XEROX CORP

Previous wording

Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which holds an investment in Myriad Ventures Fund I LP (Myriad). Myriad is fully consolidated by Xerox Holdings. At June 30, 2026 and December 31, 2025 investments in Myriad were $50 million and $41 million, respectively. For ease of discussion, the following MD&A includes the results of Xerox Ventures LLC as they are immaterial to earnings and the balance sheet.

Current wording

Xerox Holdings' other direct subsidiary is Xerox Ventures LLC, which holds an investment in Myriad Ventures Fund I LP (Myriad). Myriad is fully consolidated by Xerox Holdings. At September 30, 2026 and December 31, 2025 investments in Myriad were $52 million and $41 million, respectively. For ease of discussion, the following MD&A includes the results of Xerox Ventures LLC as they are immaterial to earnings and the balance sheet.

Previous wording

Our results include Lexmark International II, LLC (Lexmark) from July 1, 2025, the effective date of the Lexmark Acquisition. In order to provide a clearer comparison of our results to the prior year, we are also providing a discussion and analysis on a pro forma basis. See the “Pro Forma Basis” section below for further explanation and discussion of pro forma results. In addition, the following discussion includes references to "legacy Xerox", which reflects the financial results of Xerox, excluding the impact of the Lexmark Acquisition, as applicable.

Current wording

Our results include Lexmark International II, LLC (Lexmark) from July 1, 2025, the effective date of the Lexmark Acquisition. In order to provide a clearer comparison of our current year-to-date results to the prior year-to-date results, we are providing a year-to-date discussion and analysis on a pro forma basis. As Lexmark was included in our results for the three months ended September 30, 2026 and 2025, we are not providing a comparative discussion of the quarterly results on a pro forma basis. See the “Pro Forma Basis” section below for further explanation and discussion of pro forma results. In addition, the following year-to-date discussion may include references to "legacy Xerox", which reflects the financial results of Xerox, excluding the impact of the Lexmark Acquisition, as applicable.

Previous wording

Second quarter 2026 reflects the continued benefits of the Lexmark Acquisition and Xerox's transformation efforts. Pro forma 1 gross margins expanded year-over-year for the second consecutive quarter, driven by integration synergies, cost discipline, and an increasingly unified operating model. These gains are complemented by new product launches under the unified Xerox brand, growing partner validation, and a more focused go-to-market approach which is collectively positioning the company for continued operational and financial improvement in the second half of 2026 and beyond.

Current wording

Third quarter of 2026 reflects the continued benefits of the Lexmark Acquisition and Xerox's transformation efforts. On a pro forma basis 1, revenue declines improved sequentially from the second quarter 2026. Adjusted 2 operating income expanded year-over-year for the third consecutive quarter, driven by integration synergies, cost discipline, and an increasingly unified operating model. These gains are complemented by new product launches under the unified Xerox brand, growing partner validation, and a more focused go-to-market approach which is collectively positioning the company for continued operational and financial improvement. We also reduced leverage further in the quarter.

Previous wording

Post sale revenue of $1,346 million in the second quarter 2026 increased 30.7% in actual currency and 29.7% in constant currency 2, as compared to second quarter 2025, and included a 37.5-percentage point benefit from the Lexmark Acquisition. Excluding the Lexmark Acquisition, post sale revenue declined 6.8% in actual currency primarily reflecting lower equipment service revenue and managed print services. Post sale revenue was also adversely impacted by intentional reductions in non-strategic revenue, including the exit of certain production print manufacturing operations in prior years, as well as a decline in financing revenue reflecting the continued sales of finance receivables to our various funding affiliates and lower originations. On a pro forma 1 basis, second quarter 2026 revenue decreased 3.9%, primarily reflecting the impacts noted above.

Current wording

Post sale revenue of $1,295 million in the third quarter 2026 decreased 4.5% in actual currency and 4.4% in constant currency 3, as compared to third quarter 2025. The decline in constant currency 3 primarily reflects lower equipment service revenue and managed print services, as well as lower supplies and rental revenue. Post sale revenue was also adversely impacted by a decline in financing revenue reflecting the continued sales of finance receivables to our various funding affiliates and lower originations.

Previous wording

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

Current wording

We test Goodwill for impairment annually as of October 1, and between annual tests when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. After completing the quantitative impairment test, we determined that the carrying value of the Print and Other reporting unit exceeded its estimated fair value and recognized an after-tax non-cash impairment charge of $955 million ($959 million pre-tax) in the third quarter 2026. Refer to Note 1 - Basis of Presentation - Goodwill in the Condensed Consolidated Financial Statements for additional information regarding the assessment of Goodwill.

Previous wording

In January 2026, the Board of Directors of Xerox Holdings Corporation approved a pro-rata distribution of warrants to holders of Xerox Holdings Corporation’s common stock, par value $1.00 per share, Series A Convertible Perpetual Voting Preferred Stock and 3.75% Convertible Senior Notes due 2030. Refer to Note 16 - Shareholders'

Current wording

In January 2026, the Board of Directors of Xerox Holdings Corporation approved a pro-rata distribution of warrants to holders of Xerox Holdings Corporation’s common stock, par value $1.00 per share, Series A Convertible Perpetual Voting Preferred Stock and 3.75% Convertible Senior Notes due 2030. Refer to Note 16 - Shareholders' (Deficit) Equity of Xerox Holdings in the Condensed Consolidated Financial Statements for additional information regarding the Warrant Dividend.

Previous wording

•a decrease of 10.0% in IT Solutions revenue, including a 1.0-percentage point unfavorable impact from currency.

Current wording

•a decrease of 18.9% in IT Solutions revenue, including a 0.4-percentage point unfavorable impact from currency.

Previous wording

Total revenue of $3.77 billion for the six months ended June 30, 2026 increased 24.2% as compared to the prior year period, including a 31.7-percentage point benefit from the Lexmark Acquisition, as well as a 1.8-percentage point favorable impact from currency. On a pro forma 1 basis total revenue declined 5.1%. Total revenue reflected the following:

Current wording

Total revenue of $5.64 billion for the nine months ended September 30, 2026 increased 12.9% as compared to the prior year period, including a 19.3-percentage point benefit from the Lexmark Acquisition, as well as a 1.1-percentage point favorable impact from currency. On a pro forma 1 basis total revenue declined 5.0%. Total revenue reflected the following:

Previous wording

•an increase of 30.7% in Post sale revenue, including a 37.5-percentage point benefit from the Lexmark Acquisition, as well as a 1.0-percentage point favorable impact from currency. On a pro forma 1 basis post sale revenue declined 3.9%.

Current wording

•an increase of 16.5% in Post sale revenue, including a 21.9-percentage point benefit from the Lexmark Acquisition, as well as a 1.3-percentage point favorable impact from currency. On a pro forma 1 basis post sale revenue declined 4.1%.

Previous wording

•an increase of 15.2% in Equipment sales revenue, including a 33.1-percentage point benefit from the Lexmark Acquisition, and a 0.2-percentage point favorable impact from currency. On a pro forma 1 basis equipment sales revenue declined 13.0%.

Current wording

•an increase of 15.5% in Equipment sales revenue, including a 21.9-percentage point benefit from the Lexmark Acquisition, and a 0.7-percentage point favorable impact from currency. On a pro forma 1 basis equipment sales revenue declined 4.7%.

Previous wording

•a decrease of 8.0% in IT Solutions revenue, including a 0.2-percentage point unfavorable impact from currency.

Current wording

•a decrease of 12.1% in IT Solutions revenue, including a 0.3-percentage point favorable impact from currency.

Previous wording

Net Income (Loss) and adjusted 1 Net Income (Loss) were as follows:

Current wording

Net (Loss) and adjusted 1 Net Income (Loss) were as follows:

Previous wording

Net Income for the second quarter 2026 was $13 million as compared to a Net (Loss) of $(106) million for the second quarter 2025. Net income for the second quarter 2026, which includes the results of Lexmark, increased by $119 million as compared to the second quarter 2025 primarily reflecting higher revenues and higher gross profit, as well as lower Other expenses (income), net and Income tax expense. These benefits were partially offset by higher SAG, Non-financing interest expense, RD&E, Amortization of intangible assets, and Restructuring and related costs, net. Second quarter 2026 adjusted 1 Net Income was $55 million as compared to adjusted 1 Net (Loss) of $(77) million for the second quarter 2025. Adjusted 1 Net Income (Loss), which includes the results of Lexmark, increased by $132 million primarily reflecting primarily reflecting higher revenues and higher gross profit, as well as lower Income tax expense. These benefits were partially offset by higher SAG, Non-financing interest expense, Other expenses (income), net, and RD&E.

Current wording

Net (Loss) for the third quarter 2026 was $(1,015) million, which includes the after-tax non-cash Goodwill impairment charge of $955 million ($959 million pre-tax). This compares to a Net (Loss) of $(760) million for the third quarter 2025, which included higher income tax expense, as a result of the establishment of a valuation allowance of $478 million against certain deferred tax assets to reflect their realizability. The increase in Net (Loss) for the third quarter 2026 as compared to the third quarter 2025 was $255 million primarily reflecting the Goodwill impairment charge, as well as lower revenues, and higher Non-financing interest expense. These adverse impacts were partially offset by lower Income tax expense, as well as higher gross profit, and lower Selling, administrative and general expenses (SAG), Restructuring and related costs, net, and Research, development and engineering expense (RD&E). Third quarter 2026 adjusted 1 Net Income was $7 million as compared to adjusted 1 Net Income of $27 million for the third quarter 2025. Adjusted 1 Net Income decreased by $20 million primarily reflecting lower revenues, as well as higher Income tax expense, Non-financing interest expense, and Other expenses (income), net. These adverse impacts were partially offset by higher gross profit, as well as lower SAG and RD&E.

Previous wording

Net (Loss) for the six months ended June 30, 2026 was $(92) million as compared to the prior year period Net (Loss) of $(196) million, which reflected the establishment of a valuation allowance of $59 million against certain deferred tax assets to reflect their realizability in 2025. Net (Loss) for the six months ended June 30, 2026, which includes the results of Lexmark, decreased by $104 million primarily reflecting higher revenues and higher gross profit, as well as lower Other expenses (income), net and Income tax expense. These benefits were partially offset by higher SAG, Non-financing interest expense, Restructuring and related costs, net, RD&E, and Amortization of intangible assets. Adjusted 1 Net Income for the six months ended June 30, 2026 was $4 million as compared to the prior year period adjusted 1 Net (Loss) of $(81) million. Adjusted 1 Net Income (Loss), which includes the results of

Current wording

Net (Loss) for the nine months ended September 30, 2026 was $(1,107) million, which includes the after-tax non-cash Goodwill impairment charge of $955 million ($959 million pre-tax), as well as the results of Lexmark. This compares to the prior year period Net (Loss) of $(956) million, which reflected the establishment of a valuation allowance of $537 million against certain deferred tax assets to reflect their realizability in 2025. The increase in Net (Loss) for the nine months ended September 30, 2026, as compared to the prior year period was $151 million reflecting the Goodwill impairment charge, as well as higher Non-financing interest expense, Amortization of intangible assets, RD&E, Restructuring and related costs, net, and SAG. These adverse impacts were partially offset by higher revenues and higher gross profit, as well as lower Income tax expense and Other expenses (income), net. Adjusted 1 Net Income for the nine months ended September 30, 2026 was $11 million as compared to the prior year period adjusted 1 Net (Loss) of $(54) million. Adjusted 1 Net Income (Loss), which includes the results of Lexmark, increased by $65 million primarily reflecting higher revenues and higher gross profit. These benefits were partially offset by higher Non-financing interest expense, SAG, Other expenses (income), net, Income tax expense, and RD&E.

Previous wording

For the six months ended June 30, 2026, net cash used in operating activities was $107 million, net cash used in investing activities was $33 million, and net cash provided by financing activities was $128 million. Refer to the Capital Resources and Liquidity section for additional information regarding our cash flows.

Current wording

For the nine months ended September 30, 2026, net cash used in operating activities was $77 million, net cash used in investing activities was $57 million, and net cash provided by financing activities was $101 million. Refer to the Capital Resources and Liquidity section for additional information regarding our cash flows.

Previous wording

Total revenue for the six months ended June 30, 2026 increased 24.2% as compared to the prior year period and included a 31.7-percentage point benefit from the Lexmark Acquisition as well as a 1.8-percentage point benefit from currency. The Lexmark contribution was partially offset by lower revenue at legacy Xerox. Total revenue for legacy Xerox decreased 7.5% in actual currency, primarily reflecting lower installations, reduced equipment service revenue, and declines in managed print services and IT Solutions revenue, as well as the adverse impact of Transformation-related actions. On a pro forma 1 basis, total revenue for the six months ended June 30, 2026 declined 5.1% as compared to the prior period, primarily reflecting the impacts noted above, partially offset by growth from legacy Lexmark

Current wording

Total revenue for the nine months ended September 30, 2026 increased 12.9% as compared to the prior year period and included a 19.3-percentage point benefit from the Lexmark Acquisition, as well as a 1.1-percentage point benefit from currency, and a 0.4-percentage point benefit from higher revenue associated with a licensing agreement. The Lexmark contribution was partially offset by lower revenue at legacy Xerox. Total revenue for legacy Xerox decreased 6.4% in actual currency, primarily reflecting reduced installations and lower equipment service revenue, as well as lower revenues from managed print services and IT Solutions, and the adverse impact of Transformation-related actions. On a pro forma 1 basis, total revenue for the nine months ended September 30, 2026 declined 5.0% as compared to the prior period, primarily reflecting the impacts noted above, partially offset by growth from legacy Lexmark.

Previous wording

Gross margin for the six months ended June 30, 2026 of 32.8% increased by 3.9-percentage points as compared to the prior year period, which included an approximate 2.8-percentage point benefit related to the IEEPA tariff receivables and a 1.2-percentage point benefit related to the Lexmark Acquisition. The increase for the six months ended June 30, 2026 primarily reflects higher revenue and gross profit, which includes the benefits from the IEEPA tariff receivables as well as the benefits associated with Transformation-related cost and productivity actions. These benefits were partially offset by the adverse impact related to product cost increases and an unfavorable revenue mix, including lower equipment service revenue and managed print services. Excluding the impact of the Lexmark Acquisition, gross margin increased 2.7-percentage points. On a pro forma 1 basis, gross margin for the six months ended June 30, 2026 of 32.8% increased by 3.6-percentage points, driven by the IEEPA tariff receivables.

Current wording

Gross margin for the nine months ended September 30, 2026 of 31.6% increased by 5.1-percentage points as compared to the prior year period. The nine months ended September 30, 2026 included an approximate 1.8-percentage point benefit related to the IEEPA tariff receivables and a 1.0-percentage point benefit related to the Lexmark Acquisition. The increase for the nine months ended September 30, 2026 primarily reflects higher revenue and gross profit, which includes the benefits from the IEEPA tariff receivables, a favorable impact resulting from the non-recurring prior year purchase accounting adjustments related to the Lexmark acquisition, and the benefits associated with Transformation-related cost and productivity actions, as well as a 0.2-percentage point benefit from higher revenue associated with a licensing agreement. These benefits were partially offset by the adverse impacts related to product cost increases and an unfavorable revenue mix, including lower equipment service revenue and managed print services, as well as IT products. Excluding the impact of the Lexmark Acquisition, gross margin increased 4.1-percentage points. On a pro forma 1 basis, gross margin for the nine months ended September 30, 2026 of 31.6% increased by 4.6-percentage points, driven by the IEEPA tariff receivables.

Previous wording

Second quarter 2026 post sale gross margin of 39.9% increased by 10.0-percentage points as compared to second quarter of 2025, which included a 5.1-percentage point benefit related to the Lexmark Acquisition, and a 3.4-percentage point benefit related to the IEEPA tariff receivables. Excluding the impact of the Lexmark Acquisition, post sale gross margin increased 4.9-percentage points. The increase in the second quarter 2026 primarily reflects higher revenue and gross profit, including the benefits from the IEEPA tariff receivables and Transformation-related cost and productivity actions. These benefits were partially offset by unfavorable revenue mix, including lower equipment service revenue and managed print services, rental and other revenues, as well as lower financing fees, and higher benefits costs and higher incentive compensation expense. On a pro forma 1 basis, second quarter 2026 post sale gross margin of 39.9% increased 4.8-percentage points, primarily reflecting the impacts noted above.

Current wording

Third quarter 2026 post sale gross margin of 35.6% increased by 13.8-percentage points as compared to third quarter 2025. The increase in the third quarter 2026 primarily reflects higher gross profit, including the favorable impact resulting from the non-recurring prior year purchase accounting adjustments related to the Lexmark acquisition, Transformation-related cost and productivity actions, a 0.9-percentage point benefit from higher revenue associated with a licensing agreement, and lower tariff-related costs. These benefits were partially offset by unfavorable revenue mix, including lower equipment service revenue and managed print services, as well as lower IT products and services revenue, rental revenue, and lower financing fees.

Previous wording

Post sale gross margin for the six months ended June 30, 2026 of 37.3% increased by 7.6-percentage points as compared to the prior year period, which included a 4.7-percentage point benefit related to the Lexmark Acquisition, and included a 1.7-percentage point benefit related to the IEEPA tariff receivables. Excluding the impact of the Lexmark Acquisition, post sale gross margin increased 2.9-percentage points. The increase for the six months ended June 30, 2026 primarily reflects higher revenue and gross profit, including the benefits from the IEEPA tariff receivables and Transformation-related cost and productivity actions. These benefits were partially offset by the adverse impact related to a fixed asset-related purchase accounting adjustment related to the Lexmark Acquisition, higher incentive compensation expense and benefit costs, unfavorable revenue mix, including lower equipment service revenue and managed print services, rental and other revenues, as well as lower financing fees, and product cost increases. On a pro forma 1 basis, six months ended June 30, 2026 post sale gross margin of 37.3% increased 2.7-percentage points, primarily reflecting the impacts noted above.

Current wording

Post sale gross margin for the nine months ended September 30, 2026 of 36.8% increased by 10.2-percentage points as compared to the prior year period, which included a 3.0-percentage point benefit related to the Lexmark Acquisition, and a 1.2-percentage point benefit related to the IEEPA tariff receivables. Excluding the impact of the Lexmark Acquisition, post sale gross margin increased 7.2-percentage points. The increase for the nine months ended September 30, 2026 primarily reflects higher gross profit, including the favorable impact resulting from the non-recurring prior year purchase accounting adjustments related to the Lexmark acquisition, as well as Transformation-related cost and productivity actions, the IEEPA tariff receivables, and a 0.3-percentage point benefit from higher revenue associated with a licensing agreement. These benefits were partially offset by unfavorable revenue mix, including lower equipment service revenue and managed print services, rental and other revenues, as well as lower financing fees, lower IT products revenue, and product cost increases. On a pro forma 1 basis, nine months ended September 30, 2026 post sale gross margin of 36.8% increased 6.7-percentage points, primarily reflecting the impacts noted above.

Previous wording

Second quarter 2026 SAG as a percentage of revenue of 22.5% decreased by 0.9-percentage points as compared to second quarter 2025, including a 2.4-percentage point benefit from the Lexmark Acquisition. The decrease primarily reflects revenue growth that outpaced the increase in SAG spending.

Current wording

Third quarter 2026 SAG as a percentage of revenue of 20.0% decreased by 4.3-percentage points as compared to third quarter 2025. The decrease primarily reflects the decrease in SAG spending which outpaced the decrease in revenue.

Previous wording

For the six months ended June 30, 2026, SAG as a percentage of revenue of 22.9% decreased by 1.7-percentage points as compared to the prior year period, including a 2.4-percentage point benefit from the Lexmark Acquisition. The decrease primarily reflects revenue growth that outpaced the increase in SAG spending.

Current wording

For the nine months ended September 30, 2026, SAG as a percentage of revenue of 21.9% decreased by 2.6-percentage points as compared to the prior year period, including a 1.3-percentage point benefit from the Lexmark Acquisition. The decrease primarily reflects revenue growth that outpaced the increase in SAG spending.

Previous wording

For the six months ended June 30, 2026, SAG of $862 million increased by $116 million as compared to the prior year period, primarily reflecting the impact of the Lexmark Acquisition, as well as higher incentive compensation expense and benefit costs, and unfavorable translation currency. These impacts were partially offset by productivity and cost savings related to Transformation actions, including lower marketing spend, as well as lower bad debt expense. On a pro forma 1 basis, six months ended June 30, 2026, SAG decreased $60 million, primarily reflecting Transformation actions and higher legacy Lexmark SAG expenses in the second quarter of 2025.

Current wording

For the nine months ended September 30, 2026, SAG of $1,236 million increased by $13 million as compared to the prior year period, primarily reflecting the impact of the Lexmark Acquisition, as well as higher incentive compensation expense and benefit costs, and unfavorable translation currency. These impacts were partially offset by productivity and cost savings related to Transformation actions, including lower marketing spend, as well as lower bad debt expense, and lower transaction-related costs, net. On a pro forma 1 basis, nine months ended September 30, 2026, SAG decreased $165 million, primarily reflecting Transformation actions and lower legacy Lexmark SAG expenses in the third quarter of 2026.

Previous wording

(1)Includes worldwide headcount reductions for restructuring and severance costs of approximately 475 and 115 for the three months ended June 30, 2026 and 2025, respectively, and approximately 1,255 and 340 for the six months ended June 30, 2026 and 2025, respectively, as a result of our efforts to integrate and consolidate certain operations of the legacy Xerox and Lexmark businesses.

Current wording

(1)Includes worldwide headcount reductions for restructuring and severance costs of approximately 330 and 1,510 for the three months ended September 30, 2026 and 2025, respectively, and approximately 1,585 and 1,850 for the nine months ended September 30, 2026 and 2025, respectively, as a result of our efforts to integrate and consolidate certain operations of the legacy Xerox and Lexmark businesses.

Previous wording

(2)Primarily related to the sale, exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries. Asset impairments of owned assets include cash proceeds resulting from asset sales and recoveries of $5 million and $0 million for the three months ended June 30, 2026 and 2025, respectively, and $6 million and $19 million for the six months ended June 30, 2026 and 2025, respectively.

Current wording

(2)Primarily related to the sale, exit and abandonment of leased and owned facilities, net of any potential sublease income and recoveries. Asset charges related to owned assets include cash proceeds resulting from asset sales and recoveries of $0 million and $16 million for the three months ended September 30, 2026 and 2025, respectively, and $6 million and $35 million for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

Second quarter 2026 primarily impacted the Print and Other segment in several functional areas, with approximately 40% focused on gross margin improvements, approximately 50% focused on SAG reductions, and the remainder focused on RD&E reductions. Second quarter 2025 actions impacted several functional areas, with approximately 85% focused on gross margin improvements and the remainder focused on SAG reductions.

Current wording

Third quarter 2026 and 2025 actions primarily impacted the Print and Other segment in several functional areas, with approximately 45% focused on gross margin improvements, approximately 50% focused on SAG reductions, and the remainder focused on RD&E reductions.

Previous wording

The Restructuring and related costs, net reserve balance for all programs as of June 30, 2026 was $154 million, of which $82 million is expected to be paid over the next twelve months. Refer to Note 10 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.

Current wording

The Restructuring and related costs, net reserve balance for all programs as of September 30, 2026 was $141 million, of which $82 million is expected to be paid within the next twelve months. Refer to Note 10 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.

Previous wording

Second quarter 2026 non-financing interest expense of $100 million was $45 million higher than second quarter 2025. For the six months ended June 30, 2026, non-financing interest expense of $184 million increased by $96 million from the prior year period. The increase, as compared to the respective prior year periods, reflected higher interest rates on borrowings in support of the Lexmark Acquisition, as well as funding from the Joint Venture Financing arrangement entered into with TPG in the first quarter of 2026. Also contributing to the increase is a lower debt level allocated to Xerox Financial Services, which reflects a continued reduction in the average finance receivables balance associated with the sales of finance receivables to our various funding affiliates, as well as lower originations. When non-financing interest expense is combined with financing interest expense, total interest expense for the three and six months ended June 30, 2026 increased $40 million and $88 million, respectively, compared to the respective prior year periods.

Current wording

Third quarter 2026 non-financing interest expense of $93 million was $13 million higher than third quarter 2025. For the nine months ended September 30, 2026, non-financing interest expense of $277 million increased by $109 million from the prior year period. The increase, as compared to the respective prior year periods, primarily reflected the imputed interest on the tariff receivables monetization, and the funding from the Joint Venture Financing arrangement entered into with TPG in the first quarter of 2026, partially offset by the impact from early redemptions of debt. Non-financing interest expense for the nine months ended September 30, 2026 was higher than the prior year period also reflecting higher interest rates on borrowings in support of the Lexmark Acquisition. Also contributing to the increase is a lower debt level allocated to Xerox Financial Services, which reflects a continued reduction in the average finance receivables balance associated with the sales of finance receivables to our various funding affiliates, as well as lower originations. When non-financing interest expense is combined with financing interest expense, total interest expense for the three and nine months ended September 30, 2026 increased $9 million and $97 million, respectively, compared to the respective prior year periods. Refer to Note 12 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity and interest expense.

Previous wording

Second quarter 2026 non-service retirement-related costs of $21 million increased by $2 million as compared to the second quarter 2025, and for the six months ended June 30, 2026, non-service retirement-related costs of $42 million increased by $5 million from the prior year period. The increase as compared to each of the prior year respective periods primarily reflects higher interest costs, as well as higher actuarial losses, both of which were partially offset by higher expected returns on plan assets. Refer to Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.

Current wording

Third quarter 2026 non-service retirement-related costs of $21 million increased by $1 million as compared to the third quarter 2025, reflecting higher actuarial losses, partially offset by lower interest costs. For the nine months ended September 30, 2026, non-service retirement-related costs of $63 million increased by $6 million from the prior year period reflecting the impact of the Lexmark acquisition, as well as higher interest costs and actuarial losses, both of which were partially offset by higher expected returns on plan assets. Refer to Note 15 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.

Previous wording

Second quarter 2026 currency losses, net of $8 million increased $7 million as compared to the second quarter 2025, and for the six months ended June 30, 2026, currency losses of $13 million increased by $12 million from the prior year period. The increase as compared to each of the prior year respective periods primarily reflects fluctuations in the CNY/USD and EUR/USD exchange rates and hedging costs incurred in connection with the recent acquisition of Lexmark.

Current wording

Third quarter 2026 currency losses, net of $7 million increased $2 million as compared to the third quarter 2025, primarily due to higher hedging costs as a result of incremental funding flows. For the nine months ended September 30, 2026, currency losses of $20 million increased by $14 million from the prior year period, reflecting fluctuations in the CNY/USD and EUR/USD exchange rates, as well as higher hedging costs as a result of incremental funding flows.

Previous wording

For the three and six months ended June 30, 2026, the net (gain) on early extinguishment of debt of $(39) million and $(95) million, respectively, primarily reflects the early repayment of a portion of our 5.500% Senior Unsecured Notes due 2028, as well as a portion of our 13.50% Senior Secured Notes due 2031. The net loss on early extinguishment of debt for the three and six months ended June 30, 2025 of $4 million, respectively, reflects the write-off of deferred debt issuance costs and unamortized discount, as well as other extinguishment costs related to the repayment of Senior Notes.

Current wording

For the three and nine months ended September 30, 2026, the net (gain) on early extinguishment of debt of $(5) million and $(100) million, respectively, and included debt-for-equity exchanges associated with the exercise of warrants that were distributed as a dividend in the first quarter of 2026. The net (gain) for the nine months ended September 30, 2026 also reflected the early repayment of a portion of our 5.500% Senior Unsecured Notes due 2028, as well as a portion of our 13.50% Senior Secured Second Lien Notes due 2031. The net loss on early extinguishment of debt for nine months ended September 30, 2025 of $4 million reflected the write-off of deferred debt issuance costs and unamortized discount, as well as other extinguishment costs related to the repayment of Senior Notes.

Previous wording

Xerox 2026 Form 10-Q 56 months ended June 30, 2026 declined 8.1% as compared to the prior year period, primarily reflecting the impacts noted above, partially offset by modest growth from Lexmark.

Current wording

Xerox 2026 Form 10-Q 56

Previous wording

For the three and six months ended June 30, 2026 the change in fair value of the warrant liability of $14 million and $9 million, respectively, relates to the warrant dividend issued in the first quarter of 2026 and reflects an increase in the fair value of the warrant liability during the respective periods. Refer to Note 16 - Shareholders' Equity of Xerox Holdings in the Condensed Consolidated Financial Statements for additional information regarding the warrant dividend.

Current wording

For the three and nine months ended September 30, 2026 the change in fair value of the warrant liability of $0 million and $9 million, respectively, relates to the warrant dividend issued in the first quarter of 2026 and reflects an increase in the fair value of the warrant liability during the respective periods. Refer to Note 16 - Shareholders' (Deficit) Equity of Xerox Holdings in the Condensed Consolidated Financial Statements for additional information regarding the warrant dividend.

Previous wording

Commitment fee expense for the three and six months ended June 30, 2025, primarily reflects fees associated with the Lexmark Acquisition financing which includes: the private offering of $400 million in aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030; $500 million aggregate principal amount of 13.500% Senior Secured Second Lien Notes due 2031; $250 million aggregate principal amount of 13.00% Senior Notes due 2030; and an incremental term loan borrowing of $327 million under the First Lien Term Loan Credit Agreement.

Current wording

Commitment fee expense for the nine months ended September 30, 2025, primarily reflects fees associated with the Lexmark Acquisition financing which includes: the private offering of $400 million in aggregate principal amount of 10.25% Senior Secured First Lien Notes due 2030; $500 million aggregate principal amount of 13.50% Senior Secured Second Lien Notes due 2031; $250 million aggregate principal amount of 13.00% Senior Notes due 2030; and an incremental term loan borrowing of $327 million under the First Lien Term Loan Credit Agreement.

Previous wording

Pre-tax margin (loss) for the six months ended June 30, 2026 of (1.1)% improved by 3.1-percentage points as compared to the prior period pre-tax margin (loss) of (4.2)% which included a 3.1-percentage point benefit from the Lexmark Acquisition. Pre-tax margin (loss) for the six months ended June 30, 2026 reflected higher revenue and gross profit, which includes an approximate 2.8-percentage point benefit related to the IEEPA tariff receivables as well as the benefits associated with Transformation-related cost and productivity actions, and lower Other expenses (income), net. The decrease in Other expenses (income), net included a gain on the early repayment of a portion of our 5.50% Senior Unsecured Notes due 2028, and a portion of our 13.50% Senior Unsecured Notes due 2031, as well as the absence of commitment fees incurred during 2025 related to borrowings in support of the Lexmark Acquisition. These benefits were offset by higher SAG and non-financing interest expense, as well as higher Restructuring and related costs, net, RD&E, and Amortization of intangible assets driven by the Lexmark Acquisition. On a pro forma 1 basis, pre-tax margin (loss) for the six months ended June 30, 2026, improved by 2.9-percentage points primarily reflecting the impacts noted above.

Current wording

Pre-tax (loss) margin(1) for the nine months ended September 30, 2026 of (18.6)% decreased by 10.0-percentage points as compared to the prior period pre-tax (loss) margin of (8.6)%. The nine months ended September 30, 2026 included a 5.4-percentage point benefit from the Lexmark Acquisition. The decrease in the pre-tax (loss) margin(1) for the nine months ended September 30, 2026 was primarily driven by the Goodwill impairment charge, as well as higher Non-financing interest expense and Amortization of intangible assets driven by the Lexmark Acquisition, as well as higher RD&E, Restructuring and related costs, net, and SAG. These adverse impacts were partially offset by higher revenue, including revenue associated with a licensing agreement, and higher gross profit, which includes an approximate 1.9-percentage point benefit related to the IEEPA tariff receivables and a 0.4-percentage point benefit from higher revenue associated with a licensing agreement, the favorable impact resulting from the non-recurring prior year purchase accounting adjustments related to the Lexmark acquisition, and lower tariff-related costs, as well as the benefits associated with Transformation-related cost and productivity actions, lower Other expenses (income), net, and lower bad debt expense. The decrease in Other expenses (income), net included a gain on the early repayment of a portion of our 5.50% Senior Unsecured Notes due 2028, and a portion of our 13.50% Senior Secured Second Lien Notes due 2031, as well as the absence of commitment fees incurred during 2025 related to borrowings in support of the Lexmark Acquisition. On a pro forma 2 basis, pre-tax (loss) margin for the nine months ended September 30, 2026, decreased by 10.8-percentage points primarily reflecting the impacts noted above.

Previous wording

Xerox 2026 Form 10-Q 52 revenue and equipment sales and lower gross profit, due to as well product cost increases and an unfavorable revenue mix, including lower outsourcing, rental, and other revenues, as well as lower financing fees. These impacts were partially offset by productivity and cost savings related to Transformation, and lower SAG and RD&E expenses. On a pro forma 2 basis adjusted 1 operating margin for the six months ended June 30, 2026 increased by 2.8-percentage points primarily reflecting the impacts noted above, as well as the impact of the Lexmark Acquisition.

Current wording

IEEPA tariff receivables and the Lexmark Acquisition, the increase primarily reflects higher revenue, including revenue associated with a licensing agreement, higher gross profit, which is attributable to the factors discussed above, and lower bad debt expense. These benefits were partially offset by an unfavorable revenue mix, including lower IT Products revenue and lower financing fees, as well as product cost increase, and higher SAG and RD&E expenses. On a pro forma 2 basis adjusted 1 operating margin for the nine months ended September 30, 2026 increased by 3.0-percentage points primarily reflecting the impacts noted above.

Previous wording

The effective tax rate for the six months ended June 30, 2026 was (119.0)% and resulted in tax expense of $50 million on a pre-tax (loss). On an adjusted 1 basis, the effective tax rate for the six months ended June 30, 2026 was 93.8%, which resulted in tax expense of $60 million. Both of these rates were higher than the U.S. federal statutory tax rate of 21.0% primarily due the inability to benefit from certain current year losses and expenses, as well as the geographical mix of earnings

Current wording

The effective tax rate for the nine months ended September 30, 2025 was (123.9)% and resulted in a tax expense of $529 million on a pre-tax (loss). On an adjusted 1 basis, the effective tax rate for the nine months ended September 30, 2025 was (350.0)%, which resulted in tax expense of $42 million. Both these rates were higher than the U.S. federal statutory tax rate of 21.0% primarily due to the inability to benefit from certain current year losses, and the geographical mix of earnings.

Previous wording

Refer to Note 19 - Income Taxes in the Condensed Consolidated Financial Statements for additional information.

Current wording

Refer to Note 1 - Basis of Presentation - Goodwill in the Condensed Consolidated Financial Statements for additional information regarding the assessment of Goodwill. Refer to Note 19 - Income Taxes in the Condensed Consolidated Financial Statements for additional information.

Previous wording

Xerox 2026 Form 10-Q 58

Current wording

Xerox 2026 Form 10-Q 58 or $3.68 per diluted share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability, as well as an inventory-related purchase accounting adjustment, related to the Lexmark Acquisition, of $85 million ($102 million pre-tax), or $0.67 per diluted share.

Previous wording

Net (Loss) for the six months ended June 30, 2026 was $(92) million, or $(0.77) per diluted share, and included a $95 million net gain on the early extinguishment of debt, or $0.73 per diluted share. On an adjusted 1 basis, Net Income for the six months ended June 30, 2026 was $4 million, or $(0.03) per diluted share. The loss per diluted share reflects the impact of preferred stock dividends of $7 million.

Current wording

Net (Loss) for the nine months ended September 30, 2026 was $(1,107) million, or $(8.57) per diluted share, and included an after-tax non-cash Goodwill impairment charge of $955 million ($959 million pre-tax), or ($7.32) per diluted share, and a $100 million net gain on the early extinguishment of debt, or $0.77 per diluted share. On an adjusted 1 basis, Net Income for the nine months ended September 30, 2026 was $11 million, or $(0.01) per diluted share, and excluded an after-tax non-cash Goodwill impairment charge of $955 million ($959 million pre-tax), or $(7.35) per diluted share, and a $100 million net gain on the early extinguishment of debt, or $0.77 per diluted share. The loss per diluted share reflects the impact of preferred stock dividends of $11 million.

Previous wording

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

Current wording

Refer to Note 1 - Basis of Presentation - Goodwill in the Condensed Consolidated Financial Statements for additional information regarding the assessment of Goodwill. Refer to Note 20 - (Loss) per Share in the Condensed Consolidated Financial Statements for additional information regarding the calculation of basic and diluted loss per share.