What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2023-10-30 · 379 added, 729 removed, 893 unchanged (55% of the section changed)

1 unchanged sentence

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions, except per-share data) 2024 2023

9 unchanged sentences

Selling, administrative and general expenses 397 407

Goodwill impairment — 412 — 412

Restructuring and related costs, net 39 2

Amortization of intangible assets 10 11

PARC donation — — 132 —

Divestitures 54 —

Other expenses, net 44 20

Total Costs and Expenses 1,652 1,630

Income (Loss) before Income Taxes and Equity Income 63 ( 380 ) 59 ( 474 )

Income tax expense (benefit) 15 3 1 ( 27 )

Equity in net income of unconsolidated affiliates 1 1 2 3

Net Income (Loss) 49 ( 382 ) 60 ( 444 )

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

Net Income (Loss) Attributable to Xerox Holdings $ 49 $ ( 383 ) $ 59 $ ( 443 )

Basic Earnings (Loss) per Share $ 0.29 $ ( 2.48 ) $ 0.31 $ ( 2.91 )

Diluted Earnings (Loss) per Share $ 0.28 $ ( 2.48 ) $ 0.30 $ ( 2.91 )

(Loss) Income before Income Taxes ( 150 ) 85

Income tax (benefit) expense ( 37 ) 14

Net (Loss) Income ( 113 ) 71

Preferred stock dividends, net ( 4 ) ( 4 )

Net (Loss) Income Attributable to Common Shareholders $ ( 117 ) $ 67

Basic (Loss) Earnings per Share $ ( 0.94 ) $ 0.43

Diluted (Loss) Earnings per Share $ ( 0.94 ) $ 0.43

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

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2024 2023

Net Income (Loss) $ 49 $ ( 382 ) $ 60 $ ( 444 )

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

Net Income (Loss) Attributable to Xerox Holdings 49 ( 383 ) 59 ( 443 )

Net (Loss) Income $ ( 113 ) $ 71

Other Comprehensive (Loss) Income, Net (1)

Translation adjustments, net ( 32 ) 93

Unrealized gains (losses), net 1 6 — ( 19 )

Unrealized (losses) gains, net ( 1 ) 4

Changes in defined benefit plans, net 36 ( 14 )

Other Comprehensive (Loss) Income, Net ( 66 ) ( 217 ) 33 ( 559 )

Other comprehensive income, net attributable to noncontrolling interests 1 — — —

Other Comprehensive (Loss) Income, Net Attributable to Xerox Holdings ( 67 ) ( 217 ) 33 ( 559 )

Other Comprehensive Income, Net 3 83

Comprehensive (Loss) Income, Net $ ( 110 ) $ 154

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

Comprehensive (Loss) Income, Net Attributable to Xerox Holdings $ ( 18 ) $ ( 600 ) $ 92 $ ( 1,002 )

_____________

(1) Refer to Note 19 - Other Comprehensive (Loss) Income for gross components of Other comprehensive (loss) income, net, reclassification adjustments out of Accumulated other comprehensive loss and related tax effects.

(1) Refer to Note 19 - Other Comprehensive Income for gross components of Other comprehensive income, net, reclassification adjustments out of Accumulated other comprehensive loss and related tax effects.

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

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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

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

2024 December 31,

30 unchanged sentences

Additional paid-in capital 1,099 1,114

Treasury stock, at cost ( 553 ) —

Retained earnings 4,828 4,977

4 unchanged sentences

Total Liabilities and Equity $ 9,944 $ 10,008

Shares of common stock issued 157,151 155,781

Treasury stock ( 34,245 ) —

Shares of Common Stock Outstanding 122,906 155,781

Shares of Common Stock Issued and Outstanding 124,185 123,144

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended

September 30,

Three Months Ended

(in millions) 2024 2023

Cash Flows from Operating Activities

Net Income (Loss) $ 60 $ ( 444 )

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

Net (Loss) Income $ ( 113 ) $ 71

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

Depreciation and amortization 59 64

Provisions 57 —

Net gain on sales of businesses and assets ( 37 ) ( 17 )

PARC donation 132 —

Divestitures 54 —

Stock-based compensation 12 14

Goodwill impairment — 412

Restructuring and asset impairment charges 31 1

2 unchanged sentences

Contributions to retirement plans ( 31 ) ( 17 )

Increase in accounts receivable and billed portion of finance receivables ( 47 ) ( 48 )

Decrease (increase) in inventories 50 ( 136 )

(Increase) decrease in accounts receivable and billed portion of finance receivables ( 19 ) 39

Increase in inventories ( 133 ) ( 64 )

Increase in equipment on operating leases ( 22 ) ( 40 )

Decrease (increase) in finance receivables 490 ( 10 )

Decrease in finance receivables 210 160

(Increase) decrease in other current and long-term assets ( 2 ) 3

(Decrease) increase in accounts payable ( 290 ) 198

Increase in accrued compensation 16 29

Increase (decrease) in accounts payable 17 ( 41 )

Decrease in accrued compensation ( 86 ) ( 16 )

Decrease in other current and long-term liabilities ( 77 ) ( 128 )

2 unchanged sentences

Other operating, net ( 5 ) 8

Net cash provided by (used in) operating activities 297 ( 27 )

Net cash (used in) provided by operating activities ( 79 ) 78

Cash Flows from Investing Activities

3 unchanged sentences

Other investing, net ( 11 ) ( 3 )

Net cash provided by (used in) investing activities 3 ( 95 )

Net cash used in investing activities ( 17 ) ( 17 )

Cash Flows from Financing Activities

Net proceeds from short-term debt 220 —

Proceeds from issuance of long-term debt 905 —

Payments on long-term debt ( 570 ) ( 452 )

Purchases of capped calls ( 23 ) —

Dividends ( 37 ) ( 45 )

1 unchanged sentence

Other financing, net ( 11 ) ( 8 )

Net cash used in financing activities ( 819 ) ( 755 )

Net cash provided by (used in) financing activities 261 ( 505 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 10 ) 2

Decrease in cash, cash equivalents and restricted cash ( 522 ) ( 908 )

Increase (decrease) in cash, cash equivalents and restricted cash 155 ( 442 )

Cash, cash equivalents and restricted cash at beginning of period 617 1,139

3 unchanged sentences

XEROX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2024 2023

9 unchanged sentences

Selling, administrative and general expenses 397 407

Goodwill impairment — 412 — 412

Restructuring and related costs, net 39 2

Amortization of intangible assets 10 11

PARC donation — — 132 —

Divestitures 54 —

Other expenses, net 44 20

Total Costs and Expenses 1,652 1,630

Income (Loss) before Income Taxes and Equity Income 63 ( 380 ) 59 ( 474 )

Income tax expense (benefit) 15 3 1 ( 27 )

Equity in net income of unconsolidated affiliates 1 1 2 3

Net Income (Loss) 49 ( 382 ) 60 ( 444 )

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

Net Income (Loss) Attributable to Xerox $ 49 $ ( 383 ) $ 59 $ ( 443 )

(Loss) Income before Income Taxes ( 150 ) 85

Income tax (benefit) expense ( 37 ) 14

Net (Loss) Income $ ( 113 ) $ 71

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

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2024 2023

Net Income (Loss) $ 49 $ ( 382 ) $ 60 $ ( 444 )

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

Net Income (Loss) Attributable to Xerox 49 ( 383 ) 59 ( 443 )

Net (Loss) Income $ ( 113 ) $ 71

Other Comprehensive (Loss) Income, Net (1)

Translation adjustments, net ( 32 ) 93

Unrealized gains (losses), net 1 6 — ( 19 )

Unrealized (losses) gains, net ( 1 ) 4

Changes in defined benefit plans, net 36 ( 14 )

Other Comprehensive (Loss) Income, Net ( 66 ) ( 217 ) 33 ( 559 )

Other comprehensive income, net attributable to noncontrolling interests 1 — — —

Other Comprehensive (Loss) Income, Net Attributable to Xerox ( 67 ) ( 217 ) 33 ( 559 )

Other Comprehensive Income, Net 3 83

Comprehensive (Loss) Income, Net $ ( 110 ) $ 154

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

Comprehensive (Loss) Income, Net Attributable to Xerox $ ( 18 ) $ ( 600 ) $ 92 $ ( 1,002 )

_____________

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

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) September 30,

(in millions) March 31,

2024 December 31,

39 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended

September 30,

Three Months Ended

(in millions) 2024 2023

Cash Flows from Operating Activities

Net Income (Loss) $ 60 $ ( 444 )

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

Net (Loss) Income $ ( 113 ) $ 71

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

Depreciation and amortization 59 64

Provisions 57 —

Net gain on sales of businesses and assets ( 37 ) ( 17 )

PARC donation 132 —

Divestitures 54 —

Stock-based compensation 12 14

Goodwill impairment — 412

Restructuring and asset impairment charges 31 1

2 unchanged sentences

Contributions to retirement plans ( 31 ) ( 17 )

Increase in accounts receivable and billed portion of finance receivables ( 47 ) ( 48 )

Decrease (increase) in inventories 50 ( 136 )

(Increase) decrease in accounts receivable and billed portion of finance receivables ( 19 ) 39

Increase in inventories ( 133 ) ( 64 )

Increase in equipment on operating leases ( 22 ) ( 40 )

Decrease (increase) in finance receivables 490 ( 10 )

Decrease in finance receivables 210 160

(Increase) decrease in other current and long-term assets ( 2 ) 3

(Decrease) increase in accounts payable ( 290 ) 198

Increase in accrued compensation 16 29

Increase (decrease) in accounts payable 17 ( 41 )

Decrease in accrued compensation ( 86 ) ( 16 )

Decrease in other current and long-term liabilities ( 77 ) ( 128 )

2 unchanged sentences

Other operating, net ( 5 ) 8

Net cash provided by (used in) operating activities 297 ( 27 )

Net cash (used in) provided by operating activities ( 79 ) 78

Cash Flows from Investing Activities

3 unchanged sentences

Other investing, net ( 11 ) —

Net cash provided by (used in) investing activities 6 ( 82 )

Net cash used in investing activities ( 17 ) ( 14 )

Cash Flows from Financing Activities

Net proceeds from short-term debt 220 —

Proceeds from issuance of long-term debt 905 —

2 unchanged sentences

Other financing, net ( 2 ) ( 2 )

Net cash used in financing activities ( 822 ) ( 768 )

Net cash provided by (used in) financing activities 258 ( 508 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 10 ) 2

Decrease in cash, cash equivalents and restricted cash ( 522 ) ( 908 )

Increase (decrease) in cash, cash equivalents and restricted cash 152 ( 442 )

Cash, cash equivalents and restricted cash at beginning of period 617 1,139

19 unchanged sentences

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

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

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

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

Our Goodwill, net balance was $ 2,716 and $ 2,820 at September 30, 2023 and December 31, 2022, respectively.

Our Goodwill, net balance was $ 2,720 and $ 2,747 at March 31, 2024 and December 31, 2023, respectively.

We assess Goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

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

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

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

Accordingly, as of September 30, 2023, we determined that we did not have a “triggering event” requiring a quantitative assessment of Goodwill.

The Company's actual results for the full year 2024 are in line with expectations reviewed as part of our fourth quarter 2023 Goodwill qualitative assessment.

Accordingly, as of March 31, 2024, we determined that we did not have a “triggering event” requiring a quantitative assessment of Goodwill.

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

9 unchanged sentences

GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848):

Scope , which provided clarification guidance to ASU 2020-04.

In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848), Scope, which provided clarification to ASU 2020-04.

These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022.

In December 2022, the FASB issued ASU 2022-06 , Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

In December 2022, the FASB issued ASU 2022-06 , Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848, which defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

There has been no material impact to date as a result of adopting these ASUs on reference rate reform.

However, we continue to evaluate potential future impacts that may result from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows.

Accounting Standard Updates Adopted in 2023:

Segment Disclosures

In November 2023, the FASB issued ASU 2023-07 , Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.

The update will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within segment profit and loss.

The amendments are effective for the Company's annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The amendments are effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively.

We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

Accounting Standard Updates Recently Adopted:

In September 2022, the FASB issued ASU 2022-04 , Liabilities - Supplier Finance Programs (Subtopic 405-50):

1 unchanged sentence

The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.

The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding were effective for our fiscal year beginning on January 1, 2023.

The new standard’s requirement to disclose a rollforward of obligations outstanding will be effective for our fiscal year beginning on January 1, 2024.

Refer to Note 7 - Supplementary Financial Information for the required disclosures effective January 1, 2023.

Financial Instruments

In March 2022, the FASB issued ASU 2022-02 , Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures - Gross Write-offs.

The amendments in this update eliminate the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty.

The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables.

The disclosure of current-period gross write-offs by year of origination is applicable for financing receivables and net investments in leases that are within the scope of ASC 326-20 , Financial Instruments - Credit Losses - Measured at Amortized Cost .

This update was effective for our fiscal year beginning on January 1, 2023.

The provisions of this amendment are to be applied on a prospective basis.

Refer to Note 9 - Finance Receivables, Net for required disclosures regarding gross write-offs by vintage year.

The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding were effective for our fiscal year beginning on January 1, 2023, and the requirement to disclose a rollforward of obligations outstanding is effective for our annual reporting for the fiscal year beginning on January 1, 2024.

Refer to Note 12 - Supplementary Financial Information for the required disclosures.

Other Updates

In 2023 and 2022, the FASB also issued the following ASUs, which could impact the Company in the future but currently did not have, nor are expected to have, a material impact on our financial condition, results of operations or cash flows upon adoption.

Those updates are as follows:

• Disclosure Improvements:

ASU 2023-06 , Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

Since the Company is already subject to SEC disclosure requirements, this update was effective upon issuance.

• Business Combinations:

ASU 2023-05 , Business Combinations - Joint Venture Formation (Topic 805-60):

Recognition and Initial Measurement.

This update is effective for our fiscal year beginning January 1, 2025.

In 2024, the FASB also issued the following ASUs, which could impact the Company in the future but currently did not have, nor are expected to have, a material impact on our financial condition, results of operations or cash flows upon adoption.

Xerox 2024 Form 10-Q 12

• Liabilities:

ASU 2023-04 , Liabilities (Topic 405):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

The Company adopted this conforming guidance upon issuance in August 2023.

• Investments:

ASU 2023-02 , Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force).

This update is effective for our fiscal year beginning January 1, 2024.

ASU 2023-01 , Leases (Topic 842):

Common Control Arrangements.

This update is effective for our fiscal year beginning January 1, 2024.

• Fair Value Measurement:

ASU 2022-03 , Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

This update is effective for our fiscal year beginning January 1, 2024.

• Derivatives and Hedging:

ASU 2022-01 , Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method.

This update was effective for our fiscal year beginning January 1, 2023.

• Compensation - Stock Compensation:

ASU 2024-01 , Compensation - Stock Compensation (Topic 718) - Scope Applications of Profits Interest and Similar Awards.

This update is effective for the annual period beginning after December 15, 2024, as well as interim periods within that period, with early adoption permitted.

• Codification Improvements:

ASU 2024-02 , Codification Improvements - Amendments to Remove References to the Concepts Statements.

This update is effective for our fiscal year beginning after December 15, 2024.

Note 3 – Revenue

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Primary geographical markets (1) :

7 unchanged sentences

Supplies, paper and other sales (2)

258 300 802 879

Maintenance agreements (3)

395 420 1,223 1,295

Service arrangements (4)

482 487 1,476 1,451

Rental and other 77 100

3 unchanged sentences

Direct equipment lease (5)

$ 216 $ 146 $ 691 $ 425

Distributors & resellers (6)

240 318 761 877

Customer direct 146 169

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(6) Primarily reflects sales through our two-tier distribution channels.

(7) Includes Equipment and Supplies, paper and other sales revenues.

Contract Assets and Liabilities:

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

Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $ 135 and $ 131 at September 30, 2023 and December 31, 2022, respectively.

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

Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $ 121 and $ 132 at March 31, 2024 and December 31, 2023, respectively.

The majority of the balance at March 31, 2024 will be amortized to revenue over the next 30 months.

Xerox 2024 Form 10-Q 13

Contract Costs:

Incremental direct costs of obtaining a contract primarily include sales commissions paid to salespeople and agents in connection with the placement of equipment with associated post sale services arrangements.

These costs are deferred and amortized on the straight-line basis over the estimated contract term.

We pay commensurate sales commissions upon customer renewals, therefore our amortization period is aligned to our initial contract term.

Incremental direct costs are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

We incur the following contract costs as part of our revenue arrangements:

• Incremental direct costs of obtaining a contract, which are primarily sales commissions paid to salespeople and agents in connection with the placement of equipment with associated post sale services arrangements.

These costs are deferred and amortized to Selling Expenses on a straight-line basis over the estimated contract term, which is currently estimated to be approximately four years .

We pay commensurate sales commissions upon customer renewals;

therefore, our amortization period is aligned to our initial contract term.

• Contract fulfillment costs, which are costs incurred for resources and assets that will be used to satisfy our future performance obligations included in our service arrangements.

These costs are amortized over the contractual service period of the arrangement to cost of services.

• Contract inducements, which are capitalized and amortized as a reduction of revenue over the term of the contract.

Changes in contract costs, net are as follows:

Balance at January 1st, $ 136 $ 135

Customer contract costs deferred 15 16

Amortization of customer contract costs ( 16 ) ( 16 )

Balance at March 31st, $ 134 $ 134

_____________

Incremental direct costs of obtaining a contract $ 15 $ 15 $ 49 $ 43

Amortization of incremental direct costs 16 17 48 51

The balance of deferred incremental direct costs net of accumulated amortization at September 30, 2023 and December 31, 2022 was $ 126 and $ 125 , respectively.

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

We may also incur costs associated with our services arrangements to generate or enhance resources and assets that will be used to satisfy our future performance obligations included in these arrangements.

These costs are considered contract fulfillment costs and are amortized over the contractual service period of the arrangement to cost of services.

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

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

The related amortization was $ 3 and $ 4 for the nine months ended September 30, 2023 and 2022, respectively.

(1) Includes currency.

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

Xerox 2023 Form 10-Q 14

Note 4 – Segment Reporting

Our reportable segments are aligned with how we manage the business and view the markets we serve.

We have two reportable segments - Print and Other , and Financing (FITTLE) .

Our two reportable segments are determined based on the information reviewed by the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), together with the Company’s management to evaluate performance of the business and allocate resources.

Our reportable segments - Print and Other , and Xerox Financial Services (XFS) (formerly FITTLE) – are aligned to how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies and are consistent with how we manage the business and view the markets we serve.

Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services.

The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security.

This segment also includes IT services and software.

This segment also includes Digital and IT services and software.

The product groupings range from:

4 unchanged sentences

Customers also include graphic communication enterprises as well as channel partners including distributors and resellers.

Segment revenues also include commissions and other payments from our FITTLE segment for the exclusive right to provide lease financing for Xerox products.

Segment revenues also include commissions and other payments from our XFS segment for the exclusive right to provide lease financing for Xerox products.

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

The FITTLE segment provides global leasing solutions and currently offers lease financing for direct channel customer purchases of Xerox solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox solutions through our indirect channels.

The XFS segment provides global leasing solutions and currently offers leasing for direct channel customer purchases of Xerox solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox solutions through our indirect channels.

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

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

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.

Refer to Note 9 - Finance Receivables, Net for additional information on the sale of receivables.

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.

network of independent dealers and resellers.

Segment Policy

We derive the results of our business segments directly from our internal management reporting system.

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

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

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

The CODM measures the performance of each segment based on several metrics, including segment revenues and profit.

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

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

Segment revenues also include gains/

Xerox 2024 Form 10-Q 14

losses from the sale of finance receivables including commissions, fees on the sales of underlying equipment residuals and servicing fees.

Selected financial information for our reportable segments was as follows:

Three Months Ended September 30,

2023 2022 (1)

Print and Other FITTLE Total Print and Other FITTLE Total

External revenue $ 1,554 $ 98 $ 1,652 $ 1,653 $ 98 $ 1,751

Intersegment revenue (2)

21 — 21 23 — 23

Total Segment revenue $ 1,575 $ 98 $ 1,673 $ 1,676 $ 98 $ 1,774

Segment profit $ 64 $ 4 $ 68 $ 63 $ 2 $ 65

Segment margin (3)

4.1 % 4.1 % 4.1 % 3.8 % 2.0 % 3.7 %

Depreciation and amortization $ 51 $ — $ 51 $ 55 $ — $ 55

Interest income — 46 46 — 51 51

Interest expense — 30 30 — 28 28

Nine Months Ended September 30,

2023 2022 (1)

Print and Other FITTLE Total Print and Other FITTLE Total

Three Months Ended March 31,

Print and Other XFS Total Print and Other XFS Total

External revenue $ 1,411 $ 91 $ 1,502 $ 1,613 $ 102 $ 1,715

9 unchanged sentences

_____________

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

See the Segment Reporting Change section below.

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

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

(2) Segment margin based on External revenue only.

Xerox 2023 Form 10-Q 16

Selected financial information for our reportable segments was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Total reported segments $ 1,673 $ 1,774 $ 5,186 $ 5,234

Elimination of intersegment revenue ( 21 ) ( 23 ) ( 65 ) ( 68 )

Total Revenue $ 1,652 $ 1,751 $ 5,121 $ 5,166

Pre-tax Income (Loss)

Pre-tax (Loss) Income

Total reported segments $ 33 $ 118

Goodwill impairment — ( 412 ) — ( 412 )

Restructuring and related costs, net ( 39 ) ( 2 )

Amortization of intangible assets ( 10 ) ( 11 )

PARC donation — — ( 132 ) —

Accelerated share vesting — — — ( 21 )

Divestitures ( 54 ) —

Inventory-related impact - exit of certain production print manufacturing operations ( 36 ) —

Other expenses, net ( 44 ) ( 20 )

Total Pre-tax income (loss) $ 63 $ ( 380 ) $ 59 $ ( 474 )

Total Pre-tax (loss) income $ ( 150 ) $ 85

Depreciation and Amortization

11 unchanged sentences

_____________

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

See the Segment Reporting Change section below.

Segment Reporting Change

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

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

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

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

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

Xerox 2023 Form 10-Q 17

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

Q1 Q2 Q3 Q4 Full Year Q1

Segment Revenues:

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

FITTLE 158 151 150 151 610 154

Intersegment revenue (1)

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

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

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

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

Intersegment revenue (1)

17 15 17 31 80 29

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

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

FITTLE 98 96 98 101 393 102

Intersegment revenue (1)

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

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

_____________

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

Q1 Q2 Q3 Q4 Full Year Q1

Segment Profit/(Loss):

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

FITTLE 17 17 8 ( 5 ) 37 12

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

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

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

Total $ — $ — $ — $ — $ — $ —

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

FITTLE 8 6 2 1 17 18

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

(1) Reflects the reduction of raw materials inventory of approximately $ 32 and the cancellation of related purchase contracts of approximately $ 4 , as a result of the exit of certain production print manufacturing operations during the three months ended March 31, 2024.

Xerox 2024 Form 10-Q 15

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Three Months Ended

September 30, Nine Months Ended

September 30,

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

Location in Statements of (Loss) Income 2024 2023

Revenue from sales type leases Sales $ 162 $ 230

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Total Lease income $ 258 $ 339

Profit at lease commencement on sales-type leases was estimated to be $ 79 and $ 39 for the three months ended September 30, 2023 and 2022, respectively, and $ 247 and $ 127 for the nine months ended September 30, 2023 and 2022, respectively.

Note 6 – Divestiture

Donation of Palo Alto Research Center (PARC)

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

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

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

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

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

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

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

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

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

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

Xerox 2023 Form 10-Q 19

Note 7 – Supplementary Financial Information

Cash, Cash Equivalents and Restricted Cash

Restricted cash primarily relates to escrow cash deposits made in Brazil associated with ongoing litigation as well as cash collections on finance receivables that were pledged for secured borrowings.

As more fully discussed in Note 21 - Contingencies and Litigation, various litigation matters in Brazil require us to make cash deposits to escrow as a condition of continuing the litigation.

Restricted cash amounts are classified in our Condensed Consolidated Balance Sheets based on when the cash will be contractually or judicially released.

Cash, cash equivalents and restricted cash amounts are as follows:

September 30,

2023 December 31,

Cash and cash equivalents $ 532 $ 1,045

Restricted cash

Litigation deposits in Brazil 26 39

Escrow and cash collections related to secured borrowing arrangements (1)

Other restricted cash 22 1

Total Restricted cash 85 94

Cash, cash equivalents and restricted cash $ 617 $ 1,139

_____________

(1) Represents collections on finance receivables pledged for secured borrowings that will be remitted to lenders in the following month.

Restricted cash is reported in the Condensed Consolidated Balance Sheets as follows:

September 30,

2023 December 31,

Other current assets $ 58 $ 55

Other long-term assets 27 39

Total Restricted cash $ 85 $ 94

Supplemental Cash Flow Information

Summarized cash flow information is as follows:

Location in Statement of Cash Flows Nine Months Ended

September 30,

Source/(Use) 2023 2022

Provision for receivables Operating $ 23 $ 25

Provision for inventory Operating 14 23

Depreciation of buildings and equipment Operating 45 51

Depreciation and obsolescence of equipment on operating leases Operating 83 89

Amortization of internal use software Operating 28 34

Amortization of acquired intangible assets Operating 33 31

Amortization of patents (1)

Operating 7 8

Amortization of customer contract costs (2)

Operating 51 55

Cost of additions to land, buildings and equipment Investing ( 21 ) ( 24 )

Cost of additions to internal use software Investing ( 6 ) ( 15 )

Payments to acquire noncontrolling interests - Xerox Holdings Investing ( 3 ) ( 13 )

Common stock dividends - Xerox Holdings Financing ( 120 ) ( 120 )

Preferred stock dividends - Xerox Holdings Financing ( 11 ) ( 11 )

Payments to noncontrolling interests Financing ( 2 ) ( 1 )

Investment from noncontrolling interests Financing — 6

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

_____________

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

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

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

Profit at lease commencement on sales-type leases was estimated to be $ 50 and $ 80 for the three months ended March 31, 2024 and 2023, respectively.

Note 6 – Divestitures

Sales of Argentina and Chile

In March 2024, Xerox completed the sales of its direct business operations in Argentina and Chile to Grupo Datco, a technologies and fiber optic network service provider in Latin America for a total consideration of $ 16 .

Following the transfer of ownership, the new companies will operate as independent entities and Grupo Datco will continue to service Xerox devices previously sold in Argentina and Chile and will become the exclusive partner for Xerox in these markets.

This transaction aligns with the Company's ongoing Reinvention.

The sales resulted in a net disposal loss of $ 54 in the first quarter 2024, which includes, a net currency translation loss of $ 40 , allocated Goodwill of $ 10 , and the carrying value of the net assets of $ 18 , as well as related fees of $ 2 .

The allocation of Goodwill was based on the relative fair value of the operations in Argentina and Chile to the total fair value for the Print and Other Segment Reporting Unit, which it was part of prior to the sales.

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

Xerox also recorded a net income tax benefit of $ 19 related to the sales for a net after-tax loss on the sales of $ 35 .

The sales of the Argentina and Chile subsidiaries are not expected to materially impact current estimates of future projections with respect to results of operations or cash flows of the Company.

Xerox 2024 Form 10-Q 16

Supplier Finance Programs

The Company has a program through a financial institution that enables vendors and suppliers, at their option, to receive early payment for their invoices.

The program operates in a similar manner to a purchasing card program, however with this program the Company receives invoices associated with those vendors and suppliers participating in the program and confirms and validates those invoices and amounts due before passing the invoices on to the financial institution for early payment at a discounted amount.

The financial institution subsequently invoices the Company for the stated or full amount of the invoices paid early and we are required to make payment within 45 days of the statement date.

The overall impact of the program generally results in the Company paying its supplier and vendor invoices consistent with their original terms.

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

Spending associated with this program during the three and nine months ended September 30, 2023 was approximately $ 30 and $ 90 , respectively.

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

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

Note 7 – Accounts Receivable, Net

Accounts receivable, net were as follows:

September 30,

2024 December 31,

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Balance at March 31 st

Provision 6 3

Charge-offs ( 3 ) ( 2 )

Recoveries and other (1)

Balance at June 30 th

Provision 5 ( 1 )

Charge-offs ( 4 ) ( 5 )

Recoveries and other (1)

Balance at September 30 th

_____________

2 unchanged sentences

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

Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 6.5 % at September 30, 2023 and 5.7 % at December 31, 2022.

The increase is primarily the result of slight increase in receivables aging.

Xerox 2023 Form 10-Q 21

Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 7.1 % at March 31, 2024 and 7.0 % at December 31, 2023.

Accounts Receivable Sales Arrangements

Accounts receivable sales arrangements are utilized in the normal course of business as part of our cash and liquidity management.

The accounts receivable sold are generally short-term trade receivables with payment due dates of less than 60 days.

We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse.

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

Of the accounts receivable sold and derecognized from our balance sheet, $ 79 and $ 159 remained uncollected as of September 30, 2023 and December 31, 2022, respectively.

Accounts receivable sales activity was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Accounts receivable sales (1)

$ 103 $ 164 $ 277 $ 400

(1) Losses on sales were not material.

Customers may also enter into structured-payable arrangements that require us to sell our receivables from that customer to a third-party financial institution, which then makes payments to us to settle the customer's receivable.

In these instances, we ensure the sale of the receivables are bankruptcy-remote and the payment made to us is without recourse.

The activity associated with these arrangements is not reflected in this disclosure, as payments under these arrangements have not been material and these are customer directed arrangements.

Xerox 2024 Form 10-Q 17

Note 8 – Finance Receivables, Net

2 unchanged sentences

Finance receivables, net were as follows:

September 30,

2024 December 31,

13 unchanged sentences

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

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

Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.8 % at March 31, 2024 and 3.5 % at December 31, 2023.

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

due to the favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment, which improved our credit position.

The bad debt provision followed normal trends in the second and third quarter 2023 and is slightly higher than the prior year primarily due to increased lease originations partially offset by sales of finance lease receivables.

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

The risk characteristics in our finance receivable portfolio segments are generally consistent with the risk factors associated with the economies of the countries/regions included in those geographies.

Since EMEA is comprised of various countries and regional

Xerox 2023 Form 10-Q 22

economies, the risk profile within that portfolio segment is somewhat more diversified due to the varying economic conditions among and within the countries.

Since EMEA is comprised of various countries and regional economies, the risk profile within that portfolio segment is somewhat more diversified due to the varying economic conditions among and within the countries.

In determining the level of reserve required we critically assessed current and forecasted economic conditions and trends to ensure we objectively considered those expected impacts in the determination of our reserve.

2 unchanged sentences

We continue to monitor developments in future economic conditions and trends, and as a result, our reserves may need to be updated in future periods.

Xerox 2024 Form 10-Q 18

The allowance for doubtful accounts as well as the related investment in finance receivables were as follows:

United States Canada EMEA (1)

United States Canada EMEA Total

Balance at December 31, 2023

4 unchanged sentences

Balance at March 31, 2024 $ 49 $ 11 $ 28 $ 88

Provision 5 1 3 9

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

Recoveries and other (2)

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

Provision 2 — 4 6

Charge-offs ( 6 ) ( 1 ) ( 1 ) ( 8 )

Recoveries and other (2)

— — ( 2 ) ( 2 )

Balance at September 30, 2023 $ 62 $ 7 $ 30 $ 99

Balance at December 31, 2022

4 unchanged sentences

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

Provision — 1 3 4

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

Recoveries and other (2)

— — ( 2 ) ( 2 )

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

Provision 6 1 2 9

Charge-offs ( 4 ) ( 1 ) ( 1 ) ( 6 )

Recoveries and other (2)

— — ( 2 ) ( 2 )

Balance at September 30, 2022 $ 77 $ 11 $ 29 $ 117

Finance receivables collectively evaluated for impairment (3)

September 30, 2023 (3)

March 31, 2024 (2)

$ 1,035 $ 243 $ 1,068 $ 2,346

September 30, 2022 (3)

March 31, 2023 (2)

$ 1,756 $ 233 $ 1,092 $ 3,081

_____________

(1) Includes developing market countries.

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

(3) Total Finance receivables exclude the allowance for credit losses of $ 99 and $ 117 at September 30, 2023 and 2022, respectively.

Xerox 2023 Form 10-Q 23

(2) Total Finance receivables exclude the allowance for credit losses of $ 88 and $ 101 at March 31, 2024 and 2023, respectively.

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

19 unchanged sentences

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

September 30, 2023

March 31, 2024

2024 2023 2022 2021 2020 Prior Total

35 unchanged sentences

Total $ 260 $ 122 $ 135 $ 88 $ 32 $ 8 $ 645

Charge-offs $ 1 $ 1 $ 1 $ 1 $ 1 $ 2 $ 7

United States (Indirect)

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Total $ 259 $ 154 $ 95 $ 39 $ 13 $ — $ 560

Charge-offs $ 4 $ 3 $ 3 $ 2 $ 2 $ 3 $ 17

Low Credit Risk $ 45 $ 24 $ 16 $ 9 $ 4 $ — $ 98

2 unchanged sentences

Total $ 114 $ 65 $ 38 $ 26 $ 11 $ 1 $ 255

Charge-offs $ — $ — $ — $ 2 $ — $ 1 $ 3

Low Credit Risk $ 251 $ 182 $ 110 $ 48 $ 19 $ 6 $ 616

2 unchanged sentences

Total $ 462 $ 346 $ 194 $ 91 $ 40 $ 9 $ 1,142

Charge-offs $ 3 $ 8 $ 4 $ 2 $ — $ — $ 17

Total Finance Receivables

3 unchanged sentences

Total $ 1,095 $ 687 $ 462 $ 244 $ 96 $ 18 $ 2,602

_____________

(1) Includes developing market countries.

Total Charge-offs $ 8 $ 12 $ 8 $ 7 $ 3 $ 6 $ 44

Xerox 2024 Form 10-Q 21

6 unchanged sentences

The aging of our billed finance receivables is as follows:

September 30, 2023

March 31, 2024

Current 31-90

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Sales of Receivables

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

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

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

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

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

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

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

Of the finance receivables sold and derecognized from our balance sheet, $ 809 and $ 60 remained uncollected as of September 30, 2023, and December 31, 2022, respectively.

The Company has expanded the 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.

We have received an opinion to that effect from outside legal counsel.

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

In addition, the agreement provides for the sale of the underlying leased equipment to HPS, with the commission paid by HPS covering the value associated with the underlying equipment being sold to HPS.

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

In January of 2024, we entered into a new agreement with HPS to transfer servicing of the majority of funding activity to HPS as well as extend the existing term to 5 years.

This agreement automatically renews for a one year period unless terminated by either the Company or HPS.

Xerox will be required to pay a specified fee to service the Company’s retained receivables.

For the remaining funding activity, Xerox will continue to service the lease receivables for a specified fee.

Xerox 2024 Form 10-Q 22

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Finance receivable sales - net proceeds (1)

$ 206 $ — $ 848 $ —

Gain on sale/Commissions (2)(3)

1 unchanged sentence

_____________

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

1 unchanged sentence

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

(3) The three and nine months ended September 30, 2023, includes $ 1 and $ 3 , respectively, of revenues associated with the sale of the underlying leased equipment and which are expected to be paid over the term of the agreements.

(3) Revenues associated with the sale of the underlying leased equipment, which are expected to be paid over the term of the agreements were not material for the three months ended March 31, 2024 and 2023, respectively.

Secured Borrowings and Collateral

3 unchanged sentences

The following is a summary of Inventories by major category:

September 30,

2024 December 31,

3 unchanged sentences

Total Inventories $ 736 $ 661

_____________

(1) Raw materials at March 31, 2024 reflects a reduction of approximately $ 32 , related to the exit of certain production print manufacturing operations.

The transfer of equipment from our inventories to equipment subject to an operating lease is presented in our Condensed Consolidated Statements of Cash Flows in the operating activities section.

1 unchanged sentence

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

September 30,

2024 December 31,

2 unchanged sentences

Equipment on operating leases, net $ 257 $ 265

Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, were $ 9 and $ 16 for the three months ended September 30, 2023 and 2022, respectively, and $ 42 and $ 47 for the nine months ended September 30, 2023 and 2022, respectively.

Secured Borrowings and Collateral

In 2021, we sold the rights to payments under operating leases to a consolidated special purpose entity included in our Condensed Consolidated Balance Sheet as collateral for a secured loan.

Refer to Note 13 - Debt for additional information related to this arrangement.

Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, were $ 13 and $ 17 for the three months ended March 31, 2024 and 2023, respectively.

Xerox 2024 Form 10-Q 23

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Operating lease expense $ 18 $ 23

5 unchanged sentences

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

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

As of March 31, 2024, we had no operating leases that were material that had not yet commenced.

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

September 30,

2024 December 31,

3 unchanged sentences

Total Operating lease liabilities $ 186 $ 182

The assets and the liabilities related to our finance leases were immaterial for all periods presented.

The net assets and the liabilities related to our finance leases were immaterial for all periods presented.

Xerox 2024 Form 10-Q 24

Note 11 – Restructuring Programs

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

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

During the nine months ended September 30, 2023, we recorded Restructuring and related costs, net of $ 35 , which includes $ 5 of net restructuring charges, $ 20 of asset impairment charges and $ 10 of related costs.

In connection with our Reinvention and other transformative programs, we engage in restructuring actions in order to reduce our cost structure and realign it to the changing nature of our business.

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

Restructuring and related costs, net reflect the following components:

Three Months Ended

Restructuring charges, net $ 5 $ 1

Asset impairment charges, net 26 —

Related costs, net 8 1

Total Restructuring and related costs, net $ 39 $ 2

Restructuring Charges

During the nine months ended September 30, 2023, we recorded net restructuring charges of $ 5 , which included $ 13 of severance costs related to headcount reductions of approximately 180 employees worldwide.

These costs were partially offset by $ 8 of net reversals, which primarily reflect changes in estimated reserves from prior period initiatives.

Charges were primarily related to the Print and Other segment as amounts related to the FITTLE segment were immaterial for all periods presented.

Information related to our restructuring programs is summarized below:

Restructuring charges, net primarily relate to the Print and Other segment as amounts related to the Xerox Financial Services segment were immaterial for all periods presented.

A summary of our restructuring program activity is summarized below:

Severance and

7 unchanged sentences

Balance at March 31, 2024 $ 118 $ — $ 118

Provision 3 — 3

Reversals ( 2 ) — ( 2 )

Net current period charges (1)

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

Balance at June 30, 2023 28 3 31

Provision 5 — 5

Reversals ( 1 ) ( 1 ) ( 2 )

Net current period charges (1)

Charges against reserve and currency ( 10 ) — ( 10 )

Balance at September 30, 2023 $ 22 $ 2 $ 24

_____________ _

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

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

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

1 unchanged sentence

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

Nine Months Ended

September 30,

Three Months Ended

Restructuring cash payments $ ( 16 ) $ ( 6 )

2 unchanged sentences

Asset Impairment Charges

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

Third quarter 2023 activity includes the impairment associated with the Company's sale of its Russian Subsidiary, which was completed in October 2023.

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

The nine months ended September 30, 2023 activity also includes the second quarter 2023 impairment associated with the Company's sale of its Xerox Research Center of Canada (XRCC), the Canadian research division of Xerox, to Myant Capital Partners, which was completed in July 2023.

Xerox 2023 Form 10-Q 30

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

Charges associated with asset impairments represent the write-down of the related assets to their new cost basis.

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

First quarter 2024 activity includes impairments associated with strategic actions taken as a result of the Company's Project Reinvention, including geographic simplification.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Lease right of use assets (1)

$ — $ 1 $ — $ 2

Owned assets (1)

Asset impairments (1)

Gain on sales of owned assets (2)

— ( 2 ) — ( 22 )

Adjustments/Reversals — —

1 unchanged sentence

____________ _

(1) Includes charges associated with the exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries as well as impairments on the sales of certain asset groups.

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

(1) Includes charges associated with strategic actions taken as a result of the Company's Reinvention, including geographic simplification.

Xerox 2024 Form 10-Q 25

Related Costs

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Retention related severance/bonuses (1)

$ ( 1 ) $ ( 1 ) $ — $ ( 3 )

Contractual severance costs — 1 — —

Consulting and other costs (2)

2 unchanged sentences

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

The credit for the nine months ended September 30, 2022 reflects a change in estimate.

The credit for the three months ended March 31, 2024 reflects a change in estimate.

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

Cash paid for restructuring related costs were $ 12 and $ 4 for the nine months ended September 30, 2023 and 2022, respectively.

The restructuring related costs reserve was $ 9 and $ 12 at September 30, 2023 and December 31, 2022, respectively.

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

Cash paid for restructuring related costs were $ 10 and $ 1 for the three months ended March 31, 2024 and 2023, respectively.

The restructuring related costs reserve was $ 5 and $ 8 at March 31, 2024 and December 31, 2023, respectively.

The balance at March 31, 2024 is expected to be paid over the next twelve months.

Note 12 – Supplementary Financial Information

Cash, Cash Equivalents and Restricted Cash

As more fully discussed in Note 21 - Contingencies and Litigation, various litigation matters in Brazil require us to make cash deposits to escrow as a condition of continuing the litigation.

Restricted cash amounts are classified in our Condensed Consolidated Balance Sheets based on when the cash will be contractually or judicially released.

Cash, cash equivalents and restricted cash amounts are as follows:

2024 December 31,

Cash and cash equivalents $ 685 $ 519

Restricted cash

Litigation deposits in Brazil 26 27

Escrow and cash collections related to secured borrowing arrangements and receivable sales (1)

Other restricted cash 22 22

Total Restricted cash 87 98

Cash, cash equivalents and restricted cash (2)

_____________

(1) Includes collections on finance receivables pledged for secured borrowings or sold that will be remitted to lenders in the following month.

(2) Xerox Corporation Cash, cash equivalents and restricted cash of $ 769 excludes $ 3 of cash held by Myriad Ventures Fund I LP.

Restricted cash is reported in the Condensed Consolidated Balance Sheets as follows:

2024 December 31,

Other current assets $ 60 $ 70

Other long-term assets 27 28

Total Restricted cash $ 87 $ 98

Xerox 2024 Form 10-Q 26

Supplemental Cash Flow Information

Summarized cash flow information is as follows:

Location in Statement of Cash Flows Three Months Ended

Source/(Use) 2024 2023

Provision for receivables Operating $ 14 $ ( 5 )

Provision for inventory Operating 43 5

Depreciation of buildings and equipment Operating 14 16

Depreciation and obsolescence of equipment on operating leases Operating 28 27

Amortization of internal use software Operating 7 10

Amortization of acquired intangible assets Operating 10 11

Amortization of patents (1)

Operating 2 2

Amortization of customer contract costs (2)

Operating 16 16

Cost of additions to land, buildings and equipment Investing ( 8 ) ( 6 )

Cost of additions to internal use software Investing ( 2 ) ( 2 )

Payments to acquire noncontrolling interests - Xerox Holdings Investing ( 11 ) ( 3 )

Common stock dividends - Xerox Holdings Financing ( 33 ) ( 41 )

Preferred stock dividends - Xerox Holdings Financing ( 4 ) ( 4 )

Payments to noncontrolling interests Financing ( 1 ) ( 1 )

Repurchases related to stock-based compensation - Xerox Holdings Financing ( 9 ) ( 6 )

_____________

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

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

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

Supplier Finance Program

The Company has a program through a financial institution that enables vendors and suppliers, at their option, to receive early payment for their invoices.

The financial institution subsequently invoices the Company for the stated or full amount of the invoices paid early and we are required to make payment within 45 days of the statement date.

The overall impact of the program generally results in the Company paying its supplier and vendor invoices consistent with their original terms.

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

Spending associated with our supplier finance program during the three months ended March 31, 2024 and 2023 was approximately $ 30 and $ 30 , respectively.

The amount due to vendors and suppliers participating in this program was approximately $ 30 and $ 40 as of March 31, 2024 and December 31, 2023, respectively.

Xerox 2024 Form 10-Q 27

Note 13 – Debt

Revolving Credit Facility

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

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

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

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

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

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

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

Xerox Corporation's borrowings under the ABL Facility are supported by guarantees from Xerox Holdings Corporation and certain of Xerox Corporation's Canadian and U.K.

subsidiaries, and by security interests in substantially all of the working capital assets of Xerox Corporation, Xerox Holdings Corporation, and such Canadian and U.K.

subsidiaries.

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

(1) a fluctuating rate per annum equal to the highest of (A) Citibank’s base rate, (B) a rate of 0.5 % in excess of the “NYFRB” rate, and (C) a rate of 1.0 % in excess of one-month Term SOFR, provided that such fluctuating rate

In March 2024, Xerox Holdings Corporation issued $ 500 of 8.875 % Senior Notes due in 2029 (the 2029 Notes) at par, resulting in net proceeds (after fees and expenses) of approximately $ 495 .

The 2029 Notes are senior unsecured obligations of Xerox Holdings Corporation and are fully and unconditionally guaranteed on a senior unsecured basis by Xerox Corporation and Xerox Business Services, LLC, as well as certain other wholly owned domestic restricted subsidiaries of the Company.

The 2029 Notes and the related guarantees were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

Interest is payable semi-annually in arrears on May 30th and November 30th of each year, beginning on November 30, 2024.

Xerox Holdings Corporation may, at its option, redeem some or all of the 2029 Notes, at varying prices based on the timing of the redemption.

The indenture governing the 2029 Notes contains covenants that, among other things, limit the ability of Xerox Holdings Corporation and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, prepay, redeem or repurchase certain subordinated debt, issue certain preferred stock or similar equity securities, make loans and investments, sell or otherwise dispose of assets, incur liens, enter into transactions with affiliates, enter into agreements restricting its subsidiaries’ ability to pay dividends, and consolidate, merge or sell all or substantially all assets.

Additionally, if Xerox Holdings Corporation experiences a Change of Control Triggering Event (as defined in the indenture governing the 2029 Notes), Xerox Holdings Corporation is required to offer to repurchase the 2029 Notes at 101 % of the principal amount of such notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

Debt issuance costs of approximately $ 5 were paid and deferred in connection with the issuance of the 2029 Notes, and will be amortized over the term of the 2029 Notes.

Refer to the Use of Aggregate Proceeds from Senior Notes section below for additional information regarding the use of net proceeds.

Convertible Senior Notes and Capped Call

Convertible Senior Notes

In March 2024, Xerox Holdings Corporation issued an aggregate $ 400 of 3.75 % Convertible Senior Notes due in 2030 (the 2030 Notes).

The 2030 Notes are senior unsecured obligations of Xerox Holdings Corporation and are fully and unconditionally guaranteed by Xerox Corporation and Xerox Business Solutions, LLC.

The 2030 Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

Interest is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024, and will mature on March 15, 2030, unless earlier converted, redeemed or repurchased.

The net proceeds from this offering were approximately $ 390 , after deducting the debt issuance costs.

Debt issuance costs of approximately $ 10 were paid and deferred in connection with the issuance of the 2030 Notes, and will be amortized over the term of the 2030 Notes.

Refer to the Use of Aggregate Proceeds from Senior Notes section below for additional information regarding the use of net proceeds.

Holders of the 2030 Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2029 only under the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on March 31, 2024 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(ii) during the five consecutive trading day period after any ten consecutive trading day period (the measurement period) in which the trading price (as determined in accordance with the indenture governing the 2030 Notes) per $1,000 principal amount of 2030 Notes, as determined following a request by a holder or holders of the 2030 Notes, for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company's common stock and the applicable conversion rate on each such trading day;

(iii) if the Company calls any, or all of the 2030 Notes for redemption, but only with respect to the Notes called (or deemed called) for redemption;

(iv) if the Company elects to distribute to all or substantially all holders of common stock any rights, options or warrants (other than in connection with a stockholder rights plan) entitling them, for a period of not more than 45 calendar days from the declaration date for such distribution, to subscribe for or purchase shares of Company's common stock at a price per share that is less than the average of the last reported sale price of common stock for the ten consecutive trading date period ending on, and including, the trading day immediately preceding the declaration date for such distribution or distribute to all, or substantially all holders of common stock, our assets, debt securities or rights to purchase our securities, which distribution has a per share value, as

Xerox 2024 Form 10-Q 28

shall not be less than 0.0 %, in each case plus an applicable margin (the loans bearing interest at such fluctuating rate, “ABR Loans”);

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

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

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

At September 30, 2023, borrowings under the ABL Facility were $ 220 and no letters of credits were issued under the facility.

The $ 220 borrowing at September 30, 2023 currently bears interest at an average of 7.61 % through October 30, 2023.

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

Based on management's intent to repay the amount borrowed by the end of 2023 and not refinance it past one year, the $ 220 is included in short-term debt in the Balance Sheet at September 30, 2023.

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

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

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

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

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

Loan Facility

On September 28, 2023, Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, and certain of Xerox’s subsidiaries, as guarantors, entered into a Credit Agreement with Jefferies Finance LLC (Jefferies Finance), as the Administrative Agent, Collateral Agent and Lender pursuant to which Jefferies Finance provided Xerox Corporation with a $ 555 loan facility, which was fully drawn at September 30, 2023.

$ 542 of the proceeds from that borrowing were used to finance the repurchase of an aggregate of approximately 34 million shares of the Company’s common stock from Carl C.

Icahn and certain of his affiliates pursuant to the terms of a related purchase agreement as disclosed in Note 17 – Shareholders’ Equity of Xerox Holdings .

The remainder of the proceeds were used to cover fees and expenses associated with this borrowing (approximately $ 6 , which will be deferred as debt issuance costs) and the repurchase transaction (approximately $ 11 , which will be recorded as a cost of treasury stock).

The Loan Facility is a 5-year agreement with a final maturity date of September 28, 2028 and bears interest at an annual rate of 8.50 %, which will be increased by 0.25 % every 90 days, subject to a Total Cap rate of 11.0 %.

Xerox anticipates refinancing amounts borrowed under the Loan Facility with permanent long-term financing instruments in the near term.

If any of the amounts borrowed under the Loan Facility are outstanding on the “Bridge Loan Rollover Date” ( one year from closing or September 28, 2024) then the outstanding principal amount of such loans will automatically be converted into senior secured term loans (Extended Term Loans).

These loans will mature and are due on final maturity date of September 28, 2028 and will bear interest at the Total Cap rate of 11.0 %.

Xerox’s obligations under the Credit Agreement are initially unsecured obligations and are supported by guarantees from Xerox Holdings and its Canadian and U.K.

subsidiaries that guarantee Xerox’s obligations under the ABL Facility (ABL Foreign Guarantors).

On and after November 30, 2023, if any amounts under the Loan Facility remain outstanding, Xerox’s obligations under the Credit Agreement will also be guaranteed by each of its material domestic subsidiaries (subject to certain exclusions and exceptions) and secured by (i) a second priority lien on all working capital assets of Xerox, the ABL Foreign Guarantors and such additional domestic guarantors and (ii) a first priority lien on substantially all other assets of Xerox, the ABL Foreign Guarantors and such additional domestic guarantors.

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default substantially similar with such provisions contained in Xerox’s ABL Facility.

reasonably determined by our Board of Directors or a committee thereof, exceeding 10 % of the last reported sale price of the Company's common stock on the trading day immediately preceding the declaration date for such distribution;

or (v) upon the occurrence of specified corporate events (as determined in accordance with the indenture governing the 2030 Notes).

On or after December 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2030 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

As of March 31, 2024, none of the conditions permitting the holders of the 2030 Notes to convert their notes early had been met.

Therefore, the 2030 Notes are classified as long-term debt.

The initial conversion rate is 47.9904 shares of the common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $ 20.84 per share of the common stock.

The conversion rate will be subject to adjustment under certain circumstances.

In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.

Upon conversion of the 2030 Notes, the Company must pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of the Company's common stock, or a combination of cash and shares of the Company's common stock, at the Company's election in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the notes being converted.

We may not redeem the notes prior to September 20, 2027.

The Company may redeem for cash all or any portion of the notes, at our option, on or after September 20, 2027, if the last reported sale price of the Company's common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

No sinking fund for the notes has been provided.

If the Company undergoes a fundamental change (as defined in the indenture governing the 2030 Notes), holders may require the Company to repurchase for cash all or any portion of their 2030 Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The indenture governing the 2030 Notes includes customary covenants, sets forth certain events of default after which the notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the notes become automatically due and payable.

The indenture governing the 2030 Notes does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries.

In connection with the issuance of the 2030 Notes (see Convertible Senior Notes above), the Company entered into privately negotiated capped call transactions (the Capped Calls) with certain of the initial purchasers of the 2030 Notes or their respective affiliates (the option counterparties) at a cost of approximately $ 23 .

The Capped Calls cover, subject to anti-dilution adjustments, the number of shares of the Company's common stock initially underlying the 2030 Notes.

By entering into the Capped Calls, we expect to reduce the potential dilution to the Company's common stock (or, in the event a conversion of the 2030 Notes is settled in cash, to reduce our cash payment obligation) in the event that at the time of conversion of the 2030 Notes the trading price of our common stock price exceeds the conversion price of the 2030 Notes.

The initial cap sale price of the Capped Calls was approximately $ 28.34 per share, which represents a premium of 70 % over the last reported sale price of our common stock of $ 16.67 on the NASDAQ Stock Exchange on March 6, 2024, and is subject to certain adjustments under the terms of the Capped Calls.

The Capped Calls were included in Additional paid-in capital in the Condensed Consolidated Balance Sheet as of March 31, 2024, with no remeasurement in subsequent periods as it meets the conditions for equity classification.

Refer to Note 17 - Shareholders' Equity of Xerox Holdings for additional information regarding the Capped Calls.

Xerox 2024 Form 10-Q 29

Use of Aggregate Proceeds from Senior Notes

A portion of the aggregate net proceeds from the Senior Note offerings was used to fund the cost of entering into the Capped Call transactions (see Convertible Senior Notes above).

Additionally, a portion of the aggregate net proceeds were used to repay, through a tender offer for Senior Notes, approximately $ 83 of the 3.80 % Xerox Corporation Senior Notes due in 2024 and approximately $ 362 of the 5.00 % Xerox Holdings Corporation Senior Notes due in 2025.

The Company plans to use the remaining aggregate net debt proceeds to repay debt including the remaining outstanding 3.80 % Senior Notes that were not redeemed as part of the Senior Notes tender offer, when they come due.

In connection with the repayment of the 2024 and 2025 Senior Notes, we recorded a gain on the extinguishment of the debt of approximately $ 4 , which was partially offset by a loss of approximately $ 1 on the write-off of deferred debt issuance costs.

The net gain on the extinguishment of $ 3 was recorded in Other expenses, net.

Xerox Holdings Corporation/Xerox Corporation Intercompany Loan

At September 30, 2023 and December 31, 2022, the balance of the Xerox Holdings Corporation Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $ 1,497 and $ 1,496 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 10 and $ 30 , respectively.

In the first quarter 2024, Xerox Holdings Corporation and Xerox Corporation entered into two intercompany loan agreements which mirror the terms of Xerox Holdings Corporation’s 2029 and 2030 Senior Notes, including principal, interest rates, payment dates and debt issuance costs of approximately $ 15 (see the Senior Notes and the Convertible Senior Notes sections above).

As a result, Xerox Corporation recorded approximately $ 900 of Related party debt.

The proceeds of the intercompany loan were used to pay down approximately $ 362 on the existing 2020 intercompany loan made by Xerox Holdings Corporation to Xerox Corporation.

At March 31, 2024 and December 31, 2023, the balance of the Xerox Holdings Corporation Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $ 2,022 and $ 1,497 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 10 and $ 30 , respectively.

Secured Borrowings and Collateral

In 2022 and 2021, we entered into secured loan agreements with various financial institutions where we sold finance receivables and rights to payments under our equipment on operating leases.

Over the past three years, we entered into secured loan agreements with various financial institutions where we sold finance receivables and rights to payments under our equipment on operating leases.

In certain transactions, the sales were made to special purpose entities (SPEs), owned and controlled by Xerox where the SPEs funded the purchase through amortizing secured loans from the financial institutions.

5 unchanged sentences

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

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

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

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

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

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

September 30, 2023

March 31, 2024

Finance Receivables, Net (1)

4 unchanged sentences

September 2021 73 — 4 6.73 % 2024

Total 456 3 264

Canada (4)(5)

July 2023 76 — 66 6.39 % 2026

December 2022 163 0 101 5.04 % 2025

November 2023 205 — 148 5.39 % 2025

Total $ 537 $ 2 $ 253

5 unchanged sentences

Expected Maturity

December 2022 $ 370 $ — $ 247 7.43 % 2025

January 2022 $ 209 $ — $ 77 6.82 % 2024

September 2021 89 2 25 6.76 % 2024

Total 1,078 5 790

April 2022 63 — 57 5.45 % 2025

December 2022 235 — 195 3.03 % 2025

July 2023 86 — 77 6.74 % 2026

November 2023 235 — 182 5.42 % 2026

Total $ 619 $ 2 $ 361

____________ _

(1) Includes (i) Billed portion of finance receivables, net (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022.

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

(2) Represents the principal debt balance and excludes debt issuance costs of $ 1 and $ 1 as of March 31, 2024 and December 31, 2023, respectively.

(3) Represents the pre-hedged rate.

1 unchanged sentence

(4) Secured assets and obligations held by SPEs.

(5) In July 2023.

the outstanding balance from the April 2022 loan was refinanced into a new loan, resulting in additional net proceeds of approximately $ 52 .

Interest Expense and Income

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Interest expense (1)(2)

$ 44 $ 49 $ 140 $ 151

Interest income (3)

49 55 159 164

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

(2) Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $ 20 and $ 20 for the three months ended September 30, 2023 and 2022, respectively, and $ 59 and $ 59 for the nine months ended September 30, 2023 and 2022, respectively.

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

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

(2) Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $ 22 and $ 20 for the three months ended March 31, 2024 and 2023, respectively.

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

Xerox 2024 Form 10-Q 31

2 unchanged sentences

We use interest rate swap and interest rate cap agreements to manage our interest rate exposure and to achieve a desired proportion of variable and fixed rate debt.

These derivatives may be designated as fair value hedges or cash flow hedges depending on the nature of the risk being hedged.

These derivatives may be designated as fair value hedges or cash flow hedges or non-designated hedges depending on the nature of the risk being hedged.

We had no fair value hedges for the three months ended March 31, 2024 and 2023, respectively.

Cash Flow Hedges

We use interest rate swaps and caps to manage the exposure to variability in the interest rate payments on our secured loan agreements entered into over the last two years.

We use interest rate swaps and caps to manage the exposure to variability in the interest rate payments on our finance receivable secured loan borrowings.

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

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

Secured Borrowing Derivative Type Principal Debt (1)

Notional Amount

Expected Maturity Pre-Hedged Rate Hedged Rate Net Fair Value

United States N/A $ 215 $ — 2024 6.80 % — % $ —

United States Cap 49 51 2024 6.72 % 0.50 % 1

During first quarter 2024, the following derivatives were dedesignated as cash flow hedges.

The net fair value of these cash flow hedges, which was not material, was recorded in Accumulated Other Comprehensive Loss and then reclassified to earnings.

Secured Borrowing Derivative Type Notional Amount

United States (September 2021) Cap 11

Canada Swap 66

France Cap 95

Total $ 449 $ 268 $ 2

_____________

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

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

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

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

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

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

France Cap 58

Foreign Exchange Risk Management

3 unchanged sentences

• Forecasted purchases and sales in foreign currency

At September 30, 2023 and December 31, 2022, we had outstanding forward exchange and purchased option contracts with gross notional values of $ 951 and $ 1,541 respectively, with terms of less than 12 months.

At March 31, 2024 and December 31, 2023, we had outstanding forward exchange and purchased option contracts with gross notional values of $ 1,025 and $ 1,396 respectively, with terms of less than 12 months.

The decrease in the notional value amount is largely due to a decrease in our YEN exposures as a result of a change in the currency terms included in a supplier inventory contract.

At September 30, 2023, approximately 92 % of the contracts mature within three months, 4 % mature in three to six months and 4 % in six to twelve months.

At March 31, 2024, approximately 93 % of the contracts mature within three months, 4 % mature in three to six months and 3 % in six to twelve months.

Foreign Currency Cash Flow Hedges

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

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

The net liability fair value of these contracts was $ 6 and $ 4 as of September 30, 2023 and December 31, 2022, respectively.

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

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

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

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

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

The amount of ineffectiveness recorded in the Condensed Consolidated Statements of (Loss) Income for these designated cash flow hedges was not material for the three months ended March 31, 2024 and 2023, respectively.

The net liability fair value of these contracts was $ 3 and $ 2 as of March 31, 2024 and December 31, 2023, respectively.

Xerox 2024 Form 10-Q 32

Summary of Derivative Instruments Fair Value

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

Designation of Derivatives Balance Sheet Location September 30,

2023 December 31,

Derivatives Designated as Hedging Instruments

Foreign exchange contracts - forwards Other current assets $ 2 $ 5

Accrued expenses and other current liabilities ( 7 ) ( 9 )

Interest rate cap Other long-term assets 2 6

Interest rate swap Other long-term assets — 1

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

Derivatives NOT Designated as Hedging Instruments

Foreign exchange contracts – forwards Other current assets $ 3 $ 14

Accrued expenses and other current liabilities ( 4 ) ( 2 )

Interest rate cap Other long-term assets 1 —

Net undesignated derivative assets $ — $ 12

Summary of Derivatives Total Derivative assets $ 8 $ 26

Total Derivative liabilities ( 11 ) ( 11 )

Net Derivative (liabilities) assets $ ( 3 ) $ 15

Summary of Derivative Instruments Gains (Losses)

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Derivative Loss Recognized in OCI (Effective Portion)

Foreign exchange contracts - forwards and options $ ( 3 ) $ ( 2 )

Total $ ( 2 ) $ ( 3 ) $ ( 17 ) $ ( 41 )

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

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Total $ ( 3 ) $ ( 5 )

As of September 30, 2023, a net after-tax loss of $ 4 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity.

As of March 31, 2024, a net after-tax loss of $ 4 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity.

The entire balance is expected to be reclassified into Net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions.

Non-Designated Derivative Instruments Gains (Losses)

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They are not designated as hedges since there is a natural offset for the remeasurement of the underlying foreign currency-denominated asset or liability.

The net (liability) asset fair value of these contracts was $( 1 ) and $ 5 as of March 31, 2024 and December 31, 2023, respectively.

The following table provides a summary of gains and (losses) on non-designated derivative instruments:

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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Foreign exchange contracts – forwards Other expenses, net – Currency losses, net $ ( 8 ) $ ( 5 )

Xerox 2023 Form 10-Q 36

Currency losses, net were $ 6 and $ 1 for the three months ended September 30, 2023 and 2022, respectively, and were $ 22 and $ 2 for nine months ended September 30, 2023 and 2022, respectively.

Currency losses, net were $ 11 and $ 11 for three months ended March 31, 2024 and 2023, respectively.

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

Xerox 2024 Form 10-Q 33

Note 15 – Fair Value of Financial Assets and Liabilities

1 unchanged sentence

The basis for the measurement at fair value in all cases is Level 2 – Significant Other Observable Inputs.

September 30,

2024 December 31,

Foreign exchange contracts - forwards $ 5 $ 19

Interest rate cap 3 6

Interest rate swap — 1

Derivatives $ 3 $ 11

Deferred compensation plan investments in mutual funds 14 14

Total $ 17 $ 25

Foreign exchange contracts - forwards $ 11 $ 11

Derivatives $ 7 $ 8

Deferred compensation plan liabilities 13 13

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents (1)

$ 685 $ 685 $ 519 $ 519

Accounts receivable, net 846 846 850 850

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Long-term debt $ 3,199 $ 3,069 $ 2,710 $ 2,550

(1) Xerox Corporation Cash and cash equivalents $ 682 excludes $ 3 of cash held by Myriad Ventures Fund I LP.

(2) Represents subsidiaries of Xerox Corporation

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

Three Months Ended September 30,

Pension Benefits

Plans Non-U.S.

Plans Retiree Health

Components of Net Periodic Benefit Costs:

2023 2022 2023 2022 2023 2022

Service cost $ — $ — $ 1 $ 4 $ 1 $ —

Interest cost 28 24 47 32 2 2

Expected return on plan assets ( 24 ) ( 22 ) ( 55 ) ( 58 ) — —

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

Amortization of prior service cost (credit) — — 2 1 ( 4 ) ( 4 )

Recognized settlement loss 4 10 — — — —

Defined benefit plans 12 15 ( 2 ) ( 15 ) ( 4 ) ( 3 )

Defined contribution plans 5 5 4 3 n/a n/a

Net Periodic Benefit Cost (Credit) 17 20 2 ( 12 ) ( 4 ) ( 3 )

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

Net actuarial (gain) loss (1)

( 30 ) 27 ( 1 ) 1 — ( 13 )

Prior service credit — — — — — ( 10 )

Amortization of net actuarial (loss) gain ( 8 ) ( 13 ) ( 3 ) ( 6 ) 3 1

Amortization of net prior service (cost) credit — — ( 2 ) ( 1 ) 4 4

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

( 38 ) 14 ( 6 ) ( 6 ) 7 ( 18 )

Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive (Loss) Income $ ( 21 ) $ 34 $ ( 4 ) $ ( 18 ) $ 3 $ ( 21 )

Nine Months Ended September 30,

Three Months Ended March 31,

Pension Benefits

12 unchanged sentences

Net Periodic Benefit Cost (Credit) 17 14 20 ( 1 ) ( 5 ) ( 3 )

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

Net actuarial loss (gain) (1)

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

Net actuarial gain (1)

( 8 ) ( 7 ) — — — —

Prior service cost (credit) — — 36 48 — ( 33 )

Amortization of net actuarial (loss) gain ( 10 ) ( 8 ) ( 16 ) ( 1 ) 3 2

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

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

Total Recognized in Other Comprehensive Income (2)

( 18 ) ( 15 ) ( 17 ) ( 2 ) 7 6

Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive (Loss) Income $ 30 $ 45 $ ( 18 ) $ 25 $ 3 $ ( 46 )

Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive Income $ ( 1 ) $ ( 1 ) $ 3 $ ( 3 ) $ 2 $ 3

_____________

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

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

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

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

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

in 2023 and 2022, respectively.

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

Plan in 2022.

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

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

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

Xerox 2023 Form 10-Q 38

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

Pension Plan Amendment

In April 2023, our U.K.

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

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

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

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

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

In January 2024, the pension board of our Netherlands benefit pension plan transferred the plan’s assets and projected benefit obligation (PBO) to a single general pension fund.

In addition to the transition, the indexation target was increased from 75 % of price inflation to 100 % of price inflation.

This plan amendment resulted in an increase of approximately $ 47 (approximately EUR 44 million) in the PBO for this Collective Defined Contribution (CDC) plan, approximately 6 % of the plan PBO as of December 31, 2023.

From a Company risk perspective, this CDC plan operates just like a frozen defined contribution plan.

Although the Company's risk has been mitigated, under U.S.

GAAP this CDC plan doesn't meet the definition of a defined contribution plan and therefore continues to be accounted for as a defined benefit plan.

Contributions

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

Nine Months Ended

September 30, Year Ended

Three Months Ended

March 31, Year Ended

2024 2023 Estimated 2024

6 unchanged sentences

plans are for our tax-qualified defined benefit plans.

Xerox 2024 Form 10-Q 35

Note 17 – Shareholders’ Equity of Xerox Holdings

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

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

Xerox Holdings Shareholders’ Equity Non-controlling Interests Total

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

Comprehensive income (loss), net — — — 49 ( 67 ) ( 18 ) 1 ( 17 )

Cash dividends declared - common (3)

— — — ( 32 ) — ( 32 ) — ( 32 )

Cash dividends declared - preferred (4)

— — — ( 4 ) — ( 4 ) — ( 4 )

Stock option and incentive plans, net — 12 — — — 12 — 12

Payments to acquire treasury stock, including fees — — ( 553 ) — — ( 553 ) — ( 553 )

Balance at September 30, 2023 $ 157 $ 1,619 $ ( 553 ) $ 5,070 $ ( 3,504 ) $ 2,789 $ 9 $ 2,798

Xerox 2023 Form 10-Q 39

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

Xerox Holdings Shareholders’ Equity Non- controlling Interests Total

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

Comprehensive (loss) income, net — — — ( 383 ) ( 217 ) ( 600 ) 1 ( 599 )

Cash dividends declared - common (3)

— — — ( 40 ) — ( 40 ) — ( 40 )

Cash dividends declared - preferred (4)

— — — ( 4 ) — ( 4 ) — ( 4 )

Stock option and incentive plans, net 1 13 — — — 14 — 14

Investment from noncontrolling interests — — — — — — 1 1

Balance at September 30, 2022 $ 156 $ 1,577 $ — $ 5,057 $ ( 3,547 ) $ 3,243 $ 11 $ 3,254

Treasury Stock Retained

3 unchanged sentences

Balance at December 31, 2023 $ 123 $ 1,114 $ — $ 4,977 $ ( 3,676 ) $ 2,538 $ 10 $ 2,548

Comprehensive income, net — — — 59 33 92 1 93

Comprehensive (loss) income, net — — — ( 113 ) 3 ( 110 ) — ( 110 )

Cash dividends declared - common (3)

2 unchanged sentences

— — — ( 4 ) — ( 4 ) — ( 4 )

Purchases of capped calls (5)

— ( 17 ) — — — ( 17 ) — ( 17 )

Stock option and incentive plans, net 1 2 — — — 3 — 3

Payments to acquire treasury stock, including fees — — ( 553 ) — — ( 553 ) — ( 553 )

Transactions with noncontrolling interests — — — — — — ( 6 ) ( 6 )

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

Balance at September 30, 2023

Balance at March 31, 2024

$ 124 $ 1,099 $ — $ 4,828 $ ( 3,673 ) $ 2,378 $ 3 $ 2,381

3 unchanged sentences

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

Comprehensive loss, net — — — ( 443 ) ( 559 ) ( 1,002 ) ( 1 ) ( 1,003 )

Comprehensive income, net — — — 71 83 154 — 154

Cash dividends declared - common (3)

3 unchanged sentences

Stock option and incentive plans, net 1 6 — — — 7 — 7

Payments to acquire treasury stock, including fees — — ( 113 ) — — ( 113 ) — ( 113 )

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

Investment from noncontrolling interests — — — — — — 6 6

Transactions with noncontrolling interests — — — — — — ( 1 ) ( 1 )

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

Balance at September 30, 2022

Balance at March 31, 2023

$ 157 $ 1,594 $ — $ 5,162 $ ( 3,454 ) $ 3,459 $ 8 $ 3,467

1 unchanged sentence

(1) Common Stock has a par value of $ 1 per share.

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

(3) Cash dividends declared on common stock for the three and nine months ended September 30, 2023 and 2022 were $ 0.25 per share, respectively, and $ 0.75 per share, respectively.

(4) Cash dividends declared on preferred stock for the three and nine months ended September 30, 2023 and 2022 were $ 20.00 per share, respectively, and $ 60.00 per share, respectively.

Xerox 2023 Form 10-Q 40

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

(3) Cash dividends declared on common stock for the three months ended March 31, 2024 and 2023 were $ 0.25 per share, respectively.

(4) Cash dividends declared on preferred stock for the three months ended March 31, 2024 and 2023 were $ 20.00 per share, respectively.

(5) Refer to Note 13 - Debt for additional information related to the purchases of capped calls in connection with the issuance of Xerox Holdings Corporation's $ 400 of 3.75 % Convertible Senior Notes due 2030.

Common Stock and Treasury Stock

4 unchanged sentences

Balance at March 31, 2024 124,185 —

Stock based compensation plans, net 147 —

Balance at June 30, 2023 157,105 —

Stock based compensation plans, net 46 —

Acquisition of Treasury stock — 34,245

Balance at September 30, 2023 157,151 34,245

Icahn Share Repurchase

On September 28, 2023, Xerox Holdings Corporation entered into a share purchase agreement (the Purchase Agreement) with Carl C.

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, at a price of $ 15.84 per share, the closing price on September 27, 2023, the last full trading day prior to the execution of the Purchase Agreement, for an aggregate purchase price of approximately $ 542 .

The purchase was completed and settled on September 28, 2023 and was funded by a $ 555 Credit Agreement with Jefferies Finance LLC (Jefferies Finance), as the Administrative Agent, Collateral Agent and Lender (Refer to Note 13 – Debt for additional information regarding the Loan Facility).

Aggregate fees associated with the repurchase were approximately $ 11 ($ 2 paid through the third quarter 2023) and include the 1% excise tax on net share repurchases as required by the Inflation Reduction Act of 2022.

The costs incurred are included as part of the cost of Treasury Stock.

Xerox 2024 Form 10-Q 36

3 unchanged sentences

Xerox Shareholder's Equity Non- controlling Interests Total

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

Comprehensive income (loss), net — 49 ( 67 ) ( 18 ) 1 ( 17 )

Dividends declared to parent — ( 34 ) — ( 34 ) — ( 34 )

Transfers to parent ( 550 ) — — ( 550 ) — ( 550 )

Balance at September 30, 2023 $ 3,158 $ 3,366 $ ( 3,504 ) $ 3,020 $ 9 $ 3,029

Additional Paid-in Capital Retained Earnings AOCL (1)

Xerox Shareholder's Equity Non-

Balance at June 30, 2022 $ 3,630 $ 3,820 $ ( 3,330 ) $ 4,120 $ 9 $ 4,129

Comprehensive (loss) income, net — ( 383 ) ( 217 ) ( 600 ) 1 ( 599 )

Dividends declared to parent — ( 49 ) — ( 49 ) — ( 49 )

Transfers from parent 13 — — 13 — 13

Investment from noncontrolling interests — — — — 1 1

Balance at September 30, 2022

$ 3,643 $ 3,388 $ ( 3,547 ) $ 3,484 $ 11 $ 3,495

Additional Paid-in Capital Retained Earnings AOCL (1)

Xerox Shareholder's Equity Non- controlling Interests Total

Balance at December 31, 2023 $ 3,485 $ 2,959 $ ( 3,676 ) $ 2,768 $ 10 $ 2,778

Comprehensive income, net — 59 33 92 1 93

Comprehensive (loss) income, net — ( 113 ) 3 ( 110 ) — ( 110 )

Dividends declared to parent — ( 35 ) — ( 35 ) — ( 35 )

Transfers to parent ( 20 ) — — ( 20 ) — ( 20 )

Transactions with noncontrolling interests — — — — ( 6 ) ( 6 )

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

Balance at September 30, 2023

Balance at March 31, 2024

$ 3,465 $ 2,811 $ ( 3,673 ) $ 2,603 $ 3 $ 2,606

2 unchanged sentences

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

Comprehensive loss, net — ( 443 ) ( 559 ) ( 1,002 ) ( 1 ) ( 1,003 )

Comprehensive income, net — 71 83 154 — 154

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

Transfers from parent 2 — — 2 — 2

Investment from noncontrolling interests — — — — 6 6

Transactions with noncontrolling interests — — — — ( 1 ) ( 1 )

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

Balance at September 30, 2022

Balance at March 31, 2023

$ 3,695 $ 3,455 $ ( 3,454 ) $ 3,696 $ 8 $ 3,704

_____________

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

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

Xerox 2024 Form 10-Q 37

Note 19 – Other Comprehensive (Loss) Income

Other Comprehensive (Loss) Income is comprised of the following:

Note 19 – Other Comprehensive Income

Other Comprehensive Income is comprised of the following:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

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

Translation Adjustments (Losses) Gains $ ( 32 ) $ ( 32 ) $ 93 $ 93

2 unchanged sentences

Changes in cash flow hedges reclassed to earnings (1)

3 3 11 9 15 15 17 13

Net Unrealized Gains (Losses) 1 1 8 6 ( 2 ) — ( 24 ) ( 19 )

Net Unrealized (Losses) Gains — ( 1 ) 3 4

Defined Benefit Plans Gains (Losses)

Net actuarial/prior service gains (losses) 31 23 ( 5 ) ( 4 ) 11 8 ( 61 ) ( 47 )

Net actuarial/prior service gains 8 6 7 5

Prior service amortization (2)

1 unchanged sentence

Actuarial loss amortization/settlement (2)

8 7 18 14 26 20 69 52

Other gains (losses) (3)

1 unchanged sentence

Changes in Defined Benefit Plans Gains 43 36 ( 11 ) ( 14 )

Other Comprehensive (Loss) Income ( 57 ) ( 66 ) ( 215 ) ( 217 ) 38 33 ( 573 ) ( 559 )

Other comprehensive income attributable to noncontrolling interests 1 1 — — — — — —

Other Comprehensive (Loss) Income Attributable to Xerox Holdings/Xerox $ ( 58 ) $ ( 67 ) $ ( 215 ) $ ( 217 ) $ 38 $ 33 $ ( 573 ) $ ( 559 )

Other Comprehensive Income $ 11 $ 3 $ 85 $ 83

(1) Reclassified to Cost of sales - refer to Note 14 - Financial Instruments for additional information regarding our cash flow hedges.

3 unchanged sentences

AOCL is comprised of the following:

September 30,

2024 December 31,

2 unchanged sentences

Benefit plans net actuarial losses and prior service credits ( 1,591 ) ( 1,627 )

Total Accumulated Other Comprehensive Loss Attributable to Xerox Holdings/Xerox $ ( 3,504 ) $ ( 3,537 )

Total Accumulated Other Comprehensive Loss $ ( 3,673 ) $ ( 3,676 )

Xerox 2024 Form 10-Q 38

Note 20 – Earnings (Loss) per Share

Note 20 – (Loss) Earnings per Share

(shares in thousands)

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Basic Earnings (Loss) per Share

Net Income (Loss) Attributable to Xerox Holdings $ 49 $ ( 383 ) $ 59 $ ( 443 )

Basic (Loss) Earnings per Share

Net (Loss) Income Attributable to Xerox Holdings $ ( 113 ) $ 71

Accrued dividends on preferred stock ( 4 ) ( 4 )

Adjusted Net income (loss) available to common shareholders $ 45 $ ( 387 ) $ 48 $ ( 454 )

Adjusted Net (loss) income available to common shareholders $ ( 117 ) $ 67

Weighted average common shares outstanding 123,924 156,661

Basic Earnings (Loss) per Share $ 0.29 $ ( 2.48 ) $ 0.31 $ ( 2.91 )

Diluted Earnings (Loss) per Share

Net Income (Loss) Attributable to Xerox Holdings $ 49 $ ( 383 ) $ 59 $ ( 443 )

Basic (Loss) Earnings per Share:

$ ( 0.94 ) $ 0.43

Diluted (Loss) Earnings per Share

Net (Loss) Income Attributable to Xerox Holdings $ ( 113 ) $ 71

Accrued dividends on preferred stock ( 4 ) ( 4 )

Adjusted Net income (loss) available to common shareholders $ 45 $ ( 387 ) $ 48 $ ( 454 )

Adjusted Net (loss) income available to common shareholders $ ( 117 ) $ 67

Weighted average common shares outstanding 123,924 156,661

4 unchanged sentences

Adjusted weighted average common shares outstanding 123,924 157,746

Diluted Earnings (Loss) per Share $ 0.28 $ ( 2.48 ) $ 0.30 $ ( 2.91 )

Diluted (Loss) Earnings per Share $ ( 0.94 ) $ 0.43

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

2 unchanged sentences

Convertible preferred stock 6,742 6,742

Convertible notes (1)

Total Anti-Dilutive Securities 32,104 13,705

Dividends per Common Share $ 0.25 $ 0.25

_____________

(1) Refer to Note 13 - Debt for additional information related to the issuance of Xerox Holdings Corporation's $ 400 of 3.75 % Convertible Senior Notes due 2030.

Xerox 2024 Form 10-Q 39

20 unchanged sentences

Below is a summary of our Brazilian tax contingencies:

September 30,

2024 December 31,

4 unchanged sentences

Liens on Brazilian assets — —

The increase in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily due to currency and interest.

The decrease in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily due to currency, partially offset by interest.

With respect to the unreserved tax contingency, the majority has been assessed by management as being remote as to the likelihood of ultimately resulting in a loss to the Company.

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

We have issued or provided approximately $ 246 of guarantees as of September 30, 2023 in the form of letters of credit or surety bonds issued to i) support certain insurance programs;

We have issued or provided approximately $ 238 of guarantees as of March 31, 2024 in the form of letters of credit or surety bonds issued to i) support certain insurance programs;

ii) support our obligations related to the Brazil contingencies;

7 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.

What changed 10-Q

Item 1. Financial Statements