Xerox Holdings Corp [XRX] Filings

10-Q 1 xrx-20240630.htm 10-Q xrx-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


XEROX HOLDINGS CORPORATION
XEROX CORPORATION
(Exact Name of Registrant as specified in its charter)


New York	001-39013	83-3933743
New York	001-04471	16-0468020
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

	P.O. Box 4505, 201 Merritt 7 Norwalk, Connecticut 06851-1056
(Address of principal executive offices and Zip Code)

(203) 849-5216
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Xerox Holdings Corporation
Common Stock, $1 par value	XRX	Nasdaq Global Select Market
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Xerox Holdings Corporation Yes ☒ No ☐ Xerox Corporation Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Xerox Holdings Corporation

Xerox Corporation

Large accelerated filer

☒

Large accelerated filer

☐

Accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Smaller reporting company

☐

Emerging growth company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Xerox Holdings Corporation o Xerox Corporation o

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Xerox Holdings Corporation Yes ☐ No ☒ Xerox Corporation Yes ☐ No ☒



Class						Outstanding at July 31, 2024
Xerox Holdings Corporation Common Stock, $1 par value						124,331,734 shares

Cautionary Statement Regarding Forward-Looking Statements

This combined Quarterly Report on Form 10-Q (Form 10-Q), and other written or oral statements made from time to time by management contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 that involve certain risks and uncertainties. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “would”, “could”, “can” “should”, “targeting”, “projecting”, “driving”, “future”, “plan”, “predict”, “may” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of Xerox Holdings Corporation’s and Xerox Corporation’s combined Annual Report on Form 10-K for the year ended December 31, 2023 under the heading “Risk Factors.” The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Throughout this Form 10-Q, references to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” or the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. 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 subsidiaries.

Xerox Holdings Corporation's primary direct operating subsidiary is Xerox and therefore Xerox reflects nearly all of Xerox Holdings' operations.

Xerox 2024 Form 10-Q 1

XEROX HOLDINGS CORPORATION

XEROX CORPORATION

FORM 10-Q

June 30, 2024

TABLE OF CONTENTS


		Page
Part I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Xerox Holdings Corporation Condensed Consolidated Statements of Income (Loss)	3
	Xerox Holdings Corporation Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Xerox Holdings Corporation Condensed Consolidated Balance Sheets	5
	Xerox Holdings Corporation Condensed Consolidated Statements of Cash Flows	6
	Xerox Corporation Condensed Consolidated Statements of Income (Loss)	7
	Xerox Corporation Condensed Consolidated Statements of Comprehensive Income (Loss)	8
	Xerox Corporation Condensed Consolidated Balance Sheets	9
	Xerox Corporation Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
	Capital Resources and Liquidity	59
	Financial Risk Management	63
	Non-GAAP Financial Measures	63
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 4.	Controls and Procedures	68
Part II — Other Information
Item 1.	Legal Proceedings	69
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
Signatures		72

For additional information about Xerox Holdings Corporation and Xerox Corporation and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at www.xerox.com/investor. The content of our website is not incorporated by reference into this combined Form 10-Q unless expressly noted.

Xerox 2024 Form 10-Q 2

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per-share data)	2024		2023		2024		2023
Revenues
Sales	$	611	$	696	$	1,134	$	1,355
Services, maintenance and rentals	929		1,009		1,866		2,013
Financing	38		49		80		101
Total Revenues	1,578		1,754		3,080		3,469
Costs and Expenses
Cost of sales	387		452		727		877
Cost of services, maintenance and rentals	642		671		1,334		1,336
Cost of financing	29		34		56		70
Research, development and engineering expenses	50		57		99		121
Selling, administrative and general expenses	393		433		790		840

Restructuring and related costs, net	12		23		51		25
Amortization of intangible assets	10		10		20		21
Divestitures	(3)		—		51		—
PARC Donation	—		132		—		132
Other expenses, net	33		31		77		51
Total Costs and Expenses	1,553		1,843		3,205		3,473
Income (Loss) before Income Taxes	25		(89)		(125)		(4)
Income tax expense (benefit)	7		(28)		(30)		(14)



Net Income (Loss)	18		(61)		(95)		10

Less: Preferred stock dividends, net	(3)		(3)		(7)		(7)
Net Income (Loss) Attributable to Common Shareholders	$	15	$	(64)	$	(102)	$	3









Basic Earnings (Loss) per Share	$	0.12	$	(0.41)	$	(0.83)	$	0.02





Diluted Earnings (Loss) per Share	$	0.11	$	(0.41)	$	(0.83)	$	0.02

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

Xerox 2024 Form 10-Q 3

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Net Income (Loss)	$	18	$	(61)	$	(95)	$	10




Other Comprehensive (Loss) Income, Net(1)
Translation adjustments, net	(20)		49		(52)		142
Unrealized losses, net	—		(5)		(1)		(1)
Changes in defined benefit plans, net	6		(27)		42		(41)
Other Comprehensive (Loss) Income, Net	(14)		17		(11)		100



Comprehensive Income (Loss), Net	$	4	$	(44)	$	(106)	$	110

_____________

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

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

Xerox 2024 Form 10-Q 4

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in millions, except share data in thousands)	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	485	$	519
Accounts receivable (net of allowance of $66 and $64, respectively)	847		850
Billed portion of finance receivables (net of allowance of $4 and $4, respectively)	70		71
Finance receivables, net	713		842
Inventories	737		661

Other current assets	199		234
Total current assets	3,051		3,177
Finance receivables due after one year (net of allowance of $75 and $88, respectively)	1,277		1,597
Equipment on operating leases, net	253		265
Land, buildings and equipment, net	227		266

Intangible assets, net	155		177
Goodwill, net	2,719		2,747
Deferred tax assets	760		745
Other long-term assets	1,049		1,034
Total Assets	$	9,491	$	10,008
Liabilities and Equity
Short-term debt and current portion of long-term debt	$	129	$	567
Accounts payable	936		1,044
Accrued compensation and benefits costs	205		306


Accrued expenses and other current liabilities	776		862
Total current liabilities	2,046		2,779
Long-term debt	3,174		2,710
Pension and other benefit liabilities	1,180		1,216
Post-retirement medical benefits	164		171
Other long-term liabilities	338		360
Total Liabilities	6,902		7,236

Commitments and Contingencies (See Note 21)

Noncontrolling Interests	10		10

Convertible Preferred Stock	214		214

Common stock	124		123

Additional paid-in capital	1,114		1,114

Retained earnings	4,810		4,977
Accumulated other comprehensive loss	(3,687)		(3,676)
Xerox Holdings shareholders’ equity	2,361		2,538
Noncontrolling interests	4		10
Total Equity	2,365		2,548
Total Liabilities and Equity	$	9,491	$	10,008



Shares of Common Stock Issued and Outstanding	124,319		123,144

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

Xerox 2024 Form 10-Q 5

XEROX HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
(in millions)		2024		2023
Cash Flows from Operating Activities
Net (Loss) Income		$	(95)	$	10


Adjustments to reconcile Net (loss) income to Net cash provided by operating activities
Depreciation and amortization		118		126
Provisions		79		21

Net gain on sales of businesses and assets		(1)		(2)
Divestitures		51		—
PARC Donation		—		132

Stock-based compensation		29		28

Restructuring and asset impairment charges		34		14
Payments for restructurings		(47)		(14)
Non-service retirement-related costs		49		10
Contributions to retirement plans		(58)		(32)
Increase in accounts receivable and billed portion of finance receivables		(32)		(36)
(Increase) decrease in inventories		(148)		12
Increase in equipment on operating leases		(50)		(77)
Decrease in finance receivables		399		407
Decrease in other current and long-term assets		14		15
Decrease in accounts payable		(88)		(290)
Decrease in accrued compensation		(93)		(7)
Decrease in other current and long-term liabilities		(52)		(139)
Net change in income tax assets and liabilities		(64)		(17)
Net change in derivative assets and liabilities		6		22
Other operating, net		(7)		(10)


Net cash provided by operating activities		44		173
Cash Flows from Investing Activities
Cost of additions to land, buildings, equipment and software		(18)		(15)
Proceeds from sales of businesses and assets		19		3


Acquisitions, net of cash acquired		—		(7)


Other investing, net		(20)		(3)


Net cash used in investing activities		(19)		(22)
Cash Flows from Financing Activities
Net proceeds from short-term debt		—		200
Proceeds from issuance of long-term debt		906		—
Payments on long-term debt		(871)		(826)
Purchases of capped calls		(23)		—
Dividends		(71)		(88)



Payments to acquire treasury stock, including fees		(3)		—



Other financing, net		(13)		(11)
Net cash used in financing activities		(75)		(725)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(16)		4

Decrease in cash, cash equivalents and restricted cash		(66)		(570)
Cash, cash equivalents and restricted cash at beginning of period		617		1,139
Cash, Cash Equivalents and Restricted Cash at End of Period		$	551	$	569

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

Xerox 2024 Form 10-Q 6

XEROX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Revenues
Sales	$	611	$	696	$	1,134	$	1,355
Services, maintenance and rentals	929		1,009		1,866		2,013
Financing	38		49		80		101
Total Revenues	1,578		1,754		3,080		3,469
Costs and Expenses
Cost of sales	387		452		727		877
Cost of services, maintenance and rentals	642		671		1,334		1,336
Cost of financing	29		34		56		70
Research, development and engineering expenses	50		57		99		121
Selling, administrative and general expenses	392		433		789		840

Restructuring and related costs, net	12		23		51		25
Amortization of intangible assets	10		10		20		21

Divestitures	(3)		—		51		—
PARC donation	—		132		—		132
Other expenses, net	33		31		77		51
Total Costs and Expenses	1,552		1,843		3,204		3,473
Income (Loss) before Income Taxes	26		(89)		(124)		(4)
Income tax expense (benefit)	7		(28)		(30)		(14)



Net Income (Loss)	$	19	$	(61)	$	(94)	$	10

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

Xerox 2024 Form 10-Q 7

XEROX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Net Income (Loss)	$	19	$	(61)	$	(94)	$	10




Other Comprehensive (Loss) Income, Net(1)
Translation adjustments, net	(20)		49		(52)		142
Unrealized losses, net	—		(5)		(1)		(1)
Changes in defined benefit plans, net	6		(27)		42		(41)
Other Comprehensive (Loss) Income, Net	(14)		17		(11)		100



Comprehensive Income (Loss), Net	5		(44)		$	(105)	$	110

_____________

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

Xerox 2024 Form 10-Q 8

XEROX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in millions)	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	483	$	519
Accounts receivable (net of allowance of $66 and $64, respectively)	847		850
Billed portion of finance receivables (net of allowance of $4 and $4, respectively)	70		71
Finance receivables, net	713		842
Inventories	737		661

Other current assets	199		234
Total current assets	3,049		3,177
Finance receivables due after one year (net of allowance of $75 and $88, respectively)	1,277		1,597
Equipment on operating leases, net	253		265
Land, buildings and equipment, net	227		266

Intangible assets, net	155		177
Goodwill, net	2,719		2,747
Deferred tax assets	760		745
Other long-term assets	1,015		1,008
Total Assets	$	9,455	$	9,982
Liabilities and Equity
Short-term debt and current portion of long-term debt	$	129	$	567
Accounts payable	936		1,044
Accrued compensation and benefits costs	205		306



Accrued expenses and other current liabilities	733		820
Total current liabilities	2,003		2,737
Long-term debt	1,154		1,213
Related party debt	2,020		1,497
Pension and other benefit liabilities	1,180		1,216
Post-retirement medical benefits	164		171
Other long-term liabilities	338		360
Total Liabilities	6,859		7,194

Commitments and Contingencies (See Note 21)


Noncontrolling Interests	10		10


Additional paid-in capital	3,473		3,485

Retained earnings	2,796		2,959
Accumulated other comprehensive loss	(3,687)		(3,676)
Xerox shareholder's equity	2,582		2,768
Noncontrolling interests	4		10
Total Equity	2,586		2,778
Total Liabilities and Equity	$	9,455	$	9,982

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

Xerox 2024 Form 10-Q 9

XEROX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
(in millions)		2024		2023
Cash Flows from Operating Activities
Net (Loss) Income		$	(94)	$	10


Adjustments to reconcile Net (loss) income to Net cash provided by operating activities
Depreciation and amortization		118		126
Provisions		79		21

Net gain on sales of businesses and assets		(1)		(2)
Divestitures		51		—
PARC donation		—		132

Stock-based compensation		29		28

Restructuring and asset impairment charges		34		14
Payments for restructurings		(47)		(14)
Non-service retirement-related costs		49		10
Contributions to retirement plans		(58)		(32)
Increase in accounts receivable and billed portion of finance receivables		(32)		(36)
(Increase) decrease in inventories		(148)		12
Increase in equipment on operating leases		(50)		(77)
Decrease in finance receivables		399		407
Decrease in other current and long-term assets		13		15
Decrease in accounts payable		(88)		(290)
Decrease in accrued compensation		(93)		(7)
Decrease in other current and long-term liabilities		(52)		(139)
Net change in income tax assets and liabilities		(64)		(17)
Net change in derivative assets and liabilities		6		22
Other operating, net		(7)		(10)


Net cash provided by operating activities		44		173
Cash Flows from Investing Activities
Cost of additions to land, buildings, equipment and software		(18)		(15)


Proceeds from sales of businesses and assets		19		3
Acquisitions, net of cash acquired		—		(7)


Other investing, net		(11)		—


Net cash used in investing activities		(10)		(19)
Cash Flows from Financing Activities
Net proceeds from short-term debt		—		200
Proceeds from issuance of long-term debt		906		—
Payments on long-term debt		(871)		(826)






Distributions to parent		(118)		(98)



Other financing, net		(3)		(4)
Net cash used in financing activities		(86)		(728)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		(16)		4

Decrease in cash, cash equivalents and restricted cash		(68)		(570)
Cash, cash equivalents and restricted cash at beginning of period		617		1,139
Cash, Cash Equivalents and Restricted Cash at End of Period		$	549	$	569

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

Xerox 2024 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 2023 Annual Report on Form 10-K (2023 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 2023 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.

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

Certain reclassifications have been made to the amounts for prior years in order to conform to the current year's presentation.

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

Goodwill

Our Goodwill, net balance was $2,719 and $2,747 at June 30, 2024 and December 31, 2023, respectively. We assess Goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The Company's latest projections for the full year 2024 are in line with expectations reviewed as part of our fourth quarter 2023 Goodwill qualitative assessment. Accordingly, as of June 30, 2024, we determined that we did not have a triggering event requiring a quantitative assessment of Goodwill. If assumptions or estimates with respect to the Company's future performance vary from what is expected, including those assumptions relating to interest rates, inflationary pressure on product and labor costs, execution of Reinvention and geopolitical uncertainty, this may impact the impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges. We will continue to monitor developments in 2024 including updates to our forecasts as well as our market capitalization, and an update of our assessment and related estimates may be required in the future.

Xerox 2024 Form 10-Q 11

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.

Accounting Standard Updates to be Adopted:

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope, which provided clarification to ASU 2020-04. These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848, which defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

There has been no material impact to date as a result of adopting these ASUs on reference rate reform. However, we continue to evaluate potential future impacts that may result from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows.

Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The update will require public entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within segment profit and loss. The amendments are effective for the Company's annual periods beginning January 1, 2024, and interim periods beginning January 1, 2025, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the financial statements. Since this ASU only requires additional disclosures, adoption of this ASU will not have an impact on the company’s financial condition, results of operations or cash flows.

Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

Accounting Standard Updates Recently Adopted:

Liabilities

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The new standard’s requirements to disclose the key terms of the programs and information about obligations outstanding were effective for our fiscal year beginning on January 1, 2023, and the requirement to disclose a rollforward of obligations outstanding is effective for our annual reporting for the fiscal year beginning on January 1, 2024. Refer to Note 12 - Supplementary Financial Information for the required disclosures.

Xerox 2024 Form 10-Q 12

Other Updates

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

•Compensation - Stock Compensation: ASU 2024-01, Compensation - Stock Compensation (Topic 718) - Scope Applications of Profits Interest and Similar Awards. This update is effective for the annual period beginning after December 15, 2024, as well as interim periods within that period, with early adoption permitted.

•Codification Improvements: ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. This update is effective for our fiscal year beginning after December 15, 2024.

Note 3 – Revenue

Revenues disaggregated by primary geographic markets, major product lines, and sales channels are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Primary geographical markets(1):
United States	$	872	$	982	$	1,683	$	1,929
Europe	461		497		912		971
Canada	126		136		247		280
Other	119		139		238		289
Total Revenues	$	1,578	$	1,754	$	3,080	$	3,469

Major product and services lines:
Equipment	$	356	$	420	$	646	$	811
Supplies, paper and other sales(2)	255		276		488		544
Maintenance agreements(3)	388		419		775		828
Service arrangements(4)	467		499		940		994
Rental and other	74		91		151		191
Financing	38		49		80		101

Total Revenues	$	1,578	$	1,754	$	3,080	$	3,469

Sales channels:

Direct equipment lease(5)	$	163	$	245	$	325	$	475
Distributors & resellers(6)	244		261		459		521
Customer direct	204		190		350		359
Total Sales	$	611	$	696	$	1,134	$	1,355

_____________

(1)Geographic area data is based upon the location of the subsidiary reporting the revenue.

(2)Other sales include revenues associated with IT hardware.

(3)Includes revenues from maintenance agreements on sold equipment as well as IT services and revenues associated with service agreements sold through our channel partners.

(4)Primarily includes revenues from our Print and digital services outsourcing arrangements, including revenues from embedded operating leases in those arrangements, which were not significant.

(5)Primarily reflects sales through bundled lease arrangements.

(6)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 $118 and $132 at June 30, 2024 and December 31, 2023, respectively. The majority of the balance at June 30, 2024 will be amortized to revenue over the next 30 months.

Xerox 2024 Form 10-Q 13

Contract Costs:

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

•Incremental direct costs of obtaining a contract, which are primarily sales commissions paid to salespeople and agents in connection with the placement of equipment with associated post sale services arrangements. These costs are deferred and amortized to Selling Expenses on a straight-line basis over the estimated contract term, which is currently estimated to be approximately four years. We pay commensurate sales commissions upon customer renewals; therefore, our amortization period is aligned to our initial contract term.

•Contract fulfillment costs, which are costs incurred for resources and assets that will be used to satisfy our future performance obligations included in our service arrangements. These costs are amortized over the contractual service period of the arrangement to cost of services.

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

Changes in contract costs, net are as follows:



	2024		2023
Balance at January 1st,	$	136	$	135
Customer contract costs deferred	15		16
Amortization of customer contract costs	(16)		(16)
Other(1)	(1)		(1)
Balance at March 31st,	$	134	$	134
Customer contract costs deferred	13		18
Amortization of customer contract costs	(16)		(18)

Balance at June 30th,	$	131	$	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.

Xerox 2024 Form 10-Q 14

Note 4 – Segment Reporting

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

Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services. The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. This segment also includes Digital and IT services and software. 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. Segment revenues also include commissions and other payments from our XFS segment for the exclusive right to provide lease financing for Xerox products. These revenues are reported as part of Intersegment Revenues, which are eliminated in consolidated revenues.

The XFS segment provides global leasing solutions and currently offers leasing for direct channel customer purchases of Xerox solutions through bundled lease agreements and lease financing to end-user customers who purchase Xerox solutions through our indirect channels. Segment revenues primarily include financing income on sales-type leases (including month-to-month extensions) and leasing fees. Segment revenues also include gains/losses from the sale of finance receivables including commissions, fees on the sales of underlying equipment residuals and servicing fees.

Selected financial information for our reportable segments was as follows:


	Three Months Ended June 30,
	2024									2023
	Print and Other			XFS			Total			Print and Other			XFS			Total
External revenue	$	1,489		$	89		$	1,578		$	1,653		$	101		$	1,754
Intersegment revenue(1)	19			—			19			21			—			21
Total Segment revenue	$	1,508		$	89		$	1,597		$	1,674		$	101		$	1,775

Segment profit	$	81		$	4		$	85		$	107		$	—		$	107
Segment margin(2)	5.4		%	4.5		%	5.4		%	6.5		%	—		%	6.1		%

Depreciation and amortization	$	49		$	—		$	49		$	52		$	—		$	52


Interest income	—			38			38			—			49			49
Interest expense	—			29			29			—			34			34

Xerox 2024 Form 10-Q 15


	Six Months Ended June 30,
	2024									2023
	Print and Other			XFS			Total			Print and Other			XFS			Total
External revenue	$	2,900		$	180		$	3,080		$	3,266		$	203		$	3,469
Intersegment revenue(1)	38			—			38			44			—			44
Total Segment revenue	$	2,938		$	180		$	3,118		$	3,310		$	203		$	3,513

Segment profit	$	114		$	4		$	118		$	207		$	18		$	225
Segment margin(2)	3.9		%	2.2		%	3.8		%	6.3		%	8.9		%	6.5		%

Depreciation and amortization	$	98		$	—		$	98		$	105		$	—		$	105