Xerox Holdings Corp 10-K

Item 7. 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 or Xerox Holdings Corporation and its consolidated subsidiaries, as determined by the context. References herein to “we,” "us," “our,” or the “Company,” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to “Xerox Holdings Corporation” refer to the stand-alone parent company and do not include its subsidiaries. References to “Xerox Corporation” refer to the stand-alone company and do not include its subsidiaries. Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition. Throughout this combined Form 10-K, references are made to various notes in the Consolidated Financial Statements which appear in Part II, Item 8 of this combined Form 10-K, and the information contained in such notes is incorporated by reference into the MD&A in the places where such references are made. Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which was established in 2021 solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies. The investments are primarily equity or equity-linked securities and for less than 20% ownership. Xerox Ventures LLC had investments of approximately $40 million and $26 million at December 31, 2024 and 2023, respectively. In January 2024, Myriad Ventures Fund I LP was established, and the investments held by Xerox Ventures LLC were transferred to this new entity, which will continue to be fully consolidated by Xerox Holdings. Due to its immaterial impact to earnings and the balance sheet, and for ease of discussion, Xerox Ventures LLC's results are included within the following discussion. Executive Overview 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 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 Xerox 2024 Annual Report 29 Table of Contents Legal Sign-off 2.24.25 – 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 $6.2 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 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, 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. • 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 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) 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. Xerox 2024 Annual Report 30 Table of Contents Legal Sign-off 2.24.25 Financial Overview 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 (loss) income $ (1,321) $ 1 $ (322) $ (1,322) $ 323 Adjusted (1) Net income 135 287 189 (152) 98 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. _____________ (1) Refer to the "Non-GAAP Financial Measures" section for an explanation of this non-GAAP financial measure. A summary of our segment information is as follows: Year Ended December 31, % Change % of Total (in millions) 2024 2023 2022 2024 2023 2024 2023 Revenue Print and Other $ 5,935 $ 6,571 $ 6,804 (9.7) % (3.4) % 95 % 95 % XFS 357 401 393 (11.0) % 2.0 % 6 % 6 % Intersegment Elimination (1) (71) (86) (90) (17.4) % (4.4) % (1) % (1) % Total Revenue $ 6,221 $ 6,886 $ 7,107 (9.7) % (3.1) % 100 % 100 % Expenses Print and Other $ 5,667 $ 6,211 $ 6,546 (8.8) % (5.1) % 96 % 95 % XFS 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 % Profit Print and Other $ 268 $ 360 $ 258 (25.6) % 39.5 % 89 % 93 % XFS 34 29 17 17.2 % 70.6 % 11 % 7 % Total Profit $ 302 $ 389 $ 275 (22.4) % 41.5 % 100 % 100 % _____________ (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 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 . Xerox 2024 Annual Report 31 Table of Contents Legal Sign-off 2.24.25 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. 2025 Outlook 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 To understand the trends in the business, we believe that it is helpful to analyze the impact of changes in the translation of foreign currencies into U.S. Dollars on revenue and expenses. We refer to this analysis as "constant currency", “currency impact” or “the impact from currency.” This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate. This impact is calculated for all countries where the functional currency is the local country currency. We do not hedge the translation effect of revenues or expenses denominated in currencies where the local currency is the functional currency. Management believes the constant currency measure provides investors an additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency growth rates. 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 adverse impact on revenue in 2024 and a 0.2-percentage point favorable impact on revenue in 2023. Xerox 2024 Annual Report 32 Table of Contents Legal Sign-off 2.24.25 Critical Accounting Estimates In preparing our Consolidated Financial Statements and accounting for the underlying transactions and balances, we apply various accounting policies. Senior management has discussed the development and selection of the critical accounting policies, estimates and related disclosures included herein with the Audit Committee of the Xerox Holdings Board of Directors. We consider the policies discussed below as critical to understanding our Consolidated Financial Statements, as their application places the most significant demands on management's judgment, since financial reporting results rely on estimates of the effects of matters that are inherently uncertain. In instances where different estimates could have reasonably been used, we disclosed the impact of these different estimates on our operations. In certain instances, such as revenue recognition for leases, the accounting rules are prescriptive; therefore, it would not have been possible to reasonably use different estimates. Changes in assumptions and estimates are reflected in the period in which they occur. 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 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. Revenue Recognition Application of the various accounting principles in GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates including ASC Topic 606 - Revenue from Contracts with Customers and ASC Topic 842 Leases . Refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in the Consolidated Financial Statements for additional information regarding our revenue recognition and lease revenue recognition policies . Complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. Specifically, the revenue related to the following areas involves significant judgments and estimates: Bundled Lease Arrangements : We sell our equipment direct to end customers under bundled lease arrangements, which typically include the equipment, service, supplies and a financing component for which the customer pays a single negotiated fixed minimum monthly payment for all elements over the contractual lease term. These arrangements also typically include an incremental, variable component for page volumes in excess of the contractual page volume minimums, which are often expressed in terms of price-per-image or page. 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 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. Sales to Distributors and Resellers : We utilize distributors and resellers to sell many of our products, supplies and parts to end-user customers. Sales to distributors and resellers are generally recognized as revenue when products are shipped to such distributors and resellers. Distributors and resellers participate in various discount, rebate, price-support, cooperative marketing and other programs, and we record provisions and allowances for these programs as a reduction to revenue when the sales occur. Similarly, we also record estimates for sales returns and other discounts and allowances when the sales occur. We consider various factors, including a review of specific transactions and programs, historical experience and market and economic conditions when calculating these provisions and allowances. Total sales of equipment, supplies and parts to distributors and resellers were $973 million for the year ended December 31, 2024 and provisions, and allowances recorded on these sales were approximately 26% of the associated gross revenues. Allowance for Doubtful Accounts and Credit Losses The allowance for doubtful accounts and credit losses is based on an assessment of historical collection experience as well as consideration of current and future economic conditions and changes in our customer-specific collection trends. Our methodology includes an expected loss model that incorporates an assessment of current and future economic conditions. 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 Xerox 2024 Annual Report 33 Table of Contents Legal Sign-off 2.24.25 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 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. During the five-year period ended December 31, 2024, our reserve for doubtful accounts ranged from 4.1% to 4.8% of gross receivables. Holding all assumptions constant, a 0.5-percentage point increase or decrease in the reserve from the December 31, 2024 rate of 4.7% would change the 2024 provision by approximately $13 million. Refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies, Note 7 - Accounts Receivable, Net and Note 8 - Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding our policy with respect to the Allowance for Doubtful Accounts and Credit Losses. Pension Plan Assumptions We sponsor defined benefit pension plans in various forms in several countries covering employees who meet eligibility requirements. Where legally possible, we have amended our major defined benefit pension plans to freeze current benefits and eliminate benefit accruals for future service, including our U.S. defined benefit plans, the Canadian Salary Pension Plan and the U.K. Final Salary Pension Plan. In certain non-U.S. plans, we are required to continue to consider salary increases and inflation in determining the benefit obligation related to past service. Our pension plan in the Netherlands for past service is a Collective Defined Contribution (CDC) plan with future service benefits provided in a defined contribution plan for 2023 and later years. From a Company risk perspective, this CDC plan operates just like a defined contribution plan as the Company was only responsible for a contribution for annual benefit accruals under 5-year agreements through 2022. Although the Company risk has been mitigated, under U.S. GAAP this CDC plan does not meet the definition of a defined contribution plan and therefore is accounted for as a defined benefit plan. In December 2023, the Trustees for the U.K. pension plan entered a second insurance buy-in contract, in accordance with U.K. pension regulations. The insurance buy-in contract is a group annuity contract that is expected to provide an income stream to cover a significant majority of the cash flows arising for the plan population with future contracted payments. However, the benefit obligation remains with the plan and the Company. This arrangement further mitigates the Company's risk associated with these obligations. Several statistical and other factors that attempt to anticipate future events are used in calculating the expense, liability and to project asset values related to our defined benefit pension plans. These factors include assumptions we make about the expected return on plan assets, discount rate, lump-sum settlement rates, the rate of future compensation increases and mortality. 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 $2.1 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 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 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. Xerox 2024 Annual Report 34 Table of Contents Legal Sign-off 2.24.25 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. In the U.S. and the U.K., which comprise approximately 75% of our PBO, we consider yield curves derived from Moody's Aa or better rated Corporate Bonds and U.K. Corporate bonds rated AA by at least one of the main ratings agencies, respectively, in the determination of the appropriate discount rate assumptions. The consolidated weighted average discount rate we used to measure our pension obligations as of December 31, 2024 and to calculate our 2025 expense was 4.9%; the rate used to calculate our obligations as of December 31, 2023 and our 2024 expense was 4.4%. The increase reflects higher interest rates in both the U.S. and non-U.S. regions. 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: Discount Rate Expected Return (in millions) 0.25% Increase 0.25% Decrease 0.25% Increase 0.25% Decrease (Decrease)/Increase 2025 Projected net periodic pension cost $ (2) $ 3 $ (14) $ 14 Projected benefit obligation as of December 31, 2024 (75) 80 N/A N/A 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. We recognize the losses associated with these settlements immediately upon the settlement of the vested benefits. Settlement accounting requires us to recognize a pro-rata portion of the aggregate unamortized net actuarial losses upon settlement. 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. 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: Estimated Actual (in millions) 2025 2024 2023 2022 Defined benefit pension plans (1)(2) $ 85 $ 104 $ 41 $ 9 Defined contribution plans 35 40 40 37 Retiree health benefit plans (20) (18) (16) (3) Total Benefit Plan Expense $ 100 $ 126 $ 65 $ 43 ____________ (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. (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: Estimated Actual (in millions) 2025 2024 2023 2022 U.S. Defined benefit pension plans $ 110 $ 100 $ 53 $ 24 Non-U.S. Defined benefit pension plans 30 27 28 81 Defined contribution plans (1) 35 40 40 17 Retiree health benefit plans 20 18 21 19 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 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. Xerox 2024 Annual Report 35 Table of Contents Legal Sign-off 2.24.25 Approximately $77 million of the U.S. pension contributions in 2024 were for our tax-qualified defined benefit plans. Approximately $85 million of estimated U.S. pension contributions for 2025 are for our tax-qualified defined benefit plans. However, once the next actuarial valuations and projected results are available, actual contributions required to meet minimum funding requirements will be determined and finalized and may change from the current estimate. The decrease in non-U.S. Defined benefit pension plan contributions in 2023 is due to no further contributions to our U.K. defined benefit pension plan being required after October 2022 following agreement of the triennial valuation of the Plan with the Plan Trustees. Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding defined benefit pension plan assumptions, expense and funding. Income Taxes We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments are required in determining the consolidated provision for income taxes. Our provision is based on nonrecurring events as well as recurring factors, including the taxation of foreign income. In addition, our provision will change based on discrete or other nonrecurring events such as audit settlements, tax law changes, changes in valuation allowances, etc., that may not be predictable. We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and the amounts reported in our Consolidated Balance Sheets, as well as operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. 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 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. 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: Year Ended December 31, (in millions) 2024 2023 2022 Gross deferred tax assets $ 1,213 $ 1,267 $ 1,138 Valuation allowance (511) (375) (366) Net deferred tax assets $ 702 $ 892 $ 772 We are subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, we may incur additional tax expense based upon our assessment of the more-likely-than-not outcomes of such matters. In addition, when applicable, we adjust the previously recorded tax expense to reflect examination results. 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. Xerox 2024 Annual Report 36 Table of Contents Legal Sign-off 2.24.25 Unrecognized tax benefits were $95 million, $140 million and $110 million at December 31, 2024, 2023 and 2022, respectively. Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding deferred income taxes and unrecognized tax benefits. Business Combinations and Goodwill We allocate the fair value of purchase consideration to tangible assets, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to Goodwill. The allocation of the purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates can include, but are not limited to, future expected cash flows of acquired customers, development of new offerings, acquired technology and trade names from a market participant perspective, as well as estimates of useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable and when appropriate, include assistance from independent third-party valuation firms. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to Goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Refer to Note 6 - Acquisitions and Divestitures in the Consolidated Financial Statements for additional information regarding the allocation of the purchase price consideration for our acquisitions. Our Goodwill, net balance was $1.9 billion at December 31, 2024. 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 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. Our review of impairment starts with an assessment of qualitative factors to determine whether events or circumstances lead to a determination that it is more-likely-than-not that the fair value of the Company is less than the net book value. Our qualitative assessment of the recoverability of Goodwill, whether performed annually or based on specific events or circumstances, considers various macroeconomic, industry-specific and company-specific factors. These factors include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization below our net book value. After assessing the totality of events and circumstances, if we determine that it is not more-likely-than-not that the fair value of the Company is less than its net book value, no further assessment is performed. If we determine that it is more-likely-than-not that the fair value of the Company is less than net book value or if we elect to bypass the qualitative assessment, we proceed to a quantitative assessment or test of Goodwill. If a quantitative assessment of Goodwill is required, the determination of the fair value of the Company will involve the use of significant estimates and assumptions. Our quantitative Goodwill impairment test uses both the income approach and the market approach to estimate fair value. The income approach is based on the discounted cash flow method that uses the Company's estimates of forecasted future financial performance including revenues, gross margins, operating expenses, and taxes, as well as working capital and capital asset requirements. These estimates are developed as part of our long-term planning process based on assumed market segment growth rates and our assumed market segment share, estimated costs based on historical data and various internal estimates. Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risks unique to the subject cash flows. 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 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 Table of Contents Legal Sign-off 2.24.25 Goodwill Impairment and Annual Assessment 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. 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. Xerox 2024 Annual Report 38 Table of Contents Legal Sign-off 2.24.25 Revenue Results Summary Total Revenue Revenue for the three years ended December 31, 2024, 2023 and 2022 was as follows: Revenue % Change CC % Change % of Total Revenue (in millions) 2024 2023 2022 2024 2023 2024 2023 2024 2023 2022 Equipment sales $ 1,378 $ 1,655 $ 1,624 (16.7) % 1.9 % (16.5) % 1.7 % 22 % 24 % 23 % Post sale revenue 4,843 5,231 5,483 (7.4) % (4.6) % (7.3) % (4.8) % 78 % 76 % 77 % Total Revenue $ 6,221 $ 6,886 $ 7,107 (9.7) % (3.1) % (9.5) % (3.3) % 100 % 100 % 100 % Reconciliation to Consolidated Statements of (Loss) Income: Sales $ 2,378 $ 2,720 $ 2,800 (12.6) % (2.9) % (12.3) % (3.4) % Less: Supplies, paper and other sales (1,000) (1,065) (1,176) (6.1) % (9.4) % (5.7) % (10.5) % Equipment sales $ 1,378 $ 1,655 $ 1,624 (16.7) % 1.9 % (16.5) % 1.7 % Services, maintenance and rentals $ 3,692 $ 3,975 $ 4,100 (7.1) % (3.0) % (7.1) % (3.0) % Add: Supplies, paper and other sales 1,000 1,065 1,176 (6.1) % (9.4) % (5.7) % (10.5) % Add: Financing 151 191 207 (20.9) % (7.7) % (20.9) % (8.0) % Post sale revenue $ 4,843 $ 5,231 $ 5,483 (7.4) % (4.6) % (7.3) % (4.8) % Segments Print and Other $ 5,935 $ 6,571 $ 6,804 (9.7) % (3.4) % 95 % 95 % 96 % XFS 357 401 393 (11.0) % 2.0 % 6 % 6 % 5 % Intersegment elimination (1) (71) (86) (90) (17.4) % (4.4) % (1) % (1) % (1) % Total Revenue (2) $ 6,221 $ 6,886 $ 7,107 (9.7) % (3.1) % 100 % 100 % 100 % _____________ CC - See "Currency Impact" section for description of constant currency. (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. 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. 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. Contractual print services declined modestly, due to lower production print activity, our 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 from an acquisition. 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. _____________ (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. Xerox 2024 Annual Report 39 Table of Contents Legal Sign-off 2.24.25 Total revenues included the following: Post sale revenue 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 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), 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. Contractual print services revenue decreased modestly as compared to the prior year period, primarily reflecting declines in production print activity, our exit from Russia and the shift in distribution strategy for one of our European markets. 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. 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. 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. The decline at constant currency 2 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. _____________ (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. Xerox 2024 Annual Report 40 Table of Contents Legal Sign-off 2.24.25 Equipment sales revenue 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. See Segment Review - Print and Other below for additional discussion on Equipment sales revenue. _____________ (1) See "Currency Impact" section for description of constant currency. Xerox 2024 Annual Report 41 Table of Contents Legal Sign-off 2.24.25 Costs, Expenses and Other Income Summary of Key Financial Ratios The following is a summary of our key financial ratios used to assess our performance: Year Ended December 31, (in millions) 2024 2023 2022 2024 B/(W) 2023 B/(W) Gross Profit $ 1,960 $ 2,314 $ 2,318 $ (354) $ (4) RD&E 191 229 304 38 75 SAG 1,537 1,696 1,760 159 64 Equipment Gross Margin 30.2 % 33.7 % 25.1 % (3.5) pts. 8.6 pts. Post sale Gross Margin 31.9 % 33.6 % 34.9 % (1.7) pts. (1.3) pts. Total Gross Margin 31.5 % 33.6 % 32.6 % (2.1) pts. 1.0 pts. RD&E as a % of Revenue 3.1 % 3.3 % 4.3 % 0.2 pts. 1.0 pts. SAG as a % of Revenue 24.7 % 24.6 % 24.8 % (0.1) pts. 0.2 pts. Pre-tax Loss (1) $ (1,216) $ (28) $ (325) $ (1,188) $ 297 Pre-tax Loss Margin (1) (19.5) % (0.4) % (4.6) % (19.1) pts. 4.2 pts. Adjusted (2) Operating Profit $ 302 $ 389 $ 275 $ (87) $ 114 Adjusted (2) Operating Margin 4.9 % 5.6 % 3.9 % (0.7) pts. 1.7 pts. _____________ (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. Gross Margin 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. 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. 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 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. Xerox 2024 Annual Report 42 Table of Contents Legal Sign-off 2.24.25 Research, Development and Engineering Expenses (RD&E) Year Ended December 31, Change (in millions) 2024 2023 2022 2024 2023 R&D $ 142 $ 174 $ 246 $ (32) $ (72) Sustaining engineering 49 55 58 (6) (3) Total RD&E Expenses $ 191 $ 229 $ 304 $ (38) $ (75) 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. Selling, Administrative and General Expenses (SAG) 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 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. Bad debt expense for the year ended December 31, 2023 of $28 million decreased $15 million as compared to the prior year, primarily due a lower finance receivable provision of $20 million partially offset by higher provision for trade receivables of $5 million. The decrease in the 2023 finance receivable provision reflected a reserve release of approximately $12 million as a result of a favorable reassessment of the credit exposure on a large customer receivable balance as well as the benefits related to the sale of finance receivables on a non-recourse basis as part of our on-going finance receivables funding agreement. The increase in the trade receivable provisions is partly due to an increase in aged receivables in the U.S. 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 Xerox 2024 Annual Report 43 Table of Contents Legal Sign-off 2.24.25 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. 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. Restructuring and Related Costs, Net We incurred restructuring and related costs, net of $112 million, $167 million and $65 million for the three years ended December 31, 2024, 2023 and 2022, respectively. These costs were primarily related to the implementation of initiatives under our business transformation projects to reduce and realign our cost structure to the changing nature of our business. Restructuring and related costs, net reflect the following components: Year Ended December 31, 2024 2023 2022 Restructuring charges, net (1) $ 62 $ 114 $ 68 Asset impairment charges, net 25 32 (6) Related costs, net 25 21 3 Total Restructuring and related costs, net $ 112 $ 167 $ 65 ____________ (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. The restructuring reserve balance as of December 31, 2024, for all programs, was $113 million, of which $90 million is expected to be paid over the next twelve months. Amortization of Intangible Assets 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 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. Worldwide Employment Worldwide employment was approximately 16,800 as of December 31, 2024, a decrease of approximately 3,300 from December 31, 2023. 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). Xerox 2024 Annual Report 44 Table of Contents Legal Sign-off 2.24.25 Other Expenses, Net Year Ended December 31, (in millions) 2024 2023 2022 Non-financing interest expense $ 119 $ 68 $ 91 Interest income (14) (16) (11) Non-service retirement-related costs 80 19 (12) Gains on sales of businesses and assets (8) (39) (56) Currency losses, net 15 28 13 (Gain) Loss on early extinguishment of debt (2) 10 5 Transaction and related costs, net (38) — — Contract termination costs - product supply — — 33 Excess contribution refund — (6) (16) Tax indemnification from Conduent — (7) — All other expenses, net (1) 6 18 13 Other expenses, net $ 158 $ 75 $ 60 _____________ (1) Includes Equity income of $(7) million, $(4) million and $(3) million and Noncontrolling interest charge of $2 million, $3 million and $0 million for the three years ended December 31, 2024, 2023 and 2022, respectively. 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. The decrease was related to lower average non-financing debt as a result of the repayment of Senior Notes in 2022 and the first quarter 2023, partially offset by higher interest rates on new debt. 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. 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. Xerox's interest expense on the Intercompany Loan matches the interest expense recognized by Xerox Holdings on its Senior Notes. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding the Xerox Holdings Corporation/Xerox Corporation Intercompany Loan, our debt activity and information regarding the allocation of interest expense. Interest Income 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 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. Xerox 2024 Annual Report 45 Table of Contents Legal Sign-off 2.24.25 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 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 $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. (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. 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 For the year ended December 31, 2022, we recorded contract termination costs of $33 million ($25 million after-tax) associated with the early termination of a product supply agreement. The charge primarily reflects the payment of the contractual cancellation fee plus interest and related legal fees. Excess Contribution Refund During 2023 and 2022, we received a refund of $6 million and $16 million, respectively, reflecting the return of excess employer contributions to a defined contribution plan for one of our Latin American subsidiaries as a result of employee forfeitures. The excess contributions had accumulated over the past 20 plus years. Refer to Note 18 - Employee Benefit Plans in the Consolidated Financial Statements for additional information regarding our defined contribution plans. Tax Indemnification - Conduent The credit of $7 million for the year ended December 31, 2023 represents the reversal of a payable to Conduent of an IRS refund Xerox was expected to receive with the settlement of a pre-separation unrecognized tax position. The matter was resolved during the third quarter 2023 and both the receivable from the IRS and the payable to Conduent were no longer required. The reversal of the offsetting IRS refund receivable is recorded as a charge in Income tax benefit. Xerox 2024 Annual Report 46 Table of Contents Legal Sign-off 2.24.25 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. The improvement is primarily due to the Goodwill impairment charge of $412 million in 2022. In addition, the improvement also reflects the impacts of lower supply chain-related costs and the benefits of price increases and favorable mix as well as lower RD&E expenses and Selling, administrative and general expenses. These favorable impacts were partially offset by 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. 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. 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. The increase primarily reflects higher gross margin, which includes the impacts of lower supply chain-related costs, the benefits of price increases and favorable mix. The increase also reflects lower RD&E expense, and Selling, administrative and general expenses, which includes benefits associated with structural cost reductions and ongoing operating efficiencies. 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. _____________ (1) Refer to the Adjusted Operating Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section. Xerox 2024 Annual Report 47 Table of Contents Legal Sign-off 2.24.25 Income Taxes 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. Excluding this impact, the effective tax rate was 10.6%. On an adjusted 1 basis, the 2023 effective tax rate was 14.6%. Both rates were lower than the U.S. federal statutory tax rate of 21% primarily due to the tax benefits related to the redetermination of certain unrecognized tax positions upon the conclusion of several audits, as well as the remeasurement of deferred tax assets and change in tax filing positions, partially offset by the geographical mix of earnings. The 2022 effective tax rate was 0.9% and was lower than the U.S. federal statutory tax rate of 21% primarily due to the non-deductibility of the Goodwill impairment charge and the tax expense associated with changes in elections made to certain tax positions for recently filed returns, which were only partially offset by benefits from additional tax incentives and the geographical mix of earnings. On an adjusted 1 basis, the 2022 effective tax rate was 21.6%.and was higher than the U.S. 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. Xerox operations are widely dispersed. However, no one country outside of the U.S. is a significant factor in determining our overall effective tax rate. Refer to Note 19 - Income and Other Taxes in the Consolidated Financial Statements for additional information regarding the geographic mix of income before taxes and the related impacts on our effective tax rate. Our effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income. In addition, our effective tax rate will change based on discrete or other nonrecurring events that may not be predictable. _____________ (1) Refer to the Adjusted Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section. 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. 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. On an adjusted 1 basis, Net income was $189 million, or $1.12 per diluted share. Refer to Note 25 - Loss per Share in the Consolidated Financial Statements, for additional information regarding the calculation of basic and diluted loss per share. _____________ (1) Refer to the Adjusted Net Income and EPS reconciliation table in the "Non-GAAP Financial Measures" section. Xerox 2024 Annual Report 48 Table of Contents Legal Sign-off 2.24.25 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; ii) $191 million of net translation adjustment gains reflecting the strengthening of most of our major foreign currencies against the U.S. Dollar during 2023; and iii) $1 million in unrealized gains, net. 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. Dollar during 2022; ii) $171 million of net losses from the changes in defined benefit plans primarily due to actuarial losses as a result of negative asset returns, partially offset by the positive impact of currency and the amortization of actuarial losses and settlement losses; and iii) $2 million in unrealized losses, net. 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. Recent Accounting Pronouncements Refer to Note 2 - Recent Accounting Pronouncements and Summary of Significant Accounting Policies in the Consolidated Financial Statements for a description of recent accounting pronouncements including the respective dates of adoption and the effects on results of operations and financial conditions. Xerox 2024 Annual Report 49 Table of Contents Legal Sign-off 2.24.25 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 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. Segment Review Year Ended December 31, (in millions) External Revenue Intersegment Revenue (1) Total Segment Revenue % of Total Revenue Segment Costs and Expenses Segment Profit Segment Margin (2) 2024 Print and Other $ 5,864 $ 71 $ 5,935 94 % $ 5,667 $ 268 4.6 % XFS 357 — 357 6 % 323 34 9.5 % Total $ 6,221 $ 71 $ 6,292 100 % $ 5,990 $ 302 4.9 % 2023 Print and Other $ 6,485 $ 86 $ 6,571 94 % $ 6,211 $ 360 5.6 % XFS 401 — 401 6 % 372 29 7.2 % Total $ 6,886 $ 86 $ 6,972 100 % $ 6,583 $ 389 5.6 % 2022 Print and Other $ 6,714 $ 90 $ 6,804 95 % $ 6,546 $ 258 3.8 % 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 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 Digital and IT services and software. Revenue Year Ended December 31, % Change (in millions) 2024 2023 2022 2024 2023 Equipment sales $ 1,360 $ 1,634 $ 1,602 (16.8)% 2.0% Post sale revenue 4,504 4,851 5,112 (7.2)% (5.1)% Intersegment revenue (1) 71 86 90 (17.4)% (4.4)% Total Print and Other Revenue $ 5,935 $ 6,571 $ 6,804 (9.7)% (3.4)% _____________ (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, 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. 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. Xerox 2024 Annual Report 50 Table of Contents Legal Sign-off 2.24.25 • 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 reductions in the prior year. Post Sale 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 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. _____________ (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: Revenue % Change CC % Change % of Equipment Revenue (in millions) 2024 2023 2022 2024 2023 2024 2023 2024 2023 2022 Entry $ 214 $ 237 $ 280 (9.7)% (15.4)% (9.3)% (15.9)% 16% 14% 17% Mid-range 912 1,084 1,030 (15.9)% 5.2% (15.7)% 5.1% 66% 66% 64% High-end 232 316 295 (26.6)% 7.1% (26.4)% 6.8% 17% 19% 18% Other 20 18 19 11.1% (5.3)% 11.1% (5.3)% 1% 1% 1% Equipment sales (1)(2) $ 1,378 $ 1,655 $ 1,624 (16.7)% 1.9% (16.5)% 1.7% 100% 100% 100% _____________ CC - See "Currency Impact" section for description of constant currency. (1) Refer to the Products and Offerings Definitions section. (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: Entry • 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. Mid-range • 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. High-end • 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. Xerox 2024 Annual Report 51 Table of Contents Legal Sign-off 2.24.25 • 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. _____________ (1) See "Currency Impact" section for description of constant currency. Total Installs Installs reflect new placements of devices only (i.e., measure does not take into account removal of devices which may occur as a result of contract renewals or cancellations). Revenue associated with equipment installations may be reflected up-front in Equipment sales or over time either through rental income or as part of our services revenues (which are both reported within our Post sale revenues), depending on the terms and conditions of our agreements with customers. Installs include activity for Xerox and non-Xerox branded products installed by our XBS sales unit. Detail by product group (see Products and Offerings Definitions ) is shown below. Installs for the year ended December 31, 2024 were: Entry • 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. Mid-Range • 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. High-End • 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: Entry 1 • 37% decrease in entry color installs driven by declines in entry color printers and A4 Color MFPs, reflecting backlog reductions in the prior year. • 16% decrease in entry black-and-white installs driven by declines in A4 mono MFPs, primarily in EMEA, which was partially offset by higher entry mono printer installs. Mid-Range • Mid-range color installs were flat, reflecting higher light production installations offset by a slight decline in A3 color MFPs. • 7% increase in mid-range black-and-white installs, driven by A3 mono MFPs, reflecting increased product availability primarily in the Americas. High-End • 25% increase in high-end color installs reflecting higher demand for iGen and Versant products, primarily in the Americas. • 16% decrease in high-end black-and-white installs reflecting a market shift toward color production equipment. _____________ (1) Reflects install activity for total Entry product group. Product and Offerings Definitions Our product groups range from: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. • “Mid-Range” , which include A3 devices that generally serve large workgroup/work teams environments as well as products in the Light Production product groups serving centralized print centers, print for pay and lower volume production print establishments. • “High-End” , which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises. Xerox 2024 Annual Report 52 Table of Contents Legal Sign-off 2.24.25 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 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 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. 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. The increase is primarily due to higher segment gross profit, which includes reduced RD&E, lower selling expense, lower freight costs, as well as the benefits from pricing and cost and productivity actions. These benefits were partially offset by lower revenue. Xerox 2024 Annual Report 53 Table of Contents Legal Sign-off 2.24.25 Xerox Financial Services (XFS) XFS represents a global financing solutions business, primarily enabling the sale of our equipment and services. Revenue Year Ended December 31, % Change (in millions) 2024 2023 2022 2024 2023 Equipment sales $ 18 $ 21 $ 22 (14.3)% (4.5)% Financing 151 191 207 (20.9)% (7.7)% Other Post sale revenue (1) 188 189 164 (0.5)% 15.2% 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. 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, 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. Xerox 2024 Annual Report 54 Table of Contents Legal Sign-off 2.24.25 Segment Margin 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 % Xerox 2024 Annual Report 55 Table of Contents Legal Sign-off 2.24.25 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 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. Accordingly, we believe we have sufficient liquidity to manage the business and settle obligations as they come due. The following is a summary of our liquidity position: • 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. The remaining debt of $1,658 million is attributable to the core business. 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). Refer to Note 15 - Debt in the Consolidated Financial Statements for additional details regarding our debt. • 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 Xerox 2024 Annual Report 56 Table of Contents Legal Sign-off 2.24.25 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. • 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 The following summarizes our cash flows for the three years ended December 31, 2024, 2023 and 2022, as reported in our Consolidated Statements of Cash Flows in the accompanying Consolidated Financial Statements: Year Ended December 31, Change (in millions) 2024 2023 2022 2024 2023 Net cash provided by operating activities $ 511 $ 686 $ 159 $ (175) $ 527 Net cash used in investing activities (198) (5) (78) (193) 73 Net cash used in financing activities (271) (1,202) (822) 931 (380) Effect of exchange rate changes on cash, cash equivalents and restricted cash (28) (1) (29) (27) 28 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) Cash, Cash Equivalents and Restricted Cash at End of Year $ 631 $ 617 $ 1,139 $ 14 $ (522) Xerox 2024 Annual Report 57 Table of Contents Legal Sign-off 2.24.25 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 XFS’s strategy to focus on leasing of Xerox equipment. These impacts were partially offset by higher originations from increased equipment sales. Refer to Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables. • $266 million increase from inventory primarily due to the prior year increase in inventory as compared to reductions in inventory in the current year reflecting increased sales of equipment and supplies. • $43 million increase from accounts receivable due to the lower quarterly revenues partially offset by the timing of collections. • $22 million increase from lower contributions to our retirement plans mainly due to additional contributions to our U.K. defined benefit pension plan not required in 2023. • $14 million increase from accrued compensation related to the year-over-year timing of payments. • $568 million decrease from accounts payable primarily due to the timing of supplier and vendor payments and lower year-over-year spending. • $141 million decrease from other current and long-term liabilities mainly attributable to the timing of payments of higher year-end accruals. • $29 million decrease from higher installs of equipment on operating leases. Cash Flows from Investing Activities 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. 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. 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 $931 million decrease in the use of cash from 2023 was due to the following: Xerox 2024 Annual Report 58 Table of Contents Legal Sign-off 2.24.25 • $536 million decrease primarily due to the share repurchase from Icahn and Affiliated Parties in 2023. • $393 million decrease from net debt activity. 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. 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 2023. The $846 million of payments on secured financing arrangements includes the early repayments of $270 million for U.S. secured borrowings. • $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. 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. 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. The $846 million of payments on secured financing arrangements includes the early repayments of $270 million for U.S. secured borrowings. Distributions to Xerox Holdings were $202 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. Net cash used in financing activities for Xerox Holdings was $1,202 million for the year ended December 31, 2023. The $380 million increase in the use of cash from 2022 was primarily 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. • $51 million decrease from net debt activity. 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. 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. 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. Net cash used in financing activities for Xerox was $1,207 million for the year ended December 31, 2023. 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. 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. The $846 million of payments on secured financing arrangements includes the early repayments of $270 million for U.S. secured borrowings. 2022 reflects proceeds Xerox 2024 Annual Report 59 Table of Contents Legal Sign-off 2.24.25 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. 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. Cash, Cash Equivalents and Restricted Cash Refer to Note 14 - Supplementary Financial Information in the Consolidated Financial Statements for additional information regarding restricted cash. Operating Leases We have operating leases for real estate and vehicles in our domestic and international operations and for certain equipment in our domestic operations. 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 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. 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 The following summarizes our total debt: December 31, (in millions) 2024 2023 Xerox Holdings Corporation $ 2,038 $ 1,500 Xerox Corporation 1,343 1,450 Xerox - Other Subsidiaries (1) 70 361 Subtotal - Principal debt balance 3,451 3,311 Debt issuance costs Xerox Holdings Corporation (19) (6) Xerox Corporation (11) (12) Xerox - Other Subsidiaries (1) — (1) Subtotal - Debt issuance costs (30) (19) Net unamortized (discount) premium (22) (15) Total Debt $ 3,399 $ 3,277 _____________ (1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of finance receivables. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt activity. Xerox 2024 Annual Report 60 Table of Contents Legal Sign-off 2.24.25 Finance Assets and Related Debt We provide lease equipment financing to our customers. Our lease contracts permit customers to pay for equipment over time rather than at the date of installation. Our investment in these contracts is reflected in total finance assets, net. We primarily fund our customer financing activity through cash generated from operations, cash on hand, sales and securitizations of finance receivables and proceeds from capital markets offerings. We have arrangements, in certain international countries where third-party leasing companies or financial institutions independently provide lease financing directly to our customers, on a non-recourse basis to Xerox. In these arrangements, we sell and transfer title of the equipment to these entities. 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. The following represents our total finance assets, net associated with our lease and finance operations: December 31, (in millions) 2024 2023 Total finance receivables, net (1) $ 1,745 $ 2,510 Equipment on operating leases, net 245 265 Total Finance assets, net (2) $ 1,990 $ 2,775 ____________ (1) Includes (i) Billed portion of finance receivables, net, (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in our Consolidated Balance Sheets. (2) The change from December 31, 2023 includes an increase of $70 million due to currency. Our lease contracts permit customers to pay for equipment over time rather than at the date of installation; therefore, we maintain a certain level of debt (that we refer to as financing debt) to support our investment in these lease contracts, which are reflected in Total finance receivables, net. For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets. Approximately 45% of our Total Finance assets, net balance at December 31, 2024 includes indirect lease financing primarily provided to end-user customers who purchased Xerox and non-Xerox equipment sold through distributors, resellers and dealers. Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt: December 31, (in millions) 2024 2023 Finance receivables debt (1) $ 1,527 $ 2,196 Equipment on operating leases debt 214 232 Financing debt 1,741 2,428 Core debt 1,658 849 Total Debt $ 3,399 $ 3,277 _____________ (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. 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 Xerox 2024 Annual Report 61 Table of Contents Legal Sign-off 2.24.25 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 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. 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. 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 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. Icahn and certain of his affiliates pursuant to which the Company agreed to purchase an aggregate of approximately 34 million shares of the Company’s common stock for an aggregate purchase price of approximately $542 million, exclusive of fees and expenses. Refer to Note 22 - Shareholders' Equity in the Consolidated Financial Statements for additional information regarding our share repurchases. Dividends Aggregate dividends of $128 million, $146 million, and $159 million were declared on common stock in 2024, 2023 and 2022, respectively. The decrease in dividends since 2022 primarily reflects lower shares of common stock outstanding as a result of our share repurchase programs. 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. Xerox 2024 Annual Report 62 Table of Contents Legal Sign-off 2.24.25 Liquidity and Financial Flexibility We manage our worldwide liquidity using internal cash management practices, which are subject to (i) the statutes, regulations and practices of each of the local jurisdictions in which we operate, (ii) the legal requirements of the agreements to which we are a party and (iii) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services. Our principal debt maturities are in line with historical and projected cash flows and are spread over the next five years as follows: (in millions) Xerox Holdings Corporation Xerox Corporation Xerox - Other Subsidiaries (1) Total 2025 - Q1 $ — $ 34 $ 18 $ 52 2025 - Q2 — 35 17 52 2025 - Q3 388 34 17 439 2025 - Q4 — 35 15 50 2026 — 151 3 154 2027 — 55 — 55 2028 750 55 — 805 2029 500 344 — 844 2030 and thereafter 400 600 — 1,000 Total $ 2,038 $ 1,343 $ 70 $ 3,451 _____________ (1) Represents subsidiaries of Xerox Corporation. Refer to Note 15 - Debt in the Consolidated Financial Statements for additional information regarding our debt. Pension and Retiree Health Benefit Plans We sponsor defined benefit pension plans and retiree health plans that require periodic cash contributions. Our 2024 cash contributions for these plans were $127 million for our defined benefit pension plans and $18 million for our retiree health plans. In 2025, based on current actuarial calculations, we expect to make contributions of approximately $140 million to our worldwide defined benefit pension plans and $20 million to our retiree health benefit plans. Approximately $85 million of estimated contributions for 2024 are for our U.S. tax-qualified defined benefit plans. However, once the next actuarial valuations and projected results are available, actual contributions required to meet minimum funding requirements will be determined and finalized and may change from the current estimate. 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 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. Our retiree health benefit plans are unfunded and are primarily related to our U.S. and Canada operations. 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. FUJIFILM Business Innovation Corp. We purchased products, including parts and supplies, from FUJIFILM Business Innovation Corp. totaling $886 million, $933 million, and $1,175 million in 2024, 2023 and 2022, respectively. Our product supply agreements with FUJIFILM Business Innovation Corp. are designed to support the entire product lifecycle, end-to-end, including the availability of spare parts, consumables and technical support throughout the time such products are with our customers. Our purchase orders under such agreements are made in the normal course of business and typically have a lead time of three months. Xerox 2024 Annual Report 63 Table of Contents Legal Sign-off 2.24.25 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 HCL (1) $ 550 5 Years TCS (1) 460 7 Years Microsoft 118 7 Years SAP 51 7 Years Verizon 97 5 Years _____________ (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 Refer to Note 20 - Contingencies and Litigation in the Consolidated Financial Statements for additional information regarding our other contingencies and commitments. Xerox 2024 Annual Report 64 Table of Contents Legal Sign-off 2.24.25 Off-Balance Sheet Arrangements We may occasionally utilize off-balance sheet arrangements in our operations (as defined by the SEC Financial Reporting Release 67 (FRR-67), “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations”). We enter into the following arrangements that have off-balance sheet elements: • We have a facility in Europe where we sell certain accounts receivables on a recurring basis. Refer to Note 7 - Accounts Receivable, Net in the Consolidated Financial Statements for further information regarding accounts receivable sales. • 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. As of December 31, 2024, we do not believe we have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. In addition, refer to Note 20 - Contingencies and Litigation in the Consolidated Financial Statements for additional information regarding contingencies, guarantees, indemnifications and warranty liabilities. Xerox 2024 Annual Report 65 Table of Contents Legal Sign-off 2.24.25 Non-GAAP Financial Measures We have reported our financial results in accordance with generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures described below. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related income tax effects. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our Consolidated Financial Statements prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth below. Adjusted Earnings Measures • Adjusted Net Income and Earnings per share (Adjusted EPS) • Adjusted Effective Tax Rate The above measures were adjusted for the following items: Restructuring and related costs, net: Restructuring and related costs, net include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges. Restructuring consists of costs primarily related to severance and benefits paid to employees pursuant to formal restructuring and workforce reduction plans. Asset impairment includes costs incurred for those assets sold, abandoned or made obsolete as a result of our restructuring actions, exiting from a business or other strategic business changes. Additional costs for our transformation programs are primarily related to the implementation of strategic actions and initiatives and include third-party professional service costs as well as one-time incremental costs. All of these costs can vary significantly in terms of amount and frequency based on the nature of the actions as well as the changing needs of the business. Accordingly, due to that significant variability, we will exclude these charges since we do not believe they provide meaningful insight into our current or past operating performance nor do we believe they are reflective of our expected future operating expenses as such charges are expected to yield future benefits and savings with respect to our operational performance. Amortization of intangible assets: The amortization of intangible assets is driven by our acquisition activity which can vary in size, nature and timing as compared to other companies within our industry and from period to period. The use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods. 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. Accordingly, we consider these elements of our periodic retirement plan costs to be outside the operational performance of the business or legacy costs and not necessarily indicative of current or future cash flow requirements. This approach is consistent with the classification of these costs as non-operating in Other expenses, net. 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 Xerox 2024 Annual Report 66 Table of Contents Legal Sign-off 2.24.25 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, 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 • 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) 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. Constant Currency (CC) 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. Xerox 2024 Annual Report 67 Table of Contents Legal Sign-off 2.24.25 Adjusted Net Income and EPS Reconciliation Year Ended December 31, 2024 2023 2022 (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) Adjustments: Inventory-related impact - exit of certain production print manufacturing operations (3) 51 — — Accelerated share vesting — — 21 Goodwill impairment 1,058 — 412 Restructuring and related costs, net 112 167 65 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 Tax indemnification - Conduent — (7) — (Gain) Loss on early extinguishment of debt (2) 10 5 Income tax on Goodwill impairment (4) (43) — — Income tax on PARC donation (4) — (40) — Deferred tax asset valuation allowance (4) 169 — — Income tax on adjustments (4) (70) (38) (55) Adjusted $ 135 $ 0.97 $ 287 $ 1.82 $ 189 $ 1.12 Dividends on preferred stock used in adjusted EPS calculation (3) $ 14 $ 14 $ 14 Weighted average shares for adjusted EPS (5) 126 151 157 Estimated fully diluted shares at December 31, 2024 (6) 127 _____________ (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. (5) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude 7 million shares associated with our Series A Convertible preferred stock. (6) Represents common shares outstanding at December 31, 2024, plus potential dilutive common shares used for the calculation of adjusted diluted earnings per share for the year ended December 31, 2024. Excludes shares associated with our Series A convertible preferred stock, which were anti-dilutive for the year ended December 31, 2024. Xerox 2024 Annual Report 68 Table of Contents Legal Sign-off 2.24.25 Adjusted Effective Tax Rate Reconciliation Year Ended December 31, 2024 2023 2022 (in millions) Pre-Tax (Loss) Income Income Tax Expense Effective Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Reported (1) $ (1,216) $ 105 (8.6) % $ (28) $ (29) 103.6 % $ (325) $ (3) 0.9 % Goodwill impairment (2) 1,058 43 — — 412 17 PARC donation (2) — — 132 40 — — Deferred tax asset valuation allowance — (169) — — — — Non-GAAP Adjustments (2) 342 70 232 38 154 38 Adjusted (3) $ 184 $ 49 26.6 % $ 336 $ 49 14.6 % $ 241 $ 52 21.6 % _____________ (1) Pre-tax Loss and Income tax expense (benefit). (2) Refer to Adjusted Net Income and EPS reconciliation for details. (3) The tax impact on Adjusted Pre-Tax Income is calculated under the same accounting principles applied to the Reported Pre-Tax Loss under ASC 740, which employs an annual effective tax rate method to the results. Adjusted Operating Income and Margin Reconciliation Year Ended December 31, 2024 2023 2022 (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 Adjustments: 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) % Adjustments: Inventory impact related to the exit of certain Production Print manufacturing operations (1) 51 — — Reinvention Costs 12 — — Accelerated share vesting — — 21 Goodwill impairment 1,058 — 412 Restructuring and related costs, net 112 167 65 Amortization of intangible assets 73 43 42 Divestitures 47 — — PARC donation — 132 — Transaction and related costs, net 7 — — Other expenses, net (2)(3) 158 75 60 Adjusted $ 302 $ 6,221 4.9 % $ 389 $ 6,886 5.6 % $ 275 $ 7,107 3.9 % _____________ (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