Xerox Holdings Corp

The following is a summary of our liquidity position:

•As of March 31, 2024 and December 31, 2023, total cash, cash equivalents and restricted cash were $772 million and $617 million, respectively, and apart from restricted cash of $87 million and $98 million at March 31, 2024 and December 31, 2023, respectively, was readily accessible for use. The increase in total cash, cash equivalents and restricted cash of $155 million primarily reflects cash provided by financing activities of $261 million, which was partially offset by a use in operating cash activities of $79 million.

•Total debt at March 31, 2024 was $3,604 million, of which $2,200 million is allocated to and supports the Company's finance assets. The remaining debt of $1,404 million is attributable to the non-financing business and increased from $849 million at December 31, 2023. Debt consists of senior unsecured notes, secured borrowings through the securitization of finance assets, and borrowings under a Term Loan B facility.

•In March 2024, Xerox Holdings Corporation issued $500 million of 8.875% Senior Notes due in 2029, as well as an aggregate $400 million of 3.75% Convertible Senior Notes due in 2030. In connection with the issuance of the 2030 Notes, the Company entered into privately negotiated capped call transactions, with the option counterparties, including certain of the initial purchasers of the 2030 Notes or their respective affiliates at a cost of approximately $23 million. A portion of the aggregate net proceeds were used to repay, via tender offer, approximately $83 million of the 3.80% Xerox Corporation Senior Notes due in 2024 and approximately $362 million of the 5.00% Xerox Holdings Corporation Senior Notes due in 2025. The Company plans to use the remaining aggregate net debt proceeds to repay debt, including the remaining outstanding 3.80% Senior Notes of approximately $217 million, that were not redeemed as part of the Senior Notes tender offer when they come due in May 2024. Other than the May 2024 Senior Notes, no repayments for Senior Notes are due within the next twelve months.

•As of March 31, 2024, there were no borrowings or letters of credit outstanding under our ABL facility, under which we can borrow up to a maximum of $300 million. We were in full compliance with the covenants and other provisions of the ABL Facility.

•We continue to expect Operating cash flows for 2024 to be at least $650 million, which is expected to benefit from a reduction in our finance receivables balance, partially offset by approximately $50 million of higher contributions to our pension plans. Capital expenditures are expected to be approximately $50 million.

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

Cash Flow Analysis

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

Cash Flows from Operating Activities

Net cash used in operating activities was $79 million for the three months ended March 31, 2024. The $157 million decrease in operating cash from the prior year period was primarily due to the following:

•$70 million decrease in pre-tax income before depreciation and amortization, provisions, divestitures, stock-based compensation, restructuring and related costs, net and non-service retirement-related costs.

•$70 million decrease from accrued compensation due to the timing of payments of higher year-end accruals.

•$69 million decrease from inventory primarily due to higher purchases related to a change in contractual terms with a large OEM vendor.

•$58 million decrease from accounts receivable primarily due to the timing of collections.

•$19 million decrease from higher restructuring and related payments.

•$58 million increase from accounts payable primarily due to the timing of supplier and vendor payments.

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•$50 million increase from finance receivables primarily due to a higher level of run-off as a result of lower originations, partially offset by lower sales of finance receivables under the finance receivables funding agreement. Refer to Note 8 – Finance Receivables, Net in the Consolidated Financial Statements for additional information regarding the sale of finance receivables.

•$18 million increase due to lower placements of equipment on operating leases.

Cash Flows from Investing Activities

Net cash used in investing activities was $17 million for the three months ended March 31, 2024, which was flat as compared to the prior year period.

Cash Flows from Financing Activities

Net cash provided by financing activities was $261 million for the three months ended March 31, 2024. The $766 million increase in cash from the prior year period was primarily due to the following:

•$787 million increase from net debt activity. 2024 reflects proceeds of $500 million on Senior Notes and $400 million on Convertible Senior Notes offset by net payments of $441 million on Senior Notes, deferred debt issuance costs of $15 million from Senior Notes issuances, $103 million on secured financing arrangements and $7 million on the Term Loan B facility. The $441 million of net payments on Senior Notes includes $83 million on Senior Notes maturing in May 2024 and $362 million for the early redemption of 2025 Senior Notes offset by early redemption premium of $4 million. 2023 reflects payments of $300 million on Senior Notes and $152 million on secured financing arrangements.

•$23 million decrease from purchases of capped calls.

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

Cash, Cash Equivalents and Restricted Cash

Refer to Note 12 - Supplementary Financial Information in the Condensed Consolidated Financial Statements for additional information regarding Cash, cash equivalents and restricted cash.

Operating Leases

We have operating leases for real estate and vehicles in our domestic and international operations, and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to eleven years and a variety of renewal and/or termination options. As of March 31, 2024 and December 31, 2023, total operating lease liabilities were $186 million and $182 million, respectively.

Refer to Note 10 - Lessee in the Condensed Consolidated Financial Statements for additional information regarding our leases accounted for under lessee accounting.

Debt and Customer Financing Activities

The following summarizes our debt:

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

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

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Finance Assets and Related Debt

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

(1)Includes (i) Billed portion of finance receivables, net, (ii) Finance receivables, net and (iii) Finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets.

(2)The change from December 31, 2023 includes an increase of $32 million due to currency.

Our lease contracts permit customers to pay for equipment over time rather than at the date of installation; therefore, we maintain a certain level of debt (that we refer to as financing debt) to support our investment in these lease contracts, which are reflected in Total finance assets, net. For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets.

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

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

Sales of Finance Receivables and Third Party Leasing Programs

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

Capital Market/Debt Activity

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

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Liquidity and Financial Flexibility

We manage our worldwide liquidity using internal cash management practices, which are subject to i) the statutes, regulations and practices of each of the local jurisdictions in which we operate, ii) the legal requirements of the agreements to which we are a party, and iii) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services.

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

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

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

Treasury Stock

Xerox Holdings Corporation made no open-market repurchases of its Common Stock in first quarter 2024.

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