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Item 7. Management’s Discussion and Analysis

2025-02-24 compared with 2024-02-23 · 628 added, 416 removed, 772 unchanged (57% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Throughout the Management’s Discussion and Analysis (MD&A) that follows, references to "Xerox Holdings" refer to Xerox Holdings Corporation and its consolidated subsidiaries, while references to "Xerox" refer to Xerox Corporation and its consolidated subsidiaries.

References herein to “we,” "us," “our,” or the “Company,” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise.

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Executive Overview

2023 was a pivotal year for Xerox and marked the first full year of our Reinvention, a multi-year strategy to reposition our business for long-term, sustainable growth.

We took structural and foundational actions to improve our core business and simplify operations, resulting in greater operational focus and a clear path for more transformative Reinvention actions in 2024 and beyond.

For the full year, the Company delivered growth in earnings and operating cash flows despite a modest decline in revenue, reflecting the successful implementation of a more flexible cost structure and rigorous operating discipline.

Total revenue for full year 2023 of $6.9 billion decreased 3.1% and included a 0.8-percentage point benefit from acquisitions, as well as a 0.2-percentage point benefit from currency.

2024 was the second year of our Reinvention.

Reinvention is a multi-year strategy designed to transform the way Xerox operates.

Its objectives are to strengthen our core business and improve financial flexibility to enable investments in solutions, initiatives, and capabilities that will position Xerox to deliver long-term, sustainable growth in revenue and profits.

Total revenue for full year 2024 of $6.2 billion decreased 9.7% reflecting a 0.7-percentage point benefit from acquisitions, as well as a 0.2-percentage point adverse impact from currency.

Recent Changes and Developments

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

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

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

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

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

• Operating Model Simplification:

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

• Geographic and Offering Simplification:

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

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

• Reposition for Growth:

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

In January 2024, we implemented a significant reorganization of our business, including the adoption of a business unit-led operating model, the re-alignment of our sales organization and the establishment of a Global Business Services (GBS) organization to centralize key business processes and enable enterprise-wide efficiencies and productivity gains.

These changes brought closer alignment between our sales, marketing and offering teams and the economic buyers of our products and services, improved operating efficiency and positioned the Company to acquire and integrate ITsavvy and Lexmark, two transactions we expect will accelerate our Reinvention by diversifying our mix of revenue and further strengthening our core businesses.

The focus of our Reinvention efforts in 2024 was threefold:

Geographic Simplification, Operational Simplification, and Commercial Optimization & Growth.

We made significant progress across each priority.

• Geographic Simplification:

– Replaced direct-to-end-customer with partner-led distribution models in Latin America and parts of Europe

• Operational Simplification

– Implemented business-unit led operating model

– Established GBS

– Achieved gross savings target of more than $200 million in 2024

– Restructured commercial arrangements with technology and Business Process Outsourcing Partners to create flexibility and mutually aligned incentives to reduce operating costs

• Commercial Optimization and Growth:

– Stopped manufacturing certain High-End production equipment to focus on Production submarkets with higher growth and return profiles

– Deployed A.I.-enabled pricing tools and revamped sales territory coverage

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During 2023, we also divested several businesses that were non-core to Print, Digital and IT Services, including PARC, Xerox Research Center of Canada (XRCC), and Elem, our 3D printing business.

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

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

Refer to Restructuring and Related Costs, Net section of the MD&A and Note 13 - Restructuring Programs in the Consolidated Financial Statements for additional information regarding costs incurred to implement initiatives under our business transformation projects including Reinvention and the impacts from other divestitures.

Refer to Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements for additional information regarding the donation of PARC.

Russia-Ukraine Conflict

With respect to the war in Ukraine, in the first quarter 2022, we halted shipments to Russia and Belarus when sanctions were imposed.

Since the imposition of sanctions through the date of the filing of this Form 10-K, we have been compliant with sanctions and government restrictions at all times.

Finally, in October 2023, we completed the sale of our Russian subsidiary, fully exiting from this market.

Refer to Note 13 - Restructuring Programs in the Consolidated Financial Statements for additional information regarding this divestiture.

Segment Reporting Change

During the second quarter of 2023, the Company recast FITTLE’s segment revenues and profits measures to reflect the strategic shift in the Company’s approach to funding FITTLE through finance receivable funding agreements that involve the sale of lease receivables.

Refer to Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information regarding this reporting change.

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– Closed the acquisition of ITsavvy, immediately enhancing Xerox’s IT Solutions offering and expanding Total Addressable Market (TAM) of Xerox's offerings

– Announced pending acquisition of Lexmark, providing greater exposure to growing Print markets

Refer to Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements for additional information regarding our acquisitions and divestitures.

Goodwill Impairment

During the third quarter 2024, we identified events and conditions that required a quantitative assessment of Goodwill, as operating results for the quarter, as well as updated forecasts for the full year, were below previous forecasts.

In addition, during 2024, the Company experienced a decline in its stock price and market capitalization, which became significant and sustained during the third quarter.

After completing our quantitative impairment test, we concluded that the estimated fair value of the Print and Other reporting unit (the only reporting unit with Goodwill) had declined below its carrying value and we recognized an after-tax, non-cash impairment charge of $1,015 million ($1,058 million pre-tax) related to our Goodwill in the third quarter 2024.

Business Overview

With annual revenues of approximately $6.9 billion, we remain a leading global provider of digital print technology and related services, software and solutions.

With annual revenues of approximately $6.2 billion, we are a leading global provider of digital print technology and related services, software and solutions.

Our primary offerings span four main areas:

Workplace Solutions, Production Solutions, Xerox Services and FITTLE.

• Workplace Solutions includes two strategic product groups, Entry and Mid-Range, much of which share common solutions, apps and ConnectKey® software.

Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as the supplies and associated maintenance services and the financing of those products through FITTLE (captured as post sale revenue).

Workplace Solutions, Production Solutions, Xerox Services, and Xerox Financial Services (XFS).

• Workplace Solutions is comprised of two strategic product groups, Entry and Mid-Range , much of which share common solutions, apps and ConnectKey® software.

Workplace Solutions revenues include the sale of products (captured primarily as equipment sales) as well as software, supplies and the associated technical service and financing of those products through XFS (captured as post sale revenue).

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

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

• Xerox Services includes a continuum of solutions and services that helps our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security.

Our primary offerings in this area are Managed Print Services (MPS), Capture & Content Services (CCS) and Customer Engagement Services (CES) as well as IT Services.

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

• Xerox® Services includes a continuum of solutions and services that helps our customers optimize their physical print and digital information infrastructures, apply automation and simplification to maximize productivity, and ensure the highest levels of security.

Our primary offerings in this area are Managed Print Services 1 (MPS), IT Solutions, Capture & Content Services (CCS) and Customer Engagement Services (CES).

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

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

Headquartered in Norwalk, Connecticut, with approximately 20,100 employees, Xerox serves customers globally in North America, Central and South America, Brazil, Europe, Eurasia, the Middle East, Africa and India.

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

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

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

Headquartered in Norwalk, Connecticut, with approximately 16,800 employees, Xerox serves customers globally in North America, Latin America, Brazil, Europe, Eurasia, the Middle East, Africa and India.

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

Our business does not depend upon a single customer, or a few customers.

The loss of a single customer would not have a material adverse effect on our business.

In 2024, approximately 45% of our revenue was generated outside the United States.

Post-sale Based Business Model

In 2023, 76% of our total revenue was post-sale-based, which primarily reflects contractual print services 2 , supplies and financing.

These revenue streams generally follow equipment placements and provide some stability to our revenue and cash flows.

Key indicators of future post sale revenue include installs of printers and multifunction devices, the number and type of machines in the field (MIF), page volumes, revenue per page, and the type and

Xerox 2023 Annual Report 28

nature of related software and ancillary services provided to customers - e.g., digital services.

Post sale revenue also includes transactional IT hardware sales and other Managed IT services revenues, a growing part of our business as a result of recent acquisitions, as well as gains and commissions, and servicing revenue on the sale of finance receivables.

In 2024, 78% of our total revenue was post-sale-based, is comprised, in part, of managed print services 1 , supplies and financing.

These revenue streams generally follow equipment placements and provide stability to our revenue and cash flows.

Key indicators of future post sale revenue include installs of printers and multifunction devices, the number and type of machines in the field (MIF), page volumes, revenue per page, and the type and nature of related software and ancillary services provided to customers.

Post sale revenue also includes revenues from IT Solutions, comprised of IT hardware and associated services revenues, Digital services, as well as gains, commissions, and servicing revenue associated with the sale of finance receivables.

_____________

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

(2) Includes revenues from Services, maintenance and rentals.

(1) Previously known as contractual print services, and includes revenues from service, maintenance and rentals.

IT solutions and digital services are not included in managed print services.

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Financial Overview

Total revenue of $6.9 billion in 2023 decreased 3.1% and included a 0.8-percentage point benefit from acquisitions, as well as a 0.2-percentage point benefit from currency.

The decrease in revenue was attributable to lower post sale revenue reflecting the intentional reduction of non-strategic revenue - paper and IT endpoint device placement sales, as well as the termination of Fuji royalty income and the donation of PARC.

2023 total revenue reflected a decrease in Post sale revenue of 4.6%, which included a 1.1-percentage point benefit from acquisitions, as well as a 0.2-percentage point benefit from currency.

Equipment sales revenue increased 1.9% and included a 0.2-percentage point benefit from currency.

Net income (loss) was as follows:

Total revenue of $6.2 billion in 2024 decreased 9.7% and included a 0.7-percentage point benefit from acquisitions, as well as a 0.2-percentage point adverse impact from currency.

2024 total revenue reflected a decrease in Post sale revenue of 7.4%, which included a 0.9-percentage point benefit from acquisitions, as well as a 0.1-percentage point adverse impact from currency.

Equipment sales revenue decreased 16.7% and included a 0.2-percentage point adverse impact from currency.

Net (loss) income was as follows:

Year Ended December 31, B/(W)

(in millions) 2024 2023 2022 2024 2023

Net income (loss) $ 1 $ (322) $ (455) $ 323 $ 133

Net (loss) income $ (1,321) $ 1 $ (322) $ (1,322) $ 323

Adjusted (1) Net income

135 287 189 (152) 98

Net income for 2023 of $1 million improved by $323 million as compared to Net (loss) of $(322) million in 2022.

The increase in Net income is primarily due to the Goodwill impairment charge of $395 million ($412 million pre-tax) in 2022, as well as the impact of lower supply chain-related costs, lower RD&E expenses and Selling, administrative and general expenses, and a higher benefit from Income taxes.

These favorable impacts were partially offset by the after-tax PARC donation charge of $92 million ($132 million pre-tax) in the second quarter 2023, lower revenue, Restructuring and related costs, net, which were $102 million higher than 2022, and higher Other expenses, net.

Adjusted 1 net income for 2023 of $287 million increased $98 million as compared to 2022 primarily reflecting the impact of lower supply chain-related costs, as well as lower RD&E expenses and Selling, administrative and general expenses, which were primarily due to divestitures, cost reduction and productivity actions.

These favorable impacts were partially offset by lower revenue, and higher Other expenses, net.

Net loss for 2024 of $(1,321) million declined by $1,322 million as compared to Net income of $1 million in 2023.

The decrease in Net income primarily reflects the after-tax Goodwill impairment charge of $1,015 million ($1,058 million pre-tax) in 2024, as well as lower revenue and gross profit, higher Income tax expense, higher Other expenses, net, which includes the impacts of higher non-service retirement-related costs, the impact of Divestitures, and higher Amortization of intangible assets.

These negative impacts were partially offset by lower Selling, administrative and general expenses, Restructuring and related expenses, net, and Research, development and engineering expenses, as well as the favorable impact to the current year resulting from the after-tax PARC donation charge of $92 million ($132 million pre-tax) during 2023.

Adjusted 1 net income for 2024 of $135 million decreased $152 million as compared to 2023 primarily reflecting lower revenue and gross profit, as well as higher Other expenses, net.

These negative impacts were partially offset by lower Selling, administrative and general expenses, and lower Research, development and engineering expenses.

_____________

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323 372 376 (13.2) % (1.1) % 5 % 6 %

Intersegment Elimination (1)

(71) (86) (90) (17.4) % (4.4) % (1) % (1) %

Segment Expenses $ 5,919 $ 6,497 $ 6,832 (8.9) % (4.9) % 100 % 100 %

Print and Other $ 268 $ 360 $ 258 (25.6) % 39.5 % 89 % 93 %

34 29 17 17.2 % 70.6 % 11 % 7 %

Total Profit $ 302 $ 389 $ 275 (22.4) % 41.5 % 100 % 100 %

_____________

(1) Reflects revenue, primarily commissions and other payments, made by the FITTLE segment to the Print and Other segment for the lease of Xerox equipment placements .

(1) Intersegment revenue primarily reflect commissions and other payments, made by the XFS segment to the Print and Other segment for the lease of Xerox equipment placements, while Intersegment expense primarily reflect origination fees and commissions made by the Print and Other Segment to the XFS Segment who lease Xerox equipment to 3rd parties.

Cash from operating activities was $511 million in 2024 as compared to $686 million in 2023.

The increase of $527 million was primarily related to reductions in finance receivables due to on-going sales of finance receivables under our finance receivables funding agreement, as well as higher net income, partially offset by an increased use of cash for working capital 1 , particularly accounts payable.

The decrease of $175 million was primarily related to lower net income as well as higher payments for accrued compensation, pension contributions, and restructuring, partially offset by net proceeds of approximately $752 million from the on-going sales of finance receivables under the finance receivables funding agreement, as well as lower finance receivable originations, and improvements in cash for working capital 1 .

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Cash used in investing activities was $198 million in 2024 as compared to $5 million in 2023.

2024 primarily reflected the acquisition of ITsavvy, as well as capital expenditures of $44 million, $11 million related to the impact of the deconsolidation of an entity that is now accounted for using the equity method of accounting, and $16 million for investments in noncontrolling interests, all of which was partially offset by net cash proceeds of approximately $20 million from the sale of assets, and $7 million from the sales of our business operations in Argentina and Chile.

Cash used in financing activities was $271 million in 2024 as compared to $1,202 million in 2023.

2024 primarily reflected net payments of approximately $658 million on Senior Notes due in 2024 and 2025, $282 million on secured financing arrangements, $18 million for debt issuance costs, and $28 million on the Term Loan B facility.

Partially offsetting payments on debt were proceeds from the issuance of Senior Notes during first quarter 2024 of approximately $900 million.

Dividend payments were $141 million and purchases of capped calls were $23 million in connection with the issuance of Convertible Senior Notes.

_____________

(1) Working capital, net reflects Accounts receivable, net, Inventories and Accounts payable.

Xerox 2023 Annual Report 29

Core print and services business revenue is expected to be roughly flat year-over-year, reflecting stable Print demand, growth in Digital and IT Services and neutral macroeconomic conditions.

However, total revenue trends in 2024 are expected to be moderately impacted negatively by the effects of prior year backlog reductions as well as the exit or deemphasis of non-strategic businesses – all of which are unrelated to the performance of our core businesses.

We expect profit margins to improve in 2024 primarily driven by structural simplification actions enabled by our reorganization, including the effects of the workforce reduction decisions announced in January 2024.

We expect Operating cash flows to be approximately $650 million, which is expected to benefit from a reduction in our finance receivables balance.

Improvements in cash flow from underlying operations are expected to be offset by restructuring payments, higher cash taxes and an increase in pension contributions.

In 2025, we expect total Revenue to grow low single-digits in constant currency 1 , inclusive of a full year of revenue associated with the recent ITsavvy acquisition.

Revenue guidance includes approximately 400 basis points of headwinds associated with ongoing Reinvention actions, including the flow through of geographic simplification actions, reductions in High End equipment sales associated with our decision to stop manufacturing High End Production print equipment, the sale of our European paper business and the continued reduction of XFS revenue associated with a declining finance receivable portfolio.

Core, organic revenue is expected to decline, but at a lower rate than we experienced in 2024.

An improved core, organic revenue trajectory is expected to be driven primarily by market share gains in equipment, and growth in Digital Services and legacy IT Solutions.

In 2025, adjusted 1 operating income margin is expected to be at least 5.0%.

The slight year-over-year improvement reflects incremental gross cost savings, partially offset by higher product costs.

We expect Operating cash flows to be between $420 million and $470 million in 2025.

The year-over-year decline in operating cash is primarily due to lower finance receivables forward flow benefits, partially offset by improved adjusted 1 operating income and working capital.

Capital expenditures are expected to be approximately $70 million.

_____________

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

Currency Impact

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Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.

Approximately 45% of our consolidated revenues are derived from operations outside of the U.S.

Approximately 45% of our consolidated revenues during 2024 and 2023, respectively, are derived from operations outside of the U.S.

where the U.S.

Dollar is normally not the functional currency.

As a result, foreign currency translation had a 0.2-percentage point favorable impact on revenue in 2023 and a 3.8-percentage point adverse impact on revenue in 2022.

As a result, foreign currency translation had a 0.2-percentage point adverse impact on revenue in 2024 and a 0.2-percentage point favorable impact on revenue in 2023.

Xerox 2024 Annual Report 32

Application of Critical Accounting Policies

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Critical Accounting Estimates

In preparing our Consolidated Financial Statements and accounting for the underlying transactions and balances, we apply various accounting policies.

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The impact of such changes could be material to our results of operations and financial condition in any quarterly or annual period.

Specific risks associated with these critical accounting policies are discussed throughout the MD&A, where such policies affect our reported and expected financial results.

Specific risks associated with these critical accounting estimates are discussed throughout the MD&A, where such policies affect our reported and expected financial results.

For a detailed discussion of the application of these and other accounting policies, refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in the Consolidated Financial Statements.

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Lease deliverables include the equipment and financing, while the non-lease deliverables generally consist of the services, which include supplies.

Sales made under bundled lease arrangements directly to end customers comprise approximately 56% or $920 million of our equipment sales revenue.

Sales made under bundled lease arrangements directly to end customers comprise 51% or $706 million of our equipment sales revenue.

Revenues under these bundled lease arrangements are allocated considering the relative standalone selling prices of the lease and non-lease deliverables included in the bundled arrangement.

The allocation of revenue among the elements – equipment versus post sale (service, supplies and financing) – has remained fairly consistent at approximately 25% and 75%, respectively, over the past three years.

The allocation of revenue among the elements – equipment versus post sale (service, supplies and financing) – has remained fairly consistent.

Sales to Distributors and Resellers :

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Our methodology includes an expected loss model that incorporates an assessment of current and future economic conditions.

We recorded bad debt provisions of $28 million, $43 million and $7 million in Selling, administrative and general (SAG) expenses in our Consolidated Statements of Income (Loss) for the three years ended December 31, 2023, 2022 and 2021, respectively.

We recorded bad debt provisions of $42 million, $28 million and $43 million in Selling, administrative and general (SAG) expenses in our Consolidated Statements of (Loss) Income for the three years ended December 31, 2024, 2023 and 2022, respectively.

The reserves, as a percentage of trade and finance receivables, were 4.7% at

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December 31, 2024, as compared to 4.4% and 4.1% at December 31, 2023 and 2022, respectively.

We continue to assess our receivables portfolio in light of the current macroeconomic environment and its impact on our estimation of the adequacy of the allowance for doubtful accounts.

In 2023, we recorded approximately $12 million of bad debt reversals related to our finance receivable provision, primarily related to a reserve release in the U.S.

In 2024, we recorded approximately $8 million of reserve reversals related to our finance receivable provision, primarily due to the additional write-offs of two large customer receivable balances in Canada.

In 2023, we recorded approximately $12 million of reserve reversals related to our finance receivable provision, 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.

In 2021, we recorded approximately $31 million of bad debt reversals reflecting improvements in the macroeconomic environment in 2021 as well as lower write-offs as a result of the COVID-19 pandemic.

The bad debt provision in 2022 and 2023 has been more in-line with historical trends but the reserve as a percentage of our trade and finance receivables balance remains elevated to cover expected losses that may result from future macroeconomic conditions including higher inflation and interest rates.

During the five-year period ended December 31, 2024, our reserve for doubtful accounts ranged from 4.1% to 4.8% of gross receivables.

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In December 2023, the Trustees for the U.K.

pension plan entered an insurance buy-in contract, in accordance with U.K.

pension plan entered a second insurance buy-in contract, in accordance with U.K.

pension regulations.

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Differences between these assumptions and actual experiences are reported as net actuarial gains and losses and are subject to amortization to net periodic benefit cost over future periods.

Cumulative net actuarial losses for our defined benefit pension plans of $2.3 billion as of December 31, 2023 increased by $388 million from December 31, 2022, primarily due to the impact of lower discount rates and the resultant increase of the Projected Benefit Obligation (PBO), the excess of expected returns over actual returns as well as the impact from unfavorable currency, partially offset by the recognition of actuarial losses through amortization and U.S.

settlement losses.

Cumulative net actuarial losses for our defined benefit pension plans of $2.1 billion as of December 31, 2024 decreased by $177 million from December 31, 2023, primarily due to the impact of higher discount rates and the resultant decrease of the Projected Benefit Obligation (PBO), the amortization of actuarial losses, and U.S.

settlement losses, as well as the impact of favorable currency, partially offset by the loss from actual returns.

The total actuarial loss at December 31, 2024 is subject to offsetting gains or losses in the future due to both changes in actuarial assumptions and future experience and will be recognized in future periods through amortization or settlement losses.

We used a consolidated weighted average expected rate of return on plan assets of 5.2% for 2024, 5.2% for 2023 and 3.9% for 2022, on a worldwide basis.

During 2023, the actual return on plan assets was a gain of $193 million as compared to an expected return of $320 million, with the difference primarily due to lower returns than expected in our U.K.

Plan as we managed and repositioned plan assets in anticipation of entering in the buy-in contract.

During 2024, the actual return on plan assets was a loss of $98 million as compared to an expected return of $264 million, with the difference primarily due to lower returns than expected for fixed income holdings, most notably in the U.S.

Plans, and for the group annuity contracts held in our U.K.

Plan due to rising interest rates.

When estimating the 2025 expected rate of return, in addition to assessing recent performance, we considered the historical returns earned on plan assets, the rates of return expected in the future, particularly in light of current economic conditions, and our investment strategy and mix with respect to the plans' assets.

The weighted average expected rate of return on plan assets we will use in 2024 is 5.2% which is flat as compared to 2023.

The weighted average expected rate of return on plan assets we will use in 2025 is 5.6% which is 0.4% higher as compared to 2024, as a result of the increase in yields on fixed income investments.

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Another significant assumption affecting our defined benefit pension obligations and the net periodic benefit cost is the rate that we use to discount our future anticipated benefit obligations.

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the rate used to calculate our obligations as of December 31, 2023 and our 2024 expense was 4.4%.

The decrease reflects lower interest rates in both the U.S.

The increase reflects higher interest rates in both the U.S.

Holding all other assumptions constant, the following table summarizes the estimated impacts of a 0.25% change in the discount rate and a 0.25% change in the expected return on plan assets:

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(75) 80 N/A N/A

One of the most significant elements of our net periodic defined benefit pension plan expense is settlement losses.

One of the most significant elements of our net periodic defined benefit pension plan expense was settlement losses.

Our primary domestic plans allow participants the option of settling their vested benefits through the receipt of a lump-sum payment.

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Settlement accounting requires us to recognize a pro-rata portion of the aggregate unamortized net actuarial losses upon settlement.

As noted above, cumulative unamortized net actuarial losses were $2.3 billion at December 31, 2023, of which the U.S.

primary domestic plans, with a lump-sum feature, represented approximately $630 million.

The pro-rata factor is computed as the percentage reduction in the projected benefit obligation due to the settlement of a participant ' s vested benefit.

The pro-rata factor is computed as the percentage reduction in the projected benefit obligation due to the settlement of a participants' vested benefits.

Settlement accounting is only applied when the event of settlement occurs - i.e., the lump-sum payment is made.

Since settlement is dependent on an employee's decision and election, the level of settlements and the associated losses can fluctuate significantly from period to period.

During 2024, lump-sums under the U.S.

primary domestic plans became limited to less than the full benefit obligation, and as a result, settlement expense for 2024 was less than historic levels.

During the three years ended December 31, 2024, 2023 and 2022, U.S.

plan settlements were approximately $20 million, $70 million and $240 million, respectively, and the associated settlement losses on those plan settlements were $5 million, $19 million and $56 million, respectively.

In 2024, we estimate approximately $185 million of plan settlements and settlement losses of approximately $50 million.

The following is a summary of our benefit plan expenses for the three years ended December 31, 2024, 2023 and 2022, as well as estimated amounts for 2025:

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$ 85 $ 104 $ 41 $ 9

settlement losses 50 19 56 54

Defined contribution plans 35 40 40 37

Retiree health benefit plans (20) (18) (16) (3)

(20) (16) (3) (55)

Total Benefit Plan Expense $ 100 $ 126 $ 65 $ 43

_____________

(1) Excludes U.S.

settlement losses.

(2) The increase in 2022 reflects the Company's decision to resume the 2022 employer matching contribution to our U.S.

based 401(k) savings plans for salaried employees previously suspended in 2021.

(3) The 2018 U.S.

Retiree Health Plan amendment was fully amortized by December 31, 2021.

Subsequent amendments have further increased the amortization credits and the postretirement benefit (income).

(1) The increase in 2024 expense is primarily due to an increase in actuarial losses subject to amortization and the resultant increase in the amortization of these prior period losses.

Xerox 2023 Annual Report 33

(2) Includes settlement expense of $5 million, $19 million and $56 million for the three years ended December 31, 2024, 2023 and 2022, respectively.

The following is a summary of our benefit plan funding for the three years ended December 31, 2024, 2023 and 2022, as well as estimated amounts for 2025:

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Total Benefit Plan Funding $ 195 $ 185 $ 142 $ 141

_____________

(1) The difference of $20 million between the 2022 funded amount of $17 million and the 2022 expense of $37 million is due to contributions for our U.S.

(1) The difference of $20 million between the 2022 funded amount of $17 million and the 2022 expense of $37 million is due to employer matching contributions for our U.S.

based 401(k) savings plans for salaried employees being expensed in 2022 as earned and contributed in January of 2023.

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Approximately $77 million of the U.S.

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We apply judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances.

In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.

In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we consider historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.

Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding the valuation allowance against our deferred tax assets.

Due to the lower-than-expected actual results for the third quarter 2024 combined with the lower-than-expected forecast for full-year results, a valuation allowance of approximately $161 million was recorded, primarily related to certain deferred tax assets in a non-U.S.

tax jurisdiction, as we concluded that it is more-likely-than-not that those deferred tax assets will not be realized in the ordinary course of operations.

This assessment was based on the available positive and negative evidence at September 30, 2024, including scheduling of deferred tax liabilities and projected income from operating activities.

The amount of the net deferred tax assets considered realizable, however, could change in the near term if additional objective information becomes available in the future including if income or income tax rates are higher or lower than currently estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

In the event we were to determine that there is a change in the realizability of our deferred tax assets in the future, an adjustment to the valuation allowance would be recorded to income in the period such determination was made.

Our valuation allowance changed through income tax expense by approximately $195 million, $(4) million and $7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

There were other changes to our valuation allowance, including the effects of currency, of $(59) million, $13 million and $2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

These did not affect income tax expense in total as there was a corresponding adjustment to Deferred tax assets or Other comprehensive (loss) income.

These did not affect income tax expense in total as there was a corresponding adjustment to Deferred tax assets or Other comprehensive loss.

The following is a summary of gross deferred tax assets and the related valuation allowances for the years ended December 31, 2024, 2023 and 2022:

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Net deferred tax assets $ 702 $ 892 $ 772

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We are subject to ongoing tax examinations and assessments in various jurisdictions.

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Our ongoing assessments of the more-likely-than-not outcomes of the examinations and related tax positions require judgment and can materially increase or decrease our effective tax rate, as well as impact our operating results.

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Unrecognized tax benefits were $95 million, $140 million and $110 million at December 31, 2024, 2023 and 2022, respectively.

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Our Goodwill, net balance was $1.9 billion at December 31, 2024.

We assess Goodwill for impairment at least annually, during the fourth quarter based on balances as of October 1st, and more frequently on an interim basis if we believe indicators of an impairment exist.

We assess Goodwill for impairment at least annually, or more frequently on an interim basis if we believe indicators of an impairment exist.

The application of an interim or the annual Goodwill impairment test begins with the identification of reporting units, which requires judgment.

A reporting unit is the same as, or one level below, an operating segment.

The Company has two operating/reportable segments - Print and Other, and FITTLE.

We determined that the Print and Other, and FITTLE operating segments were also our reporting units for Goodwill assessment purposes.

The Goodwill, net balance is fully allocated to the Print and Other reporting unit and no Goodwill has been allocated to the FITTLE reporting unit.

The Company has two operating/reportable segments - Print and Other, and XFS.

We determined that the Print and Other, and XFS operating segments were also our reporting units for Goodwill assessment purposes.

The Goodwill, net balance is fully allocated to the Print and Other reporting unit and no Goodwill has been allocated to the XFS reporting unit.

The process of evaluating the potential impairment of Goodwill is highly subjective and requires significant judgment.

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When performing our market approach, we rely specifically on the guideline public company method.

Our guideline public company method incorporates revenues and earnings multiples from publicly traded companies

Our guideline public company method incorporates revenues and earnings multiples from publicly traded companies with operations and other characteristics similar to our reporting units.

The selected multiples consider our reporting units' growth, profitability, size and risk relative to those of the selected publicly traded companies.

Xerox 2024 Annual Report 37

with operations and other characteristics similar to our entity.

The selected multiples consider our entity's growth, profitability, size and risk relative to those of the selected publicly traded companies.

In 2023, as a result of favorable operating results as compared to prior projections and a fairly stable market capitalization, we performed our annual Goodwill assessment in the fourth quarter 2023 qualitatively.

After completing this qualitative impairment review, we concluded that it is more likely-than-not that the fair value of the Print and Other reporting unit, the only reporting unit with goodwill, is higher than its carrying amount and a quantitative Goodwill impairment test was not required.

Our qualitative review indicated that our 2023 actual results as well as our latest full year 2024 projections are in line with the projections used in our third quarter 2022 quantitative impairment test, which was when we last performed a quantitative assessment and recorded a goodwill impairment charge.

In addition, discounts rates as well as the Company’s market capitalization in the fourth quarter 2023 have remained consistent with the third quarter 2022.

If the Company's future performance varies from current expectations, assumptions, or estimates, including assumptions related to current macro-economic uncertainties as well as the expected benefits from the Company’s Reinvention project, this may impact impairment analysis in future periods.

The impact could result in a reduction in the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.

We will continue to monitor developments in 2024 including updates to our forecasts as well as discount rates and our market capitalization, and an update of our assessment and related estimates may be required in the future.

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Goodwill Impairment and Annual Assessment

In addition, during 2024, the Company experienced a decline in its stock price and market capitalization, which became significant and sustained during the third quarter.

In estimating the fair value of the Print and Other reporting unit, we reconciled the fair value of the Company to the Company's market capitalization, and our analysis reflected a 75/25 allocation between the income and market approach, respectively, and the application of a discount rate applied to our projected cash flows of approximately 12.00%.

The weighting between the income and market approach was consistent with our assessment in the third quarter 2022 (the last time a quantitative assessment was completed), and reflects the inherent limitation of a market comparison.

The applied discount rate was 125 basis points higher than the rate applied in the third quarter 2022 assessment primarily due to higher market interest rates.

We believe that the discount rate applied was reasonable based on the estimated capital costs of applicable market participants and an appropriate company-specific risk premium that reflected current market and industry conditions.

In performing our quantitative assessment for the third quarter 2024, the Company believes it made reasonable estimates based on the facts and circumstances that were available as of the reporting date.

However, the assessment of fair value includes assumptions that are subject to risk and uncertainty.

Estimated forecasts are dependent on subjective factors including the timing and amount of future cash flows and the discount rate.

If the Company's future performance varies from current expectations, assumptions, or estimates, including those assumptions relating to interest rates, inflationary pressure on product and labor costs, execution of Reinvention, and geopolitical uncertainty, 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.

Refer to Note 12 - Goodwill, Net and Intangible Assets, Net in the Consolidated Financial Statements for additional information regarding Goodwill.

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Revenue Results Summary

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Total Revenue $ 6,221 $ 6,886 $ 7,107 (9.7) % (3.1) % (9.5) % (3.3) % 100 % 100 % 100 %

Reconciliation to Consolidated Statements of Income (Loss):

Reconciliation to Consolidated Statements of (Loss) Income:

Sales $ 2,378 $ 2,720 $ 2,800 (12.6) % (2.9) % (12.3) % (3.4) %

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Print and Other $ 5,935 $ 6,571 $ 6,804 (9.7) % (3.4) % 95 % 95 % 96 %

FITTLE 401 393 401 2.0 % (2.0) % 6 % 5 % 6 %

XFS 357 401 393 (11.0) % 2.0 % 6 % 6 % 5 %

Intersegment elimination (1)

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$ 6,221 $ 6,886 $ 7,107 (9.7) % (3.1) % 100 % 100 % 100 %

Americas $ 4,524 $ 4,638 $ 4,432 (2.5) % 4.6 % (2.4) % 5.1 % 66 % 65 % 63 %

EMEA 2,241 2,291 2,434 (2.2) % (5.9) % (2.9) % 4.1 % 32 % 32 % 35 %

Other 121 178 172 (32.0) % 3.5 % (32.0) % 3.5 % 2 % 3 % 2 %

Total Revenue (3)

_____________

CC - See "Currency Impact" section for description of constant currency.

(1) Reflects revenue, primarily commissions and other payments, made by the FITTLE segment to the Print and Other segment for the lease of Xerox equipment placements.

(1) Reflects revenue, primarily commissions and other payments, made by the XFS segment to the Print and Other segment for the lease of Xerox equipment placements.

(2) Refer to the "Reportable Segments" section.

(3) Refer to the "Geographic Sales Channels" section.

2023 results were affected by uneven macroeconomic conditions, current and prior year reductions in equipment backlog 1 and the intentional reduction of certain non-strategic revenue.

Total revenue decreased 9.7% for the year ended December 31, 2024 reflecting a 0.7-percentage point benefit from acquisitions, as well as a 0.2-percentage point adverse impact from currency.

The decrease in total revenue was primarily due to lower post sale revenue, reflecting lower page volumes associated with our managed print services 1 contracts, intentional reductions in non-core revenue, including lower margin IT endpoint device placements, Fuji royalty income, paper sales, and Finance income, as well as the effects of Reinvention actions, including geographic and offering simplification, and lower PARC revenue.

These negative impacts to post sale revenue were in part offset by the benefits of a partial quarter of ITsavvy, as well as higher supplies and digital and legacy managed IT services revenue.

The decrease in total revenue also reflects lower equipment sales, resulting from an unfavorable mix, the effects of backlog fluctuations in the current and prior year, the decision to stop manufacturing certain high-end equipment, the effects of geographic simplification, and the impacts from the implementation of organizational model changes in the first half of 2024.

Equipment revenue declined across all product groups, and was most pronounced in Mid-range.

Total revenue decreased 3.1% for the year ended December 31, 2023 and included a 0.8-percentage point benefit from acquisitions and a 0.2-percentage point benefit from currency.

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The decrease in Post sale revenue was partially offset by growth in equipment sales revenue, reflecting stable demand, higher pricing, and favorable mix, as well as improved product supply availability and the associated year-over-year reduction in backlog.

Total revenue increased 1.0% for the year ended December 31, 2022 and included a 2.6-percentage point benefit from acquisitions, which was partially offset by a 3.8-percentage point adverse impact from currency.

The increase in revenue reflected growth in equipment sales revenue, due to stable demand and improved product supply availability, particularly in the last third of the year.

Post sale revenue also improved, primarily reflecting the impact from acquisitions as well as growth in IT and Digital service revenue and an increase in paper and supplies sales.

Contractual print services 2 grew low single digits at constant currency 3 , including the benefit of recent acquisitions.

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Geographically, revenue in our Americas region decreased 2.5% for the year ended December 31, 2023, as compared to the prior year, including a 0.1-percentage point adverse impact from currency.

The decline in revenue reflects lower post sale revenue, partially offset by higher equipment sales, resulting from increased product availability.

Revenues in our Americas region for the year ended December 31, 2022 increased 4.6%, as compared to the prior year, including a 0.5-percentage point adverse impact from currency, primarily reflecting the benefits of recent acquisitions and growth in equipment sales and consumables, such as paper and supplies.

Revenue in our EMEA operations decreased 2.2% for the year ended December 31, 2023, as compared to the prior year, with a 0.7-percentage point benefit from currency, driven by lower equipment sales revenue, due to prior year backlog reductions, which was partially offset by higher post sale revenue.

The increase in post sale revenue primarily reflected the benefits of a recent acquisition, partially offset by lower paper sales.

Revenue in our EMEA operations decreased 5.9% for the year ended December 31, 2022, with a 10.0-percentage point adverse impact from currency.

Absent the adverse impact from currency, revenue increased, driven by strength in equipment sales, reflecting better product availability, and the benefits of recent acquisitions.

_____________

(1) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates.

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

(2) Includes revenues from service, maintenance and rentals.

(3) See "Currency Impact" section for description of constant currency.

(1) Previously known as contractual print services, and includes revenues from service, maintenance and rentals.

IT solutions and digital services are not included in managed print services.

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Total revenues included the following:

Post sale revenue

Post sale revenue reflects revenues from Contractual print services 1 , supplies and financing.

Post sale revenue reflects revenues from managed print services 1 , supplies and financing.

These revenues are associated not only with the population of devices in the field, which is affected by installs and removals, but also by the page volumes generated from the usage of such devices and the revenue per printed page.

Post sale revenue also includes transactional IT hardware sales and other Managed IT services, as well as gains and commissions, and servicing revenue on the sale of finance receivables.

For the year ended December 31, 2023, Post sale revenue decreased 4.6% as compared to the prior year, which included a 1.1-percentage point benefit from an acquisition, as well as a 0.2-percentage point benefit from currency.

For the year ended December 31, 2022, Post sale revenue increased 0.5% as compared to the prior year and included a 3.4-percentage point benefit from acquisitions, which was partially offset by a 3.7-percentage point adverse impact from currency.

Post sale revenue also includes revenues from IT Solutions, comprised of IT hardware and associated services, Digital services, as well as gains, commissions, and servicing revenue associated with the sale of finance receivables.

For the year ended December 31, 2024, Post sale revenue decreased 7.4% as compared to the prior year, which included a 0.9-percentage point benefit from the recent acquisition of ITsavvy, partially offset by a 0.1-percentage point adverse impact from currency.

For the year ended December 31, 2023, Post sale revenue decreased 4.6% as compared to the prior year and included a 1.1-percentage point benefit from an acquisition, as well as a 0.2-percentage point benefit from currency.

Post sale revenue is comprised of the following:

Services, maintenance and rentals revenue includes maintenance revenue (including bundled supplies), print and digital services revenue from our Services offerings, rentals and other revenues.

Services, maintenance and rentals revenue includes maintenance revenue (including bundled supplies), the services portion of our IT Solutions offering, digital services revenue and rentals, and other revenues.

• For the year ended December 31, 2024, these revenues decreased 7.1% as compared to the prior year period and included no impact from currency.

Managed print services 1 revenue declined year-over year driven by lower outsourcing and print service revenue, including the effects of geographic simplification, as well as lower rental revenue, the termination of Fuji royalty income and the donation of PARC.

These impacts were partially offset by higher organic and inorganic managed IT Solutions revenue, including the benefits of a partial quarter of ITsavvy results, as well as higher digital services revenue, and gains, commission and servicing revenue associated with the sale of finance receivables.

• For the year ended December 31, 2023, these revenues decreased 3.0% as compared to the prior year period and included no impact from currency.

The decline in revenues was due in part to the termination of Fuji royalty income and the donation of PARC.

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These declines were partially offset by revenue growth in Digital and Managed IT Services, which includes the benefits of a recent acquisition, and price increases, as well as gains and commissions, and servicing revenue on sales of finance receivables.

• For the year ended December 31, 2022, these revenues decreased 3.2% as compared to the prior year period, including a 3.8-percentage point adverse impact from currency.

The increase at constant currency 2 was primarily due to increases in contracted price per page and the acquisition of Go Inspire during the third quarter 2022.

Contractual print services 1 grew modestly compared to 2021, including benefits of Go Inspire, despite a slower-than expected return of employees to offices and ongoing macroeconomic concerns.

These benefits were partially offset by the impact of lower royalty revenues from FUJIFILM Business Innovation Corp.

lower third-party leasing commissions (resulting from higher FITTLE lease penetration of our XBS operations), and slightly lower page volumes.

Supplies, paper and other sales includes unbundled supplies, IT hardware and other sales.

• For the year ended December 31, 2024, these revenues decreased 6.1% as compared to the prior year, including a 2.1-percentage point benefit from the recent acquisition of ITsavvy, as well as a 0.4-percentage point adverse impact from currency.

The decline at constant currency 2 primarily reflecting lower sales of non-strategic, lower margin IT endpoint device placements and paper sales, as well as the effects of geographic simplification.

These declines were partially offset by the benefit of revenue from the ITsavvy acquisitions, and higher supplies revenue.

• For the year ended December 31, 2023, these revenues decreased 9.4% as compared to the prior year, including a 1.1-percentage point benefit from currency, primarily reflecting lower paper sales, as well as IT hardware, particularly endpoint devices, and unbundled supplies revenue.

Paper and IT endpoint sales are low margin and non-strategic, and are expected to be reduced further over time.

Xerox 2023 Annual Report 38

• For the year ended December 31, 2022, these revenues increased 17.5% as compared to the prior year, including a 3.5-percentage point adverse impact from currency.

The increase at constant currency 2 primarily reflected higher IT Services revenues, which included revenues from the recent acquisition of Powerland as well as higher paper and supplies revenues driven by higher channel demand.

Financing revenue is generated from direct and indirect financing of Xerox equipment.

• For the year ended December 31, 2024, Financing revenue decreased 20.9% as compared to the prior year, including no impact from currency.

The decline reflects a continued reduction of the average finance receivables balance in 2024, resulting from the sales of finance receivables during 2023 and 2024 to HPS Investment Partners (HPS) and De Lage Landen Financial Services Canada Inc.

(DLL), as well as lower originations.

Finance receivables are approximately $800 million lower at December 31, 2024 as compared to December 31, 2023.

• For the year ended December 31, 2023, Financing revenue decreased 7.7% as compared to the prior year, including a 0.3-percentage point benefit from currency.

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Finance receivables were approximately $600 million lower in December of 2023 as compared to December of 2022.

• For the year ended December 31, 2022, Financing revenue decreased 6.3% as compared to the prior year, including a 3.4-percentage point adverse impact from currency.

The decline at constant currency 2 reflected a lower average finance receivables balance, due to a decrease in equipment sales in prior periods and declines in Xerox channel originations, due primarily to supply constraints, as well as lower interest rates due to an increase in indirect originations.

These declines were partially offset by an increase in originations from third-party dealers and non-Xerox equipment providers as compared to the prior year.

_____________

(1) Includes revenues from service, maintenance and rentals.

(1) Previously known as contractual print services, and includes revenues from service, maintenance and rentals.

IT solutions and digital services are not included in managed print services.

(2) See "Currency Impact" section for description of constant currency.

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Equipment sales revenue

Equipment sales revenue increased 1.9% for the year ended December 31, 2023 as compared to the prior year, including a 0.2-percentage point benefit from currency.

Equipment sales revenue decreased 16.7% for the year ended December 31, 2024 as compared to the prior year, including a 0.2-percentage point adverse impact from currency.

The decrease in constant currency 1 was primarily impacted by unfavorable mix, as well as the effects of backlog fluctuations in the current and prior year, the decision to stop manufacturing certain high-end equipment, the effects of geographic simplification, and the impacts from the organizational changes implemented in the first half of 2024.

Revenue declined across all product groups, and was most pronounced in Mid-range, reflecting declines in both black-and-white and color installations, with a mix toward lower-priced A3 color multi-function printers.

For the year ended December 31, 2023, Equipment sales revenue increased 1.9% as compared to the prior year, including a 0.2-percentage point benefit from currency.

The increase in constant currency 1 reflects improvement in product availability for higher-margin mid-range and high-end devices, in the Americas region, as well as recent pricing actions and stable demand conditions.

These increases were partially offset by lower revenue from the Entry product group, primarily in EMEA, as compared to the prior year period.

For the year ended December 31, 2022, Equipment sales revenue increased 2.7% as compared to the prior year, including a 3.9-percentage point adverse impact from currency.

The increase at constant currency 1 reflected higher demand and improvement in product availability, primarily in the last third of the year, as well as higher prices and a more favorable product and geography mix relative to the prior year.

Backlog 2 declined meaningfully on a year-over-year basis exiting 2022 but remained above pre-pandemic levels.

Equipment sales revenue increased across all product categories (entry, mid-range, and high-end), led by strength in mid-range.

See Segment Review - Print and Other below for additional discussion on Equipment sales revenue.

Geographic Sales Channels

In 2023 our geographic sales channels were as follows:

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

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

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

• Other , primarily includes royalties and licensing revenue.

_____________

(1) See "Currency Impact" section for description of constant currency.

(2) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates.

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

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Costs, Expenses and Other Income

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(1) 2023 includes the pre-tax PARC donation charge of $132 million, while 2022 and 2021 include pre-tax non-cash Goodwill impairment charges of $412 million and $781 million, respectively.

(1) 2024 includes a pre-tax non-cash Goodwill impairment charge of $1,058 million, 2023 includes the pre-tax PARC donation charge of $132 million, and 2022 includes a pre-tax non-cash Goodwill impairment charge of $412 million.

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

Total gross margin for the year ended December 31, 2023 of 33.6% increased 1.0-percentage points compared to 2022, primarily reflecting lower supply chain-related costs, favorable equipment mix, and the benefits associated with recent pricing and cost and productivity actions, as well as gains and commissions, and servicing revenues on sales of finance receivables.

Total gross margin for the year ended December 31, 2024 of 31.5% decreased 2.1-percentage points compared to 2023, primarily reflecting lower revenue and gross profit, primarily due to charges associated with the exit of certain production print manufacturing operations, which had a 0.8-percentage point unfavorable impact on gross margin, as well as higher transportation and product costs, an unfavorable equipment mix and lower print volumes.

These impacts were partially offset by the benefits associated with recent Reinvention-related cost and productivity actions and currency.

Total gross margin for the year ended December 31, 2023 of 33.6% increased 1.0-percentage points compared to 2022, primarily reflecting lower supply chain-related costs, favorable equipment mix, and the benefits associated with recent pricing and cost and productivity actions, as well as financing gains and commissions, and servicing revenues on sales of finance receivables.

These favorable impacts were partially offset by lower revenue, which includes the termination of Fuji royalty income, and price increases from a product supplier, as well as lower financing margin.

Total gross margin for the year ended December 31, 2022 of 32.6% decreased 1.5-percentage points compared to 2021, primarily reflecting approximately 0.9-percentage points associated with the adverse impacts of higher supply chain costs and capacity restrictions as well as unfavorable product and service mix.

In addition, gross margin was negatively impacted by lower third-party financing commissions, lower royalty revenue, benefits from temporary government assistance and furlough measures in the prior year, and investments to support future growth.

These negative impacts were partially offset by favorable currency and productivity and cost savings associated with Project Own It transformation actions.

Equipment gross margin for the year ended December 31, 2023 of 33.7% increased 8.6-percentage points compared to 2022, primarily reflecting higher revenue, a favorable product and channel mix, lower supply chain-related costs, and the benefits associated with recent pricing actions.

Equipment gross margin for the year ended December 31, 2024 of 30.2% decreased 3.5-percentage points compared to 2023, primarily reflecting lower revenue and gross profit, as well as higher product and transportation costs, the exit of certain production print manufacturing operations, and unfavorable product and channel mix.

These impacts were partially offset by currency.

Equipment gross margin for the year ended December 31, 2023 of 33.7% increased 8.6-percentage points as compared to 2022, reflecting higher revenue, a favorable product and channel mix, lower supply chain-related costs, and the benefits associated with recent pricing actions.

These favorable impacts were partially offset by price increases from a product supplier.

Equipment gross margin for the year ended December 31, 2022 of 25.1% increased 0.9-percentage points as compared to 2021, primarily reflecting the benefits of price increases, lower freight costs, and favorable mix of products, partially offset by the impact of continued product supply constraints and higher product costs.

Post sale gross margin for the year ended December 31, 2024 of 31.9% decreased 1.7-percentage points compared to 2023, reflecting lower revenue, including lower page volumes, lower gross profit, and charges associated with the Company's Reinvention, primarily related to the exit of certain production print manufacturing operations, which had a 1.0-percentage point unfavorable impact on gross margin.

These impacts were partially offset by the benefits associated with recent Reinvention-related cost and productivity actions and favorable currency.

Post sale gross margin for the year ended December 31, 2023 of 33.6% decreased 1.3-percentage points compared to 2022, reflecting lower revenue due to the termination of Fuji royalty income, and lost revenues as a result of the donation of PARC, as well as a lower financing margin.

Financing margin decreased primarily due to higher interest costs.

These impacts were partially offset by the benefits associated cost and productivity actions and lower supply chain-related costs, as well as gains and commissions, and servicing revenues on sales of finance receivables.

Post sale gross margin for the year ended December 31, 2022 of 34.9% decreased 2.1-percentage points compared to 2021, reflecting higher parts costs associated with supply chain disruption, the impacts of recent acquisitions, benefits from temporary government assistance in the prior year, a competitive price environment, and lower royalty revenues and third-party financing commissions.

A higher mix of IT services revenues also contributed to the decrease in margins.

These negative impacts were partially offset by favorable currency as well as productivity and cost savings associated with Project Own It transformation actions.

These impacts were partially offset by the benefits of associated cost and productivity actions and lower supply chain-related costs, as well as gains, commissions, and servicing revenues on sales of finance receivables.

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Research, Development and Engineering Expenses (RD&E)

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RD&E as a percentage of revenue for the year ended December 31, 2024 of 3.1% decreased 0.2-percentage points as compared to 2023, and RD&E of $191 million for the year ended December 31, 2024 decreased $38 million as compared to 2023.

The decrease was primarily due to productivity and cost savings related to the Company's Reinvention, the spin-off, exit, or shutdown of certain other RD&E related activities or businesses, and the corresponding reduction in real estate.

The lower spending in innovation reflects decisions which provide greater focus and financial flexibility to pursue growth opportunities adjacent to our core operations.

The decrease also reflected the strategic decision to donate PARC in 2023.

RD&E as a percentage of revenue for the year ended December 31, 2023 of 3.3% decreased 1.0-percentage point as compared to 2022, and RD&E of $229 million for the year ended December 31, 2023, decreased $75 million as compared to 2022.

The decrease was primarily due to the strategic decision to donate PARC and the spin-off, exit, or shutdown of certain other RD&E related activities or businesses.

The lower spending in innovation reflects decisions which provide greater focus and financial flexibility to pursue growth opportunities adjacent to our core operations within Print, Digital and Managed IT services.

RD&E as a percentage of revenue for the year ended December 31, 2022 of 4.3% decreased 0.1-percentage points as compared to 2021, and RD&E of $304 million for the year ended December 31, 2022, decreased $6 million from 2021, primarily due to investment prioritization and rationalization as well as cost savings from restructuring and productivity actions.

Spending in innovation areas was lower in the fourth quarter 2022 reflecting the decision to scale back activities in PARC and to spin out or shut down certain other businesses and activities.

Selling, Administrative and General Expenses (SAG)

SAG as a percentage of revenue of 24.6% decreased 0.2-percentage points for the year ended December 31, 2023 as compared to 2022.

SAG as a percentage of revenue of 24.7% increased 0.1-percentage points for the year ended December 31, 2024 as compared to 2023, primarily due to lower revenue, as well as higher bad debt expense, which were partially offset by lower selling and other administrative and general expenses.

SAG expenses of $1,537 million for the year ended December 31, 2024 were $159 million lower than 2023, primarily reflecting productivity and cost savings related to the Company's Reinvention, as well as, lower incentive compensation expense, IT expenses, outsourcing costs, commission payments, litigation expense, and advertising costs, as well as the strategic decision to donate PARC in the prior year.

These favorable impacts were partially offset by higher bad debt expense, the inclusion of a partial quarter of ITsavvy results and transaction-related expenses related to the recent acquisition of ITsavvy and expected acquisition of Lexmark, as well as other Reinvention-related investments, and unfavorable currency.

Bad debt expense for the year ended December 31, 2024 of $42 million increased $14 million as compared to 2023.

The increase reflects a reserve release in 2023 of approximately $12 million due to a favorable reassessment of the credit exposure on a large customer receivable balance, as well as an increased provision for aged accounts receivables in the current year.

The adverse impacts were offset by a lower finance receivable balance, as a result of sales of finance receivables in recent quarters to HPS Investment Partners and De Lage Landen Financial Services Canada Inc.

SAG as a percentage of revenue of 24.6% decreased 0.2-percentage points for the year ended December 31, 2023 compared to 2022.

SAG expenses of $1,696 million for the year ended December 31, 2023 were $64 million lower than 2022 primarily reflecting the prior year stock compensation expense of $21 million associated with the accelerated vesting of all outstanding equity awards in connection with the passing of Xerox Holding's former CEO.

SAG also benefited from productivity and cost savings, including savings related to restructuring actions, the strategic decision to donate PARC and other dispositions as well as a reduced investment in new businesses.

Additionally, the decrease in SAG also reflected lower bad debt expense, lower supply chain-related costs, and the favorable true-up of prior year shared services contract costs.

Additionally, the decrease in SAG reflected lower bad debt expense, lower supply chain-related costs, and the favorable true-up of prior year shared services contract costs.

These benefits were partially offset by higher incentive compensation expense and marketing expenses, and the impact of an acquisition.

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The increase in the trade receivable provisions is partly due to an increase in aged receivables in the U.S.

SAG as a percentage of revenue of 24.8% increased 0.4-percentage points for the year ended December 31, 2022 compared to 2021 primarily due to higher administrative and bad debt expenses, partially offset by lower selling expenses as a result of the favorable impact from currency as well as productivity and cost savings associated with our Project Own It transformation actions, and the impact of higher revenues.

SAG expenses of $1,760 million for the year ended December 31, 2022 increased $42 million from 2021, reflecting higher bad debt expense due to the reserve releases in 2021 and higher stock compensation expense of $21 million.

The higher stock compensation expense was primarily due to the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO.

The increase in SAG expenses was also due to acquisitions, investments in FITTLE, as well as benefits from temporary government assistance in 2021.

These actions were partially offset by lower sales and marketing expenses resulting from lower sales volumes in the first half of 2022, and productivity and cost savings associated with our Project Own It transformation actions, as well as the favorable impact from currency.

Bad debt expense for the year ended December 31, 2022 of $43 million increased $36 million as compared to the prior year period, primarily due to reserve releases of approximately $31 million in 2021 as well as increased provisions as a result of macroeconomic conditions during the year.

Refer to Note 7 - Accounts Receivable, Net and Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding our bad debt provision and related reserves.

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

As of December 31, 2024, on a trailing twelve-month basis, bad debt expense (excluding

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the reserve release in 2024) was approximately 1.9% of total receivables, as compared to approximately 1.3% for the prior year comparable period (excluding the reserve release of approximately $12 million in 2023), primarily due to a lower finance receivables balance of approximately $800 million at December 31, 2024.

Restructuring and Related Costs, Net

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Total Restructuring and related costs, net $ 112 $ 167 $ 65

(1) Reflects net headcount reductions of approximately 2,125, 1,940, and 525 for the three years ended 2023, 2022 and 2021, respectively.

2023 Restructuring charges, net includes a pre-tax charge of $104 million associated with the workforce reduction announced in January 2024 as part of the reorganization of our business and the establishment of a Global Business Services (GBS) organization to enable enterprise-wide efficiencies and productivity gains.

2023 actions impacted several functional areas, with approximately 25% focused on gross margin improvements, approximately 65% focused on SAG reductions, and the remainder focused on RD&E optimization.

We expect 2024 pre-tax savings of approximately $165 million from our 2023 restructuring actions, with a significant portion related to the workforce reduction announced in January 2024.

2023 activity also include asset impairment charges of $32 million primarily associated with the following:

• The sale of our Russian subsidiary, which was completed in October 2023;

• The sale of our Xerox Research Center of Canada (XRCC), which was completed in July 2023;

• The strategic actions taken as a result of the Company's Reinvention, including the outsourcing of certain back-office functions and geographic simplification.

Restructuring and related costs for 2023 also included related costs of $21 million primarily related to consulting and other costs associated with our initiatives.

(1) Reflects net headcount reductions of approximately 1,100, 2,125, and 1,940 for the three years ended December 31, 2024, 2023 and 2022, respectively.

2024 Restructuring and related costs, net are associated with strategic actions taken as a result of the Company's Reinvention, primarily related to optimizing operations, the exit of certain production print manufacturing operations, and geographic simplification, as well as consulting and other costs associated with our initiatives.

2024 actions impacted several functional areas, with approximately 55% focused on gross margin improvements, approximately 35% focused on SAG reductions, and the remainder focused on RD&E enhancements.

We expect 2025 pre-tax savings of approximately $98 million from our 2024 restructuring actions.

Refer to Note 13 - Restructuring Programs in the Consolidated Financial Statements for additional information regarding our restructuring programs.

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Amortization of intangible assets for the three years ended December 31, 2024, 2023 and 2022 was $73 million, $43 million and $42 million, respectively.

The decreased level of amortization in 2022 was primarily related to the write-off of certain XBS trade names in prior years as part of our continued efforts to realign and consolidate this sales unit, partially offset by intangible amortization related to our recent acquisitions of Powerland and Go Inspire.

The increased level of amortization of intangible assets in 2024, as compared to 2023, was primarily related to the strategic write-off of approximately $37 million of certain trade names in 2024, partially offset by the amortization expense associated with the intangible assets from the recent acquisition of ITsavvy.

Refer to Note 6 - Acquisitions and Divestitures, and Note 12 - Goodwill, Net and Intangible Assets, Net in the Consolidated Financial Statements for additional information regarding our intangible assets.

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Worldwide employment was approximately 16,800 as of December 31, 2024, a decrease of approximately 3,300 from December 31, 2023.

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

The decrease primarily relates to the Company's Reinvention, which includes the effects of workforce reduction decisions announced in January 2024, as well as net attrition (attrition net of gross hires).

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Other Expenses, Net

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Currency losses, net 15 28 13

Loss on early extinguishment of debt 10 5 —

(Gain) Loss on early extinguishment of debt (2) 10 5

Transaction and related costs, net (38) — —

Contract termination costs - product supply — — 33

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Non-Financing Interest Expense

Non-financing interest expense for the year ended December 31, 2024 of $119 million was $51 million higher than 2023.

The increase was primarily due to higher interest rates on new Senior Notes issued in 2024, lower financing debt, as well as a slightly higher average debt balance as a result of issuance of Senior Notes and promissory notes in 2024.

When non-financing interest expense is combined with financing interest expense (Cost of financing), total interest expense of $225 million increased by $27 million from the prior year period, primarily reflecting the impact of higher average interest rates.

Non-financing interest expense for the year ended December 31, 2023 of $68 million was $23 million lower than 2022.

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When non-financing interest expense is combined with financing interest expense (Cost of financing), total interest expense of $198 million decreased by $1 million from the prior year period primarily reflecting a lower average debt balance, mostly offset by the impact of higher average interest rates.

Non-financing interest expense for the year ended December 31, 2022 of $91 million was $5 million lower than 2021.

When non-financing interest expense is combined with financing interest expense (Cost of financing), total interest expense of $199 million decreased by $8 million from the prior year period primarily reflecting a lower average debt balance offset slightly by higher average interest rates.

For the years ended December 31, 2023, 2022 and 2021, both Xerox Holdings and Xerox reported total interest expense of $198 million, $199 million and $207 million, respectively, however, the amount reported by Xerox includes $80 million of interest expense, in each of the three years, paid to Xerox Holdings on an Intercompany Loan.

For the years ended December 31, 2024, 2023 and 2022, both Xerox Holdings and Xerox reported total interest expense of $225 million, $198 million and $199 million, respectively, however, the amount reported by Xerox includes interest expense of $111 million, $80 million and $80 million for the three years ended December 31, 2024, 2023 and 2022, respectively, paid to Xerox Holdings on an Intercompany Loan.

The Intercompany Loan represents a loan to Xerox of the net proceeds Xerox Holdings Corporation received from its Senior Notes, which was used to repay existing debt of Xerox Corporation.

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Interest Income

Interest income for the year ended December 31, 2023 was $5 million higher than 2022, and for the year ended December 31, 2022 was $7 million higher than 2021.

The increase in both years was due to higher interest rates, partially offset by a lower cash balance.

Interest income for the year ended December 31, 2024 was $2 million lower than 2023, and for the year ended December 31, 2023 was $5 million higher than 2022.

The increase in interest income 2023 as compared to 2022 was due to higher interest rates, partially offset by a lower cash balance.

Non-Service Retirement-Related Costs

Non-service retirement-related costs increased $61 million for the year ended December 31, 2024 as compared to 2023.

The increase primarily reflects higher interest cost associated with higher discount rates as well as a decrease in the expected return on plan assets, partially offset by lower settlement losses.

Non-service retirement-related costs increased $77 million for the year ended December 31, 2022 as compared to 2021 primarily driven by an increase in interest costs due to higher discount rates as well as negative asset returns on certain plan assets.

Service retirement-related costs, which are included in operating expenses, were $6 million, $18 million and $24 million for December 31, 2023, 2022 and 2021, respectively.

The decrease in service-related costs for the year ended December 31, 2023 as compared to 2022 is primarily due to the transition of our pension plan in the Netherlands to a Defined Contribution Plan for future service at the end of 2022.

Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.

The increase primarily reflects higher interest cost associated with an increase in actuarial losses subject to amortization, higher discount rates and a decrease in the expected return on plan assets, all of which were partially offset by lower settlement losses.

Non-service retirement-related costs increased $31 million for the year ended December 31, 2023 as compared to 2022.The increase primarily reflects higher interest cost associated with higher discount rates as well as a decrease in the expected return on plan assets, partially offset by lower settlement losses.

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Service retirement-related costs, which are included in operating expenses, were $6 million, $6 million and $18 million for the years December 31, 2024, 2023 and 2022, respectively.

The decrease in service-related costs for the year ended December 31, 2023 as compared to 2022 was primarily due to the transition of our pension plan in the Netherlands to a Defined Contribution Plan for future service at the end of 2022.

Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.

Gains on Sales of Businesses and Assets

Gains on sales of businesses and assets primarily relate to sales of non-core surplus business assets.

Gains on sales of businesses and assets for the year ended December 31, 2024 was $31 million lower than 2023, and for the year ended December 31, 2023 was $17 million lower than 2022.

The decrease in both years primarily relates to lower sales of non-core surplus business assets in the current year, as compared to the prior year.

Currency Losses, Net

Currency losses, net of $28 million for the year ended December 31, 2023 were $15 million higher as compared to 2022 due to continued volatility in the global exchange rates, particularly in the Middle East and Argentina, which could not be fully hedged, as well as an increase in the cost of hedging.

Currency losses, net of $13 million for the year ended December 31, 2022 were $6 million higher than 2021 primarily due to increased volatility in the global exchange rates, particularly in our Eurasia and Middle East operations, which could not be fully hedged.

Currency losses, net of $15 million for the year ended December 31, 2024 were $13 million lower as compared to 2023 primarily due to the sale of our direct business operations in Argentina in 2024, as well as of the sale our Russian subsidiary in 2023.

Currency losses, net of $28 million for the year ended December 31, 2023 were $15 million higher than 2022 due to continued volatility in the global exchange rates, particularly in the Middle East and Argentina, which could not be fully hedged, as well as an increase in the cost of hedging.

Refer to Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information regarding our foreign currency derivatives.

Loss on Early Extinguishment of Debt

(Gain) Loss on Early Extinguishment of Debt

During 2024, we recorded a $(4) million (gain) on the repayment of Senior Notes (through a tender offer) in the first quarter of 2024, partially offset by a loss of approximately $2 million on the write-off of deferred debt issuance costs.

During 2023, we recorded losses of $10 million on the extinguishment of debt related to the early repayment on secured borrowings, the termination of our $250 million Credit Facility prior to entering into the new 5-year Asset Based Lending Facility (ABL), and the write-off of deferred debt issuance costs associated with the early extinguishment of the $555 million Bridge Loan Facility, that was replaced with the Term Loan B facility.

During 2022, we recorded a loss of $1 million related to the write-off of deferred debt issuance costs as a result of the reduction in the Company's Credit Facility from $500 million to $250 million and $4 million related to the early redemption of $700 million of the $1 billion of Xerox Corporation's 4.625% Senior Notes due March 2023.

Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our Senior Notes and Credit Facilities.

Transaction and related costs, net

2024 activity reflects the insurance proceeds related to a legal settlement, for the reimbursement of certain legal and other professional costs, associated with a past potential merger.

Contract Termination Costs

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The reversal of the offsetting IRS refund receivable is recorded as a charge in Income tax benefit.

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Pre-tax (Loss) Margin

Pre-tax (loss) margin for the year ended December 31, 2024 of (19.5)% increased 19.1-percentage points from the pre-tax (loss) margin of (0.4)% in 2023.

The increase in pre-tax (loss) margin was primarily due to the pre-tax non-cash Goodwill impairment charge of $1,058 million, which was recorded during third quarter 2024.

In addition, the pre-tax (loss) margin also reflects lower revenues and associated gross profit, including the intentional reduction of non-strategic revenue, the divestitures of certain direct business operations in Latin America, the exit of certain production print manufacturing operations, as well as higher Amortization of intangible assets, and higher Other expense, net.

These impacts were partially offset by the PARC donation charge in 2023, as well as lower Selling, administrative and general expenses, lower Restructuring and related costs, net, and lower RD&E expenses.

Pre-tax (loss) margin for the year ended December 31, 2023 of (0.4)% was a 4.2-percentage point improvement from the pre-tax (loss) margin of (4.6)% in 2022.

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Pre-tax margin was also negatively impacted by the PARC donation charge of $132 million in the second quarter 2023, which had a 1.9-percentage point adverse impact on pre-tax margin, as well as higher Restructuring and related costs, net, which includes the workforce reduction announced in connection with Reinvention, and Other expenses, net.

Pre-tax (loss) margin for the year ended December 31, 2022 of (4.6)% was a 2.1-percentage point increase from the pre-tax (loss) margin of (6.7)% in 2021.

Both periods include the impact of a pre-tax non-cash Goodwill impairment charge - $412 million in 2022 or 5.8% versus $781 million in 2021 or 11.1%;

a decrease of 5.3%.

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decrease in the Goodwill impairment charge impact was partially offset by the impact of lower adjusted 1 operating margin (see Adjusted 1 Operating Margin discussion below), of 1.4-percentage points, increased Restructuring and related costs, net, and Selling, administrative and general expenses (SAG) due to higher stock compensation and bad debt expense.

Other expenses, net, were also higher primarily due to increased non-service retirement costs and a $33 million charge associated with the termination of a product supply agreement.

Adjusted 1 Operating Margin

Adjusted 1 operating margin for the year ended December 31, 2024 of 4.9% decreased 0.7-percentage points as compared to 2023.

The decrease primarily reflects lower revenue and lower gross profit, which reflected reductions in non-strategic revenue and the effects of Reinvention actions, higher transportation and product costs, an unfavorable equipment mix, and lower print volumes, as well as the termination of Fuji royalty income, and higher bad debt expense.

These impacts were partially offset by lower Selling, administrative and general expenses, including lower incentive compensation expenses, and the benefits from Reinvention related cost and productivity actions, benefits from the strategic decision to donate PARC in 2023, and the spin-off, exit, or shutdown of certain other RD&E related activities or businesses.

Adjusted 1 operating margin for the year ended December 31, 2023 of 5.6% increased 1.7-percentage points as compared to 2022.

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Partially offsetting these benefits was lower revenue, which includes the termination of Fuji royalty income, lost revenue associated with the donation of PARC, and the intentional reduction in non-strategic revenue, as well as price increases from a product supplier, and higher Other expenses, net.

Adjusted 1 operating margin for the year ended December 31, 2022 of 3.9% decreased 1.4-percentage points as compared to 2021.

The decrease is primarily due to lower gross margin, reflecting the negative impact of supply chain disruption, which caused an unfavorable mix of equipment and services revenue due to product constraints and higher product costs, partially offset by improved logistics costs.

The decrease also reflects investments to support future growth, as well as the adverse impacts from higher bad debt expense, the cessation of sales to Russia, and lower royalty revenues from FUJIFILM Business Innovation Corp.

These negative impacts were partially offset by higher revenues, favorable currency benefits, and productivity and cost savings associated with our Project Own It transformation actions.

_____________

(1) Refer to the Adjusted Operating Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section.

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The 2024 effective tax rate was (8.6)%.

Excluding the tax impacts for the goodwill impairment charge and the establishment of a valuation allowance on certain deferred tax assets, the rate was 13.3%.

This rate was lower than the U.S.

federal statutory tax rate of 21% primarily due to the geographical mix of earnings, partially offset by the tax benefit associated with the redetermination of certain unrecognized tax positions.

On an adjusted 1 basis, the 2024 effective tax rate was 26.6%, which was higher than the U.S.

federal statutory tax rate of 21% primarily due to the geographical mix of adjusted earnings, partially offset by the redetermination of certain unrecognized tax positions.

The 2023 effective tax rate was 103.6% and includes the loss on the PARC donation as well as the associated tax benefits.

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federal statutory tax rate of 21% primarily due to tax expense associated with changes in elections made to certain tax positions for recently filed returns, offset by benefits from additional tax incentives.

The 2021 effective tax rate was 3.6%.

On an adjusted 1 basis, the 2021 effective tax rate was 6.4%.

Both rates were lower than the U.S.

statutory tax rate of 21% primarily due to the benefits from tax law changes, additional incentives as a result of changes in elections made with the filed tax returns, the decrease in deferred tax valuation allowances as well as the remeasurement of uncertain tax positions.

The reported effective tax rate also reflected the non-deductibility of the Goodwill impairment charge, while the adjusted 1 effective tax rate also reflects partial offsets for the geographical mix of earnings.

Xerox operations are widely dispersed.

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(1) Refer to the Adjusted Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section.

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Net Income (Loss)

Net income for the year ended December 31, 2023 was $1 million, or $(0.09) per diluted share, which included the after-tax PARC donation charge of $92 million ($132 million pre-tax), or $0.58 per diluted share.

On an adjusted 1 basis, Net Income was $287 million, or $1.82 per diluted share.

Net (loss) for the year ended December 31, 2022 was $(322) million, or $(2.15) per diluted share, which included an after-tax Goodwill impairment charge of $395 million (pre-tax charge of $412 million) or $(2.54) per share.

Net (Loss) Income

Net (loss) for the year ended December 31, 2024 was $(1,321) million, or $(10.75) per diluted share, which included the following:

• After-tax Reinvention-related charge of $100 million ($129 million pre-tax), or $0.81 per diluted share, in first quarter 2024, primarily related to the exit of certain production print manufacturing operations and geographic simplification

• After-tax non-cash goodwill impairment charge of $1,015 million ($1,058 million pre-tax), or $8.17 per share, in third quarter 2024.

• After-tax write-off of intangibles of $28 million ($37 million pre-tax), or $0.22 per share, in fourth quarter 2024.

• After-tax Reinvention and transaction-related costs, net of $15 million ($19 million pre-tax), or $0.12 per share, in fourth quarter 2024.

• Tax expense charge of $161 million, or $1.30 per share, in third quarter 2024, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability

On an adjusted 1 basis, Net Income for the year ended December 31, 2024 was $135 million, or $0.97 per diluted share.

Net income for the year ended December 31, 2023 was $1 million, or $(0.09) per diluted share, which included the after-tax PARC donation charge of $92 million (pre-tax charge of $132 million) or $0.58 per diluted share, and after-tax Restructuring and related costs, net charge of $78 million ($104 million pre-tax), or $0.52 per share, related to the Reinvention-related workforce reduction.

On an adjusted 1 basis, Net income was $287 million, or $1.82 per diluted share.

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(1) Refer to the Adjusted Net Income and EPS reconciliation table in the "Non-GAAP Financial Measures" section.

Other Comprehensive (Loss) Income

Other comprehensive loss was $139 million in 2023 and included the following:

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Other Comprehensive Loss, Net

Other comprehensive loss, net was $23 million in 2024 and included the following:

i) $120 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S.

Dollar during 2024;

ii) $88 million of net gains from the changes in defined benefit plans primarily due to actuarial gains as a result of an increase in discount rates, the amortization of actuarial losses partially offset by lower settlement expense as a result of a change during 2024 to pension plans in the U.S.

restricting the lump-sum election to 50% of a participant's benefit obligation, as well as the positive impact of currency;

and iii) $9 million in unrealized gains, net.

Other comprehensive loss, net was $139 million in 2023 and included the following:

i) $331 million of net losses from the changes in defined benefit plans primarily due to actuarial losses as a result of a decrease in discount rates and lower asset returns as compared to expected returns, as well as the negative impact of currency, partially offset by the amortization of actuarial losses and settlement losses;

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and iii) $1 million in unrealized gains, net.

Other comprehensive loss was $549 million in 2022 and included the following:

Other comprehensive loss, net was $549 million in 2022 and included the following:

i) $376 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S.

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and iii) $2 million in unrealized losses, net.

Other comprehensive income was $344 million in 2021 and included the following:

i) $489 million of net gains from the changes in defined benefit plans primarily due to remeasurement and net actuarial gains as a result of higher discount rates, as well as the favorable impact of currency;

ii) $141 million of net translation adjustment losses reflecting the weakening of our major foreign currencies against the U.S.

Dollar during 2021;

and iii) $4 million in unrealized losses, net.

Refer to our discussion of Pension Plan Assumptions in the Application of Critical Accounting Policies section of the MD&A as well as Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding changes in our defined benefit plans.

Refer to our discussion of Pension Plan Assumptions in the Application of Critical Accounting Estimates section of the MD&A as well as Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding changes in our defined benefit plans.

Refer to Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information regarding our foreign currency derivatives and associated unrealized gains and losses.

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Reportable Segments

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

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

We have two operating and reportable segments – Print and Other and Xerox Financial Services (XFS) .

Refer to Note 4 - Segment and Geographic Area Reporting in the Consolidated Financial Statements for additional information regarding our reportable segments.

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(in millions) External Revenue Intersegment Revenue (1)

Total Segment Revenue % of Total Revenue Segment Profit Segment Margin (2)

Total Segment Revenue % of Total Revenue Segment Costs and Expenses Segment Profit Segment Margin (2)

Print and Other $ 5,864 $ 71 $ 5,935 94 % $ 5,667 $ 268 4.6 %

FITTLE 401 — 401 6 % 29 7.2 %

XFS 357 — 357 6 % 323 34 9.5 %

Total $ 6,221 $ 71 $ 6,292 100 % $ 5,990 $ 302 4.9 %

Print and Other $ 6,485 $ 86 $ 6,571 94 % $ 6,211 $ 360 5.6 %

FITTLE 393 — 393 5 % 17 4.3 %

XFS 401 — 401 6 % 372 29 7.2 %

Total $ 6,886 $ 86 $ 6,972 100 % $ 6,583 $ 389 5.6 %

Print and Other $ 6,714 $ 90 $ 6,804 95 % $ 6,546 $ 258 3.8 %

FITTLE 401 — 401 6 % 64 16.0 %

XFS 393 — 393 5 % 376 17 4.3 %

Total $ 7,107 $ 90 $ 7,197 100 % $ 6,922 $ 275 3.9 %

_____________

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

(1) Reflects revenue, 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.

Print and Other

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

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

Year Ended December 31, % Change

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_____________

(1) Reflects revenue, primarily commissions and other payments, made by the FITTLE segment to the Print and Other segment for the lease of Xerox equipment placements.

(1) Reflects revenue, primarily commissions and other payments, made by the XFS segment to the Print and Other segment for the lease of Xerox equipment placements.

For the year ended December 31, 2024 Print and Other segment revenue decreased 9.7% as compared to 2023, and for the year ended December 31, 2023 Print and Other segment revenue decreased 3.4% as compared to 2022.

Print and Other segment revenue results included the following:

Equipment Sales Revenue

• For the year ended December 31, 2023, Equipment sales revenue increased 2.0% as compared to 2022, driven by improvement in product availability for higher-margin mid-range and high-end devices in the Americas, as well as recent pricing actions and stable demand conditions, both of which were partially offset by lower revenue from the Entry product group, primarily in EMEA, due to backlog 1 reductions in the prior year.

• For the year ended December 31, 2022, Equipment sales revenue increased 3.1% as compared to 2021, reflecting higher demand, primarily for our Mid-range products, and improvement in product availability in both the Americas and EMEA regions.

Backlog declined meaningfully on a year-over-year basis but remained above pre-pandemic levels.

_____________

(1) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates.

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

• For the year ended December 31, 2024, Equipment sales revenue decreased 16.8% as compared to 2023, primarily impacted by unfavorable mix, as well as the effects of backlog fluctuations in the current and prior year, the decision to stop certain manufacturing of high-end equipment, the effects of geographic simplification, and the impacts of organizational changes implemented in the first half of 2024.

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Post Sale Revenue

• For the year ended December 31, 2023, Post sale revenue decreased by 5.1% as compared to 2022 due primarily to lower sales of lower-margin, non-strategic paper and IT endpoint devices, as well as the termination of Fuji royalty income and PARC revenue.

• For the year ended December 31, 2024, Post sale revenue decreased by 7.2% as compared to 2023.

Managed print services 1 declined as compared to 2023, driven by lower outsourcing and print service revenue, which includes the effects of geographic simplification.

Post sales declines also resulted from lower sales of non-strategic, lower margin IT endpoint device placements, rental revenue, and paper sales.

These impacts were partially offset by higher organic and inorganic IT Solutions revenue, including a partial quarter of ITsavvy results, as well as higher digital services and supplies revenue.

• For the year ended December 31, 2023, Post sale revenue decreased 5.1% as compared to 2022 due primarily to lower sales of lower-margin, non-strategic paper and IT endpoint devices, as well as the termination of Fuji royalty income and PARC revenue.

Supplies, paper and other, and Contractual print services revenue declined modestly as compared to the prior year period.

The decline in Contractual print services 1 is mainly driven by lower production print activity, the exit from Russ ia and a shift in distribution strategy for one of our European markets, partially offset by Digital and Managed IT Services revenue growth, which includes the benefits of a recent acquisition.

The decline in Contractual print services is mainly driven by lower production print activity, the exit from Russia and a shift in distribution strategy for one of our European markets, partially offset by Digital and Managed IT Services revenue growth, which includes the benefits of a recent acquisition.

These declines were partially offset by price increases, as well as gains and commissions, and servicing revenue on sales of finance receivables.

• For the year ended December 31, 2022, Post sale revenue increased 0.6% as compared to 2021 primarily driven by growth in our IT Services business, including our recent acquisition of Powerland as well as growth in supplies and paper revenue and Contractual Print Services 1 , which includes the acquisition of Go Inspire.

These increases were partially offset by the adverse impacts from currency, lower royalty income and third-party leasing commissions as compared to 2021.

_____________

(1) Represents revenues from service, maintenance and rentals.

(1) Previously known as contractual print services, and includes revenues from service, maintenance and rentals.

IT solutions and digital services are not included in managed print services.

Detail by product group is shown below:

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(1) Refer to the Products and Offerings Definitions section.

(2) Includes equipment sales related to the FITTLE segment of $21 million, $22 million and $27 million for the three years ended December 31, 2023, 2022 and 2021, respectively.

(2) Includes equipment sales related to the XFS segment of $18 million, $21 million and $22 million for the three years ended December 31, 2024, 2023 and 2022, respectively.

The change at constant currency 1 reflected the following:

• For the year ended December 31, 2024, the decrease, as compared to 2023, primarily reflects higher backlog reductions and installations of Entry printer, and Entry A4 color devices in the prior year, partially offset by higher installations of Entry A4 black-and-white devices in the current year.

• For the year ended December 31, 2023, the decrease, as compared to 2022, primarily reflects backlog reductions in the prior year, and the normalization of work-from-home demand, offset by price increases.

• For the year ended December 31, 2022, the increase, as compared to 2021, was driven by growth in color devices, and overall price increases, partially offset by the impacts of supply constraints, which most significantly affected our black-and-white devices, and lower sales in the developing regions of EMEA, including lower sales associated with halting shipments to Russia.

• For the year ended December 31, 2024, the decrease, as compared to 2023, reflects higher backlog reductions in the prior year, as well as declines in both black-and-white and color installations, and higher mix of lower-priced A3 color multi-function printers.

• For the year ended December 31, 2023, the increase, as compared to 2022, reflects improved product availability primarily in the Americas and price increases, partially offset by declines in EMEA due to backlog reductions in the prior year.

• For the year ended December 31, 2022, the increase, as compared to 2021, was primarily driven by improved product availability, price increases, and a more favorable product mix toward color devices in both the Americas and EMEA regions.

• For the year ended December 31, 2024, the decrease, as compared to 2023, was primarily due to higher backlog reductions in the prior year, as well as an unfavorable mix toward black-and-white devices, as well as lower High-end color installations, reflecting the evolution of our Production Print portfolio.

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• For the year ended December 31, 2023, the increase, as compared to 2022, was driven by revenue growth in the Americas, as well as higher revenue and higher installs of both Entry Production Color devices and iGens, due to improved product availability and benefits from price increases.

• For the year ended December 31, 2022, the increase, as compared to 2021, was primarily driven by a favorable mix toward color devices, higher sales in our channels in the U.S.

and Canada and increased product availability, partially offset by lower sales of mono devices and lower sales in the developing regions of EMEA, as well as the impact of global product supply constraints and freight disruptions.

_____________

(1) See "Currency Impact" section for description of constant currency.

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Total Installs

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Installs for the year ended December 31, 2024 were:

• 11% decrease in entry color installs driven by declines in entry color printers, as well as declines in A4 Color MFPs.

• 2% decrease in entry black-and-white installs driven by declines in entry mono printers, partially offset by higher installs of A4 mono MFPs.

• 5% decrease in mid-range color installs, primarily reflecting declines in A3 color MFPs, as well as Entry Production Color devices.

• 19% decrease in mid-range black-and-white installs, primarily driven by A3 mono MFPs, as well as light production devices.

• 25% decrease in high-end color installs, primarily reflecting declines in Entry Production Color products.

• 15% decrease in high-end black-and-white installs, reflecting declines in Higher End Cut Sheet products.

Installs for the year ended December 31, 2023 were:

• 37% decrease in entry color installs driven by declines in entry color printers and A4 Color MFPs, reflecting backlog reductions in the prior year.

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(1) Reflects install activity for total Entry product group.

Installs for the year ended December 31, 2022 were:

• 37% increase in color multifunction devices reflecting higher demand for devices at the lower end of the portfolio and increased product availability, primarily in the EMEA region.

• 34% decrease in black-and-white multifunction devices primarily due to higher prior year installs in the developing regions of EMEA associated with work-from-home demand, resulting from the COVID-19 pandemic, and halting shipments to Russia, as well as ongoing product constraints.

• 9% increase in mid-range color installs primarily in EMEA, reflecting higher installs of our recently launched new-generation of ConnectKey multi-function printers, as well as increased installs of our PrimeLink entry-production color devices in the fourth quarter of 2022.

• 13% decrease in black-and-white installs, primarily in the developing regions of EMEA, reflecting the impact of freight disruption and product supply constraints.

• 3% decrease in color installs, primarily in EMEA, reflecting the impact of global product constraints and freight disruptions, partially offset by higher installations of our Baltoro cut-sheet inkjet devices.

• 15% decrease in black-and-white systems, primarily in the Americas region, reflecting the impact of global product constraints and freight disruptions.

Product and Offerings Definitions

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Segment Expenses

Print and Other Segment expenses included the following:

Research, Development and Engineering Expenses (RD&E)

• RD&E of $191 million for the year ended December 31, 2024 decreased $38 million as compared to 2023.

The lower spending in innovation reflects decisions which provide greater focus and financial flexibility to pursue growth opportunities adjacent to our core operations.

The decrease also reflected the strategic decision to donate PARC in 2023.

• RD&E of $229 million for the year ended December 31, 2023, decreased $75 million as compared to 2022.

The decrease was primarily due to the strategic decision to donate PARC and the spin-off, exit, or shutdown of certain other RD&E related activities or businesses.

Selling, Administrative and General Expenses (SAG )

• SAG expenses of $1,392 million for the year ended December 31, 2024 were $171 million lower than 2023, primarily reflecting productivity and cost savings related to the Company's Reinvention, as well as lower incentive compensation expense, IT expenses, outsourcing costs, commission payments, litigation expense, and advertising costs, and the strategic decision to donate PARC in the prior year.

These favorable impacts were partially offset by higher bad debt expense, the inclusion of a partial quarter of ITsavvy results, and unfavorable currency.

• SAG expenses of $1,563 million for the year ended December 31, 2023 were $21 million lower than 2022 primarily reflecting the benefits from productivity and cost savings, including savings related to restructuring actions, the strategic decision to donate PARC and other dispositions as well as a reduced investment in new businesses.

Additionally, the decrease in SAG also reflected lower supply chain-related costs, and the favorable true-up of prior year shared services contract costs.

These benefits were partially offset by higher bad debt expense, incentive compensation expense and marketing expenses, and the impact of an acquisition.

Segment Margin

Print and Other segment margin of 4.6% for the year ended December 31, 2024 decreased 1.0-percentage point as compared to 2023.

The decrease is primarily due to lower revenue, lower gross margin, and higher bad debt expense.

These adverse impacts were partially offset by lower Selling and other administrative and general expenses, and lower RD&E expense, reflecting the benefits of cost and productivity savings.

Print and Other segment margin of 5.6% for the year ended December 31, 2023 increased 1.8-percentage points as compared to 2022.

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These benefits were partially offset by lower revenue.

Print and Other segment margin of 3.8% for the year ended December 31, 2022 decreased 0.9-percentage points as compared to 2021.

The decrease is primarily due to lower segment gross profit, which includes the impacts of higher freight and production costs associated with product supply constraints, as well as the benefits from temporary government assistance and furlough measures in the prior year, and lower royalty revenues and third-party leasing commissions, partially offset by higher revenues, lower selling expense, reduced RD&E, and productivity and cost savings associated with Project Own It transformation actions.

FITTLE represents a global financing solutions business, primarily enabling the sale of our equipment and services.

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Xerox Financial Services (XFS)

XFS represents a global financing solutions business, primarily enabling the sale of our equipment and services.

Year Ended December 31, % Change

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188 189 164 (0.5)% 15.2%

Total FITTLE Revenue $ 401 $ 393 $ 401 2.0% (2.0)%

Total XFS Revenue $ 357 $ 401 $ 393 (11.0)% 2.0%

_____________

(1) Other Post sale revenue includes lease renewal and fee income as well as gains, commissions and servicing revenue associated with sold finance receivables.

FITTLE segment revenues included the following:

Financing Revenue

• For the year ended December 31, 2023, Financing revenue decreased 7.7%, as compared to 2022 and is primarily due to a reduction of the average finance receivables balance as a result of the sales of finance receivables under our finance receivables funding agreement.

Finance receivables were approximately $600 million lower as of December 2023 as compared to December 2022.

• For the year ended December 31, 2022, Financing revenue decreased 6.3%, as compared to 2021, due to a lower average finance receivables balance, as collections continue to outpace originations, and lower Print and Other equipment sales in prior periods.

Originations have been impacted by the global product supply constraints and freight disruptions.

For the year ended December 31, 2024 XFS segment revenue decreased 11.0%, as compared to 2023, and for the year ended December 31, 2023 increased 2.0%, as compared to 2022.

XFS Segment revenues included the following:

Financing Revenue is generated from direct and indirectly financed Xerox equipment sale transactions.

• For the year ended December 31, 2024, Financing revenue decreased 20.9% as compared to 2023, including no impact from currency.

The decline reflects a continued reduction of the average finance receivables balance in 2024, resulting from the sales to third parties during 2023 and 2024 to HPS Investment Partners (HPS) and De Lage Landen Financial Services Canada Inc., as well as lower originations.

Finance receivables are approximately $800 million lower at December 31, 2024 as compared to December 31, 2023.

• For the year ended December 31, 2023, Financing revenue decreased 7.7% as compared to 2022 as compared to the prior year, including a 0.3-percentage point benefit from currency.

The decline at constant currency 1 reflects a reduction of the average finance receivables balance during 2023 as a result of the sales of finance receivables to HPS Investment Partners (HPS).

Finance receivables were approximately $600 million lower in December of 2023 as compared to December of 2022.

Other Post sale revenue

• For the year ended December 31, 2023, Other Post sale revenue increased 15.2%, as compared to 2022, primarily due to higher commissions and servicing revenue on increased sales of finance receivables under our finance receivables funding agreement, which was $34 million for the year ended December 31, 2023, as compared to $2 million for the year ended December 31, 2022.

• For the year ended December 31, 2022, Other Post sale revenue increased 7.2%, as compared to 2021, primarily due to an increase in renewal income from a higher level of end of lease extensions for equipment as a result of supply constraints delaying the installation of new devices.

• For the year ended December 31, 2024, Other Post sale revenue decreased 0.5% as compared to 2023, as a result of the continued reduction of our average finance receivables balance.

Other Post sale revenue includes gains, commissions and servicing revenue on sales of finance receivables under our finance receivables funding agreement, which was $47 million for the year ended December 31, 2024, as compared to $34 million for the year ended December 31, 2023.

• For the year ended December 31, 2023, Other Post sale revenue increased 15.2% as compared to 2022, primarily due to higher commissions and servicing revenue on increased sales of finance receivables under our finance receivables funding agreement.

_____________

(1) See "Currency Impact" section for description of constant currency.

Segment Expenses

XFS segment expenses included the following:

Selling, Administrative and General Expenses (SAG)

• SAG expenses of $126 million for the year ended December 31, 2024 were $7 million lower than 2023, primarily reflecting productivity and cost savings related to the Company's Reinvention, partially offset by higher bad debt expense, which included an increased provision for aged accounts receivables in the current year.

Bad debt expense in 2024 included a credit of approximately $(8) million due to a reserve release resulting in part from a lower finance receivables balance.

• SAG expenses of $133 million for the year ended December 31, 2023 were $22 million lower than 2022, primarily reflecting lower bad debt expense which included a credit of $(12) million related to a reserve release in the U.S.

as the result of a favorable reassessment of the credit exposure on a large customer receivable balance after a contract amendment.

SAG also benefited from productivity and cost savings, including savings related to restructuring actions.

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Segment Margin

FITTLE segment margin of 7.2% for the year ended December 31, 2023 increased 2.9-percentage points, as compared to 2022, primarily due to higher revenues, lower bad debt expense, and a reduction in commissions paid to equipment suppliers (primarily the Print and Other segment), partially offset by higher funding costs.

FITTLE segment margin of 4.3% for the year ended December 31, 2022 decreased 11.7-percentage points, as compared to 2021, primarily reflects higher bad debt expense due to 2021 including reserve releases of approximately $31 million, and incremental costs associated with standing up the business, including the receivables funding agreement.

These negative impacts were partially offset by a reduction in commissions paid to the Print and Other segment due to lower new lease originations for Xerox equipment.

XFS segment margin of 9.5% for the year ended December 31, 2024 increased 2.3-percentage points as compared to 2023.

Segment profit for XFS was $5 million higher as compared to the prior year period, primarily due to lower Selling, administrative and general expenses, as well as higher servicing revenues.

These positive impacts were partially offset by lower financing revenue from reduced assets and a reserve release of $12 million in the prior year.

XFS segment margin of 7.2% for the year ended December 31, 2023 increased 2.9-percentage points, as compared to 2022.

Segment profit for XFS was $12 million higher as compared to the prior year period primarily due to higher revenues, lower bad debt expense, and a reduction in commissions paid to equipment suppliers (primarily the Print and Other segment), partially offset by higher funding costs.

2025 Segment Reporting Update

In January 2025 we announced the creation of our IT Solutions business, which comprises our recent acquisition of ITsavvy, as well as our Canadian IT Services business Powerland, and our legacy XBS IT sales businesses.

We expect to begin to provide additional information related to IT Solutions beginning with the first quarter 2025.

Accordingly, we will be reassessing our operating and reportable segments in the first quarter of 2025 and we expect to provide a revision of our segment reporting then.

2024, 2023 and 2022 Segment Review

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

Improvements to Reportable Segment Disclosures, which requires among other things, the requirement to provide enhanced disclosures related to significant segment expenses.

R efer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in our Consolidated Financial Statements for additional information regarding the adoption of this ASU.

The following table reflects the incremental disclosure requirements related to our adoption of ASU 2023-07 for the following periods:

Three Months Ended

March 31, 2024 June 30, 2024 September 30, 2024 December 30, 2024

(in millions) Print and Other XFS Total Print and Other XFS Total Print and Other XFS Total Print and Other XFS Total

External revenue $ 1,411 $ 91 $ 1,502 $ 1,489 $ 89 $ 1,578 $ 1,440 $ 88 $ 1,528 $ 1,524 $ 89 $ 1,613

Intersegment revenue (1)

19 — 19 19 — 19 17 — 17 16 — 16

Total Segment net revenue $ 1,430 $ 91 $ 1,521 $ 1,508 $ 89 $ 1,597 $ 1,457 $ 88 $ 1,545 $ 1,540 $ 89 $ 1,629

Reconciliation to Segment Profit

Cost of sales (2)

$ 319 $ 21 $ 340 $ 366 $ 19 $ 385 $ 371 $ 19 $ 390 $ 421 $ 18 $ 439

Cost of services, maintenance and rentals (2)

652 4 656 634 2 636 613 4 617 637 4 641

Cost of financing (3)

— 27 27 — 29 29 — 26 26 — 24 24

Research, development and engineering expenses 49 — 49 50 — 50 45 — 45 47 — 47

Selling, administrative and general expenses (4)(5)

358 39 397 358 35 393 344 26 370 332 26 358

Intersegment expense (6)

19 — 19 19 — 19 17 — 17 16 — 16

Segment profit $ 33 $ — $ 33 $ 81 $ 4 $ 85 $ 67 $ 13 $ 80 $ 87 $ 17 $ 104

Segment margin (7)

2.3 % — % 2.2 % 5.4 % 4.5 % 5.4 % 4.7 % 14.8 % 5.2 % 5.7 % 19.1 % 6.4 %

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Year Ended December 31,

2024 2023 2022

(in millions) Print and Other XFS Total Print and Other XFS Total Print and Other XFS Total

External revenue $ 5,864 $ 357 $ 6,221 $ 6,485 $ 401 $ 6,886 $ 6,714 $ 393 $ 7,107

Intersegment revenue (1)

71 — 71 86 — 86 90 — 90

Total Segment net revenue $ 5,935 $ 357 $ 6,292 $ 6,571 $ 401 $ 6,972 $ 6,804 $ 393 $ 7,197

Reconciliation to Segment Profit

Cost of sales (2)

$ 1,477 $ 77 $ 1,554 $ 1,686 $ 92 $ 1,778 $ 1,906 $ 96 $ 2,002

Cost of services, maintenance and rentals (2)

2,536 14 2,550 2,647 17 2,664 2,662 17 2,679

Cost of financing (3)

— 106 106 — 130 130 — 108 108

Research, development and engineering expenses 191 — 191 229 — 229 304 — 304

Selling, administrative and general expenses (4)(5)

1,392 126 1,518 1,563 133 1,696 1,584 155 1,739

Intersegment expense (6)

71 — 71 86 — 86 $ 90 $ — $ 90

Segment profit $ 268 $ 34 $ 302 $ 360 $ 29 $ 389 $ 258 $ 17 $ 275

Segment margin (7)

4.6 % 9.5 % 4.9 % 5.6 % 7.2 % 5.6 % 3.8 % 4.3 % 3.9 %

_____________

(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) Cost of sales and Cost of services, maintenance and rentals for the Print and Other Segment excludes $8 and $43 from the reduction of inventory and the cancellation of related purchase contracts as a result of the exit of certain production print manufacturing operations during the year ended December 31, 2024.

(3) Cost of financing is Interest expense associated with allocated debt of the Company, and is fully allocated to the XFS segment in support of its Finance assets, while no interest expense is allocated to the Print and Other segment.

(4) Includes bad debt expense for the Print and Other segment of $7 (Q124), $4 (Q224), $9 (Q324), and $5 (Q424), and bad debt expense for the XFS segment of $8 (Q124), $6 (Q224), $1 (Q324), and $2 (Q424).

For the three years ended December 31, 2024, 2023 and 2022 bad debt expense for the Print and Other segment was $25, $22, and $17 respectively, and bad debt expense for the XFS segment was $17, $6 and $26, respectively.

(5) The Print and Other segment excludes $12 of Reinvention costs and $7 of Transaction and related costs, net for the year ended December 31, 2024.

(6) Intersegment expense is primarily origination fees and commissions made by the Print and Other Segment to the XFS Segment which leases Xerox equipment to third parties.

(7) Segment margin based on External revenue only.

Capital Resources and Liquidity

Our liquidity is primarily dependent on our ability to continue to generate positive cash flows from operations.

Our liquidity is primarily dependent on our ability to generate positive cash flows from operations.

Additional liquidity is also provided through access to the financial capital markets and a committed asset-based revolving credit agreement (the ABL Facility), as well as through secured borrowings on our finance receivable balances and the sales and assignment of finance lease receivables.

1 unchanged sentence

The following is a summary of our liquidity position:

• As of December 31, 2023, total cash, cash equivalents and restricted cash were $617 million and apart from restricted cash of $98 million, was readily accessible for use.

• As of December 31, 2024, total cash, cash equivalents and restricted cash were $631 million, and apart from restricted cash of $55 million, were readily accessible for use.

• Total debt at December 31, 2024 was $3,399 million of which $1,741 million is internally allocated to and supports the Company's finance assets.

1 unchanged sentence

Debt consists of senior unsecured notes, secured borrowings through the securitization of finance assets, and borrowings of $523 million under a Term Loan B credit facility (the TLB).

The TLB was entered into in the fourth quarter 2023 to repay a bridge Loan Facility which was used to initially fund a share repurchase from Icahn and affiliates.

The Company has a balanced bond maturity ladder over the next few years with $300 million of senior note debt maturing in the second quarter of 2024.

Refer to Note 15 - Debt in the Consolidated Financial Statements for additional details regarding our debt.

• During 2023, we refinanced our French and Canadian secured borrowing arrangements, which resulted in additional net proceeds of $107 million and $52 million, respectively.

• In May 2023, we entered into a five-year senior secured revolving credit facility of up to $300 million (the ABL Facility).

Our previous $250 million Credit Facility due July 2024 was terminated prior to entering into the ABL Facility.

As of December 31, 2023, there were no borrowings under the ABL Facility, and no letters of credits were issued under the facility.

• In March 2024, Xerox Holdings Corporation issued $500 million of 8.875% Senior Notes due in 2029, as well as an aggregate $400 million of 3.75% Convertible Senior Notes due in 2030.

In connection with the issuance of the 2030 Notes, the Company entered into privately negotiated capped call transactions, with the option counterparties, including certain of the initial purchasers of the 2030 Notes or their respective affiliates, at a cost of approximately $23 million.

A portion of the aggregate net proceeds was used to repay, through a tender offer, approximately $84 million of the 3.80% Xerox Corporation Senior Notes due in 2024 and approximately $362 million of the 5.00% Xerox Holdings Corporation Senior Notes due in 2025.

The remaining outstanding

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3.80% Senior Notes that were not redeemed as part of the Senior Notes tender offer were repaid in May 2024.

Approximately $388 million, which is the remaining portion of our 5.00% Senior Notes, is due in August 2025.

In November 2024, the Company issued two non-interest bearing, secured promissory notes (the 2025 Note and the 2026 Note, or the Notes).

Each of the Notes has a principal amount of $110 million.

The total amount recorded was $210 million, and was net of unamortized debt discount of $10 million.

The 2025 Note has a maturity date of October 8, 2025, and the 2026 Note has a maturity date of January 30, 2026.

• In June 2024 we amended our ABL facility dated as of May 22, 2023, to (i) increase the commitments of the lenders under the ABL Credit Agreement from $300 million to $425 million and (ii) amend the excess availability used to trigger the fixed charge coverage ratio springing covenant from 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), to an amount equal to the greater of (x) $31.875 million and (y) 10% of the Line Cap.

As of December 31, 2024, there were no borrowings under the ABL Facility, and $2 million of letters of credits were issued under the facility.

During 2024, maximum borrowings under the ABL Facility were $130 million.

We are in full compliance with the covenants and other provisions of the ABL Facility.

• In December 2022, Xerox entered into a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) that provides a committed funding arrangement for new financed lease originations through the sale of those receivables.

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

We sold approximately $1,100 million of finance receivables to HPS during 2023, which included sales of leases originated in prior years.

• We expect Operating cash flows in 2024 to be approximately $650 million and capital expenditures to be approximately $50 million.

Refer to Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables, Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity and Note 22 – Shareholders’ Equity in the Consolidated Financial Statements for additional information regarding the Icahn share repurchase.

• In January 2024, the Company entered into a new agreement with HPS Investment Partners (HPS) to transfer servicing of the majority of funding activity to HPS as well as extend the existing term to five years.

In October 2024, the Company entered into a finance receivables funding agreement with De Lage Landen Financial Services Canada Inc.

(DLL), pursuant to which the Company can offer for sale, and DLL may purchase, certain eligible pools of finance receivables.

We received proceeds of $752 million related to finance receivables sold during 2024, which included sales of leases originated in prior years.

• In December 2024, in connection with the Company's pending acquisition of Lexmark International II, LLC (Lexmark), Xerox Corporation and Xerox Holdings Corporation obtained commitments for new debt financing pursuant to (i) a commitment letter with certain Incremental Commitment Parties for approximately $357 million in senior secured incremental term loan facility (the Incremental Facility), (ii) a commitment letter with senior unsecured commitment parties to provide debt financing in the form of $250 million principal amount of senior unsecured notes, and (iii) a debt commitment letter with Jefferies Finance LLC and Jefferies LLC (collectively, Jefferies), pursuant to which Jefferies agreed to provide debt financing in the form of $250 million senior unsecured notes (the SUNs), and a committed $550 million senior secured term loan facility.

Xerox Corporation and Xerox Holdings Corporation intend to use the majority of the proceeds from these commitments (and/or an equivalent amount of debt securities issued in lieu thereof), together with cash on hand and drawings under Xerox Corporation’s asset-backed revolving credit facility (as needed) to fund the purchase price of Lexmark, and to refinance $388 million of Xerox Holdings Corporation’s 5.00% Senior Notes due 2025.

• We expect Operating cash flows to be between $420 million and $470 million in 2025.

Capital expenditures are expected to be approximately $70 million.

Refer to Note 6 – Acquisitions and Divestitures in the Consolidated Financial Statements for additional information regarding our acquisition of ITsavvy and our pending acquisition of Lexmark, Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables and Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity.

Cash Flow Analysis

6 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash (28) (1) (29) (27) 28

Decrease in cash, cash equivalents and restricted cash (522) (770) (782) 248 12

Increase (decrease) in cash, cash equivalents and restricted cash 14 (522) (770) 536 248

Cash, cash equivalents and restricted cash at beginning of year 617 1,139 1,909 (522) (770)

1 unchanged sentence

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Cash Flows from Operating Activities

Net cash provided by operating activities was $511 million for the year ended December 31, 2024.

The $175 million decrease in operating cash from 2023 was primarily due to the following:

• $101 million decrease in pre-tax income before depreciation and amortization, provisions, gains on sales of businesses and assets, divestitures, PARC donation, stock-based compensation, goodwill impairment, restructuring and related costs, net and non-service retirement-related costs.

• $245 million decrease from inventory primarily due to higher purchases related to a change in contractual terms with a large OEM vendor and decreased sales of equipment and supplies.

• $126 million decrease from accrued compensation due to payments of higher year-end accruals.

• $53 million decrease from higher restructuring and related payments.

• $43 million decrease from higher pension contributions.

• $242 million increase from accounts payable primarily due the timing of supplier and vendor payments.

• $76 million increase from accounts receivable primarily due to lower revenues partially offset by timing of collections.

• $49 million increase from finance receivables primarily due to a higher level of run-off as a result of lower originations, partially offset by lower sales of finance receivables under the finance receivables funding agreement.

Refer to Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables.

• $34 million increase due to lower placements of equipment on operating leases.

Net cash provided by operating activities was $686 million for the year ended December 31, 2023.

The $527 million increase in operating cash from 2022 was primarily due to the following:

• $116 million increase in pre-tax income before depreciation and amortization, provisions, gains on sales of businesses and assets, PARC donation, stock-based compensation, goodwill impairment, restructuring and related costs, net and non-service retirement-related costs.

• $755 million increase from finance receivables reflecting the sale of approximately $1,100 million of finance receivables under the finance receivables funding agreement in the current year as well as lower indirect originations due to the change in FITTLE’s strategy to focus on leasing of Xerox equipment.

• $755 million increase from finance receivables reflecting the sale of approximately $1,100 million of finance receivables under the finance receivables funding agreement in the current year as well as lower indirect originations due to the change in XFS’s strategy to focus on leasing of Xerox equipment.

These impacts were partially offset by higher originations from increased equipment sales.

8 unchanged sentences

• $29 million decrease from higher installs of equipment on operating leases.

Net cash provided by operating activities was $159 million for the year ended December 31, 2022.

The $470 million decrease in operating cash from 2021 was primarily due to the following:

• $151 million decrease in pre-tax income before depreciation and amortization, provisions, gains on sales of businesses and assets, stock-based compensation, goodwill impairment, restructuring and related costs, net and non-service retirement-related costs.

• $231 million decrease due to higher inventory levels in anticipation of increased sales activity in the first half of 2023 as the Company continues to work down its backlog 1 and manage continued supply chain challenges.

• $146 million decrease primarily due to lower royalty income as the prior year includes receipts of an upfront prepaid fixed royalty from Fuji Xerox (now known as FUJIFILM Business Innovation Corp.) of $100 million for their continued use of the Xerox brand trademark after the termination of our technology agreement with them and $46 million of royalty payments under the technology agreement prior to its termination.

• $144 million decrease due to a current year increase in net finance receivables of $161 million reflecting improved equipment sale activity and the financing business growth strategy offset by lower equipment on operating leases of $17 million.

The $161 million use of cash in 2022 is net of $60 million received in connection with the sale of finance receivables in the fourth quarter 2022 under a Receivables Funding Agreement.

Refer to Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables.

• $89 million decrease from accounts receivable primarily due to higher revenues partially offset by the timing of collections.

• $160 million increase from accounts payable primarily due to the timing of supplier and vendor payments and higher spending as compared to the prior year.

• $36 million increase from lower contributions to retirement plans primarily as a result of a $30 million decrease in required contributions to our non-U.S.

plans, particularly the U.K.

pension plan, as well as a $6 million decrease in retiree-health contributions.

• $25 million increase from accrued compensation primarily related to the year-over-year timing of payments.

• $24 million increase primarily due to lower payments associated with restructuring and related costs as a result of the timing of actions.

_____________

(1) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates.

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

Xerox 2023 Annual Report 52

Cash Flows from Investing Activities

Net cash used in investing activities was $5 million for the year ended December 31, 2023.

The $73 million decrease in the use of cash from 2022 was primarily due to lower acquisitions, capital expenditures and corporate venture capital investments, partially offset by lower proceeds from the sale of surplus buildings and other assets.

Net cash used in investing activities was $78 million for the year ended December 31, 2022.

The $7 million decrease in the use of cash from 2021 was primarily due to the following:

• $28 million decrease from the sales of surplus buildings and land in 2022 of $25 million in the U.S and $7 million in Europe as compared to $4 million in the U.S.

in the prior year.

• $11 million decrease reflecting lower capital expenditures.

• $10 million decrease from the sales of non-core business assets of $48 million in 2022 as compared to $38 million in the prior year.

Net cash used in investing activities for Xerox Holdings was $198 million for the year ended December 31, 2024.

The $193 million increase in the use of cash from 2023 was primarily due to the following:

• $154 million increase from acquisitions.

• Other investing, net of Xerox Holdings includes $19 million of noncontrolling investments as part of our corporate venture capital fund for 2024 as compared to $5 million in the prior year.

Net cash used in investing activities was $5 million for the year ended December 31, 2023.

Cash Flows from Financing Activities

Net cash used in financing activities for Xerox Holdings was $271 million for the year ended December 31, 2024.

The $380 million increase in the use of cash from 2022 was due to the following:

• $431 million increase due to the share repurchase from Icahn and Affiliated Parties for $544 million in 2023 compared to $113 million of share repurchases in the prior year under the Company’s open-market share repurchase program.

The $931 million decrease in the use of cash from 2023 was due to the following:

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• $536 million decrease primarily due to the share repurchase from Icahn and Affiliated Parties in 2023.

• $393 million decrease from net debt activity.

2023 reflects net proceeds of $524 million from the TLB, which is net of an original issue discount of $17 million and debt issuance costs payments of $9 million, and net proceeds of $107 million and $52 million from the refinance of our French and Canadian secured loans, respectively.

These borrowings were offset by payments of $846 million on secured financing arrangements, $300 million on Senior Notes and deferred debt issuance costs payments of $14 million on the ABL Facility and the bridge Loan Facility used to initially fund the Icahn share repurchase, which was repaid in the fourth quarter 2023.

2024 reflects proceeds of $500 million on Senior Notes and $400 million on Convertible Senior Notes offset by net payments of $658 million on Senior Notes, deferred debt issuance costs of $18 million from Senior Notes issuances, $282 million on secured financing arrangements and $28 million on the Term Loan B facility.

The $658 million of net payments on Senior Notes includes $300 million on Senior Notes that matured in May 2024 and $362 million for the early redemption of 2025 Senior Notes offset by a gain on the extinguishment of debt of $4 million.

2023 reflects net proceeds of $524 million from the Term Loan B facility, which is net of an original issue discount of $17 million and debt issuance costs payments of $9 million, and net proceeds of $107 million and $52 million from the refinance of our French and Canadian secured loans, respectively.

The $846 million of payments on secured financing arrangements includes the early repayments of $270 million for U.S.

secured borrowings.

2022 reflects proceeds of $1,193 million on secured financing arrangements offset by payments of $714 million, $300 million on maturing 2022 Senior Notes and $703 million for the early partial redemption of 2023 Senior Notes, which includes a premium payment of $3 million.

Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding debt activity and Note 22 – Shareholders’ Equity in the Consolidated Financial Statements for additional information regarding the Icahn share repurchase.

• $24 million decrease from common stock dividends due to lower outstanding shares.

• $23 million increase from purchases of capped calls.

Net cash used in financing activities for Xerox was $291 million for the year ended December 31, 2024.

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secured borrowings.

Distributions to Xerox Holdings were $202 million and were primarily used to fund Xerox Holdings continuing dividends to shareholders and share repurchases.

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Net cash used in financing activities for Xerox Holdings was $1,202 million for the year ended December 31, 2023.

The $488 million decrease in the use of cash from 2021 was primarily due to the following:

• $775 million decrease due to lower share repurchases in the current year.

• $32 million decrease due to lower common stock dividends due to lower outstanding shares.

• $321 million increase from net debt activity.

The $380 million increase in the use of cash from 2022 was primarily due to the following:

• $51 million decrease from net debt activity.

The $846 million of payments on secured financing arrangements includes the early repayments of $270 million for U.S.

secured borrowings.

Xerox 2023 Annual Report 53

2021 reflects payments of $518 million on secured financing arrangements and $1 million of deferred debt issuance costs offset by proceeds of $311 million on a new secured financing arrangement.

• Other financing, net includes receipts for noncontrolling investments of $6 million in 2022 as compared to $15 million in the prior year.

Net cash used in financing activities for Xerox was $1,207 million for the year ended December 31, 2023.

2021 reflects payments of $518 million on secured financing arrangements and $1 million of deferred debt issuance costs offset by proceeds of $311 million on a new secured financing arrangement.

The $846 million of payments on secured financing arrangements includes the early repayments of $270 million for U.S.

secured borrowings.

2022 reflects proceeds

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of $1,193 million on secured financing arrangements offset by payments of $714 million, $300 million on maturing 2022 Senior Notes and $703 million for the early partial redemption of 2023 Senior Notes, which includes a premium payment of $3 million.

Distributions to Xerox Holdings were $722 million and were primarily used to fund Xerox Holdings continuing dividends to shareholders and share repurchases.

Xerox's distributions to the parent are expected to continue with those distributions primarily being used by Xerox Holdings to fund dividends and share repurchases.

Cash, Cash Equivalents and Restricted Cash

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Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations.

Our leases have remaining terms of up to eleven years and a variety of renewal and/or termination options.

Our leases have remaining terms of up to ten years and a variety of renewal and/or termination options.

As of December 31, 2024 and 2023, total operating lease liabilities were $188 million and $182 million, respectively.

Refer to Note 11 - Lessee in the Consolidated Financial Statements for additional information regarding our right-of-use (ROU) assets and lease obligations associated with our operating leases.

Finance Leases

Xerox has finance leases for equipment in the U.S.

and Europe, as well as for vehicles and related infrastructure, within outsourced warehouse supply arrangements, in the U.S.

These leases have remaining maturities up to five years.

As of December 31, 2024 and 2023, total finance lease liabilities were $53 million and $17 million, respectively.

The increase in finance leases since December 31, 2023 is primarily related to an agreement entered into during the second half of 2024 to lease vehicles in the U.S.

Refer to Note 11 - Lessee in the Consolidated Financial Statements for additional information regarding our right-of-use (ROU) assets and lease obligations associated with our operating and finance leases.

Debt and Customer Financing Activities

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Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity.

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Finance Assets and Related Debt

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In these arrangements, we sell and transfer title of the equipment to these entities.

Generally, we have no continuing

Xerox 2023 Annual Report 54

ownership rights in the equipment subsequent to its sale;

Generally, we have no continuing ownership rights in the equipment subsequent to its sale;

therefore, the unrelated third-party finance receivable and debt are not included in our Consolidated Financial Statements.

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(1) Finance receivables debt is the basis for our calculation of “Cost of financing” expense in the Consolidated Statements of Income (Loss).

(1) Finance receivables debt is the basis for our calculation of “Cost of financing” expense in the Consolidated Statements of (Loss) Income.

At December 31, 2024, leverage was assessed against the total debt of Xerox Holdings Corporation and Xerox Corporation since the debt held by Xerox Holdings Corporation is guaranteed by Xerox Corporation and the funds from that borrowing were contributed in full by Xerox Holdings Corporation to Xerox Corporation.

In 2025, we expect to continue leveraging our finance assets on a total debt basis at an assumed 7:1 ratio of debt to equity.

Sale of Finance 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.

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

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

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

Sales of Finance Receivables

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 a 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 2024, we entered into a new agreement with HPS to transfer the servicing of the majority of funding activity to HPS as well as extend the existing term to five 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

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service the Company’s retained receivables.

Xerox will continue to service the lease receivables from prior arrangements with HPS for a specified fee.

In October 2024, the Company entered into a finance receivables funding agreement with De Lage Landen Financial Services Canada Inc.

(DLL), pursuant to which the Company can offer for sale, and DLL may purchase, certain eligible pools of finance receivables structured as “true sales at law” and bankruptcy remote transfers and we have received an opinion to that effect from outside counsel.

This finance receivables funding agreement has an initial term of five years, with automatic one-year extensions thereafter, unless terminated by either the Company or DLL.

The Company will be paid a commission on lease receivables sold and will continue to service the lease receivables under the finance receivables funding agreement.

If the portfolio performs above a certain level of incremental service, a fee can be earned annually.

Refer to Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding our sales of finance receivables.

Third Party Leasing Programs

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 Xerox and non-Xerox equipment sold through our U.S.

In 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 Xerox and non-Xerox equipment sold through our U.S.

network of independent dealers and resellers.

In the fourth quarter 2023, our partnership with PEAC Solutions was further expanded to include the transition of some FITTLE U.S.

Our partnership with PEAC Solutions was further expanded to include the transition of some XFS U.S.

employees in risk, IT, and operations to PEAC Solutions.

Upon completion of this transition, PEAC Solutions will become the preferred financing partner, primary funder, and service provider for XBS leases in the U.S.

Xerox 2023 Annual Report 55

PEAC Solutions is Xerox's preferred financing partner, primary funder, and service provider for XBS leases in the U.S.

Capital Market/Debt Activity

During 2023 we received net proceeds of $524 million from the Term Loan B Facility, and approximately $159 million from the refinancing of our Canadian and French secured financing arrangements.

We paid $846 million on existing secured financing arrangements, which includes the early repayment of $185 million on a U.S.

secured borrowing, and also repaid $300 million of Senior Notes that matured in 2023.

During 2024, we received proceeds of $900 million from the issuance of Senior Notes and Convertible Senior Notes.

We made net payments of $658 million on Senior Notes, including $300 million on Senior Notes that matured in May 2024 and $362 million for the early redemption of 2025 Senior Notes offset by early redemption premium of $4 million.

In addition, we made payments of $18 million on deferred debt issuance costs from Senior Notes issuances, $282 million on secured financing arrangements and $28 million on the Term Loan B facility.

Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity, as well as our secured financing arrangements.

Financial Instruments

In September 2024, we entered into two floating-to-fixed interest rate swaps for $300 million to hedge against interest rate volatility associated with any of our floating rate debt which was primarily under our Term Loan B Credit Agreement (TLB).

The TLB had an outstanding principal balance of $523 million as of December 31, 2024.

The remaining portion of the TLB of $223 million is not hedged, and is subject to interest rate fluctuations.

Refer to Note 16 - Financial Instruments in the Consolidated Financial Statements for additional information.

Share Repurchase Programs - Treasury Stock

There were no repurchases of Xerox Holdings Corporation's Common Stock for the year ended December 31, 2024.

On September 28, 2023, Xerox Holdings Corporation entered into a share purchase agreement with Carl C.

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Aggregate dividends of $14 million were declared on preferred stock in 2024, 2023 and 2022, respectively.

In conjunction with this financing, the Xerox Board of Directors approved a change in the dividend policy to reduce the Xerox annual dividend from $1 per share to 50 cents per share starting with the dividend expected to be declared in the first quarter of 2025.

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Liquidity and Financial Flexibility

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Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt.

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Pension and Retiree Health Benefit Plans

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Contributions to our defined benefit pension plans in subsequent years will depend on multiple factors, including the investment performance of plan assets and discount rates as well as potential legislative and plan changes.

Although most of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain under-funded or unfunded by design.

The projected benefit obligations for these benefit plans at December 31, 2023 exceeded the fair value of the assets of those plans by $1,190 million, which is an increase of $48 million from the balance at December 31, 2022, of $1,142 million.

The increase is largely due to decreased discount rates and the resultant increase in projected benefit obligations.

Although all of our major defined benefit plans have been amended to freeze current benefits and eliminate benefit accruals for future service, several plans remain under-funded or unfunded by design.

The projected benefit obligations for these benefit plans at December 31, 2024 exceeded the fair value of the assets of those plans by $1,067 million, which is a decrease of $123 million from the balance at December 31, 2023, of $1,190 million.

The decrease is largely due to increased discount rates and the resultant decrease in projected benefit obligations.

Cash contributions to our retiree health plans are made each year to cover medical premiums and claim costs incurred during the year.

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and Canada operations.

The unfunded balance of our retiree health plans of $193 million at December 31, 2023 decreased by $16 million from the balance at December 31, 2022, primarily due to benefit payments partially offset by decreased discount rates.

The unfunded balance of our retiree health plans of $173 million at December 31, 2024 decreased by $20 million from the balance at December 31, 2023, primarily due to benefit payments as well as increased discount rates.

Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding contributions to our defined benefit pension and retiree health plans.

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Our purchase orders under such agreements are made in the normal course of business and typically have a lead time of three months.

Shared Services Arrangements

In March 2019, Xerox entered into a shared services arrangement with HCL Technologies (HCL) pursuant to which we transitioned certain global administrative and support functions, including, among others, selected information technology and finance functions, from Xerox to HCL.

The shared services arrangement with HCL includes a remaining aggregate spending commitment of approximately $440 million over the next 3 years.

However, we can terminate the arrangement at any time at our discretion, subject to payment of termination fees that decline over the term, or for cause.

In July 2021, Xerox entered into an arrangement with Tata Consulting Services (TCS), whereby TCS provides business processing outsourcing services in support of our global finance and accounting organization.

The shared services arrangement with TCS includes a remaining aggregate spending commitment of approximately $144 million over the next 4 years.

We can terminate the arrangement subject to payment of termination fees that decline over the term.

We incurred net charges of $227 million, $220 million and $207 million for the three years ended December 31, 2023, 2022, and 2021, respectively, related to these shared services arrangements.

The cost has been allocated to the various functional expense lines in the Consolidated Statements of Income (Loss) based on an estimate of the nature and amount of the costs incurred for the various transferred functions.

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Shared Services and Technology Arrangements

In the third quarter 2024, Xerox entered into an agreement with HCL Technologies Limited (HCL), to renew and extend the original shared services arrangement contract, entered into in 2019, in which HCL provides certain global administrative and support functions to Xerox.

In addition to the existing shared services arrangement, HCL will support Xerox's Global Business Services (GBS) organization with professional services support, sales efficiency, and remote problem-solving.

Xerox can terminate the arrangement at any time starting in July 2025, subject to payment of termination fees that decline over the term, or for cause.

In the second quarter 2024, Xerox entered into a seven year agreement with Tata Consulting Services (TCS), for the purpose of consolidating Xerox’s technology services to improve business outcomes, migrate legacy data centers to the cloud, deploy a cloud-based digital ERP platform to transform business processes, and incorporate generative artificial intelligence (GenAI) into operations to help drive sustainable growth.

The agreement expanded Xerox's previous partnership entered into with TCS in 2021, under which TCS will continue to provide business processing outsourcing services in support of our global finance and accounting organization;

there were no changes to the terms of the business processing outsourcing services agreement.

Xerox can terminate the arrangement with 90 days' notice, subject to payment of a termination fee.

In connection with the technology agreement with TCS, Xerox also entered into seven-year agreements with both SAP Limited (SAP), who will provide Xerox with a cloud-based digital ERP platform, and Microsoft, who will provide their Azure cloud platform services.

In the second quarter 2024, Xerox entered into a five-year agreement with Verizon Business Services (Verizon) to provide their Network as a Service (NaaS) solutions framework as part of Xerox's Reinvention.

Under the terms of the agreement, Verizon will provide a secure network platform solution delivering network services to Xerox business locations globally.

The approximate aggregate spending commitments related to these shared services and technology arrangements are as follows:

(in millions) December 31, 2024 Agreement Term

$ 550 5 Years

Microsoft 118 7 Years

SAP 51 7 Years

Verizon 97 5 Years

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(1) Represents all contractual arrangements between Xerox and the vendor.

We incurred net charges for these shared service and technology agreements of $259 million, $227 million and $220 million for the three years ended December 31, 2024, 2023, and 2022, respectively.

The costs have been allocated to the various functional expense lines in the Consolidated Statements of (Loss) Income based on an estimate of the nature and amount of the costs incurred for the various transferred functions.

Other Contingencies and Commitments

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Off-Balance Sheet Arrangements

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Refer to Note 7 - Accounts Receivable, Net in the Consolidated Financial Statements for further information regarding accounts receivable sales.

• During 2022, the Company entered into a Master Agreement for the Sale and Assignment of Lease Receivables that establishes a committed sale and purchase facility pursuant to which the Company agreed to offer for sale certain eligible pools of finance receivables relating to equipment leases on a monthly basis in transactions intended to be true sales.

During 2023 and 2022, the Company sold approximately $1,100 million and $60 million, respectively, in principal balances of lease receivables under this agreement and will continue to service those receivables for which we will earn a servicing fee.

• Since 2022, the Company has entered into Master Agreements for the sale and assignment of lease receivables with two counterparties that establishes a committed sale and purchase facility pursuant to which the Company agreed to offer for sale certain eligible pools of finance receivables relating to equipment leases on a monthly basis in transactions intended to be true sales.

For the three years ended December 31, 2024, 2023, and 2022, the Company sold finance leases under these agreements, and received proceeds of $752 million, $1,102 million, and $60 million, respectively.

We will continue to service a portion of those lease receivables, and we will earn a servicing fee on a portion of those lease receivables serviced.

Refer to Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for further information regarding this arrangement.

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Non-GAAP Financial Measures

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Non-service retirement-related costs:

Our defined benefit pension and retiree health costs include several elements impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity markets as well as those that are predominantly legacy in nature and related to employees who are no longer providing current service to the Company (e.g.

retirees and ex-employees).

These elements include (i) interest cost, (ii) expected return on plan assets, (iii) amortization of prior plan amendments, (iv) amortized actuarial gains/losses and (v) the impacts of any plan settlements/curtailments.

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Adjusted earnings will continue to include the service cost elements of our retirement costs, which is related to current employee service as well as the cost of our defined contribution plans.

Transaction and related costs, net:

Transaction and related costs, net are costs and expenses primarily associated with certain major or significant strategic M&A projects.

These costs are primarily for third-party legal, accounting, consulting and other similar type professional services as well as potential legal settlements that may arise in connection with those M&A transactions.

These costs are considered incremental to our normal operating charges and were incurred or are expected to be incurred solely as a result of the planned transactions.

Accordingly, we are

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excluding these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis.

Discrete, unusual or infrequent items:

We excluded the following items given their discrete, unusual or infrequent nature and their impact on our results for the period:

• PARC donation

We excluded the following items, when applicable, given their discrete, unusual or infrequent nature and their impact on the comparability of our results for the current period to prior periods:

• Inventory impact related to the exit of certain production print manufacturing operations

• Stock compensation expense associated with the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO

• Goodwill impairment loss

• Divestitures

• PARC donation

• Reinvention-related costs

• Contract termination costs - product supply

• Losses on early extinguishment of debt

• Tax Indemnification - Conduent

• Gains and Losses on early extinguishment of debt

• Deferred tax asset valuation allowance

Adjusted Operating Income and Margin

We calculate and utilize adjusted operating income and margin measures by adjusting our reported pre-tax loss and margin amounts.

In addition to the costs and expenses noted as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses.

We calculate and utilize adjusted operating income and margin measures by adjusting our reported pre-tax (loss) income and margin amounts.

In addition to the costs and expenses noted above as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses.

We exclude these amounts in order to evaluate our current and past operating performance and to better understand the expected future trends in our business.

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Refer to the Currency Impact section in the MD&A for a discussion of this measure and its use in our analysis of revenue growth.

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Adjusted Net Income and EPS Reconciliation

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2024 2023 2022

(in millions, except per share amounts) Net Income EPS Net (Loss) Income EPS Net (Loss) Income EPS

(in millions, except per share amounts) Net (Loss) Income EPS Net (Loss) Income EPS Net (Loss) Income EPS

Reported (1) (2)

$ (1,321) $ (10.75) $ 1 $ (0.09) $ (322) $ (2.15)

PARC donation 132 — —

Inventory-related impact - exit of certain production print manufacturing operations (3)

Accelerated share vesting — — 21

Goodwill impairment 1,058 — 412

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Amortization of intangible assets 73 43 42

Divestitures 47 — —

PARC donation — 132 —

Non-service retirement-related costs 80 19 (12)

Reinvention-related costs 12 — —

Transaction and related costs, net (31) — —

Contract termination costs - product supply — — 33

Accelerated share vesting — 21 —

Loss on early extinguishment of debt 10 5 —

Tax indemnification - Conduent — (7) —

(Gain) Loss on early extinguishment of debt (2) 10 5

Income tax on Goodwill impairment (4)

Income tax on PARC donation (4)

Deferred tax asset valuation allowance (4)

Income tax on adjustments (4)

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(1) Net Income (loss) and EPS.

(1) Net (Loss) income and EPS.

(2) Full-year 2024 Pre-Tax (Loss) and Margin, and Diluted (Loss) per Share, include the following:

Q1-24 $129 million pre-tax ($100 million after-tax) Reinvention-related charge, or $0.81 per share, primarily related to the exit of certain Production Print manufacturing operations and geographic simplification;

Q3-24 pre-tax non-cash goodwill impairment charge of $1,058 million ($1,015 million after-tax), or $8.17 per share;

Q4-24 $37 million pre-tax ($28 million after-tax) write-off of intangibles, or $0.22 per share, and $19 million of pre-tax ($15 million after-tax) Reinvention-related and acquisition charges, or $0.12 per share.

Full year 2024 EPS also includes a Q3-24 tax expense charge of $161 million, or $1.30 per share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability.

This adjustment was excluded due to its unique nature and significant impact which is not considered part of our core operations.

Full year 2023 includes a Q2-23 net pre-tax PARC donation charge of $132 million ($92 million after-tax), or $0.58 per share, and a Q4-23 $104 million pre-tax Restructuring and related costs, net charge ($78 million after-tax), or $0.52 per share, related to the Reinvention-related workforce reduction.

(3) Reflects the reduction of inventory of approximately $45 million and the cancellation of related purchase contracts of approximately $6 million, as a result of the exit of certain production print manufacturing operations during the year ended December 31, 2024.

(4) Refer to Adjusted Effective Tax Rate reconciliation.

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Adjusted Effective Tax Rate Reconciliation

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(Loss) Income Income Tax

(Benefit) Expense Effective

Expense Effective

Tax Rate Pre-Tax

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$ (1,216) $ 105 (8.6) % $ (28) $ (29) 103.6 % $ (325) $ (3) 0.9 %

PARC donation (2)

Goodwill impairment (2)

1,058 43 — — 412 17

PARC donation (2)

— — 132 40 — —

Deferred tax asset valuation allowance — (169) — — — —

Non-GAAP Adjustments (2)

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(1) Pre-tax Loss and Income tax benefit.

(1) Pre-tax Loss and Income tax expense (benefit).

(2) Refer to Adjusted Net Income and EPS reconciliation for details.

3 unchanged sentences

2024 2023 2022

(in millions) Profit (Loss) Revenue Margin (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin

Net Income (Loss) $ 1 $ 6,886 $ (322) $ 7,107 $ (455) $ 7,038

Income tax benefit (29) $ — (3) $ — (17) $ —

(in millions) (Loss) Profit Revenue Margin Profit (Loss) Revenue Margin (Loss) Profit Revenue Margin

Net (Loss) Income $ (1,321) $ 6,221 $ 1 $ 6,886 $ (322) $ 7,107

Income tax expense (benefit) 105 $ — (29) $ — (3) $ —

Pre-tax (loss) $ (1,216) $ 6,221 (19.5) % $ (28) $ 6,886 (0.4) % $ (325) $ 7,107 (4.6) %

Inventory impact related to the exit of certain Production Print manufacturing operations (1)

Reinvention Costs 12 — —

Accelerated share vesting — — 21

Goodwill impairment 1,058 — 412

1 unchanged sentence

Amortization of intangible assets 73 43 42

Divestitures 47 — —

PARC donation — 132 —

Accelerated share vesting — 21 —

Transaction and related costs, net 7 — —

Other expenses, net (2)(3)

1 unchanged sentence

_____________

(1) Reflects the reduction of inventory of approximately $45 million and the cancellation of related purchase contracts of approximately $6 million, as a result of the exit of certain production print manufacturing operations during the year ended December 31, 2024.

(2) Includes $38 million of insurance proceeds related to a legal settlement for the reimbursement of certain legal and other professional costs, associated with a past potential merger, for the year ended December 31, 2024.

(3) Includes non-service retirement-related costs.

Xerox 2024 Annual Report 69

Table of Contents Legal Sign-off 2.24.25

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

What changed 10-K

Item 7. Management’s Discussion and Analysis