What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-04 · 480 added, 503 removed, 344 unchanged (74% of the section changed)

8 unchanged sentences

Throughout this MD&A, references are made to various notes in the Condensed Consolidated Financial Statements which appear in Item 1 of this combined Quarterly Report on Form 10-Q (this Form 10-Q), 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 solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies.

At December 31, 2023 Xerox Ventures, LLC held investments of $26 million.

In January 2024, Myriad Ventures Fund I LP (Myriad) was established, and the investments held by Xerox Ventures, LLC were transferred to Myriad, which will continue to be fully consolidated by Xerox Holdings.

At September 30, 2024 Myriad had investments of approximately $41 million.

Xerox Holdings' other direct subsidiary is Myriad Ventures Fund I LP (Myriad), which was established solely to invest in startups and early/mid-stage growth companies aligned with the Company’s innovation focus areas and targeted adjacencies.

Myriad is fully consolidated by Xerox Holdings.

At March 31, 2025 and December 31, 2024 Xerox Ventures, LLC held investments of $39 million and $40 million, respectively.

Due to its immaterial nature, and for ease of discussion, Xerox Ventures LLC's results are included within the following discussion.

7 unchanged sentences

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

In the third quarter of 2024, the benefits of Reinvention drove improved financial results, albeit at a slower pace than expected.

Third quarter 2024 included a second consecutive period of moderating revenue declines, year over year improvements in adjusted 1 operating income and income margin, and more than 100 percent free cash flow 2 conversion from adjusted 1 operating income.

Further, the pending acquisition of ITsavvy is expected to improve our mix of revenue from complementary, value-added businesses with higher underlying rates of revenue growth.

Equipment sales of $339 million in the third quarter 2024 declined 12.2% in actual and constant currency 1 , as compared to the third quarter 2023.

The effects of fluctuations in backlog 3 in the prior and current years and other Reinvention actions drove approximately 4.0-percentage points of the year-over-year decline.

The remainder of the decline primarily reflects the delayed global launch of two new products, lower-than-expected improvements in sales force productivity, delays in the timing of installations associated with Hurricane Helene, unfavorable mix, and a large Production equipment sale in the prior year.

Total equipment installations increased approximately 17.0% year-over-year, due to growth in entry level equipment.

Post-sale revenue of $1.2 billion declined 6.1% in actual currency, or 5.7% in constant currency 1 , as compared to third quarter 2023.

The decline was primarily due to lower outsourcing and service revenue, intentional reductions in non-strategic revenue, and the effects of geographic simplification.

Excluding non-strategic effects, post sale revenue decreased low-single digits.

Pre-tax loss of approximately $1.1 billion for the third quarter 2024 decreased by approximately $1.2 billion as compared to pre-tax income of $64 million in the third quarter 2023.

Third quarter 2024 includes a pre-tax, non-cash goodwill impairment charge of $1.1 billion ($1.0 billion after-tax) or $8.16 per diluted share.

As a result of a sustained market capitalization below our book value and current results, in the third quarter 2024 we performed a

In the first quarter balanced execution, the benefits of last year’s Reinvention-related organizational changes and ongoing Reinvention initiatives resulted in an improved revenue trajectory and another quarter of double-digit declines in operating expenses, excluding one-time Reinvention costs and the impact from the recent acquisition of ITsavvy.

Sales productivity and services metrics have improved, and the ITsavvy integration and cost reduction programs are running ahead of Plan, placing us on a near-term path for revenue stabilization and growth in adjusted 1 operating income.

Equipment sales of $284 million in the first quarter 2025 declined 2.1% in actual currency, or 0.7% in constant currency 1 , as compared to the first quarter 2024, an improvement in the pace of decline compared to recent quarters.

The decline primarily reflects product mix and reductions in high-end installations, due to exit of certain production print manufacturing operations in the prior year.

Total equipment installations increased approximately 24.0% year-over-year, due primarily to growth in entry level equipment and modest growth in mid-range equipment.

Post sale revenue of $1.2 billion declined 3.2% in actual currency, or 1.2% in constant currency 1 , as compared to first quarter 2024.

First quarter 2025 post sale revenue included an 8.2-percentage point benefit from the recent acquisition of ITsavvy.

Excluding ITsavvy, post-sale revenue declined 11.4% in actual currency.

The decline was primarily due to lower managed print services 2 revenue.

Reinvention-related actions, and lower financing revenue also contributed to the decline.

Excluding these effects, excluding growth in legacy IT Solutions’ backlog 3 , post sale revenue declined low single digits.

Pre-tax loss of $67 million for the first quarter 2025 improved by approximately $83 million as compared to a pre-tax loss of $150 million in the first quarter 2024.

Pre-tax loss margin improved 5.4% for the first quarter 2025 as compared to the first quarter 2024 and included a 0.6-percentage point benefit from the recent acquisition of ITsavvy.

Further benefiting the first quarter 2025 was the exit of certain production print manufacturing operations in the prior year period and sales of certain direct business operations in Latin America, which resulted in a net disposal loss of $54 million in the first quarter 2024, lower Restructuring and related costs, net, as well as lower Selling, administrative and general expenses associated with productivity and cost savings related to the

Xerox 2025 Form 10-Q 42

quantitative assessment of Goodwill.

Although operating results and related cash flows are expected to sequentially improve in the fourth quarter 2024, and in 2025, we see greater risk to our previous outlooks and estimates, at least in the near term.

This impact and the resulting effect on discounted future cash flows, continued to negatively impact the Company’s valuation resulting in the goodwill impairment charge for the third quarter 2024.

The decrease associated with this charge was partially offset by an increase in adjusted 1 operating income.

Adjusted 1 operating income increased by $12 million as compared to third quarter 2023, reflecting lower Selling, administrative and general expenses associated with actions taken to simplify our organization, Research, development and engineering expenses (RD&E), and partially offset by lower equipment and post sale revenue and associated gross profits.

Company's Reinvention.

These benefits were partially offset by higher Other expenses, net, primarily reflecting fees associated with the recently completed debt offering, and lower revenue and associated gross profit.

Adjusted 1 operating income of $22 million decreased by $11 million as compared to first quarter 2024, reflecting lower revenue and gross profit, as well as higher advertising expense, partially offset by productivity and cost savings related to the Company's Reinvention, lower bad debt expense and favorable currency.

____________________________

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

(2) Free cash flow is defined as Net cash provided by operating activities less capital expenditures.

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

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

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

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

Goodwill - Quantitative Impairment Evaluation

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

During the third quarter 2024, we identified events and conditions that required a quantitative assessment of Goodwill.

Refer to Note 1 - Basis of Presentation in the Condensed Consolidated Financial Statements for additional information regarding the assessment of Goodwill.

It includes print-related devices as well as IT hardware associated with our IT Solutions offerings.

Recent Developments

Based on tariffs in place on May 1, 2025, we believe that Xerox’s current exposure to purchases subject to reciprocal tariffs in the U.S., excluding China, is less than 10% of total company cost of sales.

Following ongoing adjustments in manufacturing capacity, product purchases imported to the U.S.

and subject to all forms of China tariffs is expected to be limited to a low single digit percentage of cost of sales by the end of 2025, impacting only select equipment, parts, and supplies.

Plans are in place today to shift most China-produced goods to countries with lower tariffs.

Revenues from Print Services and Financing, which is more than 60% of total Print revenue, has minimal reliance on imported products.

In IT Solutions, tariff exposure varies by OEM partner, and we expect associated costs to be fully passed through to end users.

Based on tariffs in place on May 1, 2025, the expected reduction in operating income, net of price and supply chain mitigation measures already in place or planned, associated with incremental tariff costs, would be approximately $50 million in 2025.

If China tariffs are reduced from 145% to 60%, we expect to be able to offset the impact of tariffs through a comprehensive set of price increases, surcharges, geographic rebalancing and supply chain-related mitigation efforts, as well as incremental Reinvention-related savings.

We are working with supplier partners to minimize tariff-related cost increases and will monitor client sentiment and demand in response to price increases or surcharges used to mitigate the financial impact of future tariffs.

Pending Acquisition of Lexmark

We continue to make progress toward the closing of Lexmark International II (Lexmark) (the Lexmark Acquisition).

We received several key regulatory approvals in the past few months, including clearance of HSR in the US, anti-trust clearance in the UK and Canada and the clearance of most major EU countries’ Foreign Direct Investment regulatory processes.

Remaining approvals are expected in the second quarter 2025.

Outside of country-specific approvals, the last significant condition to close is the Ninestar shareholder vote and Chinese securities exchange approval, which is expected to take place in the coming months.

We have secured 32% of the required shareholder vote as part of the acquisition agreement and we currently expect closing to occur during the third quarter 2025.

We continue to expect adjusted 1 earnings and EPS accretion associated with the Lexmark Acquisition, despite a slightly higher than expected cost of funding and the potential for incremental tariff expenses.

Importantly, based on U.S.

tariffs currently proposed, we expect no impact from tariffs on Lexmark’s branded business within a few quarters of acquisition close.

Lexmark has a large manufacturing facility in Juarez, Mexico that can support all expected imports of branded product into the U.S.

market on a USMCA compliant basis.

During the first quarter of 2025, the Company updated its determination of reportable segments to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies.

As such, it was determined that there are two reportable segments - Print and Other, and IT Solutions.

Prior to this change, the company had two reportable segments - Print and Other, and Xerox Financial Services (XFS).

As a result of this change, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.

Refer to Note 4 - Segment Reporting in the condensed consolidated financial statements for additional information regarding this change.

Valuation Allowance

During the third quarter 2024, a valuation allowance was recorded primarily related to certain deferred tax assets in a non-U.S tax jurisdiction.

During the first quarter 2025, a valuation allowance was recorded primarily related to certain deferred tax assets in the United States.

Refer to Note 1 - Basis of Presentation in the Condensed Consolidated Financial Statements for additional information regarding the valuation allowance.

In March 2024, Xerox completed the sales of its direct business operations in Argentina and Chile to Grupo Datco.

Refer to Note 6 - Divestitures in the Condensed Consolidated Financial Statements for additional information regarding these sales.

Xerox 2024 Form 10-Q 48

Total revenue of $1.53 billion for third quarter 2024 decreased 7.5% from third quarter 2023, which included a 0.2-percentage point unfavorable impact from currency.

Total revenue of $4.61 billion for the nine months ended September 30, 2024 decreased 10.0% as compared to the prior year period, with no impact from currency.

Net (loss) income and adjusted 1 Net income were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2024 2023 B/(W) 2024 2023 B/(W)

Net (Loss) Income $ (1,205) $ 49 $ (1,254) $ (1,300) $ 59 $ (1,359)

Adjusted (1) Net income

____________________________

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

Xerox 2025 Form 10-Q 43

Total revenue of $1.46 billion for the three months ended March 31, 2025 decreased 3.0% as compared to the prior year period, including a 6.6-percentage point benefit from the recent acquisition of ITSavvy, partially offset by 1.9-percentage point unfavorable impact from currency.

Total revenue reflected a decrease of 3.2% in Post sale revenue, including a 2.0-percentage point unfavorable impact from currency, and a decrease of 2.1% in Equipment sales revenue, including a 1.4-percentage point unfavorable impact from currency.

Net loss and adjusted 1 Net (loss) income were as follows:

Three Months Ended March 31,

(in millions) 2025 2024 B/(W)

Net Loss $ (90) $ (113) $ 23

Adjusted (1) Net (Loss) Income

____________________________

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

Third quarter 2024 Net (loss) was $(1,205) million as compared to the third quarter 2023 Net income of $49 million.

The decrease in Net income of $1,254 million primarily reflects the after-tax non-cash Goodwill impairment charge of $1,015 million ($1,058 million pre-tax) in the third quarter 2024, as well as lower revenue and gross profit, higher Other expenses, net, which included the impacts of higher non-service retirement-related costs, higher Restructuring and related costs, net, and higher Income tax expense.

These negative impacts were partially offset by lower Selling, administrative and general expenses and Research, development and engineering expenses (RD&E).

Third quarter 2024 Adjusted 1 Net income of $34 million decreased $43 million as compared to the prior year period, primarily reflecting lower revenue and gross profit, as well as higher Other expenses, net, and Income tax expense.

These negative impacts were partially offset by lower Selling, administrative and general expenses, and RD&E.

Net (loss) for the nine months ended September 30, 2024 was $(1,300) million as compared to the prior year period Net income of $59 million.

The decrease in Net income of $1,359 million primarily reflects the after-tax non-cash Goodwill impairment charge of $1,015 million ($1,058 million pre-tax) in the third quarter 2024, as well as lower revenue and gross profit, higher Other expenses, net, which included the impacts of higher non-service retirement-related costs, higher Income tax expense, higher Restructuring and related costs, net, the loss from divestitures of certain direct business operations in Latin America, and the exit of certain production print manufacturing operations.

These negative impacts were partially offset by lower Selling, administrative and general expenses and lower RD&E.

A djusted 1 Net income for the nine months ended September 30, 2024 of $86 million decreased $145 million as compared to the prior year period, 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, lower RD&E, and lower Income tax expense.

First quarter 2025 Net loss was $90 million as compared to the first quarter 2024 Net loss of $113 million.

Net loss was lower by $23 million primarily reflecting a divestiture of certain direct business operations in Latin America and the exit of certain production print manufacturing operations, both in the prior year.

The lower level of (loss) also reflects lower Restructuring and related costs, net, Selling, administrative and general expenses, and Research, development and engineering expenses (RD&E).

These positive impacts were partially offset by higher Income tax expense, lower revenues, higher Other expenses, net and lower gross profit.

First quarter 2025 adjusted 1 Net loss of $4 million increased by $15 million as compared to the prior year period, 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, Income tax expense and RD&E.

____________________________

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

The following is a summary of our segments - Print and Other and Xerox Financial Services (XFS) :

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2024 2023 % Change 2024 2023 % Change

The following is a summary of our segments - Print and Other and IT Solutions :

Three Months Ended March 31,

(in millions) 2025 2024 % Change

Print and Other $ 1,294 $ 1,428 (9.4) %

XFS 88 98 (10.2) % 268 301 (11.0) %

IT Solutions 164 74 121.6 %

Total Segment revenue 1,458 1,502 (2.9) %

Intersegment Elimination (1)

(17) (21) (19.0) % (55) (65) (15.4) %

Corporate Other — — NM

Total Revenue $ 1,457 $ 1,502 (3.0) %

Print and Other $ 1,253 $ 1,370 (8.5) %

XFS 13 4 nm 17 22 (22.7) %

IT Solutions 159 75 112.0 %

Total Segment expenses 1,412 1,445 (2.3) %

Intersegment Elimination (1)

Corporate Other 24 24 — %

Total Expenses $ 1,435 $ 1,469 (2.3) %

Print and Other $ 41 $ 58 (29.3) %

IT Solutions 5 (1) NM

Total Segment profit 46 57 (19.3) %

Corporate Other (24) (24) — %

Total Profit $ 22 $ 33 (33.3) %

____________________________

(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.

(1) Reflects primarily IT hardware, software solutions and services revenues, sold by the IT Solutions segment to the Print and Other segment.

(2) Reflects primarily costs related to the sale of IT hardware, software solutions and services by the IT Solutions segment, to the Print and Other segment.

Xerox 2025 Form 10-Q 44

Cash flows from operating activities during the nine months ended September 30, 2024 was a source of $160 million and decreased $137 million as compared to the prior year period, 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 $511 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 .

Cash used in investing activities during the nine months ended September 30, 2024 was $26 million, reflecting capital expenditures of $27 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 during the nine months ended September 30, 2024 was $149 million reflecting net payments of approximately $658 million on Senior Notes due in 2024 and 2025, $211 million on secured financing arrangements, $18 million for debt issuance costs, and $21 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 $107 million and purchases of capped calls were $23 million in connection with the issuance of Convertible Senior Notes.

Cash flows from operating activities during the three months ended March 31, 2025 were a use of $89 million and decreased $10 million as compared to the prior year period.

The decrease primarily related to lower net proceeds from the on-going sales of finance receivables under the finance receivables funding agreements, which were partially offset by the timing of working capital 1 , and lower finance receivable originations.

Cash provided by investing activities during the three months ended March 31, 2025 was $6 million, reflecting $19 million related to the sale of a surplus facility, $3 million related to a change in lease classification for certain vehicles, and $5 million from a divestiture, all of which was partially offset by capital expenditures of $20 million.

Cash used in financing activities during the three months ended March 31, 2025 was $159 million, reflecting net payments of approximately $72 million on secured financing arrangements, approximately $28 million for payments on secured promissory notes, and $7 million on the Term Loan B facility.

Dividend payments were $39 million, and other financing, net was $16 million, reflecting $6 million for repurchases related to stock-based compensation, $5 million related to finance leases, and $4 million for payments of financing commitment fees related to the expected acquisition of Lexmark.

____________________________

(1) Working capital, net reflects Accounts receivable, Billed portion of finance receivables, Inventories and Accounts payable.

Revenue guidance was reduced from a decline of 5% to 6% in constant currency 1 to a decline of about 10% in constant currency 1 , reflecting the incremental effects of intentional reductions in non-strategic revenue and lower equipment revenue associated with the delayed global launch of two new products and lower-than-expected improvements in sales force productivity.

Adjusted 1 operating income guidance was reduced from at least 6.5% to about 5.0%, reflecting the effects of gross profit declines associated with the decline in revenue guidance, and to a lesser extent, delays in the implementation of certain cost reduction initiatives to 2025.

Operating cash flows are now expected to be to be within a range of $490 million to $540 million, versus prior guidance of at least $600 million, reflecting the after-tax effects of the reduction in adjusted 1 operating income guidance.

We now expect capital expenditures to be approximately $40 million, as compared to previous guidance of approximately $50 million.

Due to lower-than-expected revenue in 2024, we no longer expect to grow adjusted 1 operating income $300 million above 2023 levels by 2026.

However, we continue to expect growth in adjusted 1 operating income and a return to double-digit adjusted 1 operating income margin over the course of our Reinvention.

Given the evolving and fluid nature of proposed tariff policies, and the uncertain impact of future policy outcomes on macroeconomic conditions, we have not adjusted our full-year outlook.

We continue to expect Revenue to grow at low single-digits in constant currency 1 , inclusive of a full year of revenue associated with the recent ITsavvy acquisition, and adjusted 1 operating income margin is expected to be at least 5.0%.

We also continue to expect operating cash flows to be between $420 million to $470 million, and capital expenditures to be approximately $70 million in 2025.

Guidance does not include any impact from the pending acquisition of Lexmark.

Guidance further excludes potential adverse effects of tariff and trade policy, and the resultant impact on the macroeconomic outlook for the second half of the year, as tariff rates and trade policy remain fluid and unpredictable.

We currently expect minimal tariff-related impacts to our financial results in the second quarter of 2025.

____________________________

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30, % of Total Revenue

(in millions) 2024 2023 % Change CC % Change 2024 2023 % Change CC % Change 2024 2023

March 31, % of Total Revenue

(in millions) 2025 2024 % Change CC % Change 2025 2024

Equipment sales $ 284 $ 290 (2.1) % (0.7) % 19 % 19 %

1 unchanged sentence

Total Revenue $ 1,457 $ 1,502 (3.0) % (1.1) % 100 % 100 %

Reconciliation to Condensed Consolidated Statements of (Loss) Income):

Reconciliation to Condensed Consolidated Statements of Loss:

Sales $ 557 $ 523 6.5 % 8.7 %

IT products (1)

(105) (47) 123.4 % 122.2 %

Supplies, paper and other sales (168) (186) (9.7) % (5.9) %

Equipment sales $ 284 $ 290 (2.1) % (0.7) %

Services, maintenance and rentals $ 902 $ 962 (6.2) % (6.1) % $ 2,768 $ 2,975 (7.0) % (7.0) %

Services, maintenance, rentals and other (2)(3)

$ 900 $ 979 (8.1) % (6.4) %

IT products (1)

105 47 123.4 % 122.2 %

Supplies, paper and other sales 168 186 (9.7) % (5.9) %

Financing 38 46 (17.4) % (17.6) % 118 147 (19.7) % (19.9) %

Post sale revenue

1 unchanged sentence

Print and Other $ 1,294 $ 1,428 (9.4) % (7.6) % 89 % 95 %

Xerox Financial Services (XFS) 88 98 (10.2) % 268 301 (11.0) % 6 % 6 %

IT Solutions 164 74 121.6 % 124.8 % 11 % 5 %

Intersegment elimination (4)

(17) (21) (19.0) % (55) (65) (15.4) % (1) % (1) %

(1) — NM NM — % — %

Total Revenue (5)

2 unchanged sentences

CC - See "Currency Impact" section for a 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.

(1) IT Products reflect IT hardware and software solutions provided by the IT Solutions segment.

Refer to Reportable Segments - IT Solutions for further information.

(2) Includes financing revenue generated from direct and indirectly financed Xerox equipment sale transactions of $33 million and $42 million for the three months ended March 31, 2025 and 2024, respectively.

(3) Services, maintenance, rentals and other revenue include IT services support of $58 million and $27 million for the three months ended March 31, 2025 and 2024, respectively, provided by our IT Solutions segment.

(4) Primarily reflects IT hardware, software solutions and hardware sold by the IT Solutions segment to the Print and Other segment.

(5) Refer to Note 4 - Segment Reporting in the Condensed Consolidated Financial Statements for additional information regarding our reportable segments.

Third quarter 2024 total revenue decreased 7.5% as compared to third quarter 2023, and included a 0.2-percentage point adverse impact from currency, while total revenue for the nine months ended September 30, 2024 decreased 10.0%, with no impact from currency.

The decrease in equipment sales revenue at constant currency 1 for the three months ended September 30, 2024 was primarily attributable to a delay in the global launch of two new products, lower-than-expected improvements in sales productivity, unfavorable mix, and a large production equipment sale in the third quarter 2023.

Equipment sales revenue for the three months ended September 30, 2024 was also impacted by the effects of backlog fluctuations in the current and prior year quarters, and non-strategic reductions in revenue, including geographic simplification.

For the nine months ended September 30, 2024, equipment sales revenue was primarily impacted by lower-than-expected improvements in sales productivity and unfavorable mix, as well as the effects of backlog fluctuations in the current and prior year quarters, and non-strategic reductions in revenue, including geographic simplification.

Third quarter 2024 Post sale revenue decreased at constant currency 1 due to a decline in contractual print services 2 revenue, driven by lower service and outsourcing revenue, and reductions in lower margin IT endpoint device placements.

These negative impacts were partially offset by higher supplies revenue and digital and managed IT services revenue.

For the nine months ended September 30, 2024, Post sale revenue decreased at constant currency 1 primarily due to the decline in Contractual print services 2 driven by lower service and outsourcing revenue, and reductions in lower margin IT endpoint device placements, as well as the termination of Fuji royalty income and PARC revenue, lower paper sales, lower Finance income, and the effects of geographic simplification.

These negative impacts were partially offset by higher supplies revenue and digital and managed IT services revenue.

Total revenue for the three and nine months ended September 30, 2024 reflected the following:

First quarter 2025 total revenue decreased 3.0% as compared to first quarter 2024, and included a 1.9-percentage point adverse impact from currency.

First quarter 2025 total revenue also included a 6.6-percentage point benefit from the recent acquisition of ITsavvy.

First quarter 2025 equipment sales revenue decreased at constant currency 1 , and included a 0.9-percentage point adverse impact from the exit of certain production print manufacturing operations in the prior year period and the effects of geographic simplification, partially offset by a reduction in backlog 3 .

First quarter 2025 Post sale revenue decreased at constant currency 1 and included an 8.2-percentage point benefit from the recent acquisition of ITsavvy.

The decrease was due to a decline in managed print services 2 revenue, driven by lower outsourcing and print service revenue, and lower supplies.

Post sale revenue declines also reflect intentional reduction in non-strategic revenue, such as paper and financing income, and the effects of geographic and offering simplification.

These impacts were partially offset by higher IT Solutions revenue, driven by the ITsavvy acquisition, and modest growth in digital services revenue.

____________________________

(1) See "Currency Impact" section for a description of Constant Currency.

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

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

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

It includes print-related devices as well as IT hardware associated with our IT Solutions offerings.

Xerox 2025 Form 10-Q 46

Total revenue for the three months ended March 31, 2025 reflected the following:

Post sale revenue

Post sale revenue reflects revenues from Contractual print services 2 , supplies and financing.

Post sale revenue reflects revenues from managed print services 2 , supplies, paper and financing.

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

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

Post sale revenue decreased 6.1% as compared to third quarter 2023, which included a 0.4-percentage point adverse impact from currency, while Post sale revenue decreased 7.7% for the nine months ended September 30, 2024 as compared to the prior year period, with no impact from currency.

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

Post sale revenue decreased 3.2% as compared to the first quarter of 2024, which included a 2.0-percentage point adverse impact from currency.

First quarter 2025 total Post sale revenue included an 8.2-percentage point benefit from the recent acquisition of ITsavvy.

Post sale revenue reflected the following:

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

For the three months ended September 30, 2024, these revenues decreased 6.2% as compared to third quarter 2023, which included a 0.1-percentage point adverse impact from currency, while for the nine months ended September 30, 2024 these revenues decreased 7.0% as compared to the prior year period, with no impact from currency.

The decline at constant currency 1 for both the three and nine months ended September 30, 2024, respectively, was primarily due to Contractual print services 2 declines.

Contractual print services 2 revenue declined mid-single digits for the three and nine months ended September 30, 2024 as compared to the respective prior year periods, driven by lower outsourcing and service revenue, which includes the effects of geographic simplification, which were partially offset by higher digital and IT managed services, as well as gains, commissions, and servicing revenue on sales of finance receivables.

The decline for the nine months ended September 30, 2024 was also driven by the termination of Fuji royalty income and PARC revenue.

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

For the three months ended September 30, 2024, these revenues decreased 3.5% as compared to third quarter 2023, including a 1.2-percentage point adverse impact from currency, while for the nine months ended September 30, 2024 the revenues decreased 8.1% as compared to the prior year period with no impact from currency.

The decline at constant currency 1 for both the three and nine months ended September 30, 2024, respectively, primarily reflected lower sales of non-strategic, lower margin IT endpoint device placements and paper sales, as well as the effects of geographic simplification.

The decline in both periods was partially offset by higher supplies revenue.

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

These revenues decreased 17.4% as compared to third quarter 2023, including a 0.2-percentage point benefit from currency.

Financing revenue for the nine months ended September 30, 2024 decreased 19.7% as compared to the prior year period, including a 0.2-percentage point benefit from currency.

The decline at constant currency 1 for both the three and nine months ended September 30, 2024, respectively, reflects a continued reduction of the average finance receivables balance in 2024 as a result of the sales of finance receivables in recent quarters to HPS Investment Partners (HPS), as well as lower originations.

Finance receivables are approximately $630 million lower as of September 30, 2024 when compared with September 30, 2023.

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

For the three months ended March 31, 2025, these revenues decreased 8.1% as compared to first quarter of 2024, which included a 1.7-percentage point adverse impact from currency.

First quarter 2025 revenues included a 3.3-percentage point benefit from the recent acquisition of ITsavvy.

The decline in constant currency 1 was primarily due to managed print services 2 revenue which declined high-single digits as compared to first quarter 2024, reflecting lower outsourcing and print service revenue, which includes the effects of geographic and offering simplification, and lower financing revenue.

Lower financing revenue reflects a continued reduction of the average finance receivable balance in the first quarter 2025 as a result of the sales of finance receivables in recent quarters to HPS Investment Partners (HPS), and De Lage Landen Financial Services Canada Inc., and De Lage Landen Financial Services France Inc.

These impacts were partially offset by higher IT Solutions services revenue, driven by the ITsavvy acquisition, and modest growth in digital services revenue.

• IT products revenue includes the sale of notebooks, network communications and other endpoint devices, desktop computers and other IT hardware.

Software product sales include deployments of cloud and security solutions, endpoint security application suites, operating systems, other applications and network management solutions.

First quarter 2025 revenues increased 123.4% as compared to first quarter 2024, and included a 1.2-percentage point benefit from currency.

First quarter 2025 revenues included a 143.8-percentage point benefit from the recent acquisition of ITsavvy.

Excluding the impact of ITsavvy, IT products revenues decreased 20.4% in actual currency as compared to first quarter 2024 due to growth in legacy IT Solutions’ backlog 3 , the timing of large product placements in the prior year, a larger mix of revenue subject to deferred revenue recognition, and lower in-period billings in certain legacy IT Solutions regions.

• Supplies, paper and other sales revenue includes unbundled supplies, paper and other sales.

For the three months ended March 31, 2025, these revenues decreased 9.7% as compared to the first quarter of 2024, which included a 3.8-percentage point adverse impact from currency.

The decline in constant currency 1 primarily reflects lower paper sales as a result of the sale of our European paper business and lower supplies revenue.

Equipment sales revenue

Equipment sales revenue decreased 12.2% as compared to third quarter 2023, with no impact from currency.

The decrease in constant currency 1 was primarily attributable to a delay in the global launch of two new products, lower-than-expected improvements in sales productivity, unfavorable mix, and a large production equipment sale in the prior year.

Equipment sales revenue was also impacted by the effects of backlog fluctuations in the current and prior year quarters, and non-strategic reductions in revenue, including geographic simplification.

Revenue declined across all product groups, and was most pronounced in Mid-range, driven by declines in entry production color products.

For the nine months ended September 30, 2024 Equipment sales revenue decreased 17.7%, with no impact from currency.

The decrease in constant currency 1 was primarily impacted by lower-than-expected improvements in sales productivity, unfavorable mix, as well as the effects of backlog fluctuations in the current and prior year quarters, and non-strategic reductions in revenue, including offering and geographic simplification.

Revenue declined across all product groups, and was most pronounced in Mid-range, driven by declines in A3 color multi-function printers.

Equipment sales revenue decreased 2.1% as compared to the first quarter of 2024, which included a 1.4-percentage point adverse impact from currency.

The decrease in constant currency 1 was primarily attributable to the exit of certain production print manufacturing operations in the prior year and Reinvention-related actions, including geographic simplification, partially offset by a reduction in backlog 3 .

Revenue declines for Entry and High-End products were partially offset by growth in Mid-Range.

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

1 unchanged sentence

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

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

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

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

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

It includes print-related devices as well as IT hardware.

Xerox 2025 Form 10-Q 47

2 unchanged sentences

The following is a summary of key financial ratios used to assess our performance:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2024 2023 B/(W) 2024 2023 B/(W)

Three Months Ended March 31,

(in millions) 2025 2024 B/(W)

Gross Profit $ 426 $ 443 $ (17)

RD&E 45 52 7 144 173 29

SAG 378 397 19

Equipment Gross Margin 27.9 % 31.0 % (3.1) pts.

31.4 % 34.3 % (2.9) pts.

Post sale Gross Margin 29.6 % 29.1 % 0.5 pts.

31.7 % 33.4 % (1.7) pts.

Total Gross Margin 29.2 % 29.5 % (0.3) pts.

31.6 % 33.6 % (2.0) pts.

RD&E as a % of Revenue 2.9 % 3.3 % 0.4 pts.

3.1 % 3.4 % 0.3 pts.

SAG as a % of Revenue 25.9 % 26.4 % 0.5 pts.

25.2 % 24.5 % (0.7) pts.

Pre-tax (Loss) Income $ (1,087) $ 64 $ (1,151) $ (1,212) $ 60 $ (1,272)

Pre-tax (Loss) Income Margin (71.1) % 3.9 % (75.0) pts.

(26.3) % 1.2 % (27.5) pts.

Adjusted (1) Operating Income

Pre-tax Loss $ (67) $ (150) $ 83

Pre-tax Loss Margin (4.6) % (10.0) % 5.4 pts.

Adjusted (1) Operating profit

$ 22 $ 33 $ (11)

Adjusted (1) Operating Income Margin

5.2 % 4.1 % 1.1 pts.

Adjusted (1) Operating Margin

1.5 % 2.2 % (0.7) pts.

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

Third quarter 2024 gross margin of 32.4% was flat as compared to third quarter 2023, primarily reflecting lower revenue and gross profit, higher transportation costs, as well as unfavorable equipment mix and lower print volumes.

These impacts were offset by the benefits associated with recent cost and productivity actions, and favorable currency.

Gross margin for the nine months ended September 30, 2024 of 31.6% decreased by 2.0-percentage points as compared to the prior year period, reflecting lower revenue and gross profit, primarily due to charges associated with the exit of certain production print manufacturing operations, which had a 1.0-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 cost and productivity actions and favorable currency.

Third quarter 2024 Equipment gross margin of 28.5% decreased by 2.5-percentage points as compared to third quarter 2023, reflecting lower revenue and gross profit, higher transportation costs, and the release of a tariff accrual in the prior year period.

These impacts were partially offset by favorable currency.

Equipment gross margin for the nine months ended September 30, 2024 of 31.4% decreased by 2.9-percentage points as compared to the prior year period, reflecting lower revenue and gross profit, higher product and transportation costs, and the release of a tariff accrual in the prior year period.

These impacts were partially offset by favorable currency.

Third quarter 2024 Post sale gross margin of 33.5% increased by 0.6-percentage points as compared to third quarter 2023, reflecting the benefits associated with recent Reinvention-related cost and productivity actions and favorable currency.

These benefits were partially offset by lower revenue and gross profit, including lower page volumes.

Post sale gross margin for the nine months ended September 30, 2024 of 31.7% decreased by 1.7-percentage points as compared to the prior year period, reflecting lower revenue and gross profit, including lower page volumes, and charges associated with the Company's Reinvention, primarily related to the exit of certain production print manufacturing operations, which had a 1.2-percentage point unfavorable impact on gross margin.

Higher transportation costs also adversely impacted gross margin.

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

Xerox 2024 Form 10-Q 53

First quarter 2025 gross margin of 29.2% decreased 0.3-percentage points as compared to first quarter of 2024, which included a 0.7-percentage point adverse impact related to our recent acquisition of ITsavvy.

Excluding the impact of ITsavvy, the increase primarily reflects charges associated with the Company's Reinvention, primarily related to the exit of certain production print manufacturing operations, which had a 0.5-percentage point unfavorable impact on gross margin in the first quarter 2025 as compared to a 2.4-percentage point unfavorable impact on gross margin in the first quarter 2024, and the benefits associated with recent Reinvention-related cost and productivity actions.

These benefits were partially offset by lower revenue and gross profit, including lower page volumes, and finance receivable-related fees, product cost increases and tariff-related costs.

First quarter 2025 Equipment gross margin of 27.9% decreased by 3.1-percentage points as compared to first quarter of 2024.

The decrease reflects lower revenue and gro ss profit, and higher product and incremental tariff-related costs.

These impac ts were partially offset by lower freight costs, Reinvention-related cost and productivity actio ns, and favorable mix.

First quarter 2025 Post sale gross margin of 29.6% increased by 0.5-percentage points as compared to first quarter of 2024, primarily reflecting charges associated with the Company's Reinvention, primarily related to the exit of certain production print manufacturing operations, which had a 0.6-percentage point unfavorable impact on gross margin in the first quarter 2025 as compared to 3.0-percentage point unfavorable impact on gross margin in the first quarter 2024, as well as benefits associated with recent Reinvention-related cost and productivity actions.

These benefits were partially offset by lower revenue, including lower page volumes and finance receivable-related fees, and lower gross profit, including higher product and incremental tariff-related costs.

First quarter 2025 post sale gross margin also included a 0.9-percentage point adverse impact related to our recent acquisition of ITsavvy.

Research, Development and Engineering Expenses (RD&E)

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2024 2023 Change 2024 2023 Change

Three Months Ended March 31,

(in millions) 2025 2024 Change

R&D $ 29 $ 37 $ (8)

1 unchanged sentence

Total RD&E Expenses $ 42 $ 49 $ (7)

Third quarter 2024 RD&E as a percentage of revenue of 2.9% decreased 0.2-percentage points as compared to third quarter 2023, primarily due to lower revenues and lower RD&E.

RD&E as a percentage of revenue for the nine months ended September 30, 2024 of 3.1% decreased by 0.3-percentage points as compared to the prior year period, primarily due to the strategic decision to donate PARC in second quarter 2023.

Third quarter 2024 RD&E of $45 million decreased $7 million as compared to third quarter 2023.

For the nine months ended September 30, 2024 RD&E of $144 million decreased $29 million as compared to the prior year period.

The decrease, as compared to the respective prior year periods, 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 within Print, Digital and IT Services.

The decrease for the nine months ended September 30, 2024 also reflected the strategic decision to donate PARC in second quarter 2023.

First quarter 2025 RD&E as a percentage of revenue of 2.9% decreased 0.4-percentage points as compared to first quarter 2024, as reductions in RD&E spending outpaced revenue declines.

First quarter 2025 RD&E of $42 million decreased $7 million as compared to first quarter 2024, primarily due to productivity and cost savings related to the Company's Reinvention.

Xerox 2025 Form 10-Q 48

Selling, Administrative and General Expenses (SAG)

Third quarter 2024 SAG as a percentage of revenue of 24.2% decreased by 1.0-percentage points as compared to third quarter 2023, primarily due to lower revenue, as well lower selling and other administrative and general expenses.

Third quarter 2024 SAG of $370 million decreased by $46 million as compared to third quarter 2023, primarily reflecting productivity and cost savings related to the Company's Reinvention, and lower incentive compensation expenses.

SAG as a percentage of revenue for the nine months ended September 30, 2024 of 25.2% increased by 0.7-percentage points as compared to the prior year period, 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 for the nine months ended September 30, 2024 of $1,160 million decreased by $96 million as compared to the prior year period, primarily reflecting productivity and cost savings related to the Company's Reinvention, as well as, lower incentive compensation expense, lower IT, litigation, 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 and unfavorable currency.

The bad debt provision for the third quarter 2024 of $10 million was flat as compared to the third quarter 2023, and includes a reserve release of approximately $8 million due in part to a lower finance receivables balance, as a result of sales of finance receivables in recent quarters to HPS Investment Partners, mostly offset by an increased provision for aged accounts receivables.

The bad debt provision for nine months ended September 30, 2024 of $35 million, increased by $18 million as compared to the prior year period.

The increase reflects a reserve release in the prior year period 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, both of which were offset by a reserve release of approximately $8 million, in the current year, due in part to a lower finance receivables balance, as a result of sales of finance receivables in recent quarters to HPS Investment Partners.

First quarter 2025 SAG as a percentage of revenue of 25.9% decreased by 0.5-percentage points as compared to first quarter 2024, including a 1.0-percentage point benefit from the acquisition of ITsavvy, as reductions in SAG spending outpaced revenue decline.

First quarter 2025 SAG of $378 million decreased by $19 million as compared to first quarter 2024, primarily reflecting productivity and cost savings related to the Company's Reinvention, lower bad debt expense, and favorable currency.

These benefits were partially offset by expenses related to the recent acquisition of ITsavvy, and the expected acquisition of Lexmark, other Reinvention-related investments, as well as advertising and incentive compensation expense.

The bad debt provision for the first quarter 2025 of $9 million decreased by $6 million as compared to the first quarter 2024 due primarily to a lower finance receivable balance, reflecting sales of finance receivables in recent quarters to HPS Investment Partners and DLL.

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 September 30, 2024, on a trailing twelve-month basis, bad debt expense (excluding the reserve release in the third quarter 2024) was approximately 1.6% of total receivables, as compared to approximately 1.0% for the prior year comparable period, primarily due to a lower finance receivables balance, as well the reserve release of approximately $8 million in third quarter 2024.

As of March 31, 2025, on a trailing twelve-month basis, bad debt expense was 1.7% of total receivables, as compared to approximately 1.5% for the prior year comparable period.

Refer to Note 6 - Accounts Receivable, Net and Note 7 - Finance Receivables, Net in the Condensed Consolidated Financial Statements for additional information regarding our bad debt provision.

Xerox 2024 Form 10-Q 54

Restructuring and Related Costs, Net

We incurred Restructuring and related costs, net of $56 million for the third quarter 2024, as compared to $10 million for the third quarter 2023, and $107 million for the nine months ended September 30, 2024, as compared to $35 million in the prior year period.

Charges incurred during 2024 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.

Third quarter 2024 actions impacted several functional areas, with approximately 65% focused on gross margins improvements, approximately 30% focused on SAG reductions, and the remainder focused on RD&E optimization.

Third quarter 2023 actions impacted several functional areas, with approximately 80% focused on SAG reductions and approximately 20% focused on RD&E optimization.

The Restructuring and related costs, net reserve balance for all programs as of September 30, 2024 was $132 million, of which $112 million is expected to be paid over the next twelve months.

Restructuring and related costs, net for the first quarter 2025 resulted in a net credit of $(1) million, as compared to $39 million for the first quarter 2024.

First quarter 2025 and 2024 restructuring actions were related to Reinvention initiatives under our Reinvention and other transformation programs to reduce and realign our cost structure to the changing nature of our business, and included the following:

Three Months Ended

(in millions) 2025 2024

Restructuring and severance costs

Asset impairments - leased ROU assets (1)

Net asset impairments - owned assets (1)

Other contractual termination costs (2)

Reversals (3)

Restructuring and asset impairment costs

Retention-related severance/bonuses (4)

Consulting and other costs (5)

Restructuring and related costs, net

_____________

(1) Primarily related to the sale, exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries.

Asset impairments of owned assets include cash proceeds resulting from asset sales of $19 million for the first quarter 2025.

(2) Primarily includes additional costs incurred upon the exit from our facilities, including decommissioning costs and associated contractual termination costs.

(3) Reversals of prior charges primarily include net changes in estimated reserves from initiatives accrued for in prior periods, including Reinvention.

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

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

First quarter 2025 actions impacted several functional areas, with approximately 30% focused on gross margins improvements, approximately 60% focused on SAG reductions, and the remainder focused on RD&E optimization.

First quarter 2024 actions mainly impacted gross margin improvements.

The Restructuring and related costs, net reserve balance for all programs as of March 31, 2025 was $102 million, of which $74 million is expected to be paid over the next twelve months.

Refer to Note 10 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.

Xerox 2025 Form 10-Q 49

Worldwide Employment

Worldwide employment was approximately 17,300 as of September 30, 2024, a decrease of approximately 2,800 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).

Worldwide employment was approximately 17,600 as of March 31, 2025, an increase of approximately 800 since December 31, 2024.

The increase was primarily due to the impact from gross hires, partially offset by impact of the Company's Reinvention, which includes the effects of workforce reduction decisions.

Other Expenses, Net

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2025 2024

2 unchanged sentences

Non-service retirement-related costs 18 23

Gains on sales of businesses and assets (2) (35) (3) (37)

Currency losses, net — 11

Tax indemnification - Conduent — (7) — (7)

Transaction related costs, net (15) — (38) —

(Gain) loss on early extinguishment of debt — — (3) 3

Commitment fee expense 18 —

Gain on early extinguishment of debt — (3)

Gain on release of contingent consideration — (5)

2 unchanged sentences

Non-Financing Interest Expense

Third quarter 2024 non-financing interest expense of $31 million was $17 million higher than third quarter 2023.

Non-financing interest expense for the nine months ended September 30, 2024 of $88 million was $48 million higher than the prior year period.

The respective increase in both periods is primarily due to higher interest rates on new debt issued in the first quarter of 2024, partially offset by a lower average debt balance as a result of the repayment of Senior Notes in 2022 and in the first quarter 2023.

When non-financing interest is combined with financing interest expense (Cost of financing) for the three months ended September 30, 2024, total interest expense increased by $13 million as compared to third quarter 2023, while for the nine months ended September 30, 2024, total interest expense of $170 million increased by $30 million from the prior year period.

The respective increase in both periods reflects the impact of higher interest rates on new debt partially offset by a lower average debt balance, due in part to the reduction of the average finance receivables balance, due to the sales of finance receivables to HPS Investment Partners, as well as lower originations.

First quarter 2025 non-financing interest expense of $33 million was $7 million higher than first quarter 2024.

The increase is primarily due to a higher average interest rate and a lower portion of debt allocated to XFS, which reflects a reduction in the average finance receivables balance associated with the sales of finance receivables in recent quarters to HPS Investment Partners and DLL Canada and France, as well as lower originations.

When non-financing interest is combined with equipment financing interest expense, total interest expense increased by $2 million as compared to the first quarter 2024.

This reflects the impact of higher interest rates on new debt, partially offset by a lower average debt balance.

Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity and interest expense.

Non-Service Retirement-Related Costs

Xerox 2024 Form 10-Q 55

Third quarter 2024 non-service retirement-related costs of $25 million were $21 million higher than the third quarter 2023, while non-service retirement-related costs of $74 million for the nine months ended September 30, 2024 were $60 million higher than the prior year period.

The respective increase in both periods is primarily due to an increase in actuarial losses subject to amortization, as well as a decrease in the expected return on plan assets.

First quarter 2025 non-service retirement-related costs of $18 million were $5 million lower than the first quarter 2024, primarily due to an increase in actuarial losses subject to amortization, partially offset by a decrease in settlement costs due to the absence of settlement expense in the current year.

Refer to Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.

Gains on sales of businesses and assets

For the three and nine months ended September 30, 2024, gains on sales of businesses and assets decreased $33 million and $34 million, respectively, as compared to their respective prior year periods, due to the sales of non-core surplus business assets in the prior year period.

Currency losses, net

For the three and nine months ended September 30, 2024, currency losses, net decreased $4 million and $7 million, respectively, as compared to their respective prior year periods, primarily due to the prior period sales of our Russian subsidiary, and our direct business operations in Argentina.

Tax Indemnification - Conduent

Third quarter 2023 credit represents the reversal of a payable to Conduent of an IRS refund Xerox was expected to receive with the settlement of a pre-separation unrecognized tax position.

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 expense.

Transaction and related costs, net

Transaction and related costs, net primarily reflect costs from third party providers for professional services associated with certain major or strategic M&A projects.

For the three and nine months ended September 30, 2024, Transaction and related costs, net reflect insurance proceeds related to a legal settlement, for the reimbursement of certain legal and other professional costs, associated with a past potential merger.

(Gain) loss on early extinguishment of debt

The (gain) on early extinguishment of debt of $(3) million for the nine months ended September 30, 2024 reflects a $(4) million (gain) on the repayment of Senior Notes (via tender offer) in the first quarter of 2024, partially offset by a loss of approximately $1 million on the write-off of deferred debt issuance costs.

The loss on early extinguishment of debt of $3 million for the nine months ended September 30, 2023 related to the early repayment on secured borrowings and the termination of our $250 million Credit Facility prior to entering into our 5-year Asset Based Lending (ABL) Facility.

For the three months ended March 31, 2025, currency losses, net were $11 million lower as compared to the first quarter 2024.

The reduction of losses was driven by lower currency volatility, particularly against the Egyptian pound, in addition to prior period sales of our direct business operations in Argentina, Chile & Peru.

Commitment fee expense

First quarter 2025 commitment fee expense primarily reflects fees associated with the recently completed private offering of $400 million in aggregate principal amount of 10.250% Senior Secured First Lien Notes and $400 million aggregate principal amount of 13.500% Senior Secured Second Lien Notes Due in 2031.

Gain on early extinguishment of debt

First quarter 2024 gain on early extinguishment of debt of $3 million reflects a $4 million gain on the repayment of Senior Notes (via tender offer) in the first quarter of 2024, partially offset by a loss of approximately $1 million on the write-off of deferred debt issuance costs.

Gain on release of contingent consideration

The gain on the release of contingent consideration of $5 million for the nine months ended September 30, 2024 reflects a reserve release related to earn-out provisions which were not met, in connection with a prior acquisition.

Pre-tax (Loss) Income Margin

Third quarter 2024 pre-tax (loss) margin of (71.1)% increased 75.0-percentage points, as compared to third quarter 2023 pre-tax income margin of 3.9%.

The increase was due to the pre-tax non-cash goodwill impairment charge of $1,058 million, as a result of a sustained market capitalization below our book value, current results and expected future projections.

In addition, the pre-tax (loss) margin also reflects lower revenue and associated gross profit, higher Restructuring and related costs, net, as well as higher Other expenses, net.

These impacts were partially offset by lower Selling, administrative and general expenses.

Pre-tax (loss) margin of (26.3)% for the nine months ended September 30, 2024 increased 27.5-percentage points, as compared to the prior year period pre-tax income margin of 1.2%.

The increase was primarily due to the pre-tax goodwill non-cash impairment charge of $1,058 million recorded in the third quarter 2024.

In addition, the pre-tax (loss) margin also reflects lower revenues and associated gross profit, higher Restructuring and related costs, net, the divestitures of certain direct business operations in Latin America, the exit of certain production print manufacturing operations, as well as 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, and lower RD&E expenses.

The gain on the release of contingent consideration of $5 million for the three months ended March 31, 2024 reflects a reserve release related to earn-out provisions which were not met, in connection with a prior acquisition.

Xerox 2025 Form 10-Q 50

Pre-tax Loss Margin

First quarter 2025 pre-tax loss margin of 4.6% increased 5.4-percentage points, as compared to first quarter of 2024 pre-tax loss margin of 10.0% and included a 0.6-percentage point benefit from the recent acquisition of ITsavvy.

The improvement in the first quarter 2025 is a result of the sales of certain direct business operations in Latin America, resulting in a net disposal loss of $54 million in the first quarter 2024, as well as lower Restructuring and related costs, net, and lower Selling, administrative and general expenses associated with productivity and cost savings related to the Company's Reinvention.

These benefits were partially offset by higher Other expenses, net, primarily reflecting fees associated with the recently completed private offering of Senior Secured Notes, and lower revenue and associated gross profit.

Adjusted 1 Operating Margin

Third quarter 2024 adjusted 1 operating income margin of 5.2% increased by 1.1-percentage points as compared to third quarter 2023, primarily reflecting the benefits from Reinvention related cost and productivity actions, lower Selling, administrative and general expenses, including lower incentive compensation expenses, favorable currency, and the spin-off, exit, or shutdown of certain other RD&E related activities or businesses.

These benefits were partially offset by lower revenue and lower gross profit, and higher transportation costs.

Adjusted 1 operating income margin of 4.3% for the nine months ended September 30, 2024 decreased by 1.4-percentage points as compared to prior year period, reflecting lower revenue and lower gross profit, which included higher transportation and product costs, and the termination of Fuji royalty income, as well as 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 second quarter 2023, and the spin-off, exit, or shutdown of certain other RD&E related activities or businesses.

First quarter 2025 adjusted 1 operating income margin of 1.5% decreased by 0.7-percentage points as compared to the first quarter of 2024, which included a 0.5-percentage point benefit from the recent acquisition of ITsavvy.

The decrease also reflected lower revenue and gross profit, which included higher product costs, as well as higher advertising and incentive compensation expense.

These impacts were partially offset by productivity and cost savings related to the Company's Reinvention, lower bad debt expense and favorable currency.

______________

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

Third quarter 2024 effective tax rate was (10.9)%.

This rate was lower than the U.S.

federal statutory tax rate of 21% but resulted in a tax expense, primarily due to the goodwill impairment charge, the establishment of a valuation allowance on certain deferred tax assets including not benefiting related current year losses as well as the geographical mix of earnings.

On an adjusted 1 basis, third quarter 2024 effective tax rate was 27.7%, which was higher than the U.S.

federal statutory tax rate of 21% primarily due to not benefiting certain current year losses and the geographical mix of adjusted earnings, partially offset by the redetermination of certain unrecognized tax positions.

Third quarter 2023 effective tax rate was a 23.4%, which is higher than the U.S.

federal statutory tax rate of 21%, primarily due to the geographical mix of earnings, partially offset by the tax benefits due to redetermination of certain unrecognized tax positions upon conclusion of several audits, and the remeasurement of deferred tax assets.

On an adjusted 1 basis, third quarter 2023 effective tax rate was 7.2%, which is lower than the U.S.

federal statutory tax rate of 21%, primarily due to a tax rate benefit of approximately 15% related to the redetermination of certain unrecognized tax positions upon the conclusion of several audits, as well as the remeasurement of deferred tax assets, partially offset by the geographical mix of adjusted earnings.

The effective tax rate for the nine months ended September 30, 2024 was (7.3)%.

This rate was lower than the U.S.

On an adjusted 1 basis, the effective tax rate for the nine months ended September 30, 2024 was 22.5%, which was higher than the U.S.

The effective tax rate for the nine months ended September 30, 2023 was a 1.7% and includes the loss on the PARC donation as well as the associated tax benefits.

Excluding this impact, the effective tax rate was 21.5%.

On an adjusted 1 basis, the effective tax rate for the nine months ended September 30, 2023 was 14.4%.

The adjusted 1 effective tax rate was lower than the U.S.

federal statutory tax rate of 21% primarily due to a tax rate benefit of approximately 7% related to the redetermination of certain unrecognized tax positions upon the conclusion of several audits, as well as the change in tax filing positions and the remeasurement of deferred tax assets, partially offset by the geographical mix of adjusted earnings.

First quarter 2025 effective tax rate was (34.3)%.

This rate was higher than the U.S.

federal statutory tax rate of 21.0% but resulted in a tax expense, primarily due to the establishment of a valuation allowance against certain deferred tax assets and lower tax benefits of some current year losses and expenses, partially offset by the geographical mix of earnings.

On an adjusted 1 basis, first quarter 2025 effective tax rate was 60.0%, which was higher than the U.S.

federal statutory tax rate of 21.0% primarily due to lower benefits of certain current year losses and expenses.

First quarter 2024 effective tax rate was a 24.7%, which resulted in a tax benefit.

This tax benefit is higher than the

benefit under the U.S.

federal statutory tax rate of 21% due primarily to the redetermination of certain unrecognized

tax positions, primarily offset by geographical mix of earnings, including the mix associated with charges related to

the Company's Reinvention.

On an adjusted 1 basis, first quarter 2024 effective tax rate was (22.2)%, which resulted

in a tax benefit.

The difference between this rate and the U.S.

federal statutory tax rate of 21% primarily reflects tax

benefits from the redetermination of certain unrecognized tax positions offset by the geographical mix of earnings.

The effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income.

4 unchanged sentences

Net (Loss) Income

Third quarter 2024 Net (Loss) was $(1,205) million, or $(9.71) per diluted share, which includes an after-tax non-cash goodwill impairment charge of approximately $1,015 billion (approximately $1,058 billion pre-tax), or $8.16 per diluted share.

In addition, third quarter 2024 includes a tax expense charge of $161 million, or $1.29 per diluted share, related to the establishment of a valuation allowance against certain non-U.S.

tax jurisdiction deferred tax assets to reflect their realizability.

On an adjusted 1 basis, Net Income was $34 million, or $0.25 per diluted share.

Third quarter 2023 Net income was $49 million, or $0.28 per diluted share.

On an adjusted 1 basis, Net Income was $77 million, or $0.46 per diluted share.

Net (Loss) for the nine months ended September 30, 2024 was $(1,300) million, or $(10.55) per diluted share, which includes an after-tax non-cash goodwill impairment charge of approximately $1,015 billion (approximately $1,058 billion pre-tax), or $8.16 per diluted share.

In addition, 2024 includes a tax expense charge of $161 million, or $1.29 per diluted share, related to the establishment of a valuation allowance against certain non-U.S.

tax jurisdiction deferred tax assets to reflect their realizability.

On an adjusted 1 basis, Net Income was $86 million, or $0.60 per diluted share.

Net Income for the nine months ended September 30, 2023 was $59 million, or $0.30 per diluted share, which included the net after-tax PARC donation charge of $92 million ($132 million pre-tax), or $0.58 per diluted share.

First quarter 2025 Net (Loss) was $(90) million, or $(0.75) per diluted share.

On an adjusted 1 basis, Net (Loss) was $(4) million, or $(0.06) per diluted share.

First quarter 2024 Net (Loss) was $(113) million, or $(0.94) per diluted share.

On an adjusted 1 basis, Net Income was $11 million, or $0.06 per diluted share.

Refer to Note 20 - (Loss) Earnings per Share in the Condensed Consolidated Financial Statements for additional information regarding the calculation of basic and diluted (loss) earnings per share.

Refer to Note 19 - Loss per Share in the Condensed 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.

For the calculations of basis and diluted (loss) earnings per share, refer to Note 20 - (Loss) Earnings per Share in the Notes to the Condensed Consolidated Financial Statements.

Other Comprehensive Income (Loss)

Third quarter 2024 Other Comprehensive Income, Net was $173 million and included the following:

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

For the calculations of basis and diluted loss per share, refer to Note 19 - Loss per Share in the Notes to the Condensed Consolidated Financial Statements.

Other Comprehensive Income

First quarter 2025 Other Comprehensive Income, Net was $82 million and included the following:

i) net translation adjustment gains of $105 million reflecting the strengthening of all of our major foreign currencies against the U.S.

Dollar during the quarter;

ii) $5 million of net unrealized gains;

and iii) $24 million of net losses from the changes in defined benefit plans primarily reflecting the negative impact of currency, partially offset by the amortization of actuarial losses, as well as actuarial gains.

This compares to Other Comprehensive Loss, Net of $67 million for the third quarter 2023, which included the following:

i) net translation adjustment losses of $123 million reflecting the weakening of our major foreign currencies against the U.S.

ii) $21 million of net losses from the changes in defined benefit plans primarily reflecting the negative impact of currency, partially offset by the amortization of net actuarial losses;

and iii) $2 million of net unrealized losses.

This compares to Other Comprehensive Income, Net of $3 million for the first quarter 2024, which included the following:

i) $36 million of net gains from the changes in defined benefit plans reflecting the amortization of actuarial losses, the positive impact of currency, and actuarial gains;

ii) net translation adjustment losses of $32 million reflecting the weakening of most of our major foreign currencies against the U.S.

Dollar during the quarter;

ii) $55 million of net gains from the changes in defined benefit plans primarily due to due to net actuarial gains, the positive impact of currency, and the amortization of actuarial losses;

and iii) $1 million of net unrealized gains.

Other Comprehensive Income, Net for the nine months ended September 30, 2024 was $162 million and included the following:

i) net translation adjustment gains of $140 million reflecting the strengthening of the British Pound and the Euro against the U.S.

ii) $18 million of net gains from the changes in defined benefit plans primarily reflecting the amortization of actuarial losses, as well as actuarial gains, partially offset by the negative impact of currency;

and iii) $4 million of net unrealized gains.

This compares to Other Comprehensive Income, Net for the nine months ended September 30, 2023 of $33 million, which included the following:

i) net translation adjustment gains of $19 million reflecting the strengthening of most of our major foreign currencies against the U.S.

and ii) $14 million of net gains from the changes in defined benefit plans primarily due primarily due to net actuarial gains as well as the amortization of actuarial losses, partially offset by the adverse impact of currency and plan remeasurements.

Refer to Note 19 - Other Comprehensive Income (Loss) in the Condensed Consolidated Financial Statements for the components of Other Comprehensive Income (Loss), Note 14 - Financial Instruments in the Condensed Consolidated Financial Statements for additional information regarding unrealized gains (losses), net, and Note 16 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding net changes in our defined benefit plans.

Xerox 2024 Form 10-Q 58

and iii) $1 million of net unrealized losses.

Refer to Note 18 - Other Comprehensive Income in the Condensed Consolidated Financial Statements for the components of Other Comprehensive Income, Note 13 - Financial Instruments in the Condensed Consolidated Financial Statements for additional information regarding unrealized gains (losses), net, and Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding net changes in our defined benefit plans.

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) .

We have two operating and reportable segments – Print and Other and IT Solutions .

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

Segment Review

Three Months Ended September 30,

(in millions) External Revenue Intersegment Revenue (1)

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

Print and Other $ 1,440 $ 17 $ 1,457 94 % $ 67 4.7 %

XFS 88 — 88 6 % 13 14.8 %

Total $ 1,528 $ 17 $ 1,545 100 % $ 80 5.2 %

Print and Other $ 1,554 $ 21 $ 1,575 94 % $ 64 4.1 %

XFS 98 — 98 6 % 4 4.1 %

Total $ 1,652 $ 21 $ 1,673 100 % $ 68 4.1 %

Nine Months Ended September 30,

(in millions) External Revenue Intersegment Revenue (1)

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

Print and Other $ 4,340 $ 55 $ 4,395 94 % $ 181 4.2 %

XFS 268 — 268 6 % 17 6.3 %

Total $ 4,608 $ 55 $ 4,663 100 % $ 198 4.3 %

Print and Other $ 4,820 $ 65 $ 4,885 94 % $ 271 5.6 %

XFS 301 — 301 6 % 22 7.3 %

Total $ 5,121 $ 65 $ 5,186 100 % $ 293 5.7 %

(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.

Three Months Ended March 31,

(in millions) Print and Other IT Solutions Total Segment Intersegment Elimination (1)

Corporate Other (2)

Revenues $ 1,294 $ 164 $ 1,458 $ (1) $ — $ 1,457

% of Total Revenue 89 % 11 % 100 %

Expenses $ 1,253 $ 159 $ 1,412 $ (1) $ 24 $ 1,435

Segment Profit $ 41 $ 5 $ 46 $ — $ (24) $ 22

Segment Margin (3)

3.2 % 3.1 % 1.5 %

Revenues $ 1,428 $ 74 $ 1,502 $ — $ — $ 1,502

% of Total Revenue 95 % 5 % 100 %

Expenses $ 1,370 $ 75 $ 1,445 $ — $ 24 $ 1,469

Segment Profit $ 58 $ (1) $ 57 $ — $ (24) $ 33

Segment Margin (3)

4.1 % (1.4) % 2.2 %

(1) Reflects primarily IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment.

(2) Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to

either of our reportable segments.

(3) Segment margin is based on total revenue.

Xerox 2025 Form 10-Q 52

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.

The Print and Other segment includes the design, development and sale of document management systems, supplies and services as well as financing and technology-related offerings, digital and print-related software products and services.

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2025 2024 %

Change 2024 2023 %

Equipment sales $ 284 $ 290 (2.1)%

Post sale revenue (1)

Intersegment revenue (1)

1,010 1,138 (11.2)%

1 unchanged sentence

_____________

(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.

Third quarter 2024 Print and Other segment revenue decreased 7.5% as compared to third quarter 2023, and Print and Other segment revenue decreased 10.0% for the nine months ended September 30, 2024 as compared to the prior year period.

Print and Other segment revenue included the following:

Xerox 2024 Form 10-Q 59

Equipment sales revenue decreased 12.1% during the third quarter 2024 as compared to third quarter 2023, and was primarily attributable to a delay in the global launch of two new products, lower-than-expected improvements in sales productivity, unfavorable mix, and a large production equipment sale in the prior year.

Equipment sales revenue was also impacted by the effects of backlog fluctuations in the current and prior year quarters, and non-strategic reductions in revenue, including geographic simplification.

Revenue declined across all product groups, and was most pronounced in Mid-range, driven by declines in entry production color products.

Equipment sales revenue decreased 17.7% for the nine months ended September 30, 2024 as compared to the prior year period and was primarily impacted by unfavorable mix, as well as the effects of backlog fluctuations in the current and prior year quarters, non-strategic reductions in revenue, including offering and geographic simplification, and lower-than-expected improvements in sales productivity.

Revenue declined across all product groups, and was most pronounced in Mid-range, driven by declines in A3 color multi-function printers.

Post sale revenue decreased 5.8% during the third quarter 2024 as compared to third quarter 2023, primarily due to the decline in contractual print services 1 revenue.

Contractual print services 1 revenue declined mid-single digits as compared to third quarter 2023, driven by lower service and outsourcing revenue, as well as reductions in non-strategic, lower margin IT endpoint device placements, rental revenue and paper sales, as well as the effects of geographic simplification.

These impacts were partially offset by higher supplies revenue and digital services revenue.

Post sale revenue decreased 7.4% for the nine months ended September 30, 2024 as compared to the prior year period.

Contractual print services 1 revenue declined, driven by lower service and outsourcing revenue, as well as reductions in non-strategic, lower margin IT endpoint device placements and paper sales, as well as the termination of the Fuji royalty income and PARC revenue, and the effects of geographic simplification.

_____________

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

(1) Post sale revenue includes financing revenue generated from direct and indirectly financed Xerox equipment sale transactions of $33 million and $42 million for the three months ended March 31, 2025 and 2024, respectively.

First quarter 2025 Print and Other segment revenue decreased 9.4% as compared to first quarter of 2024 and included the following:

Equipment sales revenue decreased 2.1% as compared to the first quarter of 2024, which included a 1.4-percentage point adverse impact from currency.

Revenue declines for Entry and High-End products were partially offset by growth in Mid-Range.

Post sale revenue decreased 11.2% as compared to the first quarter of 2024, which included a 2.0-percentage point adverse impact from currency.

The decrease in constant currency 1 was primarily due to a decline in managed print services 2 revenue.

Managed print services 2 revenue declines reflect lower outsourcing and print service revenue, including the effects of geographic and offering simplification.

Post sale declines also reflect lower supplies and intentional reductions in non-strategic revenue, including paper and financing income.

These impacts were partially offset by modest growth in digital services revenue.

(1) Refer to the “Currency Impact” section for a description of constant currency.

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

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

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

It includes print-related devices.

Detail by product group is shown below.

Three Months Ended

September 30, Nine Months Ended

September 30, % of Equipment Sales

March 31, % of Equipment Sales

(in millions) 2025 2024 %

CC % Change 2024 2023 % Change CC % Change 2024 2023

CC % Change 2025 2024

Entry $ 43 $ 45 (4.4)% (4.2)% 15% 15%

7 unchanged sentences

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

(2) Includes equipment sales related to the XFS segment of $4 million and $5 million for the three months ended September 30, 2024 and 2023, respectively, and $14 million and $17 million for the nine months ended September 30, 2024 and 2023, respectively.

The change at constant currency 1 reflected the effects of non-strategic reductions in revenue, including offering and geographic simplification, as well as the following:

• Entry - The decrease for the three months ended September 30, 2024 reflects declines in color and a mix toward black-and-white installs.

The decrease for the nine months ended September 30, 2024 primarily reflects higher backlog reductions in the prior year period, as well as constraints in Entry, A4 devices during the first quarter of 2024.

• Mid-range - The decrease for the three months ended September 30, 2024 reflects declines in color, driven primarily by a mix within color toward lower-price A3 color devices.

The decrease for the nine months ended September 30, 2024 reflects higher backlog reductions in the prior year period, as well as declines in color devices.

• High-end - The decrease for the three months ended September 30, 2024 was primarily due to lower color installations, and an unfavorable mix toward black-and-white.

The decrease for the nine months ended September 30, 2024 was primarily due to higher backlog reductions in the prior year period, as well as lower an unfavorable mix toward black-and-white.

The change at constant currency 1 reflects the decision to the exit certain production print manufacturing operations made in the prior year period and the effects of geographic simplification, as well as the following:

• Entry - The decrease for the three months ended March 31, 2025 reflects a higher mix of black-and-white installs and a higher mix of sales to indirect channel partners.

• Mid-range - The increase for the three months ended March 31, 2025 reflects growth in color installations.

Black-and-white Mid-range revenue grew compared to the first quarter 2024 despite lower installs driven by favorable product family mix.

• High-end - The decrease for the three months ended March 31, 2025 was primarily due to lower High-end color installations, and the exit certain production print manufacturing operations in the prior year period.

_____________

4 unchanged sentences

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.

Installs include activity for Xerox and non-Xerox branded products installed by XBS.

Detail by product group (see Products and Offerings Definitions ) is shown below.

Installs for the three months ended September 30, 2024 as compared to prior year period reflect the following:

• 4% decrease in entry color installs, driven by declines in Entry Color Printers, partially offset by growth in A4 Color MFPs.

• 34% increase in entry black-and-white installs, driven by growth in A4 Mono MFPs.

• 3% increase in mid-range color installs driven by growth in A3 Color MFPs, partially offset by declines in Entry Production Color Low.

• 12% decrease in mid-range black-and-white installs driven primarily by A3 Mono MFPs.

Installs for the three months ended March 31, 2025, as compared to the prior year period, reflect the following:

• 18% increase in entry color installs, driven by growth in A4 Color MFPs and Entry Color Printers.

• 39% increase in entry black-and-white installs, driven by growth in A4 Mono MFPs and Entry Mono Printers.

• 11% increase in mid-range color installs driven by growth in A3 Color MFPs and Entry Production Color Low.

• 11% decrease in mid-range black-and-white installs driven by A3 Mono MFPs and Light Production Digital Business.

• 19% decrease in high-end color installs primarily reflecting declines in Entry Production Color Mid and High.

• 29% increase in high-end black-and-white primarily reflecting growth in High End Cut Sheet products.

Installs for the nine months ended September 30, 2024 as compared to prior year period reflect the following:

• 20% decrease in entry color installs, with A4 Color MFPs driving the majority of the decline.

• 11% decrease in entry black-and-white installs, with Entry Mono printers driving the majority of the decline.

• 10% decrease in mid-range color installs, driven primarily by declines in A3 Color MFPs.

• 24% decrease in mid-range black-and-white installs, driven primarily by A3 Mono MFPs.

• 30% decrease in high-end color installs primarily reflecting declines in Entry Production Color Mid.

• 2% decrease in high-end black-and-white reflecting declines in High End Cut Sheet products.

• 67% decrease in high-end black-and-white driven by declines in High End Cut Sheet products.

Products and Offerings Definitions

1 unchanged sentence

• “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.

Segment Expenses

Research, Development and Engineering Expenses (RD&E)

First quarter 2025 RD&E of $42 million decreased $7 million as compared to first quarter 2024, primarily due to productivity and cost savings related to the Company's Reinvention.

Selling, Administrative and General Expenses (SAG)

First quarter 2025 SAG of $322 million decreased by $39 million as compared to first quarter 2024, primarily reflecting productivity and cost savings related to the Company's Reinvention, lower bad debt expense, and favorable currency.

These benefits were partially offset by expenses related to the expected acquisition of Lexmark, other Reinvention-related investments, as well as higher advertising and incentive compensation expense.

Segment Margin

Third quarter 2024 Print and Other segment margin of 4.7% increased by 0.6-percentage points as compared to third quarter 2023, primarily due to lower Selling, administrative and general expenses, including lower incentive compensation expenses, as well as benefits of cost and productivity savings, higher supplies revenue and favorable currency.

This activity was partially offset by lower revenue, higher transportation costs, and the release of a tariff-related accrual in the prior year period.

Print and Other segment margin of 4.2% for the nine months ended September 30, 2024 decreased 1.4-percentage points as compared to the prior year period.

The decrease is primarily due to lower revenue, higher transportation and product costs, and higher bad debts expense.

These adverse impacts were partially offset by lower Selling and other administrative and general expenses, and lower RD&E expense, as well as higher supplies revenue, favorable currency, and the benefits of cost and productivity savings.

First quarter 2025 Print and Other segment margin of 3.2% decreased by 0.9-percentage points as compared to first quarter of 2024, primarily due to lower revenue and gross profit, impacted by higher product and incremental tariff-related costs.

These impacts were partially offset by lower Selling, administrative and general expenses (SAG) and Research, development and engineering expenses (RD&E), lower freight costs, as well as Reinvention-related cost and productivity actions.

Xerox 2025 Form 10-Q 54

Xerox Financial Services

Xerox Financial Services (XFS) represents a global financing solutions business, primarily enabling the sale of our equipment and services.

The IT Solutions segment provides clients with global infrastructure technology solutions, with a focus on delivering business outcomes through a frictionless sales and service delivery experience.

IT Solutions’ offerings include the provision of hardware, software and associated services as well as product lifecycle, deployment and network monitoring services, and managed services.

It is comprised of our recent acquisition of ITsavvy, as well as our Canadian IT Services provider Powerland, and our legacy XBS IT solutions.

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2025 2024 %

Change 2024 2023 %

Equipment sales $ 4 $ 5 (20.0)% $ 14 $ 17 (17.6)%

Financing 38 46 (17.4)% 118 147 (19.7)%

Other Post sale revenue (1)

IT Products (1)

$ 105 $ 47 123.4%

Total XFS Revenue $ 88 $ 98 (10.2)% $ 268 $ 301 (11.0)%

IT Services (2)

Intersegment revenue (3)

Total IT Solutions $ 164 $ 74 121.6%

_____________

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

Third quarter 2024 XFS segment revenue decreased 10.2% as compared to third quarter 2023, and for the nine months ended September 30, 2024 segment revenue decreased 11.0% as compared to the prior year period and reflected the following:

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

For the three months ended September 30, 2024, these revenues decreased 17.4% as compared to third quarter 2023, including a 0.2-percentage point benefit from currency.

Financing revenue for the nine months ended September 30, 2024 decreased 19.7% as compared to the prior year period, including a 0.2-percentage point benefit from currency.

Finance receivables are approximately $630 million lower in September of 2024 as compared to September of 2023.

Other Post sale revenue decreased 2.1% as compared to third quarter 2023, and for the nine months ended September 30, 2024 decreased 0.7% as compared to the prior year period, 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 were $10 and $7 for the three months ended September 30, 2024 and 2023, respectively, and $31 and $21 for the nine months ended September 30, 2024 and 2023, respectively .

(1) IT Products reflect the sale of IT hardware and software solutions, Hardware product sales include the sale of notebooks, network communications and other endpoint devices, desktop computers and other IT hardware.

Software product sales include deployments of cloud and security solutions, endpoint security application suites, operating systems, other applications and network management solutions.

(2) IT Services reflect revenue associated with the implementation of IT solutions, including product lifecycle, deployment and network monitoring services, and other managed IT services.

(3) Reflects primarily IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment.

First quarter 2025 XFS segment revenue increased 121.6% as compared to first quarter of 2024, and reflected the following:

IT Products revenue increased 123.4% during the three months ended March 31, 2025 as compared to first quarter of 2024, primarily due to the ITsavvy acquisition, partially offset by growth in legacy IT Solutions’ backlog 1 , the timing of large product placements in the prior year, a larger mix of revenue subject to deferred revenue recognition, and lower in-period billings in certain legacy IT Solutions regions.

IT Services revenue increased 114.8% during the three months ended March 31, 2025 as compared to the first quarter of 2024, primarily due to the ITsavvy acquisition.

____________________________

(1) Refer to the “Currency Impact” section for a description of constant currency.

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

It includes IT hardware associated with our IT Solutions offerings.

Segment Expenses

Selling, Administrative and General Expenses (SAG)

First quarter 2025 SAG of $23 million increased by $11 million as compared to first quarter 2024, primarily due to the recent acquisition of ITsavvy, as well as higher incentive compensation expense.

Segment Margin

Third quarter 2024 XFS segment margin of 14.8% increased 10.7-percentage points as compared to third quarter 2023.

Segment profit for XFS was $9 million higher as compared to third quarter 2023 mainly due to lower Selling administrative and general expenses, as well as a lower bad debt provision, partially offset by lower revenues from reduced assets.

XFS segment margin of 6.3% for the nine months ended September 30, 2024 decreased 1.0-percentage points as compared to the prior year period.

Segment profit for XFS was $5 million lower as compared to the prior year period mainly due to lower revenue from reduced assets and higher bad debt expense of $12 million as compared to the prior year period.

These adverse impacts were partially offset by lower administrative and general expenses.

First quarter 2025 IT Solutions segment margin of 3.1% increased 4.5-percentage points as compared to first quarter of 2024, primarily due to the ITsavvy acquisition.

Xerox 2025 Form 10-Q 55

Capital Resources and Liquidity

The following is a summary of our liquidity position:

• As of September 30, 2024 and December 31, 2023, total cash, cash equivalents and restricted cash of Xerox Holdings Corporation were $590 million and $617 million, respectively, and apart from restricted cash of $69 million and $98 million at September 30, 2024 and December 31, 2023, respectively, was readily accessible for use.

The decrease in total cash, cash equivalents and restricted cash of $27 million primarily reflects net cash used in financing activities of $149 million, as well as net cash used in investing activities of $26 million, both of which were partially offset by net cash provided by operating cash activities of $160 million.

• Total debt at September 30, 2024 was $3,271 million, of which $1,963 million is allocated to and supports the Company's finance assets.

The remaining debt of $1,308 million is attributable to the non-financing business and increased from $849 million at December 31, 2023.

Debt consists of senior unsecured notes, secured borrowings through the securitization of finance assets, and borrowings under a Term Loan B facility.

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

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

A portion of the aggregate net proceeds were used to repay, via 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 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 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 (A) $31.875 million and (B) 10% of the Line Cap.

Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.

• As of September 30, 2024, there were no borrowings or letters of credit outstanding under our ABL facility, under which we can borrow up to a maximum of $425 million.

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

• As a result of our lowered guidance, we now expect Operating cash flows for 2024 to be within a range of $490 million to $540 million, versus prior guidance of at least $600 million, reflecting the after-tax effects of the reduction in adjusted 1 operating income guidance.

We now expect capital expenditures to be approximately $40 million, as compared to previous guidance of approximately $50 million.

2024 Segment Review

The following are our 2024 segment results, recast for comparison purposes, to reflect the changes made to segment reporting in 2025:

(in millions) Print and Other IT Solutions Total Segment Intersegment Elimination (1)

Corporate Other (2)

Revenues $ 1,428 $ 74 $ 1,502 $ — $ — $ 1,502

Expenses 1,370 75 1,445 — 24 1,469

Segment Profit 58 (1) 57 — (24) 33

Segment Margin (3)

4.1 % (1.4) % 2.2 %

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

Revenues $ 1,494 $ 84 $ 1,578 $ — $ — $ 1,578

Expenses 1,387 83 1,470 — 23 1,493

Segment Profit 107 1 108 — (23) 85

Segment Margin (3)

7.2 % 1.2 % 5.4 %

Revenues $ 1,442 $ 86 $ 1,528 $ — $ — $ 1,528

Expenses 1,339 86 1,425 — 23 1,448

Segment Profit 103 — 103 — (23) 80

Segment Margin (3)

7.1 % — % 5.2 %

Revenues $ 1,500 $ 114 $ 1,614 $ (1) $ — $ 1,613

Expenses 1,372 114 1,486 (1) 24 1,509

Segment Profit 128 — 128 — (24) 104

Segment Margin (3)

8.5 % — % 6.4 %

Revenues $ 5,864 $ 358 $ 6,222 $ (1) $ — $ 6,221

Expenses 5,468 358 5,826 (1) 94 5,919

Segment Profit 396 — 396 — (94) 302

Segment Margin (3)

6.8 % — % 4.9 %

_____________

(1) Reflects primarily IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment.

(2) Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to

either of our reportable segments.

(3) Segment margin is based on total revenue.

The following are reconciliations of our segment profit to our pre-tax (loss) income for 2024:

(in millions) Q1 2024 Q2 2024 Q3 2024 Q4 2024 Full Year 2024

Pre-tax (Loss) Income

Total reported segments $ 33 $ 85 $ 80 $ 104 $ 302

Inventory-related impact - exit of certain production print manufacturing operations (1)

(36) (8) — (7) (51)

Reinvention costs — — — (12) (12)

Goodwill impairment — — (1,058) — (1,058)

Restructuring and related costs, net (39) (12) (56) (5) (112)

Amortization of intangible assets (10) (10) (10) (43) (73)

Divestitures (54) 3 — 4 (47)

Transaction and related costs, net — — — (7) (7)

Other expenses, net (44) (33) (43) (38) (158)

Total Pre-tax (loss) income $ (150) $ 25 $ (1,087) $ (4) $ (1,216)

_____________

(1) As a result of the exit of certain production print manufacturing operations, reflects the inventory-related charges of approximately $32 million in Q1-24, $6 million in Q2-24, and $7 million in Q4-24, as well as the cancellation of related purchase contracts of approximately $4 million in Q1-24, and $2 million in Q2-24.

Xerox 2025 Form 10-Q 56

Capital Resources and Liquidity

The following is a summary of our liquidity position:

• As of March 31, 2025 and December 31, 2024, total cash, cash equivalents and restricted cash of Xerox Holdings Corporation were $390 million and $631 million, respectively, and apart from restricted cash of $54 million and $55 million at March 31, 2025 and December 31, 2024, respectively, was readily accessible for use.

The decrease in total cash, cash equivalents and restricted cash of $241 million reflects net cash used in financing activities of $159 million, as well as net cash used in operating cash activities of $89 million, both of which were partially offset by cash provided by investing activities of $6 million.

• Total debt at March 31, 2025 was $3,298 million, of which $1,651 million is allocated to and supports the Company's finance assets.

The remaining debt of $1,647 million is attributable to the non-financing business and decreased from $1,658 million at December 31, 2024.

Debt consists of senior unsecured notes, secured promissory notes, and borrowings under a Term Loan B facility.

• On April 11, 2025, we prepaid approximately $90 million of the Senior Notes due August 2025 using proceeds from the $400 million aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030 (the First Lien Notes) issued by Xerox Corporation, with the remaining balance of approximately $298 million due on or to prior to maturity in August 2025.

Also on April 11, 2025, we repaid $95 million of aggregate principal amount of borrowings under Xerox Corporation’s first lien senior secured term loan credit facility (the TLB Facility).

The application of the remaining proceeds from the First Lien Notes will be used for general corporate purposes.

Refer to Note 21 - Subsequent Events for additional information related to our Debt activity in second quarter 2025.

• In December 2024, in connection with the Company's pending acquisition of Lexmark International II LLC, 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 unsecured term loan facility (the Jefferies Term Loan Facility).

On March 25, 2025, Xerox announced its intention to replace Jefferies' aggregate commitments for the SUNs and the Jefferies Term Loan Facility with the $400 million aggregate principal amount of 10.25% Senior Secured First Lien Notes Due in 2030 and $400 million aggregate principal amount of 13.50% Senior Secured Second Lien Notes Due in 2031 (collectively, the Notes) and such commitments were terminated following the completion of the offering of the Notes on April 11, 2025.

Xerox Corporation and Xerox Holdings Corporation intend to use the remaining proceeds from these commitments (and/or an equivalent amount of debt securities in lieu thereof), together with cash on hand and drawings under Xerox Corporation's asset-backed revolving credit facility (as needed) to fund the $1.5 billion, inclusive of net debt and other assumed liabilities, purchase price of Lexmark.

• As of March 31, 2025, there were no borrowings under the ABL Facility, and approximately $41 million of letters of credits were issued under the facility.

During the three months ended March 31, 2025, the maximum borrowings under the ABL Facility were $25 million.

• We continue to expect operating cash flows to be between $420 million to $470 million, and capital expenditures to be approximately $70 million in 2025.

Cash Flow Analysis

The following summarizes our cash, cash equivalents and restricted cash:

Nine Months Ended

September 30, Change

Three Months Ended

March 31, Change

(in millions) 2025 2024

Net cash provided by operating activities $ 160 $ 297 $ (137)

Net cash (used in) provided by investing activities (26) 3 (29)

Net cash used in financing activities (149) (819) 670

Net cash used in operating activities $ (89) $ (79) $ (10)

Net cash provided by (used in) investing activities 6 (17) 23

Net cash (used in) provided by financing activities (159) 261 (420)

Effect of exchange rate changes on cash, cash equivalents and restricted cash 1 (10) 11

Decrease in cash, cash equivalents and restricted cash (27) (522) 495

(Decrease) increase in cash, cash equivalents and restricted cash (241) 155 (396)

Cash, cash equivalents and restricted cash at beginning of period 631 617 14

Cash, Cash Equivalents and Restricted Cash at End of Period $ 390 $ 772 $ (382)

Xerox 2025 Form 10-Q 57

Cash Flows from Operating Activities

Net cash provided by operating activities was $160 million for the nine months ended September 30, 2024.

Net cash used in operating activities was $89 million for the three months ended March 31, 2025.

The $10 million decrease in operating cash from the prior year period was primarily due to the following:

• $88 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 charge, restructuring and related costs, net and non-service retirement-related costs.

• $186 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.

• $94 million decrease from accrued compensation due to the timing of payments of higher year-end accruals.

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

• $39 million decrease from higher pension contributions.

• $59 million decrease in pre-tax income before provisions, divestitures, restructuring and related costs and non-service retirement-related costs.

• $82 million decrease from finance receivables primarily due to lower sales of finance receivables partially offset by a higher level of run-off due to lower originations.

• $72 million increase from accounts payable primarily due to the timing of supplier and vendor payments.

• $77 million increase from other current and long-term liabilities due to timing of payments.

• $65 million increase from accounts receivable primarily due to the timing of collections.

• $31 million increase due to lower placements of equipment on operating leases.

• $56 million increase from accrued compensation due to the timing of payments of lower year-end accruals.

Cash Flows from Investing Activities

Net cash used in investing activities was $26 million for the nine months ended September 30, 2024.

The $29 million change from the prior year period was primarily due to noncontrolling investments as part of our corporate venture capital fund and lower proceeds from the sale of assets.

Net cash provided by investing activities was $6 million for the three months ended March 31, 2025.

The $23 million change from the prior year period was primarily due to higher proceeds from the sale of surplus property and assets in the U.S.

Cash Flows from Financing Activities

Net cash used in financing activities was $149 million for the nine months ended September 30, 2024.

The $670 million decrease in the use of cash from the prior year period was primarily due to the following:

• $541 million decrease from share repurchases.

Net cash used in financing activities was $159 million for the three months ended March 31, 2025.

The $420 million decrease cash from the prior year period was primarily due to the following:

• $439 million decrease from net debt activity.

2025 reflects payments of $72 million on secured financing arrangements, $28 million on secured promissory notes and $7 million on the Term Loan B facility.

2024 reflects proceeds of $500 million on Senior Notes and $400 million on Convertible Senior Notes offset by net payments of $441 million on Senior Notes, deferred debt issuance costs of $15 million from Senior Notes issuances, $103 million on secured financing arrangements and $7 million on the Term Loan B facility.

The $441 million of net payments on Senior Notes includes $83 million on Senior Notes maturing in May 2024 and $362 million for the early redemption of 2025 Senior Notes offset by early redemption premium of $4 million.

2023 reflects net proceeds of $549 million from the Loan Facility, used to fund the share repurchase, and $213 million from the ABL Facility, which include debt issuance costs payments of $6 million and $7 million, respectively, and net proceeds of $52 million from the refinance of our Canadian secured loan.

These borrowings were offset by payments of $644 million on secured financing arrangements and $300 million on Senior Notes.

The $644 million of payments on secured financing arrangements includes the early repayment of $185 million U.S.

secured borrowing.

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

• $23 million increase from purchases of capped calls.

• $23 million increase due to no purchases of capped calls in the current year.

Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity.

Xerox 2024 Form 10-Q 64

Cash, Cash Equivalents and Restricted Cash

3 unchanged sentences

Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations.

Our leases have remaining terms of up to ten years and a variety of renewal and/or termination options.

As of September 30, 2024 and December 31, 2023, total operating lease liabilities were $177 million and $182 million, respectively.

Our operating leases have remaining terms of up to ten years and a variety of renewal and/or termination options.

As of March 31, 2025 and December 31, 2024, total operating lease liabilities were $196 million and $188 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 seven years.

As of March 31, 2025 and December 31, 2024, total finance lease liabilities were $14 million and $53 million, respectively.

The decrease in finance leases since December 31, 2024 is primarily related to the modification of a lease agreement entered into during the first quarter of 2025, which resulted in a change in the lease classification from financing to operating.

Accordingly, we remeasured the right of use asset and the corresponding lease liability.

Refer to Note 9 - Lessee in the Condensed Consolidated Financial Statements for additional information regarding our leases accounted for under lessee accounting.

Xerox 2025 Form 10-Q 58

Debt and Customer Financing Activities

The following summarizes our debt:

(in millions) September 30, 2024 December 31, 2023

(in millions) March 31, 2025 December 31, 2024

Xerox Holdings Corporation $ 2,038 $ 2,038

5 unchanged sentences

Xerox Corporation (11) (11)

Xerox - Other Subsidiaries (1)

Subtotal - Debt issuance costs (28) (30)

2 unchanged sentences

_____________

(1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables.

(1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables in prior year.

These securitizations were repaid during the first quarter 2025.

Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt.

1 unchanged sentence

The following represents our total finance assets, net associated with our lease and finance operations:

(in millions) September 30, 2024 December 31, 2023

(in millions) March 31, 2025 December 31, 2024

Total finance receivables, net (1)

6 unchanged sentences

(2) The change from December 31, 2024 includes a decrease of $36 million due to currency.

Xerox 2024 Form 10-Q 65

Our lease contracts permit customers to pay for equipment over time rather than at the date of installation;

2 unchanged sentences

Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt:

(in millions) September 30, 2024 December 31, 2023

(in millions) March 31, 2025 December 31, 2024

Finance receivables debt (1)

5 unchanged sentences

__________________

(1) Finance receivables debt is the basis for our calculation of "Cost of financing" expense in the Condensed Consolidated Statements of Income (Loss).

(1) Finance receivables debt is the basis for our calculation of Equipment financing interest expense, which is included in Cost of services, maintenance, rentals and other in the Condensed Consolidated Statements of Loss.

Sales of Finance Receivables and Third Party Leasing Programs

Refer to Note 8 - Finance Receivables, Net and Note 22 - Subsequent Events in the Condensed Consolidated Financial Statements for additional information regarding our sales of finance receivables and our third party leasing programs.

Refer to Note 7 - Finance Receivables, Net in the Condensed Consolidated Financial Statements for additional information regarding our sales of finance receivables and our third party leasing programs.

Capital Market/Debt Activity

Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding our debt activity.

Refer to Note 12 - Debt and Note 21 - Subsequent Events in the Condensed Consolidated Financial Statements for additional information regarding our debt activity.

Xerox 2025 Form 10-Q 59

Liquidity and Financial Flexibility

1 unchanged sentence

Our principal debt maturities are spread over the next five years as follows:

(in millions) Xerox Holdings Corporation Xerox Corporation Xerox - Other Subsidiaries (1)

(in millions) Xerox Holdings Corporation Xerox Corporation Total

2025 Q2 $ — $ 34 $ 34

2025 388 28 103 519

2025 Q4 — 35 35

2026 — 151 151

4 unchanged sentences

_____________

(1) Represents secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables.

(1) On April 11, 2025, Xerox repaid approximately $90 million of Xerox Holdings Corporation's 5.00% Senior Notes due August 2025.

Refer to Note 21 - Subsequent Events in the Condensed Consolidated Financial Statements for additional information regarding our debt activity.

Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt.

1 unchanged sentence

Xerox Holdings Corporation made no open-market repurchases of its Common Stock during 2025.

Xerox 2024 Form 10-Q 66

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 expands Xerox's existing partnership with TCS, who currently provides 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.

Shared Service Arrangement

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.

The approximate aggregate spending commitments are as follows:

(in millions) September 30, 2024 Agreement Term

$ 590 5 Years

Microsoft 125 7 Years

SAP 50 7 Years

Verizon 85 5 Years

_____________

(1) Represents all contractual arrangements between Xerox and the vendor as of September 30, 2024.

Xerox 2024 Form 10-Q 67

Financial Risk Management

19 unchanged sentences

Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Xerox 2025 Form 10-Q 60

The current market events have not required us to materially modify or change our financial risk management strategies with respect to our exposures to interest rate and foreign currency risk.

14 unchanged sentences

• Adjusted Effective Tax Rate

Xerox 2024 Form 10-Q 68

The above measures were adjusted for the following items:

16 unchanged sentences

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.

Adjusted earnings will continue to include the service cost elements of our retirement costs, which are related to current employee service as well as the cost of our defined contribution plans.

Xerox 2025 Form 10-Q 61

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 primarily for third-party legal, accounting, consulting and other similar types of 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 excluding these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis.

Accordingly, we exclude these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis.

Discrete, unusual or infrequent items:

We exclude these item(s), when applicable, given their discrete, unusual or infrequent nature and their impact on the comparability of our results for the period to prior periods and future expected trends.

• Goodwill impairment charge

• Inventory-related impact - exit of certain production print manufacturing operations

• Divestitures

• PARC donation

• (Gain) loss on early extinguishment of debt

• Tax Indemnification - Conduent

• Reinvention-related costs

• Commitment fee expenses

• Gain on early extinguishment of debt

• Deferred tax asset valuation allowance

• Income tax on PARC Donation

Adjusted Operating Income and Margin

5 unchanged sentences

Xerox 2025 Form 10-Q 62

Adjusted Net Income and EPS reconciliation:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

(in millions, except per share amounts) Net (Loss) Income Diluted EPS Net Income Diluted EPS Net (Loss) Income Diluted EPS Net Income Diluted EPS

Adjusted Net (Loss) Income and EPS reconciliation:

Three Months Ended March 31,

(in millions, except per share amounts) Net Loss Diluted EPS Net Income Diluted EPS

$ (90) $ (0.75) $ (113) $ (0.94)

Goodwill impairment 1,058 — 1,058 —

Inventory-related impact - exit of certain production print manufacturing operations (2)

2 unchanged sentences

Divestitures (4) 54

PARC donation — — — 132

Non-service retirement-related costs 18 23

Reinvention-related costs 6 —

Transaction and related costs, net 3 —

(Gain) loss on early extinguishment of debt — — (3) 3

Tax indemnification - Conduent — (7) — (7)

Income tax on Goodwill impairment (43) — (43) —

Income tax on PARC donation (3)

Commitment fee expense (3)

Gain on early extinguishment of debt — (3)

Deferred tax asset valuation allowance (4)

Income tax on PARC donation (5)

Income tax on adjustments (6)

(13) 9 (55) 2

Adjusted $ (4) $ (0.06) $ 11 $ 0.06

Dividends on preferred stock used in adjusted EPS calculation (7)

$ 4 $ 4 $ 11 $ 11

Weighted average shares for adjusted EPS (7)

126 159 126 158

Fully diluted shares at September 30, 2024 (5)

Fully diluted shares at March 31, 2025 (8)

____________________________

(1) Net (Loss) Income and EPS.

For the three and nine months ended September 30, 2024 Net (Loss) and EPS includes an after-tax non-cash goodwill impairment charge of approximately $1,015 million (approximately $1,058 million pre-tax), or $8.16 per diluted share.

In addition, the three and nine months ended September 30, 2024 includes a tax expense charge of $161 million, or $1.29 per diluted 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.

(2) Reflects the reduction of inventory of approximately $0 and $38 and the cancellation of related purchase contracts of approximately $0 and $6, as a result of the exit of certain production print manufacturing operations during the three and nine months ended September 30, 2024, respectively.

(1) Net Loss and EPS.

For the three months ended March 31, 2025 Net Loss and Diluted Loss per Share include a charge to tax expense related to the establishment of $59 million of valuation allowances, or $0.47 per share, and $14 million of after-tax financing-related charges, or $0.11 per share, related to our recently completed debt offering.

For the three months ended March 31, 2024 Net Loss and Diluted Loss per Share includes a $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.

(2) As a result of the exit of certain production print manufacturing operations, for the three months ended March 31, 2025 and 2024, reflects the inventory-related charges of approximately $7 million and $32 million, respectively, and the cancellation of related purchase contracts of approximately $0 million and $4 million, respectively.

(3) Primarily reflects fees associated with unused commitments resulting from the recently completed private offering of $400 million in aggregate principal amount of 10.25% Senior Secured First Lien Notes and $400 million aggregate principal amount of 13.5% Senior Secured Second Lien Notes Due in 2031.

(4) Reflects the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability.

(5) Reflects the change in the realizability of the PARC donation tax benefit recognized in the second quarter of 2023.

(6) Refer to Adjusted Effective Tax Rate reconciliation.

(4) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude the 7 million shares associated with our Series A convertible preferred stock.

(5) Reflects common shares outstanding at September 30, 2024, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the third quarter 2024.

Excludes shares associated with our Series A convertible preferred stock, which were anti-dilutive for the third quarter 2024 and 2023, respectively.

(7) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude the 7 million shares associated with Xerox Holdings Corporation's Series A Convertible preferred stock.

(8) Reflects common shares outstanding at March 31, 2025, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the first quarter 2025.

Excludes potentially dilutive common shares associated with our series A convertible preferred stock, as well as shares granted under stock-based compensation programs, all of which were anti-dilutive for the first quarter 2025.

Xerox 2025 Form 10-Q 63

Adjusted Effective Tax Rate reconciliation:

Three Months Ended September 30,

(in millions) Pre-Tax (Loss) Income Income Tax Expense Effective

Tax Rate Pre-Tax Income Income Tax Expense Effective

$ (1,087) $ 118 (10.9) % $ 64 $ 15 23.4 %

Goodwill impairment (2)

Deferred tax asset valuation allowance (2)

Non-GAAP Adjustments (2)

$ 47 $ 13 27.7 % $ 83 $ 6 7.2 %

Nine Months Ended September 30,

(in millions) Pre-Tax (Loss) Income Income Tax Expense Effective

Tax Rate Pre-Tax Income Income Tax Expense Effective

Three Months Ended March 31,

(in millions) Pre-Tax (Loss) Income Tax Expense (Benefit) Effective

Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective

$ (67) $ 23 (34.3) % $ (150) $ (37) 24.7 %

Goodwill impairment (2)

Deferred tax asset valuation allowance (2)

PARC donation (2)

Income tax on PARC donation (2)

Non-GAAP Adjustments (2)

1 unchanged sentence

____________________________

(1) Pre-tax (loss) income and Income tax expense.

For the three and nine months ended September 30, 2024 Pre-tax (loss) includes a non-cash goodwill impairment charge of approximately $1,058 million (approximately $1,015 million after-tax).

(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) income under ASC 740, which employs an annual effective tax rate method to the results.

Xerox 2024 Form 10-Q 71

(1) Pre-tax loss and Income tax expense (benefit).

(2) Refer to Adjusted Net (Loss) Income and EPS reconciliation for details.

(3) The tax impact on the Adjusted Pre‐Tax (Loss) Income is calculated under the same accounting principles applied to the As Reported Pre-Tax Loss under ASC 740, which employs an annual effective tax rate method to the results.

Adjusted Operating Income and Margin reconciliation:

Three Months Ended September 30,

(in millions) (Loss) Profit Revenue Margin Profit Revenue Margin

$ (1,205) $ 1,528 $ 49 $ 1,652

Income tax expense 118 — 15 —

Pre-tax (loss) income $ (1,087) $ 1,528 (71.1) % $ 64 $ 1,652 3.9 %

Goodwill impairment 1,058 —

Restructuring and related costs, net 56 10

Amortization of intangible assets 10 12

Other expenses, net (3)

Adjusted $ 80 $ 1,528 5.2 % $ 68 $ 1,652 4.1 %

Nine Months Ended September 30,

(in millions) (Loss) Profit Revenue Margin Profit Revenue Margin

Three Months Ended March 31,

(in millions) (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin

$ (90) $ 1,457 $ (113) $ 1,502

Income tax expense 88 1

Pre-tax (loss) income $ (1,212) $ 4,608 (26.3) % $ 60 $ 5,121 1.2 %

Goodwill impairment 1,058 —

Income tax expense (benefit) 23 — (37) —

Pre-tax loss $ (67) $ 1,457 (4.6) % $ (150) $ 1,502 (10.0) %

Inventory-related impact - exit of certain production print manufacturing operations (2)

Reinvention-related costs 6 —

Restructuring and related costs, net (1) 39

1 unchanged sentence

Divestitures (4) 54

PARC donation — 132

Transaction and related costs, net 3 —

Other expenses, net (3)(4)

1 unchanged sentence

____________________________

(1) Net (Loss) Income.

For the three and nine months ended September 30, 2024 Net (Loss) includes an after-tax non-cash goodwill impairment charge of approximately $1,015 million (approximately $1,058 million pre-tax), or $8.16 per diluted share.

This adjustment was excluded due to its unique nature and significant impact which is not considered part of our core operations.

(1) Net Loss.

(3) Includes non-service retirement-related costs.

(4) Includes fees associated with the recently completed private offering of $400 million in aggregate principal amount of 10.25% Senior Secured First Lien Notes and $400 million aggregate principal amount of 13.5% Senior Secured Second Lien Notes Due in 2031.

Xerox 2025 Form 10-Q 64

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis