to make it easier to do business within Xerox by investing in processes that drive incremental organizational efficiencies and enable collaboration required to offer holistic solutions for our clients.

Shareholder Returns:

We will manage the business with the aim of optimizing free cash flow generation and return at least 50% of free cash flow to shareholders.

We expect to focus on driving higher profits, but we also remain focused on generating more cash flow per profit dollar.

In 2022, FITTLE entered into a Receivables Funding Agreement that we expect to improve Xerox’s cash flow profile while continuing to support FITTLE’s growth and we also intend to concentrate on inventory efficiency, which we expect to improve as supply chain conditions normalize.

Strengthen Core Businesses:

Our Print, Digital and IT Services businesses form the bedrock of our strategic repositioning, from which new capabilities and our client-centric mindset will be leveraged to drive incremental services opportunities and revenue diversification.

Recent changes to our organizational model, including the implementation of a business unit-led organizational structure, rather than a geographic-led go-to-market model, and greater focus on partner-led distribution models, are expected to both strengthen our core business and position us to capture new ancillary revenue opportunities over time.

A business unit-led organizational structure more closely aligns Xerox products and services with the economic buyers of today’s hybrid workplace.

And through the establishment of a global partner ecosystem, we will pursue new partner relationships to expand the reach of our core businesses.

Stronger end-market alignment and partner reach is expected to further improve equipment market share and Print, Digital, and IT services penetration rates with existing and prospective clients.

Structural Cost Improvements:

We continue to implement structural cost improvements to drive higher profitability and total shareholder returns.

Our newly formed GBS organization will drive enterprise-wide efficiency and scalability by centrally coordinating internal processes.

GBS serves as a catalyst for organizational savings in 2024 and an engine for continuous cost improvement going forward.

The optimization of our geographic footprint and product offerings are also expected to generate profit improvements in 2024.

Balanced Capital Allocation:

We believe it is important to directly reward shareholders as we execute our Reinvention.

In 2024, free cash flow is expected to be used to pay our $1 per share dividend and reduce leverage.

Excess free cash flow will be used to tactically invest in projects or acquisitions that deliver high rates of return on invested capital.

Acquisitions and Investments

We maintain a broad M&A pipeline that includes targets within the print industry and adjacent markets.

In 2022, Xerox acquired Powerland, an IT service provider in Canada, and Go Inspire, a print and digital marketing and communication services provider in the U.K.

Further details about our acquisitions and investments can be found in Note 6 - Acquisitions and Investments, in the Consolidated Financial Statements.

Further information about our acquisitions and investments can be found in Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements.

Reportable Segments and Geographic Sales Channels

Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate.

We have two operating and reportable segments – Print and Other and Financing (FITTLE) .

• Print and Other – the design, development and sale of document management systems, solutions, and services as well as associated technology offerings including IT and software products and services.

• Financing (FITTLE) – a financing solutions business primarily providing financing for the sales of Xerox equipment and also non-Xerox office equipment and IT services equipment.

We also operate a matrix organization that includes a geographic focus that is primarily organized from a sales perspective on the basis of “go-to-market” (GTM) sales channels as follows:

• Americas , which includes our sales channels in the U.S.

and Canada, as well as Mexico, Brazil, and Central and South America.

• EMEA , which includes our sales channels in Europe, the Middle East, Africa and India.

• Other , which primarily includes royalties and licensing revenue.

These GTM sales channels are structured to serve a range of customers for our products and services, including financing.

Accordingly, we will continue to provide information, primarily revenue related, with respect to our principal GTM sales channels.

During 2023 we had two operating and reportable segments – Print and Other and FITTLE .

• Print and Other – the design, development and sale of document systems, solutions, and services, as well as associated technology offerings including IT and software products and services.

• FITTLE – a financing solutions business for direct channel customer purchases of Xerox equipment and solutions, and lease financing to end-user customers who purchase Xerox equipment and solutions.

We also employ a matrix organization that includes a product and geographic focus based on alignment with the economic buyers of our products and services.

Please refer to the Reportable Segments section of Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information.

We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized market clients to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations.

We have a broad and diverse base of customers by both geography and industry, ranging from small and mid-sized clients to printing production companies, governmental entities, educational institutions and Fortune 1000 corporations.

Our business does not depend upon a single customer, or a few customers, the loss of which would have a material adverse effect on our business.

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We offer our ConnectKey® system of digital workflow and applications across a large portion of these devices.

Xerox 2022 Annual Report 2

• Mid-Range are primarily A3 devices that have more features and can handle higher print volumes and larger paper sizes than entry devices.

We are a leader in this area of the market and offer a wide range of MFPs, digital printing presses and light production devices, as well as solutions that deliver flexibility and advanced features.

Xerox 2023 Annual Report 2

Production Solutions (High-End) are designed for customers in the graphic communications, in-plant and production print environments with high-volume printing requirements.

Our broad portfolio of presses and solutions provides full-color, on-demand printing of a wide range of applications.

Our broad portfolio of presses and solutions provides black-and white and full-color, on-demand printing of a wide range of applications.

Our xerographic and ink jet presses provide high-speed, high-volume cut-sheet printing, ideal for publishing, and transactional printing, including variable data for personalized content and one-to-one marketing, to the highest quality of color and embellishment requirements.

Our cut-sheet press enables new applications in true high-definition resolution with high fusion ink, AI Powered image quality and advanced productivity technologies.

Our cut-sheet inkjet press enables new applications in true high-definition resolution with high fusion ink, AI Powered image quality and advanced productivity technologies.

Our portfolio spans a variety of print speeds, image quality, feeding, finishing and media options.

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CCS and CES encompass a range of Digital Services that leverage our software capabilities in Workflow Automation, Personalization and Communication Software, Content Management Solutions, and Digitization Services.

The COVID-19 pandemic shifted our customers’ focus toward secure, efficient and flexible solutions to operate in a hybrid work environment.

The pandemic shifted our customers’ focus toward secure, efficient, and flexible solutions to operate in a hybrid work environment.

As a result, we enhanced our focus on the development and promotion of offerings to help our customers accelerate their digital transformations.

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We provide the most comprehensive portfolio of MPS services in the industry and are recognized as an industry leader by major analyst firms including IDC and Quocirca.

Our MPS offering targets clients ranging from global enterprises to governmental entities to small and mid-sized markets businesses, including those served via our channel partners.

Our MPS offering targets clients ranging from global enterprises to governmental entities and small and mid-sized businesses, including those served via our channel partners.

This portfolio includes a suite of services to help clients manage hybrid workforces, including cost effective and secure printing devices along with apps and software tools that enable work from anywhere, cloud server-enabled fleet management, security and automation software and remote customer support.

Xerox® Workflow Central extends the document workflow solutions available through our ConnectKey® technologies to all devices, including PCs and smartphones, for easier access to workflow solutions in hybrid workplace environments.

• Capture & Content Services (CCS) enables content digitization and management, workflow automation and intelligent document processing and includes offerings such as Xerox® Digital Mailroom , where we use scanning and capture technology combined with AI to extract printed and digital information into usable data that is routed into business workflows (such as accounts payable) or into archives, integrating with cloud-based content management systems such as our DocuShare® software.

• Capture & Content Services (CCS) enables content digitization, management, workflow automation, and intelligent document processing and includes offerings such as Xerox® Digital Mailroom , where we use scanning and capture technology combined with AI to extract printed and digital information into usable data that is routed into business workflows (such as accounts payable) or into archives, integrating with cloud-based content management systems such as our DocuShare® software.

• Customer Engagement Services (CES) enable the integration of Xerox technology, software, and services to securely design and manage our clients’ personalization and customization of targeted communications.

These services include Xerox® Digital Hub and Cloud Print services, a one-stop shop where customers can submit print jobs from anywhere and leverage our Web2Print portal with on and off-site printing networks to meet their printing or marketing collateral needs on demand.

Our Customer Communications Management and Campaigns on Demand solutions, such as those provided by recently acquired Go Inspire, help drive personalized and meaningful communications and touchpoints.

• IT Services , provides small and mid-sized markets clients with cost efficient and secure solutions, including end user computing devices, network infrastructure, communications technology, and a range of managed IT solutions, such as technology product support, professional engineering and commercial RPA.

FITTLE is a global financing solutions business and currently offers financing for direct channel customer purchases of Xerox equipment through bundled lease agreements, lease financing to end-user customers who purchase Xerox and non-Xerox equipment through our indirect channels and leasing solutions for OEMs of print and non-print related office equipment and IT services equipment.

Our Customer Communications Management and Campaigns on Demand solutions, such as those provided through our acquisition of Go Inspire, help drive personalized and meaningful communications and touchpoints.

• IT Services provides small and mid-sized clients with cost efficient and secure solutions, including end user computing devices, network infrastructure, communications technology, and a range of managed IT solutions, such as technology product support, professional engineering, and commercial RPA.

FITTLE is a global financing solutions business and currently offers lease financing for direct channel customer purchases of Xerox equipment and solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox equipment and solutions through our indirect channels.

In addition to our four primary offering areas described above, a small portion of our revenues comes from non-core streams including paper sales in our developing market countries, and standalone software such as CareAR, DocuShare®, and XMPie.

Xerox 2023 Annual Report 3

In addition to our four primary offering areas described above, a smaller but growing portion of our revenues comes from non-core streams including paper sales in our developing market countries, wide-format systems, licensing revenue, as well as standalone software such as CareAR, DocuShare® and XMPie.

In addition, our PARC innovation group, which comprises the research efforts undertaken at our facilities located in Palo Alto, Calif.;

Webster, N.Y.;

Cary, N.C., and Toronto, Canada, is focused on incubating, productizing and commercializing disruptive technology.

Geographic Information

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These agreements vary in subject matter, scope, compensation, significance, and duration.

In the U.S., we own approximately 161 U.S.

trademarks, either registered or applied for.

These trademarks have a perpetual life, subject to renewal every 10 years.

In the U.S., we own 155 trademarks, either registered or applied for.

Outside of the U.S., we own 3,740 trademarks, either registered or applied for.

These trademarks have a perpetual life, subject to periodic renewal requirements.

We vigorously enforce and protect our trademarks.

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This commitment stems from our corporate values established over sixty years ago, which include:

succeeding through satisfied customers;

succeeding through satisfied clients;

delivering quality and excellence in all we do;

requiring a premium return on assets;

using technology to develop market leaders;

using technology to develop market leadership;

valuing and empowering our employees;

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Our pledge to inspire and support our people, conduct business ethically, and protect our planet remains at the core of everything we do.

At Xerox, we believe in continuously improving, and we apply this mentality to ensuring we are always finding ways to improve the sustainability of our operations.

At Xerox, we believe in continuously improving, and we apply this mentality to ensuring we are finding ways to improve the sustainability of our operations.

From our earliest days as a company, Xerox has demonstrated a steadfast commitment to corporate social responsibility.

Our greatest goal is to facilitate employee-driven philanthropy, with a focus on strengthening our communities, sustainability, diversity, inclusion and belonging, education, and disaster relief.

Together, Xerox and our employees are creating real impact and sustainable change for the greater good.

In 2023, Xerox employees volunteered for approximately 42,300 hours, an increase of nearly 75% as compared to 2022, and donated approximately $1.1 million, which includes the amount matched by Xerox.

The Xerox 2023 Corporate Social Responsibility (CSR) Report describes our management approach related to ESG.

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We share our roadmap to reach net zero in our 2023 CSR Report.

Our roadmap covers our full value chain and focuses on improving processes and energy efficiency as well as designing environmentally responsible products and clean technologies that extend beyond print.

Our roadmap covers our full value chain and focuses on improving processes and energy efficiency as well as designing environmentally responsible products.

Our interim goal is to reduce our Scope 1 and Scope 2 GHG emissions at least 60% by 2030, against the Company’s 2016 baseline.

This is in line with the ambitious science-based global warming target, validated and approved by the Science Based Targets initiative (SBTi).

Our GHG emissions are

Xerox's Scope 1 and Scope 2 GHG emissions decreased approximately 6.9% in 2022 (the latest year we reported GHG emissions in our CSR report), bringing our total reduction to approximately 46% from our 2016

Xerox 2023 Annual Report 4

third-party assured in accordance with ISO 14064-3:2019 and are updated in our progress summary as new data becomes available.

This is in line with the ambitious science-based global warming target, validated and approved by the Science Based Targets initiative (SBTi).

Our GHG emissions are third-party assured in accordance with the International Organization for Standardization (ISO) 14064-3:2019 and are updated in our progress summary as new data becomes available.

In 2023, Xerox was named to CDP’s Annual "A List” for climate change transparency and performance.

CDP is a nonprofit organization that runs the global disclosure system for investors, companies, and regions to manage their environmental impacts.

Xerox has long paired its technology with sustainability, influencing not just our industry but others.

Serving as an ENERGY STAR Charter Partner, Xerox helped the U.S.

Environmental Protection Agency (EPA) create its standards and still works with the agency today.

Since 1993, more than 500 Xerox® products have achieved ENERGY STAR registration.

In 2022, 100% of our eligible new products have achieved ENERGY STAR and EPEAT registration.

ENERGY STAR requirements serve as the foundation for other eco-labels such as Electronic Products Environmental Assessment Tool (EPEAT) that is composed of criteria spanning corporate and product requirements.

EPEAT product criteria combine comprehensive requirements for design, production, energy use, and recycling, with ongoing independent verification of manufacturer claims.

Circular economy initiatives remain a part of our business strategy.

Our first commercial product in 1959, the Xerox 914, introduced electronics remanufacturing long before the term “circular economy” became popular.

Our vision was to transform Xerox manufacturing, operations, offices and facilities into waste-free workplaces.

We had this same vision for our clients’ workplaces:

a world where electronics and supplies at the end of their useful life would come full circle to become raw materials for tomorrow’s technology.

In this model, quality and performance are not compromised, precious natural resources are conserved, and waste becomes obsolete.

Six decades later, we continue to demonstrate that a circular economy delivers environmental, economic and societal benefits.

To meet this commitment, we have developed several collection and waste reduction programs, while also designing technology to align with the circular economy’s key elements.

The majority of spent toner cartridges and other consumables returned through Green World Alliance, Xerox's customer recycling program, are recycled, reused or remanufactured.

We have developed several collection and waste reduction programs, while also designing technology to align with the circular economy’s key elements.

Based on data from 2022 (the latest full year data is available), approximately 93% of spent toner cartridges and other consumables, returned through Green World Alliance (Xerox's customer recycling program), are recycled, reused or remanufactured.

We continue to make progress towards increasing the post-consumer recycled content in our eco-label eligible devices.

Human Capital

Our Employees

As of December 31, 2023, we had approximately 20,100 employees;

a reduction of approximately 2,800 (12.0%) employees since December 31, 2021.

The reduction in headcount resulted from net attrition (attrition net of gross hires), restructuring, as well as the impact of organizational changes including employee transfers associated with shared services arrangements.

a reduction of approximately 400 employees, or 2.0%, since December 31, 2022.

The reduction in headcount resulted from net attrition (attrition net of gross hires) and restructuring.

On a geographic basis, approximately 10,200 employees were located in the U.S.

and approximately 9,900 employees were located outside the U.S.

We had approximately 11,900 employees or approximately 60% of our employees engaged in providing services to customers (direct service and managed services) and approximately 3,000 engaged in direct sales.

We had approximately 10,400 employees or approximately 50% of our employees engaged in providing services to customers (direct service and managed services) and approximately 2,400 employees engaged in direct sales.

Approximately 20% of our employees are represented by unions or similar organizations, such as worker’s councils with approximately 87% located outside the U.S.

As of December 31, 2022, approximately 25% of our employees were women and 30% of our U.S.

As of December 31, 2023, approximately 25% of our employees were women and approximately 30% of our U.S.

employees self-identified as diverse.

As a result of Xerox’s Reinvention and the implementation of our new operating model, in January 2024 the Company announced a 15 percent targeted workforce reduction.

The actions to be taken are expected to be across all levels and areas of the organization.

Proposed reductions will be subject to formal consultation with local works councils and employee representative bodies, where applicable, and we will fully comply with all required notifications, including U.S.

state WARN laws, at the appropriate time.

The decision to reduce our workforce was a difficult but necessary step toward establishing the long-term viability for the Company, and we are committed to providing transition support for affected employees.

Refer to the Recent Changes and Developments section above for additional information regarding Reinvention.

Employee Safety

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Several methods are also used to raise employee safety awareness including site-specific hazard management, off-the-job safety information and communications regarding safety concerns.

In 2022, Xerox’s Day Away from Work Case Injury Rate was 0.40, which was an 8.1% increase from the 2021 rate of 0.37, and better than the 2022 targeted rate of 0.44 by 9.1%.

In 2023, we created and launched a safety training module to raise safety awareness globally, which was completed by approximately 99% of employees.

During 2023 the total number Day Away from Work Injury cases, which relies on employees to self-report, was 102 cases, as compared to 77 cases in 2022.

Diversity, Inclusion and Belonging

Diversity, inclusion and belonging (DIB) is more than in our DNA at Xerox, it connects us culturally.

Our first CEO, Joseph Wilson, called for social responsibility, diversity and inclusion by shaping our core values to reflect on the value of our employees for races and ethnicities.

After we reaffirmed our commitment to DIB in 2020, we have expanded our commitment to social responsibility and diversity through employee listening sessions to educate and to cultivate belonging.

Joseph Wilson’s vision is still reflected today in our DIB roadmap through the development and execution of ESG targets.

Our DIB roadmap continues to enable us to have a bigger impact on employees and society.

To support this, our roadmap and our actions focuses on:

Xerox 2022 Annual Report 5

• Diverse Pipeline :

Recruit, hire and promote more women globally, and underrepresented talent within the U.S.

for professional-level job roles.

Our pipeline is governed by Xerox's diversity policy known as the Wilson Rule.

• Partnership :

Build relationships with external organizations to increase the sourcing of incoming talent to better reflect the markets and communities we serve.

For example, we are working with AI vendors using their unique algorithms to increase the pool of women and underrepresented candidates for our job openings.

• Culture Change :

Leveled-up our culture cohesion by hosting organization-wide DIB learning events and listening sessions, and expansion of our Employee Resource Groups (ERGs) to 10 groups.

In 2022, we held our third annual global DIB virtual event, called All of Us Together.

This global event is planned by members of our ERGs, and it is open to all Xerox employees.

In addition to increasing global employee participation in ERGs, we expanded the footprint of our ERGs with the creation of our new disability ERG called Enable_All.

• Community Outreach :

Fostering relationships with partners that reflect the communities that we serve is at the heart of our DIB roadmap.

We continue to nurture our partnership with A Better Chance (ABC) and the Thurgood Marshall College Fund Leadership Institute through mentorship, sponsorship, and scholarship support to youth of color, providing equality-opportunities for more successful career outcomes.

In the U.K., we partner with the Black Young Professionals Network to mentor black professionals and provide career opportunities.

• Accountability :

Measuring our progress against our ESG metrics and continuing to be transparent by utilizing our CSR Report to inform the public about our strategy and progress.

We are confident that over time, our efforts will yield sustainable progress in this critical business challenge.

In 2022, we completed an assurance audit against the Social KPIs that confirmed the accuracy in the methodology.

Talent Management and Workforce Development

Talent management and workforce development are critical for the future of Xerox and fueling business growth and innovation.

We use high-impact practices and technology to drive global workforce capability and integrate learning with work.

Our organization and talent planning processes include reviews with business leaders to build our talent pipeline.

More broadly, Human Resources (HR) provides a forum for management to review the future needs of the organization, noting strengths, gaps and strategies to build strong teams for the next chapter at Xerox.

During our most recent organization and talent planning process, we identified the potential successors for critical roles.

We utilize a third-party, online learning platform that is available to all Xerox employees for self-directed learning, which supports skill and career growth.

The Company is also committed to accelerating the careers of high-potential, diverse employees and women along with identifying more diverse candidates for open roles.

For example, Vista, our high-potential development program, recently completed its second year, and we are preparing to launch the third cohort in early 2023.

This is a one-year program that provides opportunities for our highest-potential employees across the globe, to accelerate their career development through education, experience, and exposure.

This program also includes individualized career coaching, mentorship, and networking opportunities with Executive Committee and Senior Leadership members, which accelerates our talent pipeline, retains early talent, and increases employee engagement.

Additionally, our leaders embrace and support the Wilson Rule, which requires that one out of every three final candidates for professional roles be diverse.

Finally, we provide ongoing diversity training sessions to managers to reinforce the importance of a diverse workforce.

Global Learning Innovation

We adopt a blended technology-led learning model to drive the Xerox business and talent strategies.

Learning is delivered to our staff using an appropriate modality to support professional development and build capabilities across the company, on time, and in a cost-effective manner.

Our Learning and Development (L&D) function is focused on business agility and driving digital transformation across our workforce.

Our employees have access to a global learning platform that includes an extensive portfolio of online courses, virtual classroom events, simulations, job aids, and other learning and development resources.

Learning topics include critical job-specific information and technical upskilling, management development and professional effectiveness, productivity tools for project management, client service, negotiations, technology solutions, ethics, diversity and inclusion, and information security.

As our business evolves, we will continue to leverage technology to identify new skills or capabilities required to ensure we remain competitive in the global market.

Our L&D function partners with Xerox business leaders to design capability-building programs and the Xerox senior leadership champions a long-term vision to continually develop the skills of our employees.

Our commitment to diversity began more than half a century ago with our first CEO, Joseph Wilson.

His call for social responsibility, diversity and inclusiveness is a Xerox core value and part of our company DNA.

Joseph Wilson’s vision is still reflected today in our diversity, inclusion and belonging (DIB) roadmap through the development and execution of ESG targets.

In 2023, we continued to make progress to our commitment to DIB by focusing on the areas where we can make the most significant impact.

Advancing our DIB roadmap enables us to have an inclusive approach that addresses client needs, create diverse work teams, facilitate diversity of thought, increase our talent pool, and foster accountability that supports our progress against our ESG metrics.

In 2021, we outlined a 5-year DIB roadmap comprising approximately 140 initiatives.

Through 2023, we have progressed or completed approximately 70% of those initiatives.

Xerox 2023 Annual Report 5

Engagement and Talent Development

Xerox is committed to continuously revitalizing our employee experience and is focused on listening to the organization and taking distinct action based on feedback.

Beginning in 2022 and continuing into 2023, approximately 45% of Xerox employees were invited to participate in a variety of feedback processes, from digital focus groups to engagement and inclusion surveys, to ensure that we understand the sentiments of our employees.

The main areas of focus for Xerox based on employee feedback included areas such as employee well-being, leadership and belonging, and flexibility and remote work.

This initiative included a review of our total rewards package, how we support the development of our employees and our people leaders, and identifying how we leverage both our physical and virtual working environments to ensure maximum collaboration across the enterprise.

Our employee communications system is multi-channeled, including town halls, digital campaigns, and pod casts, to keep our employees linked to Xerox’s vision, mission, and values.

We evaluate our leaders against leadership attributes aligned to our corporate strategy.

We support a structured semi-annual performance management evaluation process, which enables focused goal setting, clarification of employee and career development needs, and performance evaluation.

In addition, Xerox sponsors numerous corporate development initiatives for targeted populations (i.e., high potentials, women in leadership, senior leaders identified for future executive roles, etc.), and corporate processes such as succession planning to ensure that we have a clear leadership pipeline for critical organizational roles.

Total Rewards

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Our short-term programs include:

a Management Incentive Plan (MIP), designed to drive Xerox’s pay for performance culture and incentivize our leaders to help Xerox achieve sustainable growth;

sales compensation programs to tightly align our sales force with business goals;

and a Profit Share Plan (PSP), designed to give a broad population of our employees an opportunity to share in the organization’s success.

a management incentive plan (MIP), designed to drive Xerox’s annual pay for performance culture and incentivize our leaders to help Xerox achieve sustainable growth and profitability;

and a sales compensation program that tightly aligns our sales force with business goals.

A Long-Term Incentive (LTI) equity-based program reinforces alignment of our leaders and key talent with shareholders.

In 2023, approximately 35% of Xerox's employees were eligible to participate in our LTI program.

Our benefit offerings provide our employees with choice and flexibility to help them reach their health and financial goals.

Our offerings include the following core programs:

health care, wellness, retirement, paid time off, life and disability insurance, and access to voluntary benefits.

Philanthropy and Community Involvement

From our earliest days as a company, Xerox has demonstrated a steadfast commitment to corporate social responsibility.

Our greatest goal is to facilitate employee-driven philanthropy.

Together, Xerox and our employees are creating real impact and sustainable change for the greater good.

In 2022, Xerox employees volunteered for approximately 24,400 hours.

Our efforts are focused on four strategic areas to maximize change:

• Strong vibrant communities:

Xerox invests in communities where our people and clients live and work, strengthening ties with our stakeholders and embedding Xerox into the fabric of communities around the world.

We encourage our people to give back to the causes they believe in, by providing employees with a day each year to volunteer at a cause of their choice.

Xerox also offers a limited employee match to certain charitable organizations.

• Education and workforce preparedness:

Xerox supports the role of education in society - through colleges, universities, science, technology, engineering and math (STEM) education programs, and workforce development programs that prepare the next generation of leaders, inventors and scientists.

• Science and technology:

Xerox invests in scientific research and partnerships to serve the long-term strategic interests of the Company and our world.

• Disaster relief:

Xerox provides aid to our employees and their neighbors in crises during natural disasters.

The Corporate Governance Committee of the Board of Directors has oversight for ESG.

The Committee reviews significant shareholder relations issues and environmental and CSR matters, ensuring that our actions align with our core values and citizenship priorities.

The CSR Council, comprised of senior executives who manage specific CSR topic areas, has centralized oversight of the Company’s management approach, including policies, goals, strategies and actions to drive progress.

The primary mission of the CSR Council is to drive strategies with a client-centric impact, across Xerox globally, to advance our legacy of leadership in corporate citizenship.

Actions taken must meet our stakeholders’ expectations, including customers, employees, investors, regulators and communities worldwide.

We demonstrate our Board of Directors' and executive staff's commitment to ESG as follows:

• Investor outreach:

Each year Xerox conducts regular outreach with our investors to facilitate candid discussions about our business and strategy.

In 2022, the company hosted 25 calls and meetings with 12 different investors providing feedback about ESG reporting metrics, diversity, and executive compensation practices.

We include ESG metrics in the compensation criteria for all senior management, which covers climate change, a balanced workforce, succession planning, board refreshment and workplace safety.

health, wellness, retirement, paid time off, life and disability insurance, and access to voluntary benefits.

Employee Training

All employees are required to complete annual training in ethics, privacy, DIB, and security.

Certain employees are required to complete additional specialized training pertaining to their role within the organization.

Additionally, numerous training programs are available for employees to take on their own initiative.

We adopt a blended technology-led learning model to drive the Xerox business and talent strategies.

The Xerox workforce has access to learning in various modalities that support professional development and build capabilities across the Company, on time, and in a cost-effective manner.

Our Learning and Development (L&D) function is focused on business agility and driving digital transformation across our workforce.

As our business evolves, we continue to leverage technology to identify new skills and capabilities required to ensure we remain competitive in the global market.

Our L&D function partners with Xerox business leaders to design capability-building programs and Xerox's senior leadership champions a long-term vision to continually develop the skills of our employees.

During 2023, approximately 95% of Xerox employees completed at least one or more formal learning offering, which includes both required and voluntary training.

Using Xerox’s global learning platform, Xerox employees completed approximately 257,000 courses, over approximately 203,000 hours.

Xerox 2023 Annual Report 6

• Investor Day:

Xerox hosted an Investor Day Event in February 2022 - Now & Next - with our investors and analysts.

During this event, Xerox executives provided an overview of the Company's strategic priorities, which included a discussion of ESG priorities such as our Roadmap to Net Zero, as well as discussed business solutions and financial services that make every day work better for clients.

Annual training regarding ethics, privacy, DIB and security are required of all our employees.

Additional specialized training is required for certain roles and numerous training programs are available for employees to take on their own initiative.

A variety of proprietary and leading industry security features are also used to protect Xerox® devices from malicious attacks.

Xerox's robust security and education market solutions were recognized by KeyPoint Intelligence with the Buyers Lab (BLI) 2021-2022 PaceSetter Awards for Worldwide Document Imaging Security for Production and Office solutions, as well as for the Education Market in North America.

Xerox takes data protection very seriously.

Xerox’s information security and privacy programs are designed to comply with applicable laws and regulations and are based on industry standards and best practices such as the National Institute of Technology (NIST) Cybersecurity Framework, ISO 27001.

Xerox Privacy Policy notice ensures that the processing of personal data is based on the subject’s consent, as individuals have a right to withdraw or alter consent at any time for future processing.

Please refer to Xerox’s privacy website at www.xerox.com/privacy for further information.

(The content of our website is not incorporated by reference in this combined Form 10-K unless expressly noted.)

Adherence to our policies, and procedures governing data protection, is enforced through a combination of technical and manual safeguards over our systems and facilities, disciplinary actions against employees, audit rights and other contractual rights against our vendors.

Material Government Regulations

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Marketing and Distribution

We go to market with a customer-centric, market-informed and services-led approach, selling workplace products and services that support the new hybrid and distributed workforce.

We sell directly to customers through our direct sales force or indirectly through distributors, independent agents, dealers, value-added resellers, systems integrators and e-commerce marketplaces.

In addition, we continue to focus on broadening our footprint to sell offerings to the small and mid-sized markets primarily in the U.S., U.K.

and Canada through XBS which is comprised of regional core companies that provide office technology and services, including Managed IT Services, to small and mid-sized markets clients, and through the acquisitions of dealers and IT Services providers internationally.

We are structured to serve our customers globally through two primary go-to-market units:

the Americas, comprised of the U.S.

and Canada along with Mexico, Brazil, Central and South America;

and EMEA, which includes Europe, the Middle East, Africa and India.

We have an industry leading and common global delivery model that provides a consistent customer experience worldwide.

We believe that this structure creates a leaner and more effective go-to-market model that streamlines our supply chain and provides our customers with best-in-class services.

The Technology Agreement (TA) between FUJIFILM Business Innovation Corp.

(formerly Fuji Xerox Co.

Ltd, or Fuji Xerox) and Xerox was terminated on March 31, 2021.

The TA included a provision that allowed Fuji Xerox continued use of the Xerox brand trademark for two years after the date of termination of the TA as it transitions to a new brand in exchange for an upfront prepaid fixed royalty of $100 million.

Fuji Xerox elected to continue its use the Xerox brand trademark over the two-year period and, therefore, in April 2021, made the upfront payment due under the TA.

Accordingly, we expect any potential entry by Xerox into the Fuji Xerox territory under the Xerox brand to be deferred to at least April 1, 2023.

Xerox 2022 Annual Report 8

The product supply agreements with Fuji Xerox will continue to be effective despite the termination of the TA, and Fuji Xerox and Xerox will continue to operate as each other's product supplier under existing or new purchase/supply agreements.

We go to market with a client-centric, market-informed, and services-led approach, selling workplace products and services that support the new hybrid workplace and distributed workforce.

We service our clients through our direct sales force or indirectly through distributors, independent agents, dealers, value-added resellers, systems integrators, and e-commerce marketplaces.

In addition, we continue to focus on broadening our footprint to sell offerings to the small and mid-sized markets primarily in the U.S., U.K., and Canada through Xerox Business Solutions (XBS) which is comprised of regional core companies that provide office technology and services, including Managed IT Services, to small and mid-sized markets clients, and through the acquisitions of dealers and IT Services providers internationally.

We are structured to serve our clients globally through our business-unit led operating model and organizational structure which covers direct and indirect routes to market in the Americas (comprised of the U.S.

and Canada along with Mexico, Brazil, Central and South America) and EMEA (comprised of Europe, the Middle East, Africa and India).

We have an industry leading and common global delivery model that provides a consistent client experience worldwide.

We believe that this structure creates a leaner and more effective go-to-market model that streamlines our supply chain and provides our client with best-in-class services.

Although we encounter competition in all areas of our business, we are the leader - or among the leaders - in our core mid-range and high-end product groups.

We compete on the basis of technology, performance, price, quality, reliability, brand reputation, distribution, and customer service and support.

We compete on the basis of technology, performance, price, quality, reliability, brand reputation, distribution, service and support.

The larger competitors in our print business include Canon, FUJIFILM Business Innovations Corp., HP Inc., Konica Minolta, and Ricoh.

Our brand recognition, reputation for document management expertise, innovative technology and service delivery excellence are our competitive advantages.

These advantages, combined with our breadth of product offerings, global distribution channels and customer relationships, position us as a strong competitor going forward.

These advantages, combined with our breadth of product offerings, global distribution channels and client relationships, position us as a strong competitor going forward.

As we continue our strategy to diversify and grow other businesses, there may be additional non-print competitors.

With respect to our financing/FITTLE business, our main competitors vary considerably from equipment manufacturers with a captive leasing group to third-party independent leasing entities and financial institutions.

We generally compete based on relationships with dealers and partners and by offering a better service experience.

With respect to our financing business, our main competitors vary considerably from equipment manufacturers with a captive leasing group to third-party independent leasing entities and financial institutions.

We generally compete based on relationships with customers, dealers and partners and by offering a better integrated service experience.

Customer Financing (FITTLE)

We finance a large portion of our direct channel customer purchases of Xerox equipment through bundled lease agreements.

We also provide lease financing to end-user customers who purchase Xerox equipment through our indirect channels.

We compete with other third-party leasing companies with respect to the lease financing provided to these end-user customers.

We also provide lease financing to end-user customers who purchase Xerox equipment and solutions through our indirect channels.

We compete with other third-party leasing companies and financial institutions with respect to the lease financing provided to these end-user customers.

In both instances, financing facilitates customer acquisition of Xerox technology and enhances our value proposition, while providing Xerox a reasonable return on our investment in this business.

We also provide financing solutions for non-Xerox office equipment and IT services equipment.

Because our lease contracts allow customers to pay for equipment over time rather than upfront upon installation, we maintain a certain level of debt to support our investment in these lease contracts.

We fund our customer financing activity through a combination of cash generated from operations, cash on hand and proceeds from capital market offerings and securitizations through secured borrowing arrangements and sales of receivables.

We fund our customer financing activity through a combination of cash generated from operations, cash on hand and proceeds from capital market offerings as well as secured borrowing arrangements and sales of receivables.

At December 31, 2023, we had approximately $2.5 billion of finance receivables and $265 million of Equipment on operating leases, net, or Total Finance assets of approximately $2.8 billion.

We maintain an assumed 7:1 leverage ratio of debt to equity as compared to our Finance assets, which results in approximately $2.9 billion of our $3.7 billion of debt being allocated to FITTLE.

In December 2022, the Company entered into a Receivables Funding Agreement pursuant to which the Company agreed to offer for sale, and the purchaser agreed to purchase certain eligible pools of finance receivables on a monthly basis in transactions intended to be true sales.

The Receivables Funding Agreement, which contemplates receivables sales totaling approximately $600 million, has an initial term through January 31, 2024, with automatic one-year extensions thereafter, unless terminated by either the Company or the purchaser.

The Receivables Funding Agreement provides a committed funding source for FITTLE to originate and service new lease originations without incurring additional debt.

Refer to "Debt and Customer Financing Activities" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K, for additional information.

We maintain an assumed 7:1 leverage ratio of debt to equity as

Xerox 2023 Annual Report 7

compared to our Finance assets, which results in approximately $2.4 billion of our $3.3 billion of debt being allocated to our financing business.

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.

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

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

The effect of these transactions has accordingly reduced financing debt as funding for certain new finance receivable originations is through the direct sale to HPS.

Refer to "Debt and Customer Financing Activities" and "Finance Assets and Related Debt" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K, for additional information.

Manufacturing and Supply

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FUJIFILM Business Innovation Corp.

(formerly Fuji Xerox Co., Ltd.) is our largest partner with whom we maintain product sourcing agreements for specific products across our entry, mid-range and high-end portfolios.

(formerly Fuji Xerox Co., Ltd.) is our largest partner with whom we maintain product sourcing agreements for specific products primarily across our mid-range and high-end portfolios.

We also acquire products from various third parties to increase the breadth of our product portfolio and meet channel requirements.

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and Jabil Inc., which are global contract manufacturers with whom we have long-standing relationships.

Xerox 2022 Annual Report 9

Our supply chain operations utilize a network of world-class logistics partners who offer warehousing and transportation services.

Reverse Logistics is an integral part of our sustainability mission, and we perform these operations at our facility in Cincinnati, OH, and with a network of various partners worldwide.

Refer to "Contractual Cash Obligations and Other Commercial Commitments and Contingencies" in the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K for additional information regarding our relationship with FUJIFILM Business Innovation Corp.

Reverse Logistics is an integral part of our sustainability mission, and in the U.S.

we perform these operations at our facility in Cincinnati, OH, and globally with a network of various partners.

FUJIFILM Business Innovation Corp.

continues to be one of our strategic suppliers, and in 2023 we renewed our multi-year contract with them.

This agreement secures our ongoing access to the latest advancements in print engine technology and related supplies, reinforcing Xerox’s commitment to delivering differentiated solutions to our clients and partners.

Refer to the Capital Resources and Liquidity section of Management's Discussion and Analysis, included in Item 7 of this combined Form 10-K for additional information regarding our relationship with FUJIFILM Business Innovation Corp.

International Operations

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These factors have historically resulted in lower revenues, operating profits, and operating cash flows in the first and third quarters.

Prior to 2021, backlog 1 had not been a meaningful indicator of future business prospects because a significant proportion of our revenue was fulfilled from existing inventories or within a short period of order signing.

Accordingly, our level of backlog remained fairly consistent period to period.

However, starting in 2021, and continuing throughout the first three quarters of 2022, we experienced an unprecedented level of supply chain disruption, in part due the effects of the COVID-19 pandemic, which only began to meaningfully ease during the fourth quarter of 2022.

At December 31, 2022, our backlog of equipment and IT hardware remains elevated as compared to our historic levels and was $246 million.

In 2023, we expect backlog to continue to decline through the first half of the year as supply chain conditions further normalize.

_____________

(1) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be

installed, including orders with future installation dates.

It includes printing devices as well as IT hardware associated with our IT service offerings.

Backlog at December 31, 2022 of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022.

Xerox 2023 Annual Report 8

Other Information

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

What changed 10-K

Item 1. Business