Xerox Holdings Corp 10-Q

ITEM 1 — FINANCIAL STATEMENTS XEROX HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED) Three Months Ended March 31, (in millions, except per-share data) 2025 2024 Revenues Sales $ 557 $ 523 Services, maintenance, rentals and other (1) 900 979 Total Revenues 1,457 1,502 Costs and Expenses Cost of sales 382 340 Cost of services, maintenance, rentals and other (1) 649 719 Research, development and engineering expenses 42 49 Selling, administrative and general expenses 378 397 Restructuring and related costs, net ( 1 ) 39 Amortization of intangible assets 10 10 Divestitures ( 4 ) 54 Other expenses, net 68 44 Total Costs and Expenses 1,524 1,652 Loss before Income Taxes ( 67 ) ( 150 ) Income tax expense (benefit) 23 ( 37 ) Net Loss ( 90 ) ( 113 ) Less: Preferred stock dividends, net ( 4 ) ( 4 ) Net Loss Attributable to Common Shareholders $ ( 94 ) $ ( 117 ) Basic Loss per Share $ ( 0.75 ) $ ( 0.94 ) Diluted Loss per Share $ ( 0.75 ) $ ( 0.94 ) _____________ (1) On January 1, 2025, the Company updated its determination of reportable segments, and as a result, made certain reclassifications within the Condensed Consolidated Statement of Loss to the prior periods in order to conform to the current period reporting. Refer to the Segments section of Note 1 - Basis of Presentation for additional information. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 3 XEROX HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) Three Months Ended March 31, (in millions) 2025 2024 Net Loss $ ( 90 ) $ ( 113 ) Other Comprehensive Income (Loss), Net (1) Translation adjustments, net 105 ( 32 ) Unrealized losses, net ( 2 ) ( 1 ) Changes in defined benefit plans, net ( 21 ) 36 Other Comprehensive Income, Net 82 3 Comprehensive Loss, Net $ ( 8 ) $ ( 110 ) _____________ (1) Refer to Note 18 - Other Comprehensive Income for gross components of Other comprehensive income, net, reclassification adjustments out of Accumulated other comprehensive loss and related tax effects. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 4 XEROX HOLDINGS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions, except share data in thousands) March 31, 2025 December 31, 2024 Assets Cash and cash equivalents $ 336 $ 576 Accounts receivable (net of allowance of $ 68 and $ 69 , respectively) 819 796 Billed portion of finance receivables (net of allowance of $ 3 and $ 2 , respectively) 43 48 Finance receivables, net 583 608 Inventories 836 695 Other current assets 250 212 Total current assets 2,867 2,935 Finance receivables due after one year (net of allowance of $ 50 and $ 55 , respectively) 1,013 1,089 Equipment on operating leases, net 248 245 Land, buildings and equipment, net 195 251 Intangible assets, net 228 236 Goodwill, net 1,954 1,937 Deferred tax assets 607 615 Other long-term assets 1,099 1,057 Total Assets $ 8,211 $ 8,365 Liabilities and Equity Short-term debt and current portion of long-term debt $ 599 $ 585 Accounts payable 1,120 1,023 Accrued compensation and benefits costs 199 227 Accrued expenses and other current liabilities 721 784 Total current liabilities 2,639 2,619 Long-term debt 2,699 2,814 Pension and other benefit liabilities 1,077 1,088 Post-retirement medical benefits 152 154 Other long-term liabilities 363 386 Total Liabilities 6,930 7,061 Commitments and Contingencies (See Note 20) Noncontrolling Interests 10 10 Convertible Preferred Stock 214 214 Common stock 126 124 Additional paid-in capital 1,141 1,137 Retained earnings 3,403 3,514 Accumulated other comprehensive loss ( 3,617 ) ( 3,699 ) Xerox Holdings shareholders’ equity 1,053 1,076 Noncontrolling interests 4 4 Total Equity 1,057 1,080 Total Liabilities and Equity $ 8,211 $ 8,365 Shares of Common Stock Issued and Outstanding 125,780 124,435 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 5 XEROX HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, (in millions) 2025 2024 Cash Flows from Operating Activities Net Loss $ ( 90 ) $ ( 113 ) Adjustments to reconcile Net loss to Net cash used in operating activities Depreciation and amortization 60 59 Provisions 18 57 Net gain on sales of businesses and assets ( 3 ) — Divestitures ( 4 ) 54 Stock-based compensation 12 12 Restructuring and asset impairment charges ( 1 ) 31 Payments for restructurings ( 18 ) ( 16 ) Non-service retirement-related costs 18 23 Contributions to retirement plans ( 34 ) ( 31 ) Increase in accounts receivable and billed portion of finance receivables ( 12 ) ( 19 ) Increase in inventories ( 137 ) ( 133 ) Increase in equipment on operating leases ( 30 ) ( 22 ) Decrease in finance receivables 128 210 Increase in other current and long-term assets ( 16 ) ( 2 ) Increase in accounts payable 89 17 Decrease in accrued compensation ( 30 ) ( 86 ) Decrease in other current and long-term liabilities ( 48 ) ( 77 ) Net change in income tax assets and liabilities ( 2 ) ( 44 ) Net change in derivative assets and liabilities — 6 Other operating, net 11 ( 5 ) Net cash used in operating activities ( 89 ) ( 79 ) Cash Flows from Investing Activities Cost of additions to land, buildings, equipment and software ( 20 ) ( 10 ) Proceeds from sales of businesses and assets 27 4 Acquisitions, net of cash acquired 1 — Other investing, net ( 2 ) ( 11 ) Net cash provided by (used in) investing activities 6 ( 17 ) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 3 905 Payments on long-term debt ( 107 ) ( 570 ) Purchases of capped calls — ( 23 ) Dividends ( 39 ) ( 37 ) Payments to acquire treasury stock, including fees — ( 3 ) Other financing, net ( 16 ) ( 11 ) Net cash (used in) provided by financing activities ( 159 ) 261 Effect of exchange rate changes on cash, cash equivalents and restricted cash 1 ( 10 ) (Decrease) increase in cash, cash equivalents and restricted cash ( 241 ) 155 Cash, cash equivalents and restricted cash at beginning of period 631 617 Cash, Cash Equivalents and Restricted Cash at End of Period $ 390 $ 772 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 6 XEROX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED) Three Months Ended March 31, (in millions) 2025 2024 Revenues Sales $ 557 $ 523 Services, maintenance, rentals and other (1) 900 979 Total Revenues 1,457 1,502 Costs and Expenses Cost of sales 382 340 Cost of services, maintenance, rentals and other (1) 649 719 Research, development and engineering expenses 42 49 Selling, administrative and general expenses 377 397 Restructuring and related costs, net ( 1 ) 39 Amortization of intangible assets 10 10 Divestitures ( 4 ) 54 Other expenses, net 66 44 Total Costs and Expenses 1,521 1,652 Loss before Income Taxes ( 64 ) ( 150 ) Income tax expense (benefit) 23 ( 37 ) Net Loss $ ( 87 ) $ ( 113 ) _____________ (1) On January 1, 2025, the Company updated its determination of reportable segments, and as a result, made certain reclassifications within the Condensed Consolidated Statement of Loss to the prior periods in order to conform to the current period reporting. Refer to the Segments section of Note 1 - Basis of Presentation for additional information . The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 7 XEROX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) Three Months Ended March 31, (in millions) 2025 2024 Net Loss $ ( 87 ) $ ( 113 ) Other Comprehensive Income (Loss), Net (1) Translation adjustments, net 105 ( 32 ) Unrealized losses, net ( 2 ) ( 1 ) Changes in defined benefit plans, net ( 21 ) 36 Other Comprehensive Income, Net 82 3 Comprehensive Loss, Net $ ( 5 ) $ ( 110 ) _____________ (1) Refer to Note 18 - Other Comprehensive Income for gross components of Other comprehensive income, net, reclassification adjustments out of Accumulated other comprehensive loss and related tax effects. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 8 XEROX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions) March 31, 2025 December 31, 2024 Assets Cash and cash equivalents $ 336 $ 575 Accounts receivable (net of allowance of $ 68 and $ 69 , respectively) 819 796 Billed portion of finance receivables (net of allowance of $ 3 and $ 2 , respectively) 43 48 Finance receivables, net 583 608 Inventories 836 695 Other current assets 250 212 Total current assets 2,867 2,934 Finance receivables due after one year (net of allowance of $ 50 and $ 55 , respectively) 1,013 1,089 Equipment on operating leases, net 248 245 Land, buildings and equipment, net 195 251 Intangible assets, net 228 236 Goodwill, net 1,954 1,937 Deferred tax assets 607 615 Other long-term assets 1,060 1,017 Total Assets $ 8,172 $ 8,324 Liabilities and Equity Short-term debt and current portion of long-term debt $ 211 $ 197 Short-term related party debt 388 388 Accounts payable 1,120 1,023 Accrued compensation and benefits costs 199 227 Accrued expenses and other current liabilities 695 741 Total current liabilities 2,613 2,576 Long-term debt 1,064 1,180 Long-term related party debt 1,635 1,634 Pension and other benefit liabilities 1,077 1,088 Post-retirement medical benefits 152 154 Other long-term liabilities 363 386 Total Liabilities 6,904 7,018 Commitments and Contingencies (See Note 20) Noncontrolling Interests 10 10 Additional paid-in capital 3,474 3,487 Retained earnings 1,397 1,504 Accumulated other comprehensive loss ( 3,617 ) ( 3,699 ) Xerox shareholder's equity 1,254 1,292 Noncontrolling interests 4 4 Total Equity 1,258 1,296 Total Liabilities and Equity $ 8,172 $ 8,324 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 9 XEROX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, (in millions) 2025 2024 Cash Flows from Operating Activities Net Loss $ ( 87 ) $ ( 113 ) Adjustments to reconcile Net loss to Net cash used in operating activities Depreciation and amortization 60 59 Provisions 18 57 Net gain on sales of businesses and assets ( 3 ) — Divestitures ( 4 ) 54 Stock-based compensation 12 12 Restructuring and asset impairment charges ( 1 ) 31 Payments for restructurings ( 18 ) ( 16 ) Non-service retirement-related costs 18 23 Contributions to retirement plans ( 34 ) ( 31 ) Increase in accounts receivable and billed portion of finance receivables ( 12 ) ( 19 ) Increase in inventories ( 137 ) ( 133 ) Increase in equipment on operating leases ( 30 ) ( 22 ) Decrease in finance receivables 128 210 Increase in other current and long-term assets ( 19 ) ( 2 ) Increase in accounts payable 89 17 Decrease in accrued compensation ( 30 ) ( 86 ) Decrease in other current and long-term liabilities ( 48 ) ( 77 ) Net change in income tax assets and liabilities ( 2 ) ( 44 ) Net change in derivative assets and liabilities — 6 Other operating, net 11 ( 5 ) Net cash used in operating activities ( 89 ) ( 79 ) Cash Flows from Investing Activities Cost of additions to land, buildings, equipment and software ( 20 ) ( 10 ) Proceeds from sales of businesses and assets 27 4 Acquisitions, net of cash acquired 1 — Other investing, net — ( 11 ) Net cash provided by (used in) investing activities 8 ( 17 ) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 3 905 Payments on long-term debt ( 107 ) ( 570 ) Distributions to parent ( 47 ) ( 75 ) Other financing, net ( 9 ) ( 2 ) Net cash (used in) provided by financing activities ( 160 ) 258 Effect of exchange rate changes on cash, cash equivalents and restricted cash 1 ( 10 ) (Decrease) increase in cash, cash equivalents and restricted cash ( 240 ) 152 Cash, cash equivalents and restricted cash at beginning of period 630 617 Cash, Cash Equivalents and Restricted Cash at End of Period $ 390 $ 769 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. Xerox 2025 Form 10-Q 10 XEROX HOLDINGS CORPORATION XEROX CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in millions, except per-share data and where otherwise noted) Note 1 – Basis of Presentation References to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries, while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” and the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to "Xerox Holdings Corporation" refer to the stand-alone parent company and do not include its subsidiaries. References to "Xerox Corporation" refer to the stand-alone company and do not include its subsidiaries. The accompanying unaudited Condensed Consolidated Financial Statements and footnotes represent the respective consolidated results and financial results of Xerox Holdings and Xerox and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise. This is a combined report of Xerox Holdings and Xerox, which includes separate unaudited Condensed Consolidated Financial Statements for each registrant. The accompanying unaudited Condensed Consolidated Financial Statements of both Xerox Holdings and Xerox have been prepared in accordance with the accounting policies described in the Combined 2024 Annual Report on Form 10-K (2024 Annual Report), except as noted herein, and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. You should read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements included in the 2024 Annual Report. In our opinion, all adjustments necessary for a fair statement of financial position, operating results and cash flows for the interim periods presented have been made. These adjustments consist of normal recurring items. Interim results of operations are not necessarily indicative of the results of the full year. Certain reclassifications have been made to the amounts for prior years in order to conform to the current year's presentation. Refer to the Segments section below, and Note 3 - Revenue, for additional information. For convenience and ease of reference, we refer to the financial statement caption “Loss before Income Taxes” as “pre-tax loss”. Notes to the Condensed Consolidated Financial Statements reflect the activity for both Xerox Holdings and Xerox for all periods presented, unless otherwise noted. Segments 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 for additional information regarding this change. In line with these changes to our reportable segments, reclassifications have been made to the Condensed Consolidated Statement of Loss as follows: Three Months Ended March 31, 2024 Previously Reported Reclassification As Reported Services, maintenance, rentals and other $ 937 $ 42 $ 979 Financing 42 ( 42 ) — Cost of services, maintenance, rentals and other $ 692 $ 27 $ 719 Cost of financing 27 ( 27 ) — Xerox 2025 Form 10-Q 11 Goodwill Interim Impairment Evaluation Our goodwill balance was $ 1,954 and $ 1,937 at March 31, 2025 and December 31, 2024, respectively. We assess goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. As noted above, during the first quarter 2025, the Company made a change to how it reports its operating and reportable segments, and as such is reporting two new operating and reportable segments - Print and Other, and IT Solutions. As a result of the new operating and reportable segments, we also reassessed our reporting units for the evaluation of goodwill. Prior to this change, consistent with the determination that we had two operating/reportable segments - Print and Other, and Xerox Financial Solutions (XFS), we had also determined that that the Print and Other, and XFS operating segments were also our reporting units for goodwill assessment purposes. Our reassessment during the first quarter of 2025 determined similarly, consistent with the determination that we had two operating and reportable segments, we also have two reporting units – Print and Other, and IT Solutions. The change in reporting units was also considered a triggering event indicating a test for goodwill impairment was required as of January 1, 2025 before and after the change in reporting units. The Company performed those impairment tests, which did not result in the identification of an impairment loss as of January 1, 2025. As a result of the change in reporting units, effective January 1, 2025, we estimated the fair value of our new reporting units. Using a combination of both an Income Approach and a Market Approach, we assessed the relative fair values of our new reporting units, and we determined that approximately $ 1,567 of goodwill was allocable to the Print and Other segment, and approximately $ 370 of goodwill was allocable to the IT Solutions segment. During the first quarter 2025, the Company's stock price and market capitalization experienced a decline. However, the decline was not considered to be sustained due to the ongoing uncertainty in the capital markets, as a result of the uncertain nature of the federal government's tariff policy and rate proposals, and the associated potential macroeconomic impacts. Despite ongoing uncertainty surrounding tariffs, management has evaluated these factors individually and, in the aggregate, concluded that we have sufficient plans to manage the uncertainty. Through the first quarter of 2025, the Company's forecasted results for the full year 2025 remain in line with expectations reviewed as part of our January 1, 2025 Goodwill quantitative assessment. Accordingly, as of March 31, 2025, we determined that we did not have a “triggering event” requiring a quantitative assessment of Goodwill. If the Company's future performance varies from current expectations, assumptions, and estimates, including assumptions related to current macro-economic uncertainties, interest rates, inflationary pressure on product and labor costs, execution of Reinvention, and geopolitical uncertainty, the impairment analysis could be impacted and result in a reduction of the underlying cash flows used to estimate fair values resulting in a decline in fair value that may trigger future impairment charges. We will continue to monitor developments throughout the remainder of 2025 including updates to our forecasts as well as discount rates and our market capitalization, and as a result, an update of our assessment and related estimates may be required in the future. Valuation Allowance We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and the amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, in each of the tax jurisdictions in which we operate, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. We apply judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we considered objective evidence including historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and prudent and feasible tax planning strategies. Due to the change in certain tax planning strategies during the first quarter 2025, which were determined to no longer be prudent and feasible as a result of ongoing macroeconomic uncertainties, a valuation allowance of approximately $ 59 was recorded, primarily related to certain deferred tax assets in the U.S. We have concluded that it is more-likely-than-not that those deferred tax assets will not be realized in the ordinary course of operations. As of March 31, 2025, our total deferred tax asset balance was $ 607 , which is net of total valuation allowances of $ 579 . The amount of the net deferred tax assets considered realizable, however, could change in the near term if additional objective information becomes available in the future including if income or income tax rates are higher or lower than currently estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences. Xerox 2025 Form 10-Q 12 Note 2 – Recent Accounting Pronouncements Xerox Holdings and Xerox consider the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). The ASUs listed below apply to both registrants. ASUs not listed below were assessed and determined to be not applicable to the Condensed Consolidated Financial Statements of either registrant. Except for the Accounting Standard Updates (ASUs) discussed below, the new ASUs issued by the FASB during 2025 did not have any significant impact on the Company . Accounting Standard Updates to be Adopted: Income Statement In November 2024, the FASB issued ASU 2024-03 , Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which is intended to improve disclosures related to certain income statement expenses of the Company. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures. Debt In November 2024, the FASB issued ASU 2024-04 , Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments , which is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures. Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures. Other Updates In 2025, the FASB also issued the following ASUs, which could impact the Company in the future but currently did not have, nor are expected to have, a material impact on our financial condition, results of operations or cash flows upon adoption. • Liabilities: ASU 2025-02 , Liabilities (Topic 405) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. This update is effective for the annual period beginning after December 15, 2025, as well as interim periods within that period. Xerox 2025 Form 10-Q 13 Note 3 – Revenue Revenues disaggregated by primary geographic markets, major product lines, and sales channels are as follows: Three Months Ended March 31, 2025 2024 Primary geographical markets (1) : United States $ 850 $ 811 Europe 402 451 Canada 103 121 Other 102 119 Total Revenues $ 1,457 $ 1,502 Major product and services lines: Equipment $ 284 $ 290 Supplies, paper and other sales (2) 168 186 IT products (2)(3) 105 47 Maintenance agreements (4) 368 387 Service arrangements (5) 429 473 Rental and other 70 77 Financing 33 42 Total Revenues $ 1,457 $ 1,502 Sales channels: Direct equipment lease (6) $ 112 $ 162 Distributors & resellers (7) 209 215 Customer direct 236 146 Total Sales $ 557 $ 523 _____________ (1) Geographic area data is based upon the location of the subsidiary reporting the revenue. (2) Certain prior year amounts have been reclassified in order to conform to the current year's presentation. (3) IT products include IT hardware and software solutions sold by the IT Solutions segment. (4) Includes revenues from maintenance agreements on sold equipment as well as revenues associated with service agreements sold through our channel partners, as well as services revenues related to our IT Solutions. (5) Primarily includes revenues from our Print outsourcing arrangements including revenues from embedded operating leases in those arrangements. (6) Primarily reflects sales through bundled lease arrangements. (7) Primarily reflects sales through our two-tier distribution channels. Contract Assets and Liabilities: We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time. Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $ 152 and $ 130 at March 31, 2025 and December 31, 2024, respectively. The majority of the balance at March 31, 2025 will be amortized to revenue over the next 30 months. Contract Costs: We incur the following contract costs as part of our revenue arrangements: • Incremental direct costs of obtaining a contract are primarily sales commissions paid to salespeople and agents in connection with the placement of equipment with associated post sale services arrangements. These costs are deferred and amortized to Selling Expenses on a straight-line basis over the estimated contract term, which is currently estimated to be approximately four years . • Contract fulfillment costs, which are costs incurred for resources and assets that will be used to satisfy our future performance obligations included in our service arrangements. These costs are amortized over the contractual service period of the arrangement to Cost of services. • Contract inducements, which are capitalized and amortized as a reduction of revenue over the term of the contract. Xerox 2025 Form 10-Q 14 Changes in contract costs, net are as follows: 2025 2024 Balance at January 1st, $ 139 $ 136 Customer contract costs deferred 17 15 Amortization of customer contract costs ( 16 ) ( 16 ) Other (1) — ( 1 ) Balance at March 31st, $ 140 $ 134 _____________ (1) Includes currency. Equipment and software used in the fulfillment of service arrangements, and where the Company retains control, are capitalized and depreciated over the shorter of their useful life or the term of the contract if an asset is contract specific. Note 4 – Segment Reporting Our reportable segments are aligned with how we manage the business and view the markets we serve. 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 determined that there were two reportable segments - Print and Other, and Xerox Financial Solutions (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. During 2024, the Company acquired ITSavvy Acquisition Company, Inc. (ITSavvy), a technology infrastructure solutions provider. As a result of this acquisition, during the first quarter of 2025, we reassessed our operating and reportable segments and determined that, based on the information provided to our CODM, as well as the CEO's management and assessment of the Company's operations, we had two operating and reportable segments - Print and Other , and IT Solutions . We also determined that there were no other businesses that met the requirements to be considered separate operating segments, including our former operating/reporting segment, XFS, whose results are now included in the Print and Other operating/reporting segment. Our Print and Other segment includes the design, development and sale of document management systems, supplies and services, as well as associated financing and technology-related offerings, digital and print-related software products and services. The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. This segment also includes Xerox Financial Services, a global financing solutions provider, primarily enabling the sale of our equipment and services (previously reported XFS segment), which includes commissions and other payments for the exclusive right to provide lease financing for Xerox products. The product groupings range from: • “Entry” , which include A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. • “Mid-Range” , which include A3 devices that generally serve large workgroup/work team environments as well as products in the Light Production product groups serving centralized print centers, print for pay and low 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. Customers range from small and mid-sized businesses to large enterprises. Customers also include graphic communication enterprises as well as channel partners including distributors and resellers. Our 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 other managed IT 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. Xerox 2025 Form 10-Q 15 Segment Policy We derive the results of our business segments directly from our internal management reporting system. The accounting policies that the Company uses to derive its segment results are substantially the same as those used by the Company in preparing its consolidated financial statements. The segment results include a significant level of management estimates regarding the allocation of expenses for shared selling, administrative and general services. Certain administrative and general expenses, which primarily relate to corporate functions, as well as Xerox Holdings' investment in Myriad, are not allocated to either of our operating/reportable segments. Accordingly, they are excluded from segment expenses and segment profit, and as such, the financial results for the segments may not be indicative of the results the businesses would have on a standalone basis or what might be presented for the businesses in stand-alone financial statements. The CODM measures the performance of each segment based on several metrics, including segment revenues, significant segment expenses, and segment profit. A segment expense is considered significant when it is material to the segment, is included in the measure of segment profit, and is included in information that is regularly provided to the CODM. The CODM uses segment revenues, significant segment expenses, and segment profit, in part, to evaluate the performance of, and to allocate resources to each segment. The CODM does not evaluate segment performance using discrete asset information, as a significant portion of the assets is managed at the total company level. Segment profit is the only measure of profitability that is used by the CODM to evaluate the performance of, and to allocate resources to each segment. Selected financial information for our reportable segments was as follows: Three months ended March 31, 2025 2024 Print and Other IT Solutions Corporate (1) Total Print and Other IT Solutions Corporate (1) Total External revenue $ 1,294 $ 163 $ — $ 1,457 $ 1,428 $ 74 $ — $ 1,502 Intersegment revenue (2) — 1 — 1 — — — — Revenue $ 1,294 $ 164 $ — $ 1,458 $ 1,428 $ 74 $ — $ 1,502 Reconciliation to Segment Profit Cost of sales (3) $ 292 $ 85 $ — $ 377 $ 299 $ 41 $ — $ 340 Cost of services, maintenance, rentals and other (4) 597 50 — 647 661 22 — 683 Research, development and engineering expenses 42 — — 42 49 — — 49 Selling, administrative and general expenses (5)(6) 322 23 24 369 361 12 24 397 Intersegment expense (7) — 1 — 1 — — — — Segment profit $ 41 $ 5 $ ( 24 ) $ 22 $ 58 $ ( 1 ) $ ( 24 ) $ 33 Depreciation $ 50 $ — $ — $ 50 $ 49 $ — $ — $ 49 Interest income (8) 33 — — 33 42 — — 42 Interest expense (4) 22 — — 22 27 — — 27 _____________ (1) Certain administrative and general expenses, which primarily relate to corporate functions, are not allocated to either of our operating/reportable segments. (2) Intersegment revenue is primarily revenue from IT hardware, software solutions and services, sold by the IT Solutions segment to the Print and Other segment. (3) As a result of the exit of certain production print manufacturing operations, for the three months ended March 31, 2025 and 2024, Cost of sales and Cost of services, maintenance, rentals and other for the Print and Other Segment excludes $ 7 and $ 32 , respectively, of inventory-related charges, and $ 0 and $ 4 , respectively, from the cancellation of related purchase contracts. (4) Includes equipment financing interest expense associated with financing debt of the Company, which is fully allocated to the Print and Other segment in support of its Finance assets. No interest expense is allocated to the IT Solutions segment, as the segment has no financing debt. (5) For the three months ended March 31, 2025 and 2024, Selling, administrative and general expenses include bad debt expense related to the Print and Other segment of $ 9 and $ 15 , respectively. (6) For the three months ended March 31, 2025 and 2024, the Print and Other segment excludes Reinvention costs of $ 6 and $ 0 , respectively, and Transaction and related costs, net of $ 3 and $ 0 , respectively. (7) Intersegment expense is primarily costs related to the sale of IT hardware, software solutions and services by the IT Solutions segment, to the Print and Other segment. (8) Reflects financing income, which is included in Services, maintenance, rentals and other in the Condensed Consolidated Statements of Loss. No interest income is allocated to the IT Solutions segment, as the segment has no finance assets. Xerox 2025 Form 10-Q 16 Selected financial information for our reportable segments was as follows: Three Months Ended March 31, 2025 2024 Pre-tax (Loss) Total Segment Profit $ 22 $ 33 Restructuring and related costs, net 1 ( 39 ) Amortization of intangible assets ( 10 ) ( 10 ) Reinvention-related costs ( 6 ) — Transaction-related costs ( 3 ) — Inventory-related impact - exit of certain production print manufacturing operations (1) ( 7 ) ( 36 ) Divestiture 4 ( 54 ) Other expenses, net ( 68 ) ( 44 ) Total Pre-tax (loss) $ ( 67 ) $ ( 150 ) Depreciation and Amortization Total reported segments $ 50 $ 49 Amortization of intangible assets 10 10 Total Depreciation and amortization $ 60 $ 59 Interest Expense Total reported segments $ 22 $ 27 Corporate 33 26 Total Interest expense $ 55 $ 53 Interest Income Total reported segments $ 33 $ 42 Corporate 2 3 Total Interest income $ 35 $ 45 _____________ (1) 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 and $ 32 , respectively, and the cancellation of related purchase contracts of approximately $ 0 and $ 4 , respectively. Note 5 – Lessor Revenue from sales-type leases is presented on a gross basis when the Company enters into a lease to realize value from a product that it would otherwise sell in its ordinary course of business, whereas in transactions where the Company enters into a lease for the purpose of generating revenue by providing financing, the profit or loss, if any, is presented on a net basis. In addition, we have elected to account for sales tax and other similar taxes collected from a lessee as lessee costs and therefore we exclude these costs from contract consideration and variable consideration and present revenue net of these costs. The components of lease income are as follows: Three Months Ended March 31, Location in Statements of Income (Loss) 2025 2024 Revenue from sales type leases Sales $ 112 $ 162 Interest income on lease receivables Services, maintenance, rentals and other 33 42 Lease income - operating leases Services, maintenance, rentals and other 41 41 Variable lease income Services, maintenance, rentals and other 9 13 Total Lease income $ 195 $ 258 Profit at lease commencement on sales-type leases was estimated to be $ 31 and $ 50 for the three months ended March 31, 2025 and 2024, respectively . Xerox 2025 Form 10-Q 17 Note 6 – Accounts Receivable, Net Accounts receivable, net were as follows: March 31, 2025 December 31, 2024 Invoiced $ 717 $ 692 Accrued (1) 170 173 Allowance for doubtful accounts ( 68 ) ( 69 ) Accounts receivable, net $ 819 $ 796 _____________ (1) Accrued receivables include amounts to be invoiced in the subsequent quarter for current services provided. The allowance for doubtful accounts was as follows: 2025 2024 Balance at January 1 st $ 69 $ 64 Provision 4 6 Charge-offs, net ( 6 ) ( 3 ) Recoveries and other (1) 1 ( 2 ) Balance at March 31 st $ 68 $ 65 _____________ (1) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations. We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. The allowance for doubtful accounts receivable is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Based on that assessment the allowance for doubtful accounts as a percent of gross accounts receivable was 7.7 % at March 31, 2025 and 8.0 % at December 31, 2024. Accounts Receivable Sales Arrangements We have one facility in Europe that enables us to sell accounts receivable associated with our distributor network on an ongoing basis, without recourse. Under this arrangement, we sell our entire interest in the related accounts receivable for cash and no portion of the payment is held back or deferred by the purchaser. Accounts receivable sales activity was as follows: Three Months Ended March 31, 2025 2024 Accounts receivable sales (1) $ 85 $ 91 ____________ (1) Losses on sales were not material. Xerox 2025 Form 10-Q 18 Note 7 – Finance Receivables, Net Finance receivables include sales-type leases and installment loans arising from the sales of our equipment. These receivables are typically collateralized by a security interest in the underlying equipment. Finance receivables, net were as follows: March 31, 2025 December 31, 2024 Gross receivables $ 1,916 $ 2,032 Unearned income ( 224 ) ( 230 ) Subtotal 1,692 1,802 Residual values — — Allowance for doubtful accounts ( 53 ) ( 57 ) Finance receivables, net 1,639 1,745 Less: Billed portion of finance receivables, net 43 48 Less: Current portion of finance receivables not billed, net 583 608 Finance receivables due after one year, net $ 1,013 $ 1,089 Finance Receivables – Allowance for Credit Losses and Credit Quality Our finance receivable portfolios are primarily in the U.S., Canada and EMEA. We generally establish customer credit limits and estimate the allowance for doubtful credit losses on a country or geographic basis. Customer credit limits are based upon an initial evaluation of the customer's credit quality, and are adjusted through ongoing credit assessments of the customer, which includes the past collections experience and changes in credit quality. The allowance for doubtful credit losses is determined based on an assessment of origination year and past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Our allowance for doubtful credit losses is effectively determined by geography. The risk characteristics in our finance receivable portfolio segments are generally consistent with the risk factors associated with the economies of the countries/regions included in those geographies. Since EMEA is comprised of various countries and regional economies, the risk profile within that portfolio segment is somewhat more diversified due to the varying economic conditions among and within those countries. Based on that assessment, the allowance for doubtful credit losses as a percentage of gross finance receivables (net of unearned income) was 3.1 % at March 31, 2025 and 3.2 % at December 31, 2024. In determining the level of reserve required we critically assessed current and forecasted economic conditions and trends to ensure we objectively considered those expected impacts in the determination of our reserve. Our assessment also included a review of current portfolio credit metrics and the level of write-offs incurred over the past year. We believe our current reserve position remains sufficient to cover expected future losses that may result from current and future macro-economic conditions including higher inflation, interest rates, and the potential for recessions in the geographic areas of our customers. We continue to monitor developments in future economic conditions and trends, and as a result, our reserves may need to be updated in future periods. Xerox 2025 Form 10-Q 19 The allowance for doubtful credit losses as well as the related investment in finance receivables were as follows: United States Canada EMEA Total Balance at December 31, 2024 $ 29 $ 5 $ 23 $ 57 Provision ( 1 ) 1 5 5 Charge-offs, net ( 3 ) ( 1 ) ( 6 ) ( 10 ) Other (1) — — 1 1 Balance at March 31, 2025 $ 25 $ 5 $ 23 $ 53 Balance at December 31, 2023 $ 58 $ 7 $ 27 $ 92 Provision ( 3 ) 5 6 8 Charge-offs, net ( 7 ) ( 1 ) ( 4 ) ( 12 ) Other (1) 1 — ( 1 ) — Balance at March 31, 2024 $ 49 $ 11 $ 28 $ 88 Finance receivables collectively evaluated for impairment March 31, 2025 (2) $ 668 $ 143 $ 881 $ 1,692 March 31, 2024 (2) $ 1,035 $ 243 $ 1,068 $ 2,346 _____________ (1) Includes the impacts of foreign currency translation and adjustments to reserves necessary to reflect events of non-payment such as customer accommodations and contract terminations. (2) Total Finance receivables exclude the allowance for credit losses of $ 53 and $ 88 at March 31, 2025 and 2024, respectively. Customers are further evaluated by class based on the type of lease origination. The primary categories are direct, which primarily includes leases originated directly with end-user customers through bundled lease arrangements, and indirect, which primarily includes leases originated through our XBS sales channel and lease financing to end-user customers who purchased equipment we sold to distributors or resellers. We evaluate our customers based on the following credit quality indicators: • Low Credit Risk: This rating includes accounts with excellent to good business credit, asset quality and capacity to meet financial obligations. These customers are less susceptible to adverse effects due to shifts in economic conditions or changes in circumstance. Loss rates in this category in the normal course are generally less than 1 %. • Average Credit Risk: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. Although we experience higher loss rates associated with this customer class, we believe the risk is somewhat mitigated by the fact that our leases are fairly well dispersed across a large and diverse customer base. In addition, the higher loss rates are largely offset by the higher rates of return we obtain with such leases. Loss rates in this category in the normal course are generally in the range of 2 % to 5 %. • High Credit Risk: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. We use numerous strategies to mitigate risk including higher rates of interest, prepayments, personal guarantees, etc. Accounts in this category include customers who were downgraded during the term of the lease from low and average credit risk evaluation when the lease was originated. Accordingly, there is a distinct possibility for a loss of principal and interest or customer default. The loss rates in this category in the normal course are generally in the range of 7 % to 10 %. Credit quality indicators are updated at least annually, or more frequently to the extent required by economic conditions, and the credit quality of any given customer can change during the life of the portfolio. Xerox 2025 Form 10-Q 20 Details about our finance receivables portfolio based on geography, origination year and credit quality indicators are as follows: March 31, 2025 2025 2024 2023 2022 2021 Prior Total Finance Receivables United States (Direct) Low Credit Risk $ 27 $ 77 $ 63 $ 29 $ 18 $ 6 $ 220 Average Credit Risk 10 37 54 21 23 7 152 High Credit Risk 7 25 23 20 11 7 93 Total $ 44 $ 139 $ 140 $ 70 $ 52 $ 20 $ 465 Charge-offs $ — $ — $ 1 $ — $ — $ — $ 1 United States (Indirect) Low Credit Risk $ 1 $ 5 $ 13 $ 24 $ 11 $ 3 $ 57 Average Credit Risk 1 8 37 39 16 4 105 High Credit Risk — 10 16 8 6 1 41 Total $ 2 $ 23 $ 66 $ 71 $ 33 $ 8 $ 203 Charge-offs $ — $ — $ 2 $ 1 $ 1 $ — $ 4 Canada Low Credit Risk $ 11 $ 27 $ 15 $ 5 $ 4 $ 1 $ 63 Average Credit Risk 11 27 15 10 4 1 68 High Credit Risk 2 5 2 1 1 1 12 Total $ 24 $ 59 $ 32 $ 16 $ 9 $ 3 $ 143 Charge-offs $ — $ — $ — $ — $ — $ — $ — EMEA Low Credit Risk $ 32 $ 129 $ 165 $ 102 $ 43 $ 14 $ 485 Average Credit Risk 20 78 129 84 31 11 353 High Credit Risk 2 9 15 11 4 2 43 Total $ 54 $ 216 $ 309 $ 197 $ 78 $ 27 $ 881 Charge-offs $ 1 $ 1 $ 2 $ 1 $ — $ — $ 5 Total Finance Receivables Low Credit Risk $ 71 $ 238 $ 256 $ 160 $ 76 $ 24 $ 825 Average Credit Risk 42 150 235 154 74 23 678 High Credit Risk 11 49 56 40 22 11 189 Total $ 124 $ 437 $ 547 $ 354 $ 172 $ 58 $ 1,692 Total Charge-offs $ 1 $ 1 $ 5 $ 2 $ 1 $ — $ 10 Xerox 2025 Form 10-Q 21 December 31, 2024 2024 2023 2022 2021 2020 Prior Total Finance Receivables United States (Direct) Low Credit Risk $ 93 $ 69 $ 34 $ 23 $ 10 $ 1 $ 230 Average Credit Risk 51 61 23 27 9 2 173 High Credit Risk 28 24 23 14 7 3 99 Total $ 172 $ 154 $ 80 $ 64 $ 26 $ 6 $ 502 Charge-offs $ 1 $ — $ 1 $ 1 $ 2 $ 2 $ 7 United States (Indirect) Low Credit Risk $ 40 $ 48 $ 25 $ 13 $ 3 $ — $ 129 Average Credit Risk 29 42 22 11 3 — 107 High Credit Risk 3 5 2 1 — — 11 Total $ 72 $ 95 $ 49 $ 25 $ 6 $ — $ 247 Charge-offs $ 1 $ 7 $ 3 $ 4 $ 2 $ 4 $ 21 Canada Low Credit Risk $ 33 $ 18 $ 7 $ 5 $ 1 $ — $ 64 Average Credit Risk 32 17 11 5 2 1 68 High Credit Risk 5 2 2 2 1 — 12 Total $ 70 $ 37 $ 20 $ 12 $ 4 $ 1 $ 144 Charge-offs $ — $ 9 $ 1 $ — $ — $ 1 $ 11 EMEA Low Credit Risk $ 131 $ 175 $ 116 $ 55 $ 20 $ 3 $ 500 Average Credit Risk 75 130 92 45 19 5 366 High Credit Risk 8 14 11 6 3 1 43 Total $ 214 $ 319 $ 219 $ 106 $ 42 $ 9 $ 909 Charge-offs $ — $ 7 $ 6 $ 3 $ 1 $ — $ 17 Total Finance Receivables Low Credit Risk $ 297 $ 310 $ 182 $ 96 $ 34 $ 4 $ 923 Average Credit Risk 187 250 148 88 33 8 714 High Credit Risk 44 45 38 23 11 4 165 Total $ 528 $ 605 $ 368 $ 207 $ 78 $ 16 $ 1,802 Total Charge-offs $ 2 $ 23 $ 11 $ 8 $ 5 $ 7 $ 56 Xerox 2025 Form 10-Q 22 The aging of our receivables portfolio is based upon the number of days an invoice is past due. Receivables that are more than 90 days past due are considered delinquent. Receivable losses are charged against the allowance when management believes the uncollectibility of the receivable is confirmed and is generally based on individual credit evaluations, results of collection efforts and specific circumstances of the customer. Subsequent recoveries, if any, are credited to the allowance. We generally continue to maintain equipment on lease and provide services to customers that have invoices for finance receivables that are 90 days or more past due and, as a result of the bundled nature of billings, we also continue to accrue interest on those receivables. However, interest revenue for such billings is only recognized if collectability is deemed probable. The aging of our billed finance receivables is as follows: March 31, 2025 Current 31-90 Days Past Due >90 Days Past Due Total Billed Unbilled Total Finance Receivables >90 Days and Accruing Direct $ 18 $ 5 $ 4 $ 27 $ 438 $ 465 $ 34 Indirect 3 2 1 6 197 203 — Total United States 21 7 5 33 635 668 34 Canada 3 1 — 4 139 143 6 EMEA 5 2 2 9 872 881 18 Total $ 29 $ 10 $ 7 $ 46 $ 1,646 $ 1,692 $ 58 December 31, 2024 Current 31-90 Days Past Due >90 Days Past Due Total Billed Unbilled Total Finance Receivables >90 Days and Accruing Direct $ 19 $ 5 $ 4 $ 28 $ 474 $ 502 $ 35 Indirect 6 1 1 8 239 247 — Total United States 25 6 5 36 713 749 35 Canada 5 1 1 7 137 144 5 EMEA 5 1 1 7 902 909 15 Total $ 35 $ 8 $ 7 $ 50 $ 1,752 $ 1,802 $ 55 Sales of Receivables The Company has a finance receivables funding agreement with an affiliate of HPS Investment Partners (HPS) pursuant to which the Company agreed to offer for sale, and HPS agreed to purchase, certain eligible pools of finance receivables, on a monthly basis, in transactions structured as "true sales at law," and bankruptcy remote transfers. We have received an opinion to that effect from outside legal counsel. Accordingly, the receivables sold are derecognized from our financial statements and HPS does not have recourse back to the Company for uncollectible receivables. In addition, the agreement provides for the sale of the underlying leased equipment to HPS, with the commission paid by HPS covering the value associated with the underlying equipment being sold to HPS. The Company retains the first right of refusal to repurchase the underlying equipment at the end of the lease term, to the extent offered for sale by HPS, at its then fair value. In addition, HPS is responsible for servicing the majority of Xerox's customers' funding activity. HPS pays a specified fee to Xerox for those lease receivables that Xerox continues to service on HPS's behalf. The Company also has a finance receivables funding agreement with De Lage Landen Financial Services Canada Inc. (DLL Canada), pursuant to which the Company can offer for sale, and DLL Canada may purchase on a non-recourse basis, certain eligible pools of finance receivables structured as “true sales at law” and bankruptcy remote transfers and we have received an opinion to that effect from outside counsel. During the first quarter 2025, the Company entered into a finance receivables funding agreement with De Lage Landen Financial Services France Inc. (DLL France), pursuant to which the Company can offer for sale, and DLL France may purchase on a non-recourse basis, certain eligible pools of finance receivables structured as “true sales at law” and bankruptcy remote transfers and we have received an opinion to that effect from outside counsel. During the first quarter of 2025, the Company received proceeds of approximately $ 15 (EUR 13 million) related to the sales of lease receivables under this finance receivables funding arrangement. Xerox 2025 Form 10-Q 23 Both DLL finance receivables funding agreements have initial terms of five years , with automatic one-year extensions thereafter, unless terminated by either the Company or DLL Canada or DLL France. The Company will be paid a commission on lease receivables sold and will continue to service the lease receivables under the finance receivables funding agreement. Finance receivable sales activity was as follows: Three Months Ended March 31, 2025 2024 Finance receivable sales - net proceeds (1) $ 75 $ 185 Gain on sale/Commissions (2) 5 6 Servicing revenue (2) $ 2 $ 2 _____________ (1) Cash proceeds are reported in Net cash provided by operating activities. (2) Recorded in Services, maintenance and rentals as Other Revenue. Amounts include revenues associated with the sale of the underlying leased equipment. Note 8 – Inventories and Equipment on Operating Leases, Net The following is a summary of Inventories by major category: March 31, 2025 December 31, 2024 Finished goods $ 744 $ 609 Work-in-process 37 36 Raw materials 55 50 Total Inventories $ 836 $ 695 The transfer of equipment from our inventories to equipment subject to an operating lease is presented in our Condensed Consolidated Statements of Cash Flows in the operating activities section. Equipment on operating leases and similar arrangements consist of our equipment rented to customers and depreciated to estimated salvage value at the end of the lease term. Equipment on operating leases and the related accumulated depreciation are as follows: March 31, 2025 December 31, 2024 Equipment on operating leases $ 942 $ 931 Accumulated depreciation ( 694 ) ( 686 ) Equipment on operating leases, net $ 248 $ 245 Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, were $ 9 and $ 13 for the three months ended March 31, 2025 and 2024, respectively . Xerox 2025 Form 10-Q 24 Note 9 – Lessee Operating Leases We have operating leases for real estate and vehicles in our domestic and international operations, and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to ten years and a variety of renewal and/or termination options. The components of lease expense are as follows: Three Months Ended March 31, 2025 2024 Operating lease expense $ 18 $ 18 Short-term lease expense 3 4 Variable lease expense (1) 16 14 Sublease income — — Total Lease expense $ 37 $ 36 _____________ (1) Variable lease expense is related to our leased real estate for offices and warehouses and primarily includes labor and operational costs, as well as taxes and insurance. As of March 31, 2025, we had no material operating leases that had not yet commenced. Operating lease ROU assets, net and operating lease liabilities were reported in the Condensed Consolidated Balance Sheets as follows: March 31, 2025 December 31, 2024 Other long-term assets (1) $ 183 $ 179 Accrued expenses and other current liabilities $ 54 $ 45 Other long-term liabilities 142 143 Total Operating lease liabilities $ 196 $ 188 _____________ (1) During the first quarter 2025, the Company modified a lease agreement for electric vehicles, 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. 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 . Finance lease ROU assets, net and operating lease liabilities were reported in the Condensed Consolidated Balance Sheets as follows: March 31, 2025 December 31, 2024 Land, buildings and equipment, net (1) $ 16 $ 55 Accrued expenses and other current liabilities $ 8 $ 15 Other long-term liabilities 6 38 Total Finance lease liabilities $ 14 $ 53 _____________ (1) During the first quarter 2025, the Company modified a lease agreement for electric vehicles, 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. Xerox 2025 Form 10-Q 25 Note 10 – Restructuring Programs In connection with our Reinvention and other transformation programs, we engage in restructuring actions in order to reduce our cost structure and realign it to the changing nature of our business. As part of our efforts to reduce costs, our restructuring actions may also include the off-shoring and/or outsourcing of certain operations, services and other functions, exit from certain product lines and geographies, as well as reducing our real estate footprint. Restructuring and related costs, net reflect the following components: Three Months Ended March 31, 2025 2024 Restructuring charges, net $ 5 $ 5 Asset impairment charges, net ( 6 ) 26 Related costs, net — 8 Total Restructuring and related costs, net $ ( 1 ) $ 39 Restructuring Charges, Net Restructuring charges, net primarily relate to the Print and Other segment as amounts related to the IT Solutions segment were immaterial for all periods presented. A summary of our restructuring program activity is as follows: Severance and Related Costs Other Contractual Termination Costs (2) Total Balance at December 31, 2024 $ 109 $ — $ 109 Restructuring provision 10 5 15 Reversals of prior charges ( 10 ) — ( 10 ) Net current period charges (1) — 5 5 Charges against reserve and currency ( 16 ) — ( 16 ) Balance at March 31, 2025 $ 93 $ 5 $ 98 _____________ _ (1) Represents net amount recognized within the Condensed Consolidated Statements of Loss for the period shown for restructuring charges. Reversals of prior charges primarily include net changes in estimated reserves from initiatives accrued for in prior periods, including Reinvention. (2) Primarily includes additional costs incurred upon the exit from our facilities, including decommissioning costs and associated contractual termination costs. We expect that the majority of these costs will be paid upon the exercise of an early termination clause in 2027. At March 31, 2025, we expect to pay $ 70 of the restructuring reserve over the next twelve months. The following table summarizes the reconciliation to the Condensed Consolidated Statements of Cash Flows: Three Months Ended March 31, 2025 2024 Restructuring cash payments $ ( 18 ) $ ( 16 ) Effects of foreign currency and other non-cash items 2 — Charges against reserve and currency $ ( 16 ) $ ( 16 ) Xerox 2025 Form 10-Q 26 Asset Impairment Charges, Net Charges associated with asset impairments represent the write-down of the related assets to their new cost basis. Impairments are net of any potential sublease income or other recovery amounts. Asset impairment charges incurred during the first quarter 2025 related to the impairment of an operating lease ROU asset, which was exited during the quarter, as well as the sale of a facility. Both the impairment and the sale are associated with strategic actions taken as a result of the Company's Reinvention. Three Months Ended March 31, 2025 2024 Lease right of use assets (1) $ 4 $ — Owned assets (1) 9 26 Asset impairments 13 26 Less: Proceeds from the sale of owned assets (2) ( 19 ) — Net asset impairment (credit) charge $ ( 6 ) $ 26 ____________ _ (1) Primarily related to the exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries. (2) Reflects net proceeds on the sale of exited surplus facilities and land. Related Costs, Net In connection with our restructuring programs, we also incurred certain related costs as follows: Three Months Ended March 31, 2025 2024 Retention related severance/bonuses (1) $ — $ ( 2 ) Consulting and other costs (2) — 10 Total $ — $ 8 ____________ _ (1) Includes retention-related severance and bonuses for employees expected to continue working beyond their minimum retention period before termination. (2) Represents professional support services associated with our business transformation initiatives. Cash paid for restructuring related costs were $ 0 and $ 10 for the three months ended March 31, 2025 and 2024, respectively. The restructuring related costs reserve was $ 4 and $ 4 at March 31, 2025 and December 31, 2024, respectively. The balance at March 31, 2025 is expected to be paid over the next twelve months. Xerox 2025 Form 10-Q 27 Note 11 – Supplementary Financial Information Cash, Cash Equivalents and Restricted Cash Restricted cash primarily relates to escrow cash deposits made in Brazil associated with ongoing litigation as well as cash collections on finance receivables that were pledged for secured borrowings. As more fully discussed in Note 20 - Contingencies and Litigation, various litigation matters in Brazil require us to make cash deposits to escrow as a condition of the continuing litigation. Restricted cash amounts are classified in our Condensed Consolidated Balance Sheets based on when the cash will be contractually or judicially released. Cash, cash equivalents and restricted cash amounts are as follows: March 31, 2025 December 31, 2024 Cash and cash equivalents $ 336 $ 576 Restricted cash Litigation deposits in Brazil 22 20 Escrow and cash collections related to secured borrowing arrangements and receivable sales (1) 9 13 Other restricted cash 23 22 Total Restricted cash 54 55 Cash, cash equivalents and restricted cash $ 390 $ 631 _____________ (1) Includes collections on finance receivables pledged for secured borrowings or receivables sold that will be remitted to lenders in the following month. Restricted cash is reported in the Condensed Consolidated Balance Sheets as follows: March 31, 2025 December 31, 2024 Other current assets $ 30 $ 33 Other long-term assets 24 22 Total Restricted cash $ 54 $ 55 Supplemental Cash Flow Information Summarized cash flow information is as follows: Location in Statement of Cash Flows Three Months Ended March 31, Source/(Use) 2025 2024 Provision for receivables (1) Operating $ 10 $ 14 Provision for inventory Operating 8 43 Depreciation of buildings and equipment Operating 15 14 Depreciation and obsolescence of equipment on operating leases Operating 29 28 Amortization of internal use software Operating 6 7 Amortization of acquired intangible assets Operating 10 10 Amortization of patents (2) Operating 2 2 Amortization of customer contract costs (3) Operating 16 16 Cost of additions to land, buildings and equipment Investing ( 5 ) ( 8 ) Cost of additions to internal use software Investing ( 15 ) ( 2 ) Payments to acquire noncontrolling interests - Xerox Holdings Investing ( 2 ) ( 11 ) Common stock dividends - Xerox Holdings Financing ( 35 ) ( 33 ) Preferred stock dividends - Xerox Holdings Financing ( 4 ) ( 4 ) Payments to noncontrolling interests Financing ( 1 ) ( 1 ) Repurchases related to stock-based compensation - Xerox Holdings Financing ( 6 ) ( 9 ) _____________ (1) Provision for receivables includes adjustments for customer accommodations and contract terminations of $ 1 and $( 1 ) for the three months ended March 31, 2025 and 2024, respectively. (2) Amortization of patents is reported in Increase in other current and long-term assets in the Condensed Consolidated Statements of Cash Flows. (3) Amortization of customer contract costs is reported in Increase in other current and long-term assets in the Condensed Consolidated Statements of Cash Flows. Refer to Note 3 - Revenue - Contract Costs for additional information. Xerox 2025 Form 10-Q 28 Supplier Finance Program We have a program through a financial institution that enables vendors and suppliers, at their option, to receive early payment for their invoices. All outstanding amounts related to the program are recorded within Accounts payable in our Condensed Consolidated Balance Sheets, and the associated payments are included in operating activities within our Condensed Consolidated Statements of Cash Flows. The program operates in a similar manner to a purchasing card program, however with this program we directly receive invoices associated with those vendors and suppliers participating in the program and confirm and validate those invoices and the amounts due before submitting the invoices to the financial institution for early payment at a discounted amount. The financial institution subsequently invoices the Company for the stated or full amount of the invoices paid early and we are required to make payment within 45 days of the statement date. The overall impact of the program generally results in paying our supplier and vendor invoices consistent with their original terms. This program is generally available to all non-inventory vendors and suppliers. The Company's supplier finance program is as follows: 2025 2024 Balance at January 1st $ 30 $ 40 Amounts invoiced 22 30 Invoices paid ( 33 ) ( 40 ) Balance at March 31st $ 19 $ 30 Note 12 – Debt Revolving Credit Facility Xerox Corporation, as borrower, and its parent company, Xerox Holdings Corporation, have a revolving credit facility (the ABL Facility), with Citibank, N.A., as administrative agent and collateral agent (the ABL Agent) and several lenders including Citibank N.A. The aggregate outstanding principal amount of the ABL Facility is payable in full at maturity on May 22, 2028, and there are no scheduled principal payments prior to maturity. The ABL Facility has commitments from the lenders of $ 425 . At March 31, 2025, there were no borrowings under the ABL Facility, and approximately $ 41 of letters of credit were issued under the facility. During the three months ended March 31, 2025, the maximum borrowings under the ABL Facility were $ 25 . Xerox Holdings Corporation/Xerox Corporation Intercompany Loan At March 31, 2025 and December 31, 2024, the balance of the Xerox Holdings Corporation Intercompany Loan reported in Xerox Corporation’s Condensed Consolidated Balance Sheet was $ 2,023 and $ 2,022 , respectively, which is net of related debt issuance costs, and the intercompany interest payable was $ 23 and $ 31 , respectively. Secured Borrowings and Collateral At December 31, 2024, we had secured borrowings of $ 70 with an interest rate of 4.62 %. The borrowings were secured by $ 58 of Finance receivables, net, and were expected to mature in 2026. During the first quarter 2025, the outstanding balance of $ 70 was repaid and there are no secured borrowings outstanding as of March 31, 2025. Xerox 2025 Form 10-Q 29 Interest Expense and Income Interest expense and income were as follows: Three Months Ended March 31, 2025 2024 Equipment financing interest (1) $ 22 $ 27 Non-financing interest expense (1)(2) 33 26 Interest expense $ 55 $ 53 Financing income (3) $ 33 $ 42 Other interest income (3) 2 3 Interest income $ 35 $ 45 ____________ (1) Equipment financing interest, which is included in Cost of services, maintenance, rentals and other, and non-financing interest expense, which is included in Other expenses, net, in the Condensed Consolidated Statements of Loss. (2) Interest expense of Xerox Corporation included intercompany interest expense associated with the Xerox Holdings Corporation / Xerox Corporation Intercompany Loan of $ 30 and $ 22 for the three months ended March 31, 2025 and 2024, respectively. (3) Financing income, which is included in Services, maintenance, rentals and other, and other interest income, which is included in Other expenses, net, in the Condensed Consolidated Statements of Loss. Note 13 – Financial Instruments Interest Rate Risk Management We use interest rate swap and interest rate cap agreements to manage our interest rate exposure and to achieve a desired proportion of variable and fixed rate debt. These derivatives may be designated as fair value hedges or cash flow hedges or non-designated hedges depending on the nature of the risk being hedged. We had no fair value hedges for the three months ended March 31, 2025 and 2024, respectively. Cash Flow Hedges We use interest rate swaps and caps to manage the exposure to variability in the interest rate payments on our finance receivable secured loan borrowings. The interest rate swaps convert the interest paid on certain loans to a fixed amount while the caps limit the maximum amount of interest paid. In September 2024, we entered into two floating-to-fixed interest rate swaps to hedge against interest rate volatility associated with our Term Loan B Credit Agreement (TLB), which had an outstanding principal balance of $ 516 as of March 31, 2025. The following is a summary of our swaps at March 31, 2025: Counterparty Derivative Type Principal Debt Notional Amount Expected Maturity Fixed Rate Paid Floating Rate Received Net Fair Value Mizuho Swap $ 175 $ 175 2027 3.271 % 4.329 % $ 1 Credit Agricole Swap 125 125 2027 3.276 % 4.329 % 1 Total $ 300 $ 300 $ 2 The remaining portion of the TLB of $ 216 is not hedged, and is subject to interest rate fluctuations. The impact of these interest rate swaps on interest expense was a net reduction of $ 1 for the three months ended March 31, 2025. Foreign Exchange Risk Management We are a global company and we are exposed to foreign currency exchange rate fluctuations in the normal course of our business. As a part of our foreign exchange risk management strategy, we use derivative instruments, primarily forward contracts and purchased option contracts, to hedge the following foreign currency exposures, thereby reducing volatility of earnings or protecting fair values of assets and liabilities: • Foreign currency-denominated assets and liabilities • Forecasted purchases and sales in foreign currency At March 31, 2025 and December 31, 2024, we had outstanding forward exchange and purchased option contracts with gross notional values of $ 1,200 and $ 1,410 respectively, with terms of less than 12 months. The decrease in the notional value is due to a reduction in foreign currency denominated intercompany balances. At March 31, 2025, approximately 94 % of the contracts mature within three months, 3 % mature in three to six months and 3 % in six to twelve months. Xerox 2025 Form 10-Q 30 Foreign Currency Cash Flow Hedges We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. The amount of ineffectiveness recorded in the Condensed Consolidated Statements of Loss for these designated cash flow hedges was not material for the three months ended March 31, 2025 and 2024, respectively. The net liability fair value of these contracts was $ 1 and $ 1 as of March 31, 2025 and December 31, 2024, respectively. Summary of Derivative Instruments Gains (Losses) Derivative gains and (losses) affect the income statement based on whether such derivatives are designated as hedges of underlying exposures. The following is a summary of derivative gains (losses). Designated Derivative Instruments Gains (Losses) The following table provides a summary of gains (losses) on derivative instruments in cash flow hedging relationships: Three Months Ended March 31, 2025 2024 Derivative Loss Recognized in OCI (Effective Portion) Foreign exchange contracts - forwards and options $ — $ ( 3 ) Interest rate contracts ( 3 ) — Total $ ( 3 ) $ ( 3 ) Location of Derivative Losses (Gains) Reclassified from AOCL to Income (Effective Portion) Cost of sales $ — $ ( 4 ) Interest expense — 1 Total $ — $ ( 3 ) As of March 31, 2025, a net after-tax gain of $ 4 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity. The entire balance is expected to be reclassified into Net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions. Credit Support Annex The Company may enter into derivative contracts with derivative counterparties that contain a provision to post collateral to the counterparties when these contracts are in a net liability position. At March 31, 2025, the Company had no collateral posted due to this provision. Non-Designated Derivative Instruments Gains (Losses) Non-designated derivative instruments are primarily instruments used to hedge foreign currency-denominated assets and liabilities. They are not designated as hedges since there is a natural offset for the remeasurement of the underlying foreign currency-denominated asset or liability. The net liability fair value of these contracts was $ 1 and $ 2 as of March 31, 2025 and December 31, 2024, respectively. The following table provides a summary of gains and (losses) on non-designated derivative instruments: Derivatives NOT Designated as Hedging Instruments Location of Derivative Gain (Loss) Three Months Ended March 31, 2025 2024 Foreign exchange contracts – forwards Other expenses, net – Currency gains (losses), net $ 6 $ ( 8 ) Currency losses, net were $ 0 and $ 11 for the three months ended March 31, 2025 and 2024, respectively. Net currency gains and losses include the mark-to-market adjustments of the derivatives not designated as hedging instruments and the related cost of those derivatives as well as the remeasurement of foreign currency-denominated assets and liabilities and are included in Other expenses, net. Xerox 2025 Form 10-Q 31 Note 14 – Fair Value of Financial Assets and Liabilities The following table represents assets and liabilities measured at fair value on a recurring basis. The basis for the measurement at fair value in all cases is Level 2 – Significant Other Observable Inputs. March 31, 2025 December 31, 2024 Assets Derivatives $ 5 $ 11 Deferred compensation plan investments in mutual funds 12 13 Total $ 17 $ 24 Liabilities Derivatives $ 5 $ 8 Deferred compensation plan liabilities 11 11 Total $ 16 $ 19 We utilize the income approach to measure the fair value for our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices, and therefore are classified as Level 2. Fair value for our deferred compensation plan investments in mutual funds is based on quoted market prices for those funds. Fair value for deferred compensation plan liabilities is based on the fair value of investments corresponding to employees’ investment selections. Summary of Other Financial Assets and Liabilities The estimated fair values of our other financial assets and liabilities were as follows: March 31, 2025 December 31, 2024 Carrying Amount Fair Value Carrying Amount Fair Value Cash and cash equivalents $ 336 $ 336 $ 576 $ 576 Accounts receivable, net 819 819 796 796 Short-term debt and current portion of long-term debt (1) 599 608 585 592 Long-term Debt Xerox Holdings Corporation 1,635 1,102 1,634 1,391 Xerox Corporation 1,064 787 1,177 989 Xerox - Other Subsidiaries (2) — — 3 3 Long-term debt $ 2,699 $ 1,889 $ 2,814 $ 2,383 ____________ (1) Includes $ 388 of Xerox Corporation related party debt. (2) Represents subsidiaries of Xerox Corporation The fair value amounts for Cash and cash equivalents and Accounts receivable, net, approximate carrying amounts due to the short maturities of these instruments. The fair value of Short-term debt, including the current portion of long-term debt, and Long-term debt was estimated based on the current rates offered to us for debt of similar maturities (Level 2). The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at such date. Xerox 2025 Form 10-Q 32 Note 15 – Employee Benefit Plans The components of Net periodic benefit cost and other changes in plan assets and benefit obligations were as follows: Three Months Ended March 31, Pension Benefits U.S. Plans Non-U.S. Plans Retiree Health Components of Net Periodic Benefit Costs: 2025 2024 2025 2024 2025 2024 Service cost $ — $ — $ 1 $ 1 $ — $ — Interest cost 28 27 46 45 2 2 Expected return on plan assets ( 22 ) ( 23 ) ( 49 ) ( 48 ) — — Recognized net actuarial loss (gain) 5 5 12 16 ( 3 ) ( 3 ) Amortization of prior service cost (credit) — — 2 1 ( 3 ) ( 4 ) Recognized settlement loss — 5 — — — — Defined benefit plans 11 14 12 15 ( 4 ) ( 5 ) Defined contribution plans 3 3 6 5 n/a n/a Net Periodic Benefit Cost (Credit) 14 17 18 20 ( 4 ) ( 5 ) Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: Net actuarial gain (1) — ( 8 ) — — — — Prior service cost — — — — — — Amortization of net actuarial (loss) gain ( 5 ) ( 10 ) ( 13 ) ( 16 ) 3 3 Amortization of prior service (cost) credit — — ( 2 ) ( 1 ) 3 4 Total Recognized in Other Comprehensive Income (2) ( 5 ) ( 18 ) ( 15 ) ( 17 ) 6 7 Total Recognized in Net Periodic Benefit Cost (Credit) and Other Comprehensive Income $ 9 $ ( 1 ) $ 3 $ 3 $ 2 $ 2 _____________ (1) The net actuarial gain for U.S. Pension Plans primarily reflects the remeasurement of our primary U.S. pension plans as a result of the payment of periodic settlements. (2) Amounts represent the pre-tax effect included within Other Comprehensive Income. Refer to Note 18 - Other Comprehensive Income for related tax effects and the after-tax amounts. Contributions The following table summarizes cash contributions to our defined benefit pension plans and retiree health benefit plans: Three Months Ended March 31, Year Ended December 31, 2025 2024 Estimated 2025 2024 U.S. plans $ 22 $ 18 $ 110 $ 100 Non-U.S. plans 6 6 30 27 Total Pension plans 28 24 140 127 Retiree Health 6 7 20 18 Total Retirement plans $ 34 $ 31 $ 160 $ 145 Approximately $ 85 of the estimated 2025 contributions for our U.S. plans are for our tax-qualified defined benefit plans. Xerox 2025 Form 10-Q 33 Note 16 – Shareholders’ Equity of Xerox Holdings (shares in thousands) The shareholders' equity information presented below reflects the consolidated activity of Xerox Holdings. Common Stock (1) Additional Paid-in Capital Retained Earnings AOCL (2) Xerox Holdings Shareholders’ Equity Non-controlling Interests Total Equity Balance at December 31, 2024 $ 124 $ 1,137 $ 3,514 $ ( 3,699 ) $ 1,076 $ 4 $ 1,080 Comprehensive (loss) income, net — — ( 90 ) 82 ( 8 ) — ( 8 ) Cash dividends declared - common (3) — — ( 17 ) — ( 17 ) — ( 17 ) Cash dividends declared - preferred (4) — — ( 4 ) — ( 4 ) — ( 4 ) Stock option and incentive plans, net 2 4 — — 6 — 6 Transactions with noncontrolling interests — — — — — 1 1 Distributions to noncontrolling interests — — — — — ( 1 ) ( 1 ) Balance at March 31, 2025 $ 126 $ 1,141 $ 3,403 $ ( 3,617 ) $ 1,053 $ 4 $ 1,057 Common Stock (1) Additional Paid-in Capital Retained Earnings AOCL (2) Xerox Holdings Shareholders’ Equity Non- controlling Interests Total Equity Balance at December 31, 2023 $ 123 $ 1,114 $ 4,977 $ ( 3,676 ) $ 2,538 $ 10 $ 2,548 Comprehensive (loss) income, net — — ( 113 ) 3 ( 110 ) — ( 110 ) Cash dividends declared - common (3) — — ( 32 ) — ( 32 ) — ( 32 ) Cash dividends declared - preferred (4) — — ( 4 ) — ( 4 ) — ( 4 ) Purchases of capped calls — ( 17 ) — — ( 17 ) — ( 17 ) Stock option and incentive plans, net 1 2 — — 3 — 3 Transactions with noncontrolling interests — — — — — ( 6 ) ( 6 ) Distributions to noncontrolling interests — — — — — ( 1 ) ( 1 ) Balance at March 31, 2024 $ 124 $ 1,099 $ 4,828 $ ( 3,673 ) $ 2,378 $ 3 $ 2,381 _____________ (1) Common Stock has a par value of $ 1 per share. (2) Refer to Note 18 - Other Comprehensive Income for the components of AOCL. (3) Cash dividends declared on common stock for the three months ended March 31, 2025 and 2024 were $ 0.125 per share and $ 0.25 per share, respectively. (4) Cash dividends declared on preferred stock for the three months ended March 31, 2025 and 2024 were $ 20.00 per share and $ 20.00 per share, respectively. Common Stock and Treasury Stock The following is a summary of the changes in Common and Treasury stock shares: Common Stock Shares Treasury Stock Shares Balance at December 31, 2024 124,435 — Stock based compensation plans, net 1,345 — Balance at March 31, 2025 125,780 — Xerox 2025 Form 10-Q 34 Note 17 – Shareholder's Equity of Xerox The shareholder's equity information presented below reflects the consolidated activity of Xerox. Additional Paid-in Capital Retained Earnings AOCL (1) Xerox Shareholder's Equity Non- controlling Interests Total Equity Balance at December 31, 2024 $ 3,487 $ 1,504 $ ( 3,699 ) $ 1,292 $ 4 $ 1,296 Comprehensive (loss) income, net — ( 87 ) 82 ( 5 ) — ( 5 ) Dividends declared to parent — ( 20 ) — ( 20 ) — ( 20 ) Transfers to parent ( 13 ) — — ( 13 ) — ( 13 ) Transactions with noncontrolling interests — — — — 1 1 Distributions to noncontrolling interests — — — — ( 1 ) ( 1 ) Balance at March 31, 2025 $ 3,474 $ 1,397 $ ( 3,617 ) $ 1,254 $ 4 $ 1,258 Additional Paid-in Capital Retained Earnings AOCL (1) Xerox Shareholder's Equity Non- controlling Interests Total Equity Balance at December 31, 2023 $ 3,485 $ 2,959 $ ( 3,676 ) $ 2,768 $ 10 $ 2,778 Comprehensive (loss) income, net — ( 113 ) 3 ( 110 ) — ( 110 ) Dividends declared to parent — ( 35 ) — ( 35 ) — ( 35 ) Transfers to parent ( 20 ) — — ( 20 ) — ( 20 ) Transactions with noncontrolling interests — — — — ( 6 ) ( 6 ) Distributions to noncontrolling interests — — — — ( 1 ) ( 1 ) Balance at March 31, 2024 $ 3,465 $ 2,811 $ ( 3,673 ) $ 2,603 $ 3 $ 2,606 _____________ (1) Refer to Note 18 - Other Comprehensive Income for the components of AOCL. Xerox 2025 Form 10-Q 35 Note 18 – Other Comprehensive Income Other Comprehensive Income is comprised of the following: Three Months Ended March 31, 2025 2024 Pre-tax Net of Tax Pre-tax Net of Tax Translation Adjustments Gains (Losses) $ 105 $ 105 $ ( 32 ) $ ( 32 ) Unrealized (Losses) Gains Changes in fair value of cash flow hedges losses ( 3 ) ( 2 ) ( 3 ) ( 3 ) Changes in cash flow hedges reclassed to earnings (1) — — 3 2 Net Unrealized Losses ( 3 ) ( 2 ) — ( 1 ) Defined Benefit Plans (Losses) Gains Net actuarial/prior service (losses) gains — ( 1 ) 8 6 Prior service amortization (2) ( 1 ) — ( 3 ) ( 2 ) Actuarial loss amortization/settlement (2) 15 14 23 17 Other (losses) gains (3) ( 34 ) ( 34 ) 15 15 Changes in Defined Benefit Plans (Losses) Gains ( 20 ) ( 21 ) 43 36 Other Comprehensive Income $ 82 $ 82 $ 11 $ 3 ____________ (1) Reclassified to Cost of sales and interest expense - refer to Note 13 - Financial Instruments for additional information regarding our cash flow hedges. (2) Reclassified to Total Net Periodic Benefit Cost - refer to Note 15 - Employee Benefit Plans for additional information. (3) Primarily represents currency impact on cumulative amount of benefit plan net actuarial losses and prior service credits in AOCL. Accumulated Other Comprehensive Loss (AOCL) AOCL is comprised of the following: March 31, 2025 December 31, 2024 Cumulative translation adjustments $ ( 2,061 ) $ ( 2,166 ) Other unrealized gains, net 4 6 Benefit plans net actuarial losses and prior service credits ( 1,560 ) ( 1,539 ) Total Accumulated Other Comprehensive Loss $ ( 3,617 ) $ ( 3,699 ) Xerox 2025 Form 10-Q 36 Note 19 – Loss per Share (shares in thousands) The following table sets forth the computation of basic and diluted loss per share of Xerox Holdings Corporation's common stock: Three Months Ended March 31, 2025 2024 Loss per Share Net Loss $ ( 90 ) $ ( 113 ) Accrued dividends on preferred stock ( 4 ) ( 4 ) Adjusted Net loss available to common shareholders $ ( 94 ) $ ( 117 ) Weighted average common shares outstanding 125,194 123,924 Basic Loss per Share $ ( 0.75 ) $ ( 0.94 ) Diluted Loss per Share Net Loss $ ( 90 ) $ ( 113 ) Accrued dividends on preferred stock ( 4 ) ( 4 ) Adjusted Net loss available to common shareholders $ ( 94 ) $ ( 117 ) Weighted average common shares outstanding 125,194 123,924 Common shares issuable with respect to: Stock options — — Restricted stock and performance shares — — Convertible preferred stock — — Adjusted weighted average common shares outstanding 125,194 123,924 Diluted Loss per Share $ ( 0.75 ) $ ( 0.94 ) The following securities were not included in the computation of diluted earnings per share as they were either contingently issuable shares or shares that if included would have been anti-dilutive: Stock options 147 216 Restricted stock and performance shares 16,415 5,950 Convertible preferred stock 6,742 6,742 Convertible notes 19,196 19,196 Total Anti-Dilutive Securities 42,500 32,104 Dividends per Common Share $ 0.125 $ 0.25 Xerox 2025 Form 10-Q 37 Note 20 – Contingencies and Litigation Legal Matters We are involved in a variety of claims, lawsuits, investigations and proceedings concerning: securities law; governmental entity contracting; servicing and procurement law; intellectual property law; environmental law; employment law; the Employee Retirement Income Security Act (ERISA); and other laws and regulations. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs. Brazil Contingencies Our Brazilian operations have received or been the subject of numerous governmental assessments related to indirect and other taxes. The tax matters principally relate to claims for taxes on the internal transfer of inventory, municipal service taxes on rentals and gross revenue taxes. We are disputing these tax matters and intend to vigorously defend our positions. Based on the opinion of legal counsel and current reserves for those matters deemed probable of loss, we do not believe that the ultimate resolution of these matters will materially impact our results of operations, financial position or cash flows. Below is a summary of our Brazilian tax contingencies: March 31, 2025 December 31, 2024 Tax contingency - unreserved $ 335 $ 305 Escrow cash deposits 20 18 Surety bonds 105 88 Letters of credit 5 10 Liens on Brazilian assets — — The increase in the unreserved portion of the tax contingency, inclusive of any related interest, was primarily due to currency, as well as interest and new cases. With respect to the unreserved tax contingency, the majority has been assessed by management as being remote as to the likelihood of ultimately resulting in a loss to the Company. In connection with the above proceedings, customary local regulations may require us to make escrow cash deposits or post other security of up to half of the total amount in dispute, as well as, additional surety bonds and letters of credit, which include associated indexation. Generally, any escrowed amounts would be refundable and any liens on assets would be removed to the extent the matters are resolved in our favor. We are also involved in certain disputes with contract and former employees. Exposures related to labor matters are not material for the periods presented. We routinely assess all these matters as to the probability of ultimately incurring a liability against our Brazilian operations and record our best estimate of the ultimate loss in situations where we assess the likelihood of an ultimate loss as probable. Litigation Miami Firefighters’ Relief & Pension Fund v. Icahn, et al.: On December 13, 2019, alleged shareholder Miami Firefighters’ Relief & Pension Fund (Miami Firefighters) filed a derivative complaint in New York State Supreme Court, New York County on behalf of Xerox Holdings Corporation (Xerox Holdings) against Carl Icahn and his affiliated entities High River Limited Partnership and Icahn Capital LP (the Icahn defendants), Xerox Holdings, and all then-current Xerox Holdings directors (the Directors). Xerox Holdings was named as a nominal defendant in the case but no monetary damages are sought against it. Miami Firefighters alleges: breach of fiduciary duty of loyalty against the Icahn defendants; breach of contract against the Icahn defendants (for purchasing HP stock in violation of Icahn’s confidentiality agreement with Xerox Holdings); unjust enrichment against the Icahn defendants; and breach of fiduciary duty of loyalty against the Directors (for any consent to the Icahn defendants’ purchases of HP common stock while Xerox Holdings was considering acquiring HP). Miami Firefighters seeks a judgment of breach of fiduciary duties against the Icahn defendants and the Directors, and disgorgement to Xerox Holdings of profits Icahn Capital and High River earned from trading in HP Xerox 2025 Form 10-Q 38 stock. This action was consolidated with a similar action brought by Steven J. Reynolds against the same parties in the same court. Miami Firefighters’ counsel has been designated as lead counsel in the consolidated action. Claims asserted against the Directors were later dismissed. The parties have reached a stipulation of settlement that has been preliminarily approved by the court. Guarantees We have issued or provided approximately $ 227 of guarantees as of March 31, 2025 in the form of letters of credit or surety bonds issued to i) support certain insurance programs; ii) support our obligations related to the Brazil contingencies; iii) support our obligations related to our U.K. pension plans; and iv) support certain contracts, primarily with public sector customers, which require us to provide a surety bond as a guarantee of our performance of contractual obligations. In general, we would only be liable for the amount of these guarantees in the event we, or one of our direct or indirect subsidiaries whose obligations we have guaranteed, defaulted in performing our obligations under each contract; the probability of which we believe is remote. We believe that our capacity in the surety markets as well as under various credit arrangements (including our Credit Facility) is sufficient to allow us to respond to future requests for proposals that require such credit support. Note 21 – Subsequent Events We have evaluated subsequent events through May 6, 2025, which is the date the financial statements were issued. Debt Issuance On April 11, 2025, Xerox Corporation and Xerox Issuer Corporation, a wholly-owned subsidiary of Xerox Corporation (Escrow Issuer), completed their previously announced private offering of (i) $ 400 aggregate principal amount of 10.250 % Senior Secured First Lien Notes due 2030 (the First Lien Notes) issued by Xerox Corporation at 99 % of par, and (ii) $ 400 aggregate principal amount of 13.500 % Senior Secured Second Lien Notes due 2031 at 98 % of par (the Second Lien Notes issued and together with the First Lien Notes, the Notes) issued by the Escrow Issuer. We received net proceeds (after discount, fees and expenses) on the issuance of the First Lien Notes of $ 366 . Additionally, $ 392 of net proceeds (after discount) was deposited into an escrow account upon the issuance of the Second Lien Notes. On May 9, 2025, the Escrow Issuer issued an additional $ 100 of the 13.500 % Second Lien Notes at 95 % of par. Also on May 9, 2025, $ 96 of the proceeds were deposited into the escrow account, which included $ 1 of accrued and unpaid interest. Xerox Corporation made an additional deposit of $ 2 into the escrow account. Net proceeds (after discounts, fees and expenses) were approximately $ 93 . Aggregate net proceeds from both issuances of the Second Lien Notes was approximately $ 485 . We expect to pay an additional $ 15 of commitment and underwriting fees upon the release of the proceeds from escrow to fund the Lexmark Acquisition (as defined below). Xerox Corporation intends to use the net proceeds from the offering of the First Lien Notes, together with cash on hand, to redeem Xerox’s 5.000 % Senior Notes due 2025 (2025 Notes) in full on or prior to their maturity and to pay fees and expenses, including redemption premiums and accrued interest, in connection with the offering, the Lexmark Acquisition and the related transactions, including redemption premiums and accrued interest in connection with the related transactions. Xerox redeemed an aggregate principal amount of $ 90 of the 2025 Notes on April 11, 2025, with the balance to be redeemed on or prior to maturity. On April 11, 2025, Xerox also repaid $ 95 aggregate principal amount of borrowings under Xerox Corporation’s first lien senior secured term loan credit facility (the TLB Facility) with a portion of the proceeds of the First Lien Notes. The application of the remaining proceeds from the First Lien Notes will be used for general corporate purposes. Xerox Corporation intends to use the net proceeds from the offering of the Second Lien Notes to (i) fund a portion of the purchase price for the Lexmark Acquisition and the repayment of substantially all of Lexmark’s outstanding debt (together with accrued interest and any applicable expenses, fees or premiums) and (ii) pay fees and expenses in connection with the offering, the Lexmark Acquisition and the related transactions. The First Lien Notes are governed by an indenture, dated as of April 11, 2025 (the First Lien Indenture), among Xerox Corporation, Xerox Holdings Corporation (Xerox and, together with Xerox Corporation, the Company), certain of Xerox’s domestic and foreign subsidiaries and U.S. Bank Trust Company, National Association, as trustee and collateral agent. The Second Lien Notes are governed by an indenture, dated as of April 11, 2025 (the Second Lien Xerox 2025 Form 10-Q 39 Indenture and, together with the First Lien Indenture, the Indentures), between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee and collateral agent. The First Lien Notes bear interest at a rate of 10.250 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2025. The First Lien Notes are unconditionally guaranteed on a senior secured basis by Xerox and certain of Xerox’s domestic and foreign subsidiaries and, subject to certain exceptions and permitted liens, secured by security interests in substantially all of the assets of Xerox and such subsidiaries (the Xerox Collateral) on a first-priority basis by the Xerox Collateral that is Fixed Asset Collateral (as defined in the First Lien Indenture) and on a second-priority basis by the Xerox Collateral that is Current Asset Collateral (as defined in the First Lien Indenture). The Second Lien Notes bear interest at a rate of 13.500 % per annum, payable semi-annually in arrears on April 15 and October 15, beginning on October 15, 2025. The gross proceeds of the Second Lien Notes were deposited into an escrow account for the benefit of the holders of the Second Lien Notes until such date that certain escrow release conditions, including the consummation of the Lexmark Acquisition, have been satisfied. The escrow account is pledged on a first priority basis in favor of the trustee for the Second Lien Notes for the benefit of holders of the Second Lien Notes. If the Lexmark Acquisition is not consummated on or prior to December 22, 2025 (subject to extension) or upon the occurrence of certain other events, the Second Lien Notes will be subject to a special mandatory redemption at a price equal to 98 % of the aggregate principal amount of the Second Lien Notes, plus accrued and unpaid interest, if any, from, and including, the most recent interest payment date, or April 11, 2025, if no interest has been paid, to, but excluding, the special mandatory redemption date. Upon the consummation of the Lexmark Acquisition, subject to certain escrow release conditions, the escrowed proceeds will be released (the Escrow Release) from the escrow account and the Escrow Issuer will be merged with and into Xerox Corporation. Upon the Escrow Release, Xerox Corporation, Xerox and certain of Xerox’s domestic and foreign subsidiaries that guarantee the First Lien Notes will enter into one or more supplemental indentures to the Second Lien Indenture to provide for the assumption by Xerox Corporation of the obligations of the Escrow Issuer as issuer of the Second Lien Notes and for the guarantees of the Second Lien Notes by Xerox and such subsidiaries (the Assumption). On the date of Escrow Release and upon consummation of the Assumption, the Second Lien Notes, subject to certain exceptions and permitted liens, will be secured on a second-priority basis by the Xerox Collateral that is Fixed Asset Collateral and on a third-priority basis by the Xerox Collateral that is Current Asset Collateral. Within 90 business days following the completion of the Lexmark Acquisition, subject to certain agreed security principles, the Notes will be jointly and severally guaranteed on a senior secured basis by Lexmark and certain of its subsidiaries that become guarantors under the TLB Facility. Subject to certain exceptions and permitted liens, the Notes will be further secured by security interests in substantially all of the assets of Lexmark and certain of its subsidiaries that will secure the TLB Facility (the Lexmark Collateral) on a first-priority basis, in respect of the First Lien Notes, and on a second-priority basis, in respect of the Second Lien Notes, by the Lexmark Collateral that is Fixed Asset Collateral and on a second-priority basis, in respect of the First Lien Notes, and on a third-priority basis, in respect of the Second Lien Notes by the Lexmark Collateral that is Current Asset Collateral. At any time and from time to time prior to October 15, 2027, some or all of the First Lien Notes are redeemable for cash at a redemption price equal to 100 % of their principal amount, plus the applicable “make-whole” premium described in the First Lien Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on October 15, 2027, some or all of the First Lien Notes are redeemable at any time and from time to time at the applicable redemption prices listed in the First Lien Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time and from time to time prior to October 15, 2027, up to 40 % of the aggregate principal amount of the First Lien Notes are redeemable with funds from one or more equity offerings at a redemption price equal to 110.250 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, prior to October 15, 2027, during each 12-month period commencing with the issue date of the First Lien Notes, up to 10 % of the aggregate principal amount of the First Lien Notes outstanding are redeemable at a redemption price equal to 103 % of the principal amount of the First Lien Notes redeemed plus accrued and unpaid interest. At any time and from time to time prior to April 15, 2028, some or all of the Second Lien Notes are redeemable for cash at a redemption price equal to 100 % of their principal amount, plus the applicable “make-whole” premium described in the Second Lien Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on April 15, 2028, some or all of the Second Lien Notes are redeemable at any time and from time to time at the applicable redemption prices listed in the Second Lien Indenture, plus accrued and Xerox 2025 Form 10-Q 40 unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time and from time to time prior to April 15, 2028, up to 40 % of the aggregate principal amount of the Second Lien Notes are redeemable with funds from one or more equity offerings at a redemption price equal to 113.500 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, prior to April 15, 2028, during each 12-month period commencing with the issue date of the Second Lien Notes, up to 10 % of the aggregate principal amount of the Second Lien Notes outstanding are redeemable at a redemption price equal to 103 % of the principal amount of the Second Lien Notes redeemed plus accrued and unpaid interest. If Xerox Corporation experiences a Change of Control Triggering Event (as defined in the Indentures), Xerox Corporation will be required to offer to repurchase the First Lien Notes, and, following the Escrow Release, the Second Lien Notes, at 101 % of the principal amount of such Notes, respectively, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase. The Indentures contain covenants that, following the issue date for the First Lien Notes and the Escrow Release for the Second Lien Notes, among other things, limit the ability of Xerox, Xerox Corporation and Xerox Corporation’s restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, prepay, redeem or repurchase certain subordinated debt, issue certain preferred stock or similar equity securities, make loans and investments, sell or otherwise dispose of assets, incur liens, enter into transactions with affiliates, enter into agreements restricting its subsidiaries’ ability to pay dividends, and consolidate, merge or sell all or substantially all assets. In addition, the notes include restrictions which limit the use of proceeds under certain sales of finance receivables. The restrictions would require proceeds from certain sales to be used to repay existing first lien debt. The Indentures provide for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest, breach of other agreements in respect of the Notes, failure to pay certain other indebtedness, failure to pay certain final judgments, failure of certain guarantees to be enforceable and certain events of bankruptcy or insolvency. Lexmark Committed Debt Financing On May 2, 2025, we received a letter (the Notice Letter) from representatives of Christy 2017, LP (the Thompson Commitment Party), one of the commitment parties under the commitment letter, among Xerox, DCS Finance LLC (DCS Finance) and the Thompson Commitment Party, dated December 22, 2024 (the Commitment Letter), providing for the commitment from the Thompson Commitment Party to purchase $ 225 aggregate principal amount of the Private Senior Unsecured Notes. The Notice Letter stated that the Thompson Commitment Party was considering its purported legal options with regard to terminating the Commitment Letter. We believe that the Notice Letter has no merit and that upon satisfaction of the conditions precedent set forth in the Commitment Letter, the Thompson Commitment Party is obligated to purchase the applicable Private Senior Unsecured Notes. Representatives of DCS Finance, who have provided a commitment to purchase $ 25 on aggregate principal amount of the Private Senior Unsecured Notes under the Commitment Letter, have informed us that they intend to fulfill their obligations under the Commitment Letter in full and that they do not believe that commitment parties to the Commitment Letter have any rights to terminate the Commitment Letter. We are engaging in discussions with representatives of the Thompson Commitment Party in order to resolve this matter. Xerox 2025 Form 10-Q 41