Xerox Holdings Corporation
11/10/2025 | Press release | Distributed by Public on 11/10/2025 15:43
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Throughout the Management's Discussion and Analysis (MD&A) that follows, 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.
Xerox Holdings' primary direct operating subsidiary is Xerox and Xerox reflects nearly all of Xerox Holdings' operations. Accordingly, the following MD&A primarily focuses on the operations of Xerox and is intended to help the reader understand Xerox's business and its results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, the Condensed Consolidated Financial Statements and the accompanying notes. Throughout this MD&A, references are made to various notes in the Condensed Consolidated Financial Statements which appear in Item 1 of this combined Quarterly Report on Form 10-Q (this Form 10-Q), and the information contained in such notes is incorporated by reference into the MD&A in the places where such references are made.
Xerox Holdings' other direct subsidiary is Myriad Ventures Fund I LP (Myriad), which was established solely to invest in startups and early/mid-stage growth companies aligned with the Company's innovation focus areas and targeted adjacencies. Myriad is fully consolidated by Xerox Holdings. At September 30, 2025 and December 31, 2024 investments of Myriad were $42 million and $40 million, respectively. Due to its immaterial nature, and for ease of discussion, Myriad's results are included within the following discussion.
Currency Impact
To understand the trends in the business, we believe that it is helpful to analyze the impact of changes in the translation of foreign currencies into U.S. Dollars on revenue and expenses. We refer to this analysis as "constant currency," "currency impact" or "the impact from currency." This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate. This impact is calculated for all countries where the functional currency is the local country currency. We do not hedge the translation effect of revenues or expenses denominated in currencies where the local currency is the functional currency. Management believes the constant currency measure provides investors an additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.
Overview
Our results include Lexmark International II, LLC (Lexmark) from July 1, 2025, the effective date of the acquisition (the Lexmark Acquisition), as well as the results of ITSavvy LLC (ITSavvy), acquired on November 20, 2024. 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 and ITSavvy, as applicable.
Third quarter results were impacted by macroeconomic challenges. We experienced continued disruption associated with tariff and government funding-related uncertainty, which primarily affected transactional Print equipment revenues, and to a lesser extent, supplies revenue. Throughout the quarter, we observed continued delays in purchasing decisions among clients, particularly those reliant on federal, state and local government funding. General economic uncertainty also resulted in delays in purchases among our commercial client base and distributors. However, page volume trends remain consistent, and branded supplies usage was in line with expectations, both of which indicate unchanged demand for printed pages. Actions undertaken through Reinvention, have provided Xerox with a flexible, simplified operating structure, allowing the company to more quickly adapt in an uncertain operating landscape.
Equipment sales of $383 million in the third quarter 2025 increased 13.0% in actual currency, or 12.1% in constant currency1, as compared to the third quarter 2024. Third quarter 2025 equipment sales included a 26.0-percentage point benefit from the Lexmark Acquisition. Total equipment installations increased approximately 55.0% including Lexmark, offset by legacy Xerox declines concentrated in the high-end and entry level equipment categories. Excluding Lexmark, equipment sales declined 13.0% in actual currency reflecting lower installations, including the exit of certain production print manufacturing operations in 2024. On a pro forma2 basis, third quarter 2025 revenue declined 16.3%, due to the impacts noted above, as well as backlog3fluctuations and timing of certain enterprise
Xerox 2025 Form 10-Q 50
deals and OEM orders within Lexmark. Lexmark's equipment sales can be more volatile on a quarter-to-quarter basis, as a higher percentage comes from large channel and OEM partners.
Post-sale revenue of approximately $1.6 billion increased 32.7% in actual currency, or 31.3% in constant currency1, as compared to third quarter 2024. Third quarter 2025 post-sale revenue included a 30.2-percentage point benefit and a 10.3-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively. Excluding these acquisitions, post sale revenue declined 7.8-percentage points in actual currency reflecting lower managed print services4 revenue, driven by lower outsourcing and print services, and lower supplies revenue. Post sale revenue was also adversely affected by intentional reductions in non-strategic revenue, such as paper and financing revenue, and the effects of geographic and offering simplification. These impacts were partially offset by growth of the legacy Xerox IT Solutions business and the benefits of currency. On a pro forma2 basis, third quarter 2025 revenue decreased 5.5%, due to the impacts noted above, and timing of certain enterprise deals within Lexmark.
Pre-tax loss of $300 million for the third quarter 2025 decreased by $787 million as compared to pre-tax loss of $1,087 million in the third quarter 2024. Pre-tax loss margin decreased 55.8% for the third quarter 2025 as compared to the third quarter 2024 and included a 1.4-percentage point benefit and a 4.2-percentage point adverse impact from the Lexmark Acquisition and ITSavvy, respectively. The improvement in the third quarter 2025 is primarily due to the pre-tax non-cash goodwill impairment charge of $1.1 billion in the third quarter 2024, and benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives. These benefits were partially offset by lower gross profit, including the adverse impact related to the Lexmark Acquisition, unfavorable revenue mix, product cost increases and incremental tariff-related costs, as well as higher Other expenses, net, which included higher non-financing interest expense related to the recently completed borrowings in support of the Lexmark Acquisition. In addition, selling, general and administrative expenses increased due to the Lexmark Acquisition and ITSavvy. On a pro forma2basis third quarter 2025 pre-tax loss decreased by $891 million as compared to the third quarter 2024, due to the impacts noted above.
Adjusted1operating income of $65 million decreased by $15 million as compared to third quarter 2024 primarily due to lower gross profit, which includes higher product costs and incremental tariff-related costs, as well as unfavorable revenue mix driven by lower outsourcing revenue. These impacts were partially offset by benefits from the Lexmark Acquisition and ITSavvy, productivity and cost savings related to the Company's Reinvention, as well as recent price increases. On a pro forma2basis third quarter 2025 adjusted1 operating income decreased $87 million, due primarily to the impacts noted above.
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(1)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
(2)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
(3)Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware.
(4)Includes revenues from Services, maintenance and rentals. IT Solutions and digital services are not included in managed print services.
Recent Developments
Acquisition of Lexmark
On July 1, 2025, Xerox Corporation completed its previously announced acquisition of all of the issued and outstanding equity of Lexmark International II, LLC (Lexmark) from Ninestar Group Company Limited.
We continue to expect Earnings per share accretion associated with the Lexmark Acquisition, despite a slightly higher than expected cost of funding. Based on U.S. tariffs currently proposed, we expect no material impact from tariffs on Lexmark's results. Lexmark has a large manufacturing facility in Juarez, Mexico that can support all expected imports of branded product into the U.S. market on a USMCA compliant basis. Refer to Note 6 - Acquisitionin the condensed consolidated financial statements for additional information regarding the Lexmark Acquisition.
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. As noted above, Lexmark was acquired during third quarter 2025. The results of Lexmark are included in the Print and Other segment. Refer to Note 4 - Segment Reportingin the Condensed Consolidated Financial Statements for additional information regarding this change.
Xerox 2025 Form 10-Q 51
Valuation Allowance
During the first and third quarter of 2025, valuation allowances were recorded primarily related to certain deferred tax assets in the United States. Refer to Note 1 - Basis of Presentationin the Condensed Consolidated Financial Statements for additional information regarding the valuation allowance.
Tax Law Change
On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act (the Act), was signed into law. Refer to Note 1 - Basis of Presentationin the Condensed Consolidated Financial Statements for additional information regarding the Act.
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(1)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
2025 Review
Total revenue of $1.96 billion for third quarter 2025 increased 28.3% from third quarter 2024, including a 29.3-percentage point benefit and an 8.0-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 1.3-percentage point favorable impact from currency. On a pro forma1basis total revenue declined 7.8%. Total revenue reflected the following:
•an increase of 32.7% in Post sale revenue, including a 30.2-percentage point benefit and a 10.3-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 1.4-percentage point favorable impact from currency. On a pro forma1basis post sale revenue declined 5.5%.
•an increase of 13.0% in Equipment sales revenue, including a 26.0-percentage point benefit from the Lexmark Acquisition, and a 0.9-percentage point favorable impact from currency. On a pro forma1basis equipment sales revenue declined 16.3%.
Total revenue of $4.99 billion for the nine months ended September 30, 2025 increased 8.4% as compared to the prior year period, including a 9.7-percentage point benefit and a 7.7-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 0.2-percentage point favorable impact from currency. On a pro forma1basis total revenue declined 7.2%. Total revenue reflected the following:
•an increase of 10.2% in Post sale revenue, including a 9.9-percentage point benefit and a 3.4-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 0.2-percentage point favorable impact from currency. On a pro forma1basis post sale revenue declined 6.8%.
•an increase of 1.8% in Equipment sales revenue, including an 8.9-percentage point benefit from the Lexmark Acquisition, and a 0.2-percentage point favorable impact from currency. On a pro forma1basis equipment sales revenue declined 8.6%.
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(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Net loss and adjusted1Net income (loss) were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | B/(W) | 2025 | 2024 | B/(W) | ||||||||||||||||||||||||||||||||
| Net Loss | $ | (760) | $ | (1,205) | $ | 445 | $ | (956) | $ | (1,300) | $ | 344 | ||||||||||||||||||||||||||
|
Adjusted(1)Net Income (Loss)
|
27 | 34 | (7) | (54) | 86 | (140) | ||||||||||||||||||||||||||||||||
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(1)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
Third quarter 2025 Net (Loss) was $760 million and improved by $445 million as compared to the third quarter 2024 Net (loss) of $1,205 million. Net (Loss) for the third quarter 2024 reflects an after-tax Goodwill impairment charge of $1,015 million ($1,058 million pre-tax). Net (Loss) for the third quarter 2025 includes the results of ITSavvy and the Lexmark Acquisition, and primarily reflects 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. Third quarter 2025 Net (Loss) also reflects lower gross profit, and higher Selling, administrative and general expenses, Other expenses, net, Research, development and engineering expenses (RD&E), Amortization of intangible assets, and Restructuring and related costs, net, all of which was partially offset by higher revenues. Third quarter 2025 adjusted1Net Income was $27 million as compared to Adjusted1Net Income of $34 million during the third quarter 2024. Adjusted1Net Income was lower by $7 million primarily reflecting higher Selling, administrative and general expenses, Other expenses, net, and RD&E, all of which was partially offset by higher revenues, as well as lower Income tax expense.
Xerox 2025 Form 10-Q 52
Net (Loss) for the nine months ended September 30, 2025 of $956 million and improved $344 million as compared to the prior year period Net (Loss) of $1,300 million. Net (Loss) for the nine months ended September 30, 2024 reflects an after-tax Goodwill impairment charge of $1,015 million ($1,058 million pre-tax). Net (Loss) for the nine months ended September 30, 2025 includes the results of ITSavvy and the Lexmark Acquisition from July 1, 2025, and primarily reflects higher Income tax expense, as a result of the establishment of valuation allowances of $537 million against certain deferred tax assets to reflect their realizability. The change also reflected lower gross profit, and higher Other expenses, net, Selling, administrative and general expenses, Amortization of intangible assets, and RD&E. These negative impacts were partially offset by higher revenues, as well as lower Divestitures, as the prior year included the divestiture of certain direct business operations in Latin America, and lower Restructuring and related costs, net. Adjusted1Net (loss) for the nine months ended September 30, 2025 was $54 million as compared to the prior year period adjusted1net income of $86 million. Adjusted1Net (loss) was higher by $140 million primarily reflecting lower gross profit, as well as higher Other expenses, net, Income tax expense and RD&E. These negative impacts were partially offset by higher revenues and lower Selling, administrative and general expenses.
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(1)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
The following is a summary of our segments - Print and OtherandIT Solutions:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 1,739 | $ | 1,442 | 20.6 | % | $ | 4,399 | $ | 4,364 | 0.8 | % | ||||||||||||||||||||||||||
| IT Solutions | 226 | 86 | 162.8 | % | 603 | 244 | 147.1 | % | ||||||||||||||||||||||||||||||
| Total Segment revenue | 1,965 | 1,528 | 28.6 | % | 5,002 | 4,608 | 8.6 | % | ||||||||||||||||||||||||||||||
|
Intersegment Elimination(1)
|
(4) | - | NM | (8) | - | NM | ||||||||||||||||||||||||||||||||
| Corporate Other | - | - | NM | - | - | NM | ||||||||||||||||||||||||||||||||
| Total Revenue | $ | 1,961 | $ | 1,528 | 28.3 | % | $ | 4,994 | $ | 4,608 | 8.4 | % | ||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 1,675 | $ | 1,339 | 25.1 | % | $ | 4,229 | $ | 4,096 | 3.2 | % | ||||||||||||||||||||||||||
| IT Solutions | 208 | 86 | 141.9 | % | 570 | 244 | 133.6 | % | ||||||||||||||||||||||||||||||
| Total Segment expenses | 1,883 | 1,425 | 32.1 | % | 4,799 | 4,340 | 10.6 | % | ||||||||||||||||||||||||||||||
|
Intersegment Elimination(2)
|
(4) | - | NM | (8) | - | NM | ||||||||||||||||||||||||||||||||
| Corporate Other | 17 | 23 | (26.1) | % | 57 | 70 | (18.6) | % | ||||||||||||||||||||||||||||||
| Total Expenses | $ | 1,896 | $ | 1,448 | 30.9 | % | $ | 4,848 | $ | 4,410 | 9.9 | % | ||||||||||||||||||||||||||
| Profit | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 64 | $ | 103 | (37.9) | % | $ | 170 | $ | 268 | (36.6) | % | ||||||||||||||||||||||||||
| IT Solutions | 18 | - | NM | 33 | - | NM | ||||||||||||||||||||||||||||||||
| Total Segment profit | 82 | 103 | (20.4) | % | 203 | 268 | (24.3) | % | ||||||||||||||||||||||||||||||
| Corporate Other | (17) | (23) | (26.1) | % | (57) | (70) | (18.6) | % | ||||||||||||||||||||||||||||||
| Total Profit | $ | 65 | $ | 80 | (18.8) | % | $ | 146 | $ | 198 | (26.3) | % | ||||||||||||||||||||||||||
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(1)Reflects primarily IT hardware, software solutions and services revenues, sold by the IT Solutions segment to the Print and Other segment.
(2)Reflects primarily costs related to the sale of IT hardware, software solutions and services by the IT Solutions segment, to the Print and Other segment.
Cash flows from operating activities during the nine months ended September 30, 2025 were a source of $16 million and decreased $144 million as compared to the prior year period. The decrease primarily related to lower profitability, as well as lower net proceeds from the on-going sales of finance receivables under the finance receivables funding agreements, and the impacts of one-time cash costs related to the Lexmark Acquisition, all of which were partially offset by the timing of working capital1, lower finance receivable originations, lower payments for accrued compensation, and lower payments for restructuring.
Cash used in investing activities during the nine months ended September 30, 2025 was $694 million, primarily reflecting the Lexmark Acquisition of $675 million, net of cash acquired, as well as capital expenditures of $67 million, and the investment in a noncontrolling interest of $9 million, all of which were partially offset by $33 million
Xerox 2025 Form 10-Q 53
related to the sales of two surplus facilities, $6 million related to a change in lease classification for certain vehicles, $9 million from divestitures, and $7 million from the sale of patents.
Cash provided by financing activities during the nine months ended September 30, 2025 was $577 million, reflecting proceeds from the issuance of our First Lien Senior Secured Notes of $400 million (First Lien Notes), the issuance of our Second Lien Senior Secured Notes of $500 million (Second Lien Notes), the issuance of $250 million of our Senior Secured Notes due July 2030 (the 2030 Notes), the issuance of our $125 million Senior Unsecured Notes due June 2026 (the 2026 Notes), $100 million from the ABL Facility and $4 million from the TLB Facility, all of which was offset by deferred debt issuance costs of $41 million and discounts of $17 million. Payments on debt reflected $388 million on the 5.000% Senior Notes due in August 2025, $102 million on the Term Loan B facility (TLB Facility), $83 million on secured promissory notes and $72 million on secured financing arrangements. Dividend payments were $65 million, and other financing, net was $28 million, reflecting $22 million for payments of financing commitment fees related to the Lexmark Acquisition, $6 million related to the settlement of stock-based compensation and $9 million related to finance leases, all of which was offset by $11 million for the issuance of warrants in connection with the issuance of the 2030 Notes.
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(1)Working capital, net reflects Accounts receivable, Billed portion of finance receivables, Inventories and Accounts payable.
Outlook
Xerox's 2025 guidance includes six months of activity associated with the Lexmark Acquisition, which was effective July 1, 2025. We expect Revenue to grow 13% in constant currency1. While we expect profitability to improve, the impacts of tariff-related expenses of approximately $35 million, net of mitigation efforts, partially offset by Lexmark-related contributions of $100 million to $110 million, will result in modestly lower margins. We now expect operating cash flows, excluding one-time items related to the Lexmark Acquisition of $70 million, to be approximately $245 million, which is a decrease from our previous guidance of approximately $345 million. The decrease reflects a higher level of cash tariff expenses and one-time costs associated with the implementation of synergy savings. We continue to expect capital expenditures to be approximately $95 million in 2025, which reflects the inclusion of Lexmark.
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(1)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
Financial Review
Revenues
|
Three Months Ended September 30, |
% of Total Revenue | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | % Change | CC % Change |
Pro Forma % Change(1)
|
2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 383 | $ | 339 | 13.0 | % | 12.1 | % | (16.3) | % | 20 | % | 22 | % | |||||||||||||||||||||||||||
| Post sale revenue | 1,578 | 1,189 | 32.7 | % | 31.3 | % | (5.5) | % | 80 | % | 78 | % | |||||||||||||||||||||||||||||
| Total Revenue | $ | 1,961 | $ | 1,528 | 28.3 | % | 27.0 | % | (7.8) | % | 100 | % | 100 | % | |||||||||||||||||||||||||||
| Reconciliation to Condensed Consolidated Statements of Loss: | |||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 993 | $ | 588 | 68.9 | % | 67.9 | % | (8.5) | % | |||||||||||||||||||||||||||||||
|
Less: IT products(2)
|
(165) | (55) | 200.0 | % | 197.6 | % | 9.8 | % | |||||||||||||||||||||||||||||||||
| Less: Supplies, paper and other sales | (445) | (194) | 129.4 | % | 129.7 | % | (6.7) | % | |||||||||||||||||||||||||||||||||
| Equipment sales | $ | 383 | $ | 339 | 13.0 | % | 12.1 | % | (16.3) | % | |||||||||||||||||||||||||||||||
|
Services, maintenance, rentals and other(3)(4)
|
$ | 968 | $ | 940 | 3.0 | % | 1.5 | % | (7.2) | % | |||||||||||||||||||||||||||||||
|
Add: IT products(2)
|
165 | 55 | 200.0 | % | 197.6 | % | 9.8 | % | |||||||||||||||||||||||||||||||||
| Add: Supplies, paper and other sales | 445 | $ | 194 | 129.4 | % | 129.7 | % | (6.7) | % | ||||||||||||||||||||||||||||||||
|
Post sale revenue
|
$ | 1,578 | $ | 1,189 | 32.7 | % | 31.3 | % | (5.5) | % | |||||||||||||||||||||||||||||||
| Segments | |||||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 1,739 | $ | 1,442 | 20.6 | % | 19.0 | % | (9.7) | % | 89 | % | 94 | % | |||||||||||||||||||||||||||
| IT Solutions | 226 | 86 | 162.8 | % | 161.3 | % | 12.4 | % | 11 | % | 6 | % | |||||||||||||||||||||||||||||
|
Intersegment elimination(5)
|
(4) | - | NM | NM | NM | - | % | - | % | ||||||||||||||||||||||||||||||||
|
Total Revenue(5)
|
$ | 1,961 | $ | 1,528 | 28.3 | % | 27.0 | % | (7.8) | % | 100 | % | 100 | % | |||||||||||||||||||||||||||
Xerox 2025 Form 10-Q 54
|
Nine Months Ended September 30, |
% of Total Revenue | |||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | % Change | CC % Change |
Pro Forma % Change(1)
|
2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 1,003 | $ | 985 | 1.8 | % | 1.6 | % | (8.6) | % | 20 | % | 21 | % | ||||||||||||||||||||||||||||||
| Post sale revenue | 3,991 | 3,623 | 10.2 | % | 10.0 | % | (6.8) | % | 80 | % | 79 | % | ||||||||||||||||||||||||||||||||
| Total Revenue | $ | 4,994 | $ | 4,608 | 8.4 | % | 8.2 | % | (7.2) | % | 100 | % | 100 | % | ||||||||||||||||||||||||||||||
| Reconciliation to Condensed Consolidated Statements of Loss: | ||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 2,215 | $ | 1,722 | 28.6 | % | 28.9 | % | (6.5) | % | ||||||||||||||||||||||||||||||||||
|
Less: IT products(2)
|
(423) | (158) | 167.7 | % | 167.9 | % | (5.8) | % | ||||||||||||||||||||||||||||||||||||
| Less: Supplies, paper and other sales | (789) | (579) | 36.3 | % | 37.7 | % | (4.8) | % | ||||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 1,003 | $ | 985 | 1.8 | % | 1.6 | % | (8.6) | % | ||||||||||||||||||||||||||||||||||
|
Services, maintenance, rentals and other(3)(4)
|
$ | 2,779 | $ | 2,886 | (3.7) | % | (4.1) | % | (7.8) | % | ||||||||||||||||||||||||||||||||||
|
Add: IT products(2)
|
423 | 158 | 167.7 | % | 167.9 | % | (5.8) | % | ||||||||||||||||||||||||||||||||||||
| Add: Supplies, paper and other sales | 789 | $ | 579 | 36.3 | % | 37.7 | % | (4.8) | % | |||||||||||||||||||||||||||||||||||
|
Post sale revenue
|
$ | 3,991 | $ | 3,623 | 10.2 | % | 10.0 | % | (6.8) | % | ||||||||||||||||||||||||||||||||||
| Segments | ||||||||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 4,399 | $ | 4,364 | 0.8 | % | 0.5 | % | (7.9) | % | 88 | % | 95 | % | ||||||||||||||||||||||||||||||
| IT Solutions | 603 | 244 | 147.1 | % | 147.2 | % | 1.3 | % | 12 | % | 5 | % | ||||||||||||||||||||||||||||||||
|
Intersegment elimination(5)
|
(8) | - | NM | NM | NM | - | % | - | % | |||||||||||||||||||||||||||||||||||
|
Total Revenue(5)
|
$ | 4,994 | $ | 4,608 | 8.4 | % | 8.2 | % | (7.2) | % | 100 | % | 100 | % | ||||||||||||||||||||||||||||||
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CC - See "Currency Impact" section for a description of Constant Currency.
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure. See "Currency Impact" section for a description of Constant Currency.
(2)IT Products reflect IT hardware, software solutions and services provided by the IT Solutions segment. Refer to Reportable Segments - IT Solutions for further information.
(3)Includes financing revenue generated from direct and indirectly financed Xerox equipment sale transactions of $32 million and $38 million for the three months ended September 30, 2025 and 2024, respectively and $97 million and $118 million for the nine months ended September 30, 2025 and 2024, respectively.
(4)Services, maintenance, rentals and other revenue include IT services support of $57 million and $31 million for the three months ended September 30, 2025 and 2024, respectively, and $172 million and $86 million for the nine months ended September 30, 2025 and 2024, respectively, provided by our IT Solutions segment.
(5)Primarily reflects IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment.
(6)Refer to Note 4 - Segment Reporting in the Condensed Consolidated Financial Statements for additional information regarding our reportable segments.
Third quarter 2025 total revenue increased 28.3% as compared to third quarter 2024, and included a 29.3-percentage point benefit and an 8.0-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 1.3-percentage point benefit from currency. The increase in the third quarter 2025 was partially offset by lower equipment sales and post sale revenue for legacy Xerox. Total revenue for legacy Xerox declined 9.0-percentage points in actual currency primarily due to lower installations, managed print services1, and supplies revenue, as well as the adverse impact from Reinvention-related actions and macroeconomic and policy-related uncertainty. These factors were partially offset by legacy IT Solutions growth. On a pro forma2basis, third quarter 2025 total revenue declined 7.8% as compared to the third quarter 2024 due to the impacts noted above, as well as backlog3 fluctuations and the timing of certain enterprise deals within Lexmark.
Total revenue for the nine months ended September 30, 2025 increased 8.4%, as compared to the prior year period, and included a 9.7-percentage point benefit and an 7.7-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 0.2-percentage point benefit from currency. The increase for the nine months ended September 30, 2025 was partially offset by lower equipment sales and post sale revenue for legacy Xerox. Total revenue for legacy Xerox declined 9.0-percentage points in actual currency due primarily to lower installations, managed print services1and supplies revenue declines, as well as the adverse impact from Reinvention-related actions and macroeconomic and policy-related uncertainty. These factors were partially offset by legacy IT Solutions growth. On a pro forma2basis, total revenue for the nine months ended September 30, 2025 declined 7.2% due to the impacts noted above, as well as backlog3 fluctuations and the timing of certain enterprise deals within Lexmark.
Xerox 2025 Form 10-Q 55
Third quarter 2025 equipment sales revenue increased 12.1% at constant currency4 and included a 26.0-percentage point benefit from the Lexmark Acquisition. The increase at constant currency4 reflects higher installations driven by the inclusion of Lexmark. Excluding Lexmark, equipment sales declined 13.0-percentage points in actual currency due to lower installations and the adverse impact from Reinvention-related actions, including the exit of certain production print manufacturing operations in 2024. On a pro forma2 basis, third quarter 2025 equipment sales revenue declined 16.3% as compared to the third quarter 2024, due to the impacts noted above, as well as backlog3fluctuations and timing of certain enterprise deals within Lexmark.
Total equipment sales revenue for the nine months ended September 30, 2025 increased 1.6% at constant currency4 and included an 8.9-percentage point benefit from the Lexmark Acquisition. The increase at constant currency4 reflects higher installations driven by the inclusion of Lexmark. Excluding Lexmark, equipment sales declined 7.1-percentage points in actual currency due to lower installations and the adverse impact from Reinvention-related actions, including the exit of certain production print manufacturing operations in 2024, as well as unfavorable product mix. On a pro forma2 basis, equipment sales revenue for the nine months ended September 30, 2025 declined 8.6% as compared to the prior year period, due to the impacts noted above, as well as backlog3fluctuations and timing of certain enterprise deals within Lexmark.
Third quarter 2025 Post sale revenue increased 31.3% at constant currency4 and included a 30.2-percentage point benefit and a 10.3-percentage point benefit from ITSavvy and the Lexmark Acquisition, respectively. Excluding these acquisitions, post sale revenue declined 7.8-percentage points in actual currency reflecting lower managed print services1 revenue, driven by lower outsourcing and print services, and lower supplies revenue. Post sale revenue was also adversely affected by intentional reductions in non-strategic revenue, such as paper and financing revenue, and the effects of geographic and offering simplification. These impacts were partially offset by growth of the legacy IT Solutions business. On a pro forma2 basis, third quarter 2025 post sale revenue decreased 5.5% as compared to the third quarter 2024.
Total post sales revenue for the nine months ended September 30, 2025 increased 10.0% at constant currency4 and included a 9.9-percentage point benefit and a 3.4-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively. Excluding these acquisitions, post sale revenue declined 3.1-percentage points in actual currency reflecting lower managed print services1 revenue, driven by lower outsourcing and print services, and lower supplies revenue. Post sale revenue was also adversely affected by intentional reductions in non-strategic revenue, such as paper and financing revenue, and the effects of geographic and offering simplification. These impacts were partially offset by growth of the legacy IT Solutions business and modest growth in digital services revenue. On a pro forma2 basis, post sales revenue for the nine months ended September 30, 2025 decreased 6.8% as compared to the prior year period, due to the impacts noted above.
____________________________
(1)Includes revenues from service, maintenance and rentals. IT solutions and digital services are not included in managed print services.
(2)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure. See "Currency Impact" section for a description of Constant Currency.
(3)Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware.
(4)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
Post sale revenue
Post sale revenue primarily reflects revenues from managed print services1, supplies, paper and financing. These revenues are associated not only with the population of devices in the field, which is affected by installs and removals, but also by the page volumes generated from the usage of such devices and the revenue per printed page. Post sale revenue also includes revenues from IT Solutions, comprised of IT products and services, Digital services, as well as gains, commissions, and servicing revenue associated with the sale of finance receivables.
Post sale revenue for the three and nine months ended September 30, 2025 reflected the following:
•Services, maintenance, rentals and otherrevenue includes maintenance and outsourcing revenue (including bundled supplies), the services portion of our IT Solutions offering, digital services revenue, rentals, financing, and other revenues.
◦For the three months ended September 30, 2025, these revenues increased 3.0% as compared to third quarter of 2024, and included an 8.7-percentage point benefit and a 3.2-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively, as well as a 1.5-percentage point benefit from currency. On a pro forma2basis, third quarter 2025 revenue decreased 7.2%, due to the impacts noted above, and timing of certain enterprise contracts within Lexmark.
◦For the nine months ended September 30, 2025 the revenues decreased 3.7% as compared to the prior year period, and included a 2.8-percentage point benefit and a 3.2-percentage point benefit from the
Xerox 2025 Form 10-Q 56
Lexmark Acquisition and ITSavvy, respectively, as well as a 0.4-percentage point benefit from currency. On a pro forma2basis revenue for the nine months ended September 30, 2025 decreased 7.8% as compared to the prior year period, due to the impacts noted above, and timing of certain enterprise contracts within Lexmark.
◦The respective decline in constant currency3for both the three and nine months ended September 30, 2025 reflects the benefit of these acquisitions, partially offset by declines of legacy Xerox. Excluding the impact of the acquisitions, revenue declined 8.9% and 9.7% in actual currency as compared to the respective prior year periods, and was due primarily to managed print services1revenue which declined mid-single digits as compared to the respective year periods, reflecting lower outsourcing and print service revenue, and the effects of geographic and offering simplification. The decline is also due to lower financing revenue reflecting a continued reduction in the average finance receivables balance associated with the sales of finance receivables in recent quarters with certain financing affiliates. These negative impacts were partially offset by modest growth in digital services revenue for the three and nine months ended September 30, 2025.
•IT products revenue includes the sale of notebooks, network communications and other endpoint devices, desktop computers and other IT hardware. Software product sales include deployments of cloud and security solutions, endpoint security application suites, operating systems, other applications and network management solutions.
◦For the three months ended September 30, 2025, these revenues increased 200.0% as compared to third quarter of 2024, and included a 168.4-percentage point benefit from the acquisition of ITSavvy, as well as a 2.4-percentage point benefit from currency. Excluding the impact of ITSavvy, revenue increased 31.6% in actual currency as compared to third quarter of 2024 due to growth in the legacy Xerox IT Solutions business. On a pro forma2basis, third quarter 2025 revenue increased 9.8%.
◦For the nine months ended September 30, 2025, these revenues increased 167.7% as compared to the prior year period, and included a 164.1-percentage point benefit from the acquisition of ITSavvy, as well as a 0.2-percentage point adverse impact from currency. Excluding the impact of ITSavvy, revenue increased 3.6% in actual currency as compared to the prior year period due to growth in the legacy Xerox IT Solutions business, partially offset by the timing of large product placements in the prior year, and a larger product mix subject to net classification and revenue deferrals. On a pro forma2basis revenue for the nine months ended September 30, 2025 declined 5.8% as compared to the prior year period.
•Supplies, paper and other salesrevenue includes unbundled supplies, paper and other sales.
◦For the three months ended September 30, 2025, these revenues increased 129.4% as compared to the third quarter of 2024 and included a 143.0-percentage point benefit from the Lexmark Acquisition and a 0.3-percentage point adverse impact from currency. Excluding the impact of Lexmark, revenue declined 13.6% in actual currency as compared to third quarter of 2024 due primarily to lower supplies revenue, as well as lower paper sales as a result of the sale of our European paper business. On a pro forma2basis, third quarter 2025 revenue decreased 6.7% as compared to third quarter of 2024.
◦For the nine months ended September 30, 2025, these revenues increased 36.3% as compared to the prior year period and included a 47.9-percentage point benefit from the Lexmark Acquisition and a 1.4-percentage point adverse impact from currency. Excluding the impact of Lexmark, revenue declined 11.6% in actual currency as compared to the prior year period due primarily to lower supplies revenue, as well as lower paper sales as a result of the sale of our European paper business. On a pro forma2basis revenue for the nine months ended September 30, 2025 declined 4.8% as compared to the prior year period.
Equipment sales revenue
Refer to the Revenuesection above for a discussion of Equipment sales revenue for the three and the nine months ended September 30, 2025.
In addition, refer theSegment Review - Print and Otherdiscussion below for additional discussion on Equipment sales revenue.
____________________________
(1)Includes revenues from service, maintenance and rentals. IT solutions and digital services are not included in managed print services.
(2)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
(3)See "Currency Impact" section for a description of Constant Currency.
Xerox 2025 Form 10-Q 57
Costs, Expenses and Other Income
Summary of Key Financial Ratios
The following is a summary of key financial ratios used to assess our performance:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | B/(W) |
Pro Forma B/(W)(1)
|
2025 | 2024 | B/(W) |
Pro Forma B/(W)(1)
|
||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Profit | $ | 445 | $ | 495 | $ | (50) | $ | (143) | $ | 1,322 | $ | 1,458 | $ | (136) | $ | (178) | ||||||||||||||||||||||||||||||||||||||||
| RD&E | 74 | 45 | (29) | 3 | 159 | 144 | (15) | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||
| SAG | 477 | 370 | (107) | (8) | 1,223 | 1,160 | (63) | 41 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment Gross Margin | 26.1 | % | 28.5 | % | (2.4) | pts. | (3.0) | pts. | 25.9 | % | 31.4 | % | (5.5) | pts. | (9.1) | pts. | ||||||||||||||||||||||||||||||||||||||||
| Post sale Gross Margin | 21.8 | % | 33.5 | % | (11.7) | pts. | (5.5) | pts. | 26.6 | % | 31.7 | % | (5.1) | pts. | 1.3 | pts. | ||||||||||||||||||||||||||||||||||||||||
| Total Gross Margin | 22.7 | % | 32.4 | % | (9.7) | pts. | (4.6) | pts. | 26.5 | % | 31.6 | % | (5.1) | pts. | (0.7) | pts. | ||||||||||||||||||||||||||||||||||||||||
| RD&E as a % of Revenue | 3.8 | % | 2.9 | % | (0.9) | pts. | (0.2) | pts. | 3.2 | % | 3.1 | % | (0.1) | pts. | - | pts. | ||||||||||||||||||||||||||||||||||||||||
| SAG as a % of Revenue | 24.3 | % | 24.2 | % | (0.1) | pts. | (2.3) | pts. | 24.5 | % | 25.2 | % | 0.7 | pts. | (1.1) | pts. | ||||||||||||||||||||||||||||||||||||||||
| Pre-tax (Loss) | $ | (300) | $ | (1,087) | $ | 787 | $ | 891 | $ | (427) | $ | (1,212) | $ | 785 | $ | 1,024 | ||||||||||||||||||||||||||||||||||||||||
| Pre-tax (Loss) Margin | (15.3) | % | (71.1) | % | 55.8 | pts. | 41.1 | pts. | (8.6) | % | (26.3) | % | 17.7 | pts. | 15.5 | pts. | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted(2)(3)Operating profit
|
$ | 65 | $ | 80 | $ | (15) | $ | (87) | $ | 146 | $ | 198 | $ | (52) | $ | (114) | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted(2)(3)Operating Margin
|
3.3 | % | 5.2 | % | (1.9) | pts. | (3.8) | pts. | 2.9 | % | 4.3 | % | (1.4) | pts. | (1.5) | pts. | ||||||||||||||||||||||||||||||||||||||||
____________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
(2)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure.
(3)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Non-GAAP Financial Measures" section for an explanation of this pro forma non-GAAP financial measure.
Gross Margin
Third quarter 2025 gross margin of 22.7% decreased by 9.7-percentage points as compared to third quarter of 2024, and included an approximate 5.2-percentage point adverse impact and a 0.5-percentage point adverse impact related to the Lexmark Acquisition and ITSavvy, respectively. Excluding the impact of these acquisitions, gross margin declined 4.0-percentage points. The decrease primarily reflects lower gross profit, including the adverse impact related to unfavorable revenue mix reflecting lower supplies, outsourcing and print service revenue, lower equipment sales and page volumes, as well as product cost increases and incremental tariff-related costs. These impacts were partially offset by benefits associated with Reinvention-related costs, productivity actions and recent pricing initiatives. On a pro forma1basis, third quarter 2025 gross margin of 27.4% decreased by 4.6 -percentage points due to the impacts noted above.
Gross margin for the nine months ended September 30, 2025 of 26.5% decreased by 5.1-percentage points as compared to the prior year period, and included an approximate 2.1-percentage point adverse impact and a 0.7-percentage point adverse impact related to the Lexmark Acquisition and ITSavvy, respectively. Excluding the impact of these acquisitions, gross margin declined 2.3-percentage points. The decrease primarily reflects lower gross profit, including the adverse impact related to unfavorable product mix due to lower services, maintenance, rentals and other revenues, lower equipment sales, lower supplies and paper revenues, lower financing fees, and lower page volumes, as well as product-related cost increases and the adverse impact related to tariffs. These impacts were partially offset by the benefits associated with Reinvention-related costs, primarily related to the exit of certain production print manufacturing operations in the prior year, as well as recent pricing incentives. On a pro forma1basis, gross margin for the nine months ended September 30, 2025 of 28.6% decreased by 0.7-percentage points due to the impacts noted above.
Third quarter 2025 equipment gross margin of 26.1% decreased by 2.4-percentage points as compared to third quarter of 2024, and included a 1.9-percentage point benefit from the Lexmark Acquisition. Excluding the impact of Lexmark, equipment gross margin declined 4.3-percentage points. The decrease primarily reflects lower equipment sales, the adverse impact related to product cost increases and incremental tariff-related costs, partially offset by
Xerox 2025 Form 10-Q 58
recent pricing initiatives. On a pro forma1 basis, third quarter 2025 equipment gross margin of 11.6% decreased 3.0 -percentage points.
Equipment gross margin for the nine months ended September 30, 2025 of 25.9% decreased by 5.5-percentage points as compared to the prior year period, and included a 0.7-percentage point benefit from the Lexmark Acquisition. Excluding the impact of Lexmark, equipment gross margin declined 6.2-percentage points. The decrease reflects lower revenue and gross profit, as well as the adverse impact related to product cost increases, incremental tariff-related costs, an unfavorable product mix, and the adverse impact due to the exit of certain production print manufacturing operations in the prior year. These impacts were partially offset by recent pricing initiatives and lower freight costs. On a pro forma1 basis, equipment gross margin for the nine months ended September 30, 2025 of 10.0% decreased 9.1 -percentage points.
Third quarter 2025 Post sale gross margin of 21.8% decreased by 11.7-percentage points as compared to third quarter of 2024, which included an approximate 7.0-percentage point adverse impact and a 0.7-percentage point adverse impact related to the Lexmark Acquisition and ITSavvy, respectively. Excluding the impact of these acquisitions, post sale gross margin declined approximately 4.0-percentage points. The decrease primarily reflects lower gross profit, including the adverse impact of unfavorable revenue mix reflecting lower supplies, outsourcing and print service revenue, and lower page volumes, as well as the adverse impact related to product cost increases and incremental tariff-related costs. These impacts were partially offset by benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives. On a pro forma1basis, third quarter 2025 post sale gross margin of 31.2% decreased 5.5 -percentage points
Post sale gross margin for the nine months ended September 30, 2025 of 26.6% decreased by 5.1-percentage points as compared to the prior year period, which included an approximate 2.8-percentage point adverse impact and a 1.0-percentage point adverse impact related to the Lexmark Acquisition and ITSavvy, respectively. Excluding the impact of these acquisitions, post sale gross margin declined approximately 1.3-percentage points. The decrease primarily reflects lower gross profit, including the adverse impact related to unfavorable revenue mix, lower financing fees, and lower page volumes, as well as the adverse impact related to cost increases and incremental tariff-related costs. Partially offsetting these impacts were benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives. On a pro forma1basis, post sale gross margin for the nine months ended September 30, 2025 of 33.3% increased 1.3 -percentage points.
____________________________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Research, Development and Engineering Expenses (RD&E)
Third quarter 2025 RD&E as a percentage of revenue of 3.8% increased 0.9-percentage points as compared to third quarter 2024, and included a 0.9-percentage point adverse impact from the Lexmark Acquisition and a 0.3-percentage point benefit from ITSavvy. RD&E as a percentage of revenue for the nine months ended September 30, 2025 of 3.2% increased by 0.1-percentage points as compared to the prior year period, and included a 0.4-percentage point adverse impact from the Lexmark Acquisition and a 0.1-percentage point benefit from ITSavvy. The increase, as compared to the respective prior year periods, reflected spending that outpaced the increase in revenue.
RD&E of $74 million increased $29 million as compared to third quarter 2024. For the nine months ended September 30, 2025 RD&E of $159 million increased $15 million as compared to the prior year period. The increase, as compared to the respective prior year periods, was primarily due to Lexmark Acquisition, partially offset by productivity and cost savings related to the Company's Reinvention. On a pro forma1basis, RD&E decreased by $3 million and $17 million for the three and nine months ended September 30, 2025, respectively, as compared to the respective prior year periods, due to the impacts noted above.
____________________________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Xerox 2025 Form 10-Q 59
Selling, Administrative and General Expenses (SAG)
Third quarter 2025 SAG as a percentage of revenue of 24.3% increased by 0.1-percentage points as compared to third quarter 2024, including a 0.7-percentage point benefit and a 1.1-percentage point benefit from the Lexmark Acquisition and ITSavvy, respectively. The increase in SAG spending outpaced the increase in revenue.
Third quarter 2025 SAG of $477 million increased by $107 million as compared to third quarter 2024, primarily due to expenses related to the Lexmark Acquisition and ITSavvy, including post-acquisition expenses associated with the settlement of pre-existing employment agreements, benefit-related expenses and unfavorable currency. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention and lower incentive compensation expenses. On a pro forma1basis, third quarter 2025 SAG increased $8 million, due to the impacts noted above.
SAG as a percentage of revenue for the nine months ended September 30, 2025 of 24.5% decreased by 0.7-percentage points as compared to the prior year period, including a 0.1-percentage point benefit from the Lexmark Acquisition and a 0.3-percentage point adverse impact from ITSavvy. The increase in SAG spending outpaced the increase in revenue.
SAG for the nine months ended September 30, 2025 of $1,223 million increased by $63 million as compared to the prior year period, primarily due to expenses related to the Lexmark Acquisition and ITSavvy, including post-acquisition expenses associated with the settlement of pre-existing employment agreements, as well as other Reinvention-related investments, and higher expense related to sales enablement and advertising. These adverse impacts were partially offset by productivity and cost savings related to the Company's Reinvention, lower incentive compensation expense and lower bad debt expense. On a pro forma1basis, SAG decreased $41 million for the nine months ended September 30, 2025 due to the impacts noted above, as well as lower post-acquisition expenses.
The bad debt provision for the third quarter 2025 of $9 million decreased by $1 million as compared to third quarter 2024, and the bad debt provision for nine months ended September 30, 2025 of $33 million, decreased by $2 million as compared to the prior year period, due to a lower finance receivable balance, reflecting sales of finance receivables in recent quarters to various funding partners. We continue to monitor developments in future economic conditions, and as a result our reserves may need to be updated in future periods. As of September 30, 2025, on a trailing twelve-month basis, bad debt expense was approximately 1.4% of total receivables, as compared to approximately 1.6% for the prior year comparable period (excluding the reserve release in the third quarter 2024).
Refer to Note 7 - Accounts Receivable, Net and Note 8 - Finance Receivables, Net in the Condensed Consolidated Financial Statements for additional information regarding our bad debt provision.
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(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Xerox 2025 Form 10-Q 60
Restructuring and Related Costs, Net
Restructuring and related costs, net for the third quarter 2025 was $59 million, as compared to $56 million for the third quarter 2024, and $68 million for the nine months ended September 30, 2025, as compared to $107 million in the prior year period. Charges incurred during 2025 and 2024 for restructuring actions were associated with Reinvention initiatives under the Company's Reinvention and other transformation programs to reduce and realign our cost structure to the changing nature of our business, as well as our efforts to integrate and consolidate certain operations of the legacy Xerox and Lexmark businesses, and included the following:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
|
Restructuring and severance costs(1)
|
$ | 83 | $ | 46 | $ | 104 | $ | 60 | ||||||||||||||||||
|
Asset impairments - leased ROU assets(2)
|
- | - | 4 | - | ||||||||||||||||||||||
|
Asset impairments - owned assets, net(2)
|
(6) | - | (14) | 24 | ||||||||||||||||||||||
|
Other contractual termination costs(3)
|
- | - | 5 | - | ||||||||||||||||||||||
|
Reversals(4)
|
(18) | - | (30) | (4) | ||||||||||||||||||||||
|
Restructuring and asset impairment costs
|
59 | 46 | 69 | 80 | ||||||||||||||||||||||
|
Retention-related severance/bonuses(5)
|
(1) | - | (1) | (2) | ||||||||||||||||||||||
|
Contractual severance costs(6)
|
1 | - | - | - | ||||||||||||||||||||||
|
Consulting and other costs(7)
|
- | 10 | - | 29 | ||||||||||||||||||||||
|
Restructuring and related costs, net
|
$ | 59 | $ | 56 | $ | 68 | $ | 107 | ||||||||||||||||||
_____________
(1)Restructuring and severance costs for the three and nine months ended September 30, 2025, include approximately $77 million for worldwide headcount reductions as a result of our efforts to integrate and consolidate certain operations of the legacy Xerox and Lexmark businesses.
(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 $16 million and $35 million for the three and nine months ended September 30, 2025, respectively.
(3)Primarily includes additional costs incurred upon the exit from our facilities, including decommissioning costs and associated contractual termination costs.
(4)Reversals of prior charges primarily include net changes in estimated reserves from initiatives accrued for in prior periods, including Reinvention.
(5)Includes reversals for retention-related severance and bonuses for employees expected to continue working beyond their minimum retention period before termination.
(6)Amounts primarily reflect severance and other related costs we are contractually required to pay in connection with employees transferred as part of the shared service arrangement entered into with third party providers.
(7)Represents professional support services associated with our business transformation initiatives.
Third quarter 2025 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. Third quarter 2024 actions impacted several functional areas, with approximately 65% focused on gross margins improvements, approximately 30% focused on SAG reductions, and the remainder focused on RD&E optimization.
The Restructuring and related costs, net reserve balance for all programs as of September 30, 2025 was $157 million, of which $96 million is expected to be paid over the next twelve months.
Refer to Note 11 - Restructuring Programs in the Condensed Consolidated Financial Statements for additional information regarding our restructuring programs.
Worldwide Employment
Worldwide employment was approximately 26,300 as of September 30, 2025, an increase of approximately 9,500 as compared to December 31, 2024. The increase reflects the Lexmark Acquisition, partially offset by the impact of the Company's Reinvention, which includes the effects of workforce reduction decisions.
Xerox 2025 Form 10-Q 61
Other Expenses, Net
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Non-financing interest expense | $ | 80 | $ | 31 | $ | 168 | $ | 88 | ||||||||||||||||||
| Interest income | (3) | (3) | (11) | (10) | ||||||||||||||||||||||
| Non-service retirement-related costs | 20 | 25 | 57 | 74 | ||||||||||||||||||||||
| Currency losses, net | 5 | 2 | 6 | 15 | ||||||||||||||||||||||
| Commitment fee expenses | - | - | 22 | - | ||||||||||||||||||||||
| Transaction and related costs, net | - | (15) | - | (38) | ||||||||||||||||||||||
| Loss (gain) on early extinguishment of debt | - | - | 4 | (3) | ||||||||||||||||||||||
| Gain on release of contingent consideration | - | - | - | (5) | ||||||||||||||||||||||
| All other expenses, net | 3 | 3 | 7 | (1) | ||||||||||||||||||||||
| Other expenses, net | $ | 105 | $ | 43 | $ | 253 | $ | 120 | ||||||||||||||||||
Non-Financing Interest Expense
Third quarter 2025 non-financing interest expense of $80 million was $49 million higher than third quarter 2024, and non-financing interest expense for the nine months ended September 30, 2025 of $168 million increased by $80 million from the prior year period. The increase, as compared to the respective prior year periods, reflects recently completed borrowings in support of the Lexmark Acquisition, repayment of existing borrowings, and general corporate purposes. 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 in recent quarters to our various funding affiliates, as well as lower originations.
When non-financing interest is combined with equipment financing interest expense, total interest expense for the third quarter 2025 of $101 million increased by $44 million as compared to the third quarter 2024, and total interest expense for the nine months ended September 30, 2025 of $234 million increased by $64 million as compared to the prior year period. The increase, as compared to the respective prior year periods, in net debt is due to the Lexmark Acquisition and ITSavvy, as well as the impacts of higher interest rates on new debt. Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt activity and interest expense.
Non-Service Retirement-Related Costs
Non-service retirement-related costs for the third quarter 2025 of $20 million decreased by $5 million as compared to the third quarter 2024, and for the nine months ended September 30, 2025 non-service retirement-related costs of $57 million decreased $17 million as compared to the prior year periods The decrease as compared to the respective prior year periods was primarily due to the absence of settlement expense in the current year, as well as higher returns on plan assets, both of which were partially offset by higher interest costs associated with higher discount rates. Refer to Note 16 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding service and non-service retirement-related costs.
Currency losses, net
Third quarter 2025 currency losses, net increased $3 million as compared to the third quarter 2024, reflecting the Lexmark Acquisition and related cost of hedging. Currency losses, net for the nine months ended September 30, 2025 decreased $9 million as compared to the prior year period, reflecting lower currency volatility, in addition to prior period sales of our direct business operations in Argentina, Chile & Peru.
Commitment fee expenses
Commitment fee expenses for the nine months ended September 30, 2025 primarily reflects fees associated with financing transactions related to the Lexmark Acquisition.
Transaction and related costs, net
Transaction and related costs, net primarily reflect costs from third party providers for professional services associated with certain major and strategic M&A projects. Second quarter 2024 Transaction and related costs, net reflect insurance proceeds related to a legal settlement, for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020.
Xerox 2025 Form 10-Q 62
Loss (Gain) on early extinguishment of debt
The loss on early extinguishment of debt for the nine months ended September 30, 2025 of $4 million 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. The (gain) on early extinguishment of debt of $3 million for the nine months ended September 30, 2024 reflects a $4 million gain on the repayment of Senior Notes (via tender offer) in the first quarter of 2024, partially offset by a loss of approximately $1 million on the write-off of deferred debt issuance costs.
Gain on release of contingent consideration
The gain on the release of contingent consideration of $5 million for the nine months ended September 30, 2024 reflects a reserve release related to earn-out provisions which were not met, in connection with a prior acquisition.
Pre-tax (Loss) Margin
Third quarter 2025 pre-tax (loss) margin of (15.3)% improved by 55.8-percentage points as compared to third quarter of 2024 pre-tax (loss) margin of (71.1)% and included a 1.4-percentage point benefit from ITSavvy and a 4.2-percentage point adverse impact from the Lexmark Acquisition. The improvement in the third quarter 2025 is primarily due to the pre-tax non-cash goodwill impairment charge of $1.1 billion in the third quarter 2024, as well as benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives in the third quarter 2025. These benefits were partially offset by lower gross margin, which includes the adverse impacts related to the Lexmark Acquisition and ITSavvy, unfavorable revenue mix, the impact of product cost increases and incremental tariff-related costs, as well as higher Other expenses, net, which included higher non-financing interest expense related to the recently completed borrowings in support of the Lexmark Acquisition, repayment of existing borrowings, and general corporate purposes. In addition, selling, general and administrative expenses increased due to the Lexmark Acquisition and ITSavvy, including post-acquisition expenses associated with the settlement of pre-existing Lexmark employment agreements, as well as benefit-related expenses. On a pro forma1basis third quarter 2025 pre-tax (loss) margin improved by 41.1-percentage points mainly due to the due to the impacts noted above.
Pre-tax (loss) margin for the nine months ended September 30, 2025 of (8.6)% improved 17.7-percentage points as compared to the prior year period pre-tax (loss) margin of (26.3)% and included a 0.5-percentage point benefit from ITSavvy and a 2.1-percentage point adverse impact from the Lexmark Acquisition. The improvement for the nine months ended September 30, 2025 is primarily due to the pre-tax non-cash goodwill impairment charge of $1.1 billion in the third quarter 2024, as well as benefits associated with Reinvention-related cost and productivity actions and recent pricing initiatives in 2025. These benefits were partially offset by lower gross margin, which includes the adverse impacts related to the Lexmark Acquisition, unfavorable product mix, the impact of product cost increases and incremental tariff-related costs. Other expenses, net, included higher non-financing interest expense related to recently completed borrowings in support of the Lexmark Acquisition, as well as commitment fees associated with those debt offerings and insurance proceeds related to a legal settlement in the second quarter 2024. In addition, selling, general and administrative expenses increased due to the Lexmark Acquisition and ITSavvy, including post-acquisition expenses associated with the settlement of pre-existing Lexmark employment agreements. These impacts were partially offset by lower Restructuring and related costs, net, as well as lower incentive compensation and benefits costs. The prior year reflected the sales of certain direct business operations in Latin America, resulting in a net disposal loss of $54 million. On a pro forma1basis pre-tax (loss) margin improved by 15.5-percentage points mainly due to the due to the impacts noted above.
____________________________
(1)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure. Pro forma results are estimated and assume Lexmark was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023.
Adjusted1Operating Margin
Third quarter 2025 adjusted1operating income margin of 3.3% decreased by 1.9-percentage points as compared to third quarter of 2024, which included an approximate 1.9-percentage point benefit from the Lexmark Acquisition and ITSavvy. Excluding these acquisitions, the decrease reflects lower gross profit, due to product cost increases and incremental tariff-related costs, as well as unfavorable revenue mix driven by lower outsourcing and print service revenue, as well as lower equipment sales. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention and price increases. On a pro forma2basis third quarter 2025 adjusted1 operating margin of 3.3% decreased by 3.8-percentage points due primarily to the impacts noted above, as well as the Lexmark Acquisition and ITSavvy.
Xerox 2025 Form 10-Q 63
Adjusted1operating margin income for the nine months ended September 30, 2025 of 2.9% decreased by 1.4-percentage points as compared to the prior year period, which included an approximate 0.9-percentage point benefit from the Lexmark Acquisition and ITSavvy. Excluding these acquisitions, the decrease reflects lower gross margin, due to unfavorable revenue mix, product cost increases and incremental tariff-related costs. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention, lower incentive compensation and benefits costs, as well as price increases. On a pro forma2basis adjusted1 operating margin for the nine months ended September 30, 2025 of 4.1% decreased by 1.5-percentage points due primarily to the impacts noted above, as well as the Lexmark Acquisition and ITSavvy.
______________
(1)Refer to the Adjusted Operating Income and Margin reconciliation table in the "Non-GAAP Financial Measures" section.
(2)Refer to the "Non-GAAP Financial Measures" section for an explanation of the non-GAAP financial measure. Pro forma results are estimated and assume Lexmark was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023.
Income Taxes
Third quarter 2025 effective tax rate was (153.3)% and resulted in a tax expense, primarily due to the establishment of a valuation allowance on certain deferred tax assets, as well the inability to benefit from certain current year losses. On an adjusted1basis, the third quarter 2025 effective tax rate was 235.0%, which resulted in a tax benefit. This rate is higher than the U.S. federal statutory tax rate of 21.0% primarily due the reversal of certain tax effects due to the change in valuation allowance position, partially offset by the inability to benefit from certain current year losses, and the geographical mix of earnings.
Third quarter 2024 effective tax rate was a (10.9)%. This rate was lower than the U.S. federal statutory tax rate of 21% but resulted in a tax expense, primarily due to the goodwill impairment charge, the establishment of a valuation allowance on certain deferred tax assets including not benefiting related current year losses as well as the geographical mix of earnings. On an adjusted1basis, third quarter 2024 effective tax rate was 27.7% which was higher than the U.S. federal statutory tax rate of 21% primarily due to not benefiting certain current year losses and the geographical mix of adjusted earnings, partially offset by the redetermination of certain unrecognized tax positions.
The effective tax rate for the nine months ended September 30, 2025 was (123.9)% and resulted in a tax expense, primarily due to the establishment of a valuation allowance on certain deferred tax assets, as well the inability to benefit from certain current year losses. On an adjusted1basis, the effective tax rate for the nine months ended September 30, 2025 was (350.0)%. 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.
The effective tax rate for the nine months ended September 30, 2024 was (7.3)%. This rate was lower than the U.S. federal statutory tax rate of 21% but resulted in a tax expense, primarily due to the goodwill impairment charge, the establishment of a valuation allowance on certain deferred tax assets including not benefiting related current year losses and the geographical mix of earnings, partially offset by the redetermination of certain unrecognized tax positions. On an adjusted1basis, the effective tax rate for the nine months ended September 30, 2024 was 22.5% which was higher than the U.S. federal statutory tax rate of 21% primarily due to not benefiting certain current year losses and the geographical mix of adjusted earnings, partially offset by the redetermination of certain unrecognized tax positions.
The effective tax rate is based on nonrecurring events as well as recurring factors, including the taxation of foreign income. In addition, the effective tax rate will change based on discrete or other nonrecurring events that may not be predictable.
_____________
(1)Refer to the Adjusted Effective Tax Rate reconciliation table in the "Non-GAAP Financial Measures" section.
Xerox 2025 Form 10-Q 64
Net (Loss) Income
Third quarter 2025 Net (Loss) was $(760) million, or $(6.01) per diluted share, which included a tax expense charge of $467 million, 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. On an adjusted1basis, Net Income was $27 million, or $0.20 per diluted share.
Third quarter 2024 Net (Loss) was $(1,205) million, or $(9.71) per diluted share, which includes an after-tax noncash goodwill impairment charge of approximately $1,015 billion (approximately $1,058 billion pre-tax), or $8.16 per diluted share. In addition, third quarter 2024 includes a tax expense charge of $161 million, or $1.29 per diluted share, related to the establishment of a valuation allowance against certain non-U.S. tax jurisdiction deferred tax assets to reflect their realizability. On an adjusted1basis, Net Income was $34 million, or $0.25 per diluted share.
Net (Loss) for the nine months ended September 30, 2025 was $(956) million, or $(7.67) per diluted share, which included tax expense charges of $517 million, or $4.10 per diluted share, related to the establishment of a valuation allowance during the first and third quarter 2025 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. On an adjusted1basis, Net (Loss) was $(54) million, or $(0.50) per diluted share.
Net (Loss) for the nine months ended September 30, 2024 was $(1,300) million, or $(10.55) per diluted share, which includes an after-tax non-cash goodwill impairment charge of approximately $1,015 billion (approximately $1,058 billion pre-tax), or $8.16 per diluted share. In addition, 2024 includes a tax expense charge of $161 million, or $1.29 per diluted share, related to the establishment of a valuation allowance against certain non-U.S. tax jurisdiction deferred tax assets to reflect their realizability. On an adjusted1basis, Net Income was $86 million, or $0.60 per diluted share
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.
_____________
(1)Refer to the Adjusted Net Income (Loss) and EPS reconciliation table in the "Non-GAAP Financial Measures" section. For the calculations of basic and diluted loss per share, refer to Note 20 - Loss per Share in the Notes to the Condensed Consolidated Financial Statements.
Other Comprehensive (Loss) Income
Third quarter 2025 Other Comprehensive (Loss), Net was $(9) million and included the following: i) net translation adjustment (losses) of $(42) million reflecting the weakening of all of our major foreign currencies against the U.S. Dollar during the quarter; ii) net unrealized (losses) of $(2) million, and iii) net gains of $35 million from the changes in defined benefit plans primarily reflecting the positive impact of currency, and the amortization of net actuarial losses. This compares to Other Comprehensive Income, Net of $173 million for the third quarter 2024, which included the following: i) net translation adjustment gains of $192 million reflecting the strengthening of all of our major foreign currencies against the U.S. Dollar during the quarter; ii) net unrealized gains of $5 million, and iii) net (losses) from the changes in defined benefit plans of $(24) million, reflecting the negative impact of currency, partially offset by amortization of actuarial losses, as well as actuarial gains.
Other Comprehensive Income, Net for the nine months ended September 30, 2025 was $242 million and included the following: i) net translation adjustment gains of $292 million reflecting the strengthening of all of our major foreign currencies against the U.S. Dollar; ii) net (losses) from the changes in defined benefit plans of $(42) million primarily reflecting the negative impact of currency, partially offset by the amortization of net actuarial losses; and iii) net unrealized (losses) of $(8) million. This compares to Other Comprehensive Income, Net for the nine months ended September 30, 2024 of $162 million, which included the following: i) net translation adjustment gains of $140 million reflecting the strengthening of the British Pound and the Euro against the U.S. Dollar; ii) net gains from the changes in defined benefit plans of $18 million primarily reflecting the amortization of actuarial losses, as well as actuarial gains, partially offset by the negative impact of currency, and iii) net unrealized gains of $4 million.
Refer to Note 19 - Other Comprehensive (Loss) Income in the Condensed Consolidated Financial Statements for the components of Other Comprehensive (Loss) Income, Note 14 - Financial Instruments in the Condensed Consolidated Financial Statements for additional information regarding unrealized gains (losses), net, and Note 16 - Employee Benefit Plans in the Condensed Consolidated Financial Statements for additional information regarding net changes in our defined benefit plans.
Xerox 2025 Form 10-Q 65
Reportable Segments
Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate. We have two operating and reportable segments - Print and Otherand IT Solutions. Refer to Note 4 - Segment Reporting in the Condensed Consolidated Financial Statements for additional information regarding our reportable segments.
Segment Review
|
Three Months Ended September 30, |
||||||||||||||||||||||||||||||||||||||
| (in millions) | Print and Other | IT Solutions | Total Segment |
Intersegment Elimination(1)
|
Corporate Other(2)
|
Total | ||||||||||||||||||||||||||||||||
| 2025 | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 1,739 | $ | 226 | $ | 1,965 | $ | (4) | $ | - | $ | 1,961 | ||||||||||||||||||||||||||
| % of Total Revenue | 88 | % | 12 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $ | 1,675 | $ | 208 | $ | 1,883 | $ | (4) | $ | 17 | $ | 1,896 | ||||||||||||||||||||||||||
| Segment Profit | $ | 64 | $ | 18 | $ | 82 | $ | - | $ | (17) | $ | 65 | ||||||||||||||||||||||||||
|
Segment Margin(3)
|
3.7 | % | 8.1 | % | NM | 3.3 | % | |||||||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 1,442 | $ | 86 | $ | 1,528 | $ | - | $ | - | $ | 1,528 | ||||||||||||||||||||||||||
| % of Total Revenue | 94 | % | 6 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $ | 1,339 | $ | 86 | $ | 1,425 | $ | - | $ | 23 | $ | 1,448 | ||||||||||||||||||||||||||
| Segment Profit | $ | 103 | $ | - | $ | 103 | $ | - | $ | (23) | $ | 80 | ||||||||||||||||||||||||||
|
Segment Margin(3)
|
7.1 | % | - | % | NM | 5.2 | % | |||||||||||||||||||||||||||||||
|
2025 Pro Forma(4)
|
||||||||||||||||||||||||||||||||||||||
| Revenues | $1,739 | $226 | $ | 1,965 | $ | (4) | $ | - | $ | 1,961 | ||||||||||||||||||||||||||||
| % of Total Revenue | 88 | % | 12 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $1,675 | $208 | $ | 1,883 | $ | (4) | $17 | $ | 1,896 | |||||||||||||||||||||||||||||
| Segment Profit | $64 | $18 | $ | 82 | $ | - | $ | (17) | $ | 65 | ||||||||||||||||||||||||||||
|
Segment Margin(3)
|
3.7 | % | 8.1 | % | NM | 3.3 | % | |||||||||||||||||||||||||||||||
|
2024 Pro Forma(4)
|
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| Revenues | $1,926 | $201 | $ | 2,127 | $ | - | $ | - | $ | 2,127 | ||||||||||||||||||||||||||||
| % of Total Revenue | 91 | % | 9 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $1,753 | $196 | $ | 1,949 | $ | - | $26 | $ | 1,975 | |||||||||||||||||||||||||||||
| Segment Profit | $173 | $5 | $ | 178 | $ | - | $ | (26) | $ | 152 | ||||||||||||||||||||||||||||
|
Segment Margin(3)
|
9.0 | % | 2.5 | % | NM | 7.1 | % | |||||||||||||||||||||||||||||||
(1)Reflects primarily IT hardware, software solutions and services, sold by the IT Solutions segment to the Print and Other segment.
(2)Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to
either of our reportable segments.
(3)Segment margin is based on total revenue. IT Solutions segment margin is net of Intersegment Elimination.
(4)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Xerox 2025 Form 10-Q 66
|
Nine Months Ended September 30, |
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| (in millions) | Print and Other | IT Solutions | Total Segment |
Intersegment Elimination(1)
|
Corporate Other(2)
|
Total | ||||||||||||||||||||||||||||||||
| 2025 | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 4,399 | $ | 603 | $ | 5,002 | $ | (8) | $ | - | $ | 4,994 | ||||||||||||||||||||||||||
| % of Total Revenue | 88 | % | 12 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $ | 4,229 | $ | 570 | $ | 4,799 | $ | (8) | $ | 57 | $ | 4,848 | ||||||||||||||||||||||||||
| Segment Profit | $ | 170 | $ | 33 | $ | 203 | $ | - | $ | (57) | $ | 146 | ||||||||||||||||||||||||||
|
Segment Margin(3)
|
3.9 | % | 5.5 | % | NM | 2.9 | % | |||||||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 4,364 | $ | 244 | $ | 4,608 | $ | - | $ | - | $ | 4,608 | ||||||||||||||||||||||||||
| % of Total Revenue | 95 | % | 5 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $ | 4,096 | $ | 244 | $ | 4,340 | $ | - | $ | 70 | $ | 4,410 | ||||||||||||||||||||||||||
| Segment Profit | $ | 268 | $ | - | $ | 268 | $ | - | $ | (70) | $ | 198 | ||||||||||||||||||||||||||
|
Segment Margin(3)
|
6.1 | % | - | % | NM | 4.3 | % | |||||||||||||||||||||||||||||||
|
2025 Pro Forma(4)
|
||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 5,339 | $ | 603 | $ | 5,942 | $ | (8) | $ | - | $ | 5,934 | ||||||||||||||||||||||||||
| % of Total Revenue | 90 | % | 10 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $ | 5,065 | $ | 570 | $ | 5,635 | $ | (8) | $ | 64 | $ | 5,691 | ||||||||||||||||||||||||||
| Segment Profit | $ | 274 | $ | 33 | $ | 307 | $ | - | $ | (64) | $ | 243 | ||||||||||||||||||||||||||
|
Segment Margin(3)
|
5.1 | % | 5.5 | % | NM | 4.1 | % | |||||||||||||||||||||||||||||||
|
2024 Pro Forma(4)
|
||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 5,796 | $ | 595 | $ | 6,391 | $ | - | $ | - | $ | 6,391 | ||||||||||||||||||||||||||
| % of Total Revenue | 91 | % | 9 | % | 100 | % | ||||||||||||||||||||||||||||||||
| Expenses | $ | 5,372 | $ | 582 | $ | 5,954 | $ | - | $ | 80 | $ | 6,034 | ||||||||||||||||||||||||||
| Segment Profit | $ | 424 | $ | 13 | $ | 437 | $ | - | $ | (80) | $ | 357 | ||||||||||||||||||||||||||
|
Segment Margin(3)
|
7.3 | % | 2.2 | % | NM | 5.6 | % | |||||||||||||||||||||||||||||||
(1)Reflects primarily IT hardware, software solutions and services, sold by the IT Solutions segment to the Print and Other segment.
(2)Corporate Other reflects certain administrative and general expenses, which primarily relate to corporate functions, and are not allocated to
either of our reportable segments.
(3)Segment margin is based on total revenue. IT Solutions segment margin is net of Intersegment Elimination.
(4)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Xerox 2025 Form 10-Q 67
Print and Other
The Print and Other segment includes the design, development and sale of document management systems, supplies and services as well as financing and technology-related offerings, digital and print-related software products and services.
Revenue
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 |
% Change |
Pro Forma(1) % Change
|
2025 | 2024 |
% Change |
Pro Forma(1) % Change
|
||||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 383 | $ | 339 | 13.0% | (16.3)% | $ | 1,003 | $ | 985 | 1.8% | (8.6)% | ||||||||||||||||||||||||||||||||
|
Post sale revenue (2)
|
1,356 | 1,103 | 22.9% | (7.7)% | 3,396 | 3,979 | (14.7)% | (7.7)% | ||||||||||||||||||||||||||||||||||||
| Total Print and Other Revenue | $ | 1,739 | $ | 1,442 | 20.6% | (9.7)% | $ | 4,399 | $ | 4,964 | (11.4)% | (7.9)% | ||||||||||||||||||||||||||||||||
_____________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
(2)Post sale revenue includes financing revenue generated from direct and indirectly financed Xerox equipment sale transactions of $32 million and $38 million for the three months ended September 30, 2025 and 2024, respectively and $97 million and $118 million for the nine months ended September 30, 2025 and 2024, respectively.
Third quarter 2025 Print and Other segment revenue increased 20.6% as compared to third quarter 2024 and Print and Other segment revenue decreased 11.4% for the nine months ended September 30, 2025 as compared to the prior year period. The increase as compared to their respective prior year periods for both the three and nine months ended September 30, 2025 was due to the Lexmark Acquisition.
Print and Other segment revenues included the following:
Equipment salesrevenue increased 13.0% during the third quarter 2025 as compared to third quarter 2024, which included a 26.0-percentage point benefit from the Lexmark Acquisition as well as a 0.9-percentage point benefit from currency. The increase in constant currency1was attributable to higher installations resulting from the Lexmark Acquisition. Excluding the Lexmark Acquisition, equipment sales declined 13.0-percentage points in actual currency due to lower installations, and Reinvention-related actions including the exit of certain production print manufacturing operations in the prior year, partially offset by higher pricing. On a pro forma2basis, third quarter 2025 revenue decreased 16.3%, due to the impacts noted above, as well as backlog3fluctuations and timing of certain enterprise deals at Lexmark.
Equipment sales revenue increased 1.8% for the nine months ended September 30, 2025 and included an 8.9-percentage point benefit from the Lexmark Acquisition, and a 0.2-percentage point benefit from currency. The increase at constant currency1 reflects higher installations driven by the inclusion of Lexmark. Excluding Lexmark, equipment sales declined 7.1-percentage points in actual currency due to lower installations and Reinvention-related actions, including the exit of certain production print manufacturing operations, as well as unfavorable product mix, partially offset by higher pricing. On a pro forma2 basis, equipment sales revenue for the nine months ended September 30, 2025 decreased 8.6% as compared to the prior year period, due to the impacts noted above, as well as backlog3fluctuations and timing of certain enterprise deals within Lexmark.
Post sale revenue decreased 22.9% during the third quarter 2025 as compared to third quarter 2024, and included an approximately 32.5-percentage point benefit from the Lexmark Acquisition as well as a 1.5-percentage point benefit from currency. Excluding the Lexmark Acquisition, post sale revenue declined approximately 9.6-percentage points in actual currency due primarily to a decline in managed print services4 revenue, driven by lower outsourcing and print services revenue, and lower supplies revenue. Post sale revenue was also adversely affected by intentional reductions in non-strategic revenue, such as paper and financing revenue, and the effects of geographic and offering simplification. On a pro forma2 basis, third quarter 2025 post sale revenue decreased 7.7%, mainly due to the impacts noted above.
Post sale revenue decreased 14.7% for the nine months ended September 30, 2025 as compared to the prior year period, and included an approximately 9.0-percentage point benefit from the Lexmark Acquisition as well as a 0.1-percentage point benefit from currency. The increase in constant currency1 was due to the Lexmark Acquisition. Excluding the Lexmark Acquisition, post sale revenue declined approximately 23.7-percentage points in actual currency due primarily to a decline in managed print services4 revenue, driven by lower outsourcing and print services revenue. Post sale revenue was also adversely affected by intentional reductions in non-strategic revenue, such as paper and financing revenue, and the effects of geographic and offering simplification, as well as lower
Xerox 2025 Form 10-Q 68
supplies revenue. On a pro forma2 basis, post sale revenue for the nine months ended September 30, 2025 decreased 7.7%, mainly due to the impacts noted above.
___________
(1)Refer to the "Currency Impact" section for a description of constant currency.
(2)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
(3)Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware.
(4)Includes revenues from service, maintenance and rentals. IT solutions and digital services are not included in managed print services.
Detail by product group is shown below.
|
Three Months Ended September 30, |
% of Equipment Sales | |||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 |
%
Change
|
CC % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| Entry | $ | 119 | $ | 53 | 124.5% | 122.8% | 31% | 16% | ||||||||||||||||||||||||||||||
| Mid-range | 222 | 224 | (0.9)% | 0.2% | 58% | 66% | ||||||||||||||||||||||||||||||||
| High-end | 39 | 57 | (31.6)% | (33.6)% | 10% | 17% | ||||||||||||||||||||||||||||||||
| Other | 3 | 5 | (40.0)% | (40.0)% | 1% | 1% | ||||||||||||||||||||||||||||||||
|
Equipment sales(1)
|
$ | 383 | $ | 339 | 13.0% | 12.1% | 100% | 100% | ||||||||||||||||||||||||||||||
|
Nine Months Ended September 30, |
% of Equipment Sales | |||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 |
%
Change
|
CC % Change | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| Entry | $ | 213 | $ | 154 | 38.3% | 37.3% | 21% | 16% | ||||||||||||||||||||||||||||||
| Mid-range | 655 | 652 | 0.5% | 2.0% | 66% | 66% | ||||||||||||||||||||||||||||||||
| High-end | 123 | 164 | (25.0)% | (25.4)% | 12% | 17% | ||||||||||||||||||||||||||||||||
| Other | 12 | 15 | 0 | (20.0)% | (20.0)% | 1% | 1% | |||||||||||||||||||||||||||||||
|
Equipment sales(1)
|
$ | 1,003 | $ | 985 | 1.8% | 1.6% | 100% | 100% | ||||||||||||||||||||||||||||||
____________
CC - See "Currency Impact" section for a description of constant currency.
(1)Refer to the Products and Offerings Definitions section.
The change at constant currency1reflects the Lexmark Acquisition, the decision to the exit certain production print manufacturing operations made in the prior year period and the effects of geographic simplification, as well as the following:
•Entry- The increase for the three and nine months ended September 30, 2025 as compared to the respective prior year periods primarily reflects the Lexmark Acquisition. Excluding the Lexmark Acquisition, the decrease reflects lower installations in black-and-white, as well as a higher mix of sales to indirect channel partners.
•Mid-range- The decrease for the three months ended September 30, 2025 as compared to third quarter 2024 reflects declines in black-and-white installations, partially offset by the incremental installations from Lexmark and growth in color. The increase for the nine months ended September 30, 2025 as compared to the prior year period reflects the incremental installations as a result of the Lexmark Acquisition, as well as growth in color revenues driven by higher installs, partially offset by lower black-and-white installs.
•High-end- The decrease for the three and nine months ended September 30, 2025 as compared to the respective prior year periods was primarily due to lower installations, and the exit certain production print manufacturing operations in the prior year period.
_____________
(1)Refer to the "Currency Impact" section for a description of constant currency.
Xerox 2025 Form 10-Q 69
Total Installs
Installs reflect new placements of devices only (i.e., measure does not take into account removal of devices which may occur as a result of contract renewals or cancellations). Revenue associated with equipment installations may be reflected up-front in Equipment sales or over time either through rental income or as part of our services revenues (which are both reported within our post sale revenues), depending on the terms and conditions of our agreements with customers. Installs include activity for Xerox and non-Xerox branded products.
Detail by product group (see Products and Offerings Definitions)is shown below.
Installs for the three months ended September 30, 2025, as compared to the prior year period, reflect the following:
•Entry increased 67% driven primarily by the contribution of Lexmark. Excluding the Lexmark Acquisition, installations decreased due to declines of black-and-white printers and MFPs. Color installations were largely unchanged.
•Mid-Range increased 15% driven by the contribution of Lexmark. Excluding the Lexmark Acquisition, installations were down primarily due to declines in black-and-white MFPs. Color installations increased driven by Entry Production Color Low.
•High-End decreased 40% primarily reflecting declines in Entry Production Color Mid, as well as the decision to the exit certain production print manufacturing operations made in the prior year period.
Installs for the nine months ended September 30, 2025:
•Entry increased 29% driven primarily by the contribution of Lexmark. Excluding the Lexmark Acquisition, installations decreased primarily due to declines of black-and-white MFPs and printers, partially offset by increases in both color MFPs and printers.
•Mid-Range increased 5% driven by the contribution of Lexmark. Excluding the Lexmark Acquisition, installations decreased primarily due to declines in black-and-white A3 MFPs. Color installations increased driven by color A3 MFPs, as well as Entry Production Color Low.
•High-End decreased 28% primarily reflecting declines in Entry Production Color Mid and black-and white High End Cut Sheet products, the decision to the exit certain production print manufacturing operations made in the prior year period.
Products and Offerings Definitions
Our 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 teams 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.
Segment Expenses
Research, Development and Engineering Expenses (RD&E)
Third quarter 2025 RD&E of $74 million increased $29 million as compared to third quarter 2024. For the nine months ended September 30, 2025 RD&E of $159 million increased $15 million as compared to the prior year period. The increase, as compared to the respective prior year periods, was primarily due to the Lexmark Acquisition, partially offset by productivity and cost savings related to the Company's Reinvention.
Selling, Administrative and General Expenses (SAG)
Third quarter 2025 SAG of $385 million increased by $52 million as compared to third quarter 2024, primarily due to expenses related to the Lexmark Acquisition, including post-acquisition expenses associated with the settlement of pre-existing employment agreements, benefit-related expenses and unfavorable currency. These impacts were partially offset by productivity and cost savings related to the Company's Reinvention and lower incentive compensation expenses.
Xerox 2025 Form 10-Q 70
SAG expenses for the nine months ended September 30, 2025 of $1,025 million decreased by $27 million as compared to the prior year period primarily due to expenses related to the Lexmark Acquisition, including post-acquisition expenses associated with the settlement of pre-existing employment agreements, as well as other Reinvention-related investments, and higher expense related to sales enablement and advertising. These adverse impacts were partially offset by productivity and cost savings related to the Company's Reinvention, lower incentive compensation expense and lower bad debt expense.
Segment Margin
Third quarter 2025 Print and Other segment margin of 3.7% decreased by 3.4-percentage points as compared to third quarter of 2024, primarily due to lower gross profit, impacted by higher product and incremental tariff-related costs, as well as higher SAG and RD&E expenses. These adverse impacts were partially offset by higher revenue, primarily as a result of the Lexmark Acquisition, as well as Reinvention-related cost and productivity actions, and recent pricing initiatives. On a pro forma1basis, Print and Other segment margin of 3.7% decreased by 5.3-percentage points as compared to third quarter of 2024, due to the impacts noted above, as well as the timing of certain enterprise deals at Lexmark.
Print and Other segment margin for the nine months ended September 30, 2025 of 3.9% decreased by 2.2-percentage points as compared to the prior year period, primarily due to lower gross profit, impacted by higher product and incremental tariff-related costs, and unfavorable mix, as well as higher SAG and RD&E expenses. These impacts were partially offset by higher revenue, primarily as a result of the Lexmark Acquisition, as well as Reinvention-related cost and productivity actions, recent pricing action, and lower freight costs. On a pro forma1basis, Print and Other segment margin of 5.1% decreased by 2.2-percentage points as compared to the prior year period, due to the impacts noted above, as well as the timing of certain enterprise deals at Lexmark.
___________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
IT Solutions
The IT Solutions segment provides clients with global infrastructure technology solutions, with a focus on delivering business outcomes through a frictionless sales and service delivery experience. IT Solutions' offerings include the provision of hardware, software and associated services as well as product lifecycle, deployment and network monitoring services, and managed services. It is comprised of our acquisition of ITSavvy, as well as our Canadian IT Services provider Powerland, and our legacy XBS IT solutions.
Revenue
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 |
% Change |
Pro Forma(1) % Change
|
2025 | 2024 |
% Change |
Pro Forma(1) % Change
|
||||||||||||||||||||||||||||||||||||||||||
|
IT Products(2)
|
$ | 165 | $ | 55 | 200.0% | 9.8% | $ | 423 | $ | 158 | 167.7% | (5.8)% | ||||||||||||||||||||||||||||||||||||||
|
IT Services(3)
|
57 | 31 | 83.9% | 28.0% | 172 | 86 | 100.0% | 28.8% | ||||||||||||||||||||||||||||||||||||||||||
|
Intersegment revenue(4)
|
4 | - | NM | NM | 8 | - | NM | NM | ||||||||||||||||||||||||||||||||||||||||||
| Total IT Solutions | $ | 226 | $ | 86 | 162.8% | 12.4% | $ | 603 | $ | 244 | 147.1% | 1.3% | ||||||||||||||||||||||||||||||||||||||
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
(2)IT Products reflect the sale of IT hardware and software solutions. Hardware product sales include the sale of notebooks, network communications and other endpoint devices, desktop computers and other IT hardware. Software product sales include deployments of cloud and security solutions, endpoint security application suites, operating systems, other applications and network management solutions.
(3)IT Services reflect revenue associated with the implementation of IT solutions, including product lifecycle, deployment and network monitoring services, and other managed IT services.
(4)Reflects primarily IT hardware, software solutions and services sold by the IT Solutions segment to the Print and Other segment.
Third quarter 2025 IT Solutions segment revenue increased 162.8% as compared to third quarter of 2024. For the nine months ended September 30, 2025 IT Solutions segment revenue increased 147.1% as compared to the prior year period. The increase for both the three and nine months ended September 30, 2025 was primarily due to ITSavvy, as compared to their respective prior year periods. IT Solutions segment revenue included the following:
IT Products revenue increased 200.0% during the three months ended September 30, 2025 as compared to third quarter of 2024, primarily due to ITSavvy. Excluding ITSavvy, revenue increased 31.6% due to growth in the legacy Xerox IT Solutions business. IT Products revenue increased 167.7% during the nine months ended September 30,
Xerox 2025 Form 10-Q 71
2025 as compared to prior year period, primarily due to ITSavvy. Excluding ITSavvy, revenue increased 3.6% due to growth in the legacy Xerox IT Solutions business, which was partially offset by the timing of large product placements in the prior year, a larger mix of revenue subject to net classification and revenue deferrals. On a pro forma1basis, IT Product revenue for the three months ended September 30, 2025 increased 9.8% due to growth from both legacy Xerox and ITSavvy, while for the nine months ended September 30, 2025 IT Products revenue decreased 5.8% due to lower revenues from legacy Xerox, offset by growth from ITSavvy.
IT Services revenue increased 83.9% during the three months ended September 30, 2025 as compared to the third quarter of 2024 and for the nine months ended September 30, 2025 IT services revenue increased 100.0% as compared to the prior year period. The increase from the prior year respective periods was due to ITSavvy. On a pro forma1basis, IT service revenue for the three and nine months ended September 30, 2025 increased 28.0% and 28.8%, respectively, due to growth from ITSavvy.
Segment Expenses
Selling, Administrative and General Expenses (SAG)
Third quarter 2025 SAG of $25 million increased by $11 million as compared to third quarter 2024, and SAG expenses for nine months ended September 30, 2025 of $73 million increased by $35 million. The increase as compared to the respective prior year periods was primarily due to ITSavvy.
Segment Margin
Third quarter 2025 IT Solutions segment margin of 8.1% increased 8.1-percentage points as compared to third quarter of 2024 and Segment margin of 5.5% for the nine months ended September 30, 2025 increased 5.5-percentage as compared to the prior year period. The increase from the respective prior year periods was driven by ITSavvy, partially offset by higher SAG. On a pro forma1basis, IT Solutions segment margin of 8.1% increased by 5.6-percentage points as compared to third quarter of 2024, and IT Solutions segment margin of 5.5% for the nine months ended September 30, 2025 increased by 3.3-percentage points as compared to the prior year period. The increase as compared to the respective prior year periods was due to the impacts noted above and the timing of certain large enterprise deals.
_____________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section for an explanation of this measure.
Xerox 2025 Form 10-Q 72
Capital Resources and Liquidity
The following is a summary of our liquidity position:
•As of September 30, 2025 and December 31, 2024, total cash, cash equivalents and restricted cash of Xerox Holdings Corporation were $535 million and $631 million, respectively, and apart from restricted cash of $56 million and $55 million at September 30, 2025 and December 31, 2024, respectively, was readily accessible for use. The decrease in total cash, cash equivalents and restricted cash of $96 million primarily reflects net cash used in investing activities of $694 million, which was partially offset by net cash provided by financing activities of $577 million, as well as net cash provided by operating activities of $16 million.
•Total debt at September 30, 2025 was $4,406 million, of which $1,624 million is allocated to and supports the Company's finance assets. The remaining debt of $2,782 million is attributable to the non-financing business and increased from $1,658 million at December 31, 2024. Debt at September 30, 2025 consists of senior secured and unsecured notes, secured promissory notes, and borrowings under a Term Loan B facility.
•During 2025, we issued $400 million aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030 (the First Lien Notes), $500 million of aggregate principal amount of 13.500% Senior Secured Second Lien Notes due 2031 (the Second Lien Notes), $250 million aggregate principal amount of 13.00% Senior Notes due 2030 (the 2030 Notes), and Xerox Corporation made an incremental term loan borrowing of approximately $327 million (Incremental Term Loans) under its Term Loan B (the TLB Facility), and $125 million aggregate principal amount of 13.00% Senior Unsecured Notes due 2026 (the 2026 Notes). Refer to Note 13 - Debt for additional information related to our Debt activity.
•In connection with the First Lien Notes offering, the Lexmark Acquisition and the related transactions, Xerox Corporation redeemed an aggregate principal amount of $90 of Senior Notes due August 2025 (2025 Notes) during first quarter 2025, with the balance of approximately $298 million redeemed at maturity in August 2025. During first quarter 2025 we also repaid approximately $95 million of aggregate principal amount of borrowings under Xerox Corporation's first lien senior secured term loan credit facility (the TLB Facility). During October 2025, we repaid approximately $41 million of the TLB Facility. Refer to Note 13 - Debt for additional information related to our Debt activity.
•As of November 10, 2025 and based on our October availability calculation, we have availability of $392 before current borrowings of approximately $150 and letters of credit issued under the ABL Facility of approximately $63. Accordingly, our net availability is approximately $179. Certain debt covenants limit our total amount of secured debt outstanding. As of the date of our filing, our capacity under the ABL was not limited by any debt covenants. Our capacity to borrow under the ABL Facility may be adversely impacted by the terms of the ABL Facility and certain other agreements that govern our indebtedness.
•We now expect operating cash flows, excluding one-time items related to the Lexmark Acquisition of $70 million, to be approximately $245 million, which is a decrease from our previous guidance of $345 million. The decrease reflects a higher level of cash tariff expenses and one-time costs associated with the implementation of synergy savings. We continue to expect capital expenditures to be approximately $95 million in 2025, which reflects the inclusion of Lexmark. Although not committed, we believe we have the ability to sell finance receivables for additional liquidity.
Cash Flow Analysis
The following summarizes our cash, cash equivalents and restricted cash:
|
Nine Months Ended September 30, |
Change | |||||||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||||||||
| Net cash provided by operating activities | $ | 16 | $ | 160 | $ | (144) | ||||||||||||||
| Net cash used in investing activities | (694) | (26) | (668) | |||||||||||||||||
| Net cash provided by (used in) financing activities | 577 | (149) | 726 | |||||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 5 | (12) | 17 | |||||||||||||||||
| Decrease in cash, cash equivalents and restricted cash | (96) | (27) | (69) | |||||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 631 | 617 | 14 | |||||||||||||||||
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 535 | $ | 590 | $ | (55) | ||||||||||||||
Xerox 2025 Form 10-Q 73
Cash Flows from Operating Activities
Net cash provided operating activities was $16 million for the nine months ended September 30, 2025. The $144 million decrease in operating cash from the prior year period was primarily due to the following:
•$303 million decrease in pre-tax income before depreciation and amortization, provisions, inventory-related purchase accounting adjustment, effective settlement of a pre-existing relationship between Lexmark and Xerox, divestitures, goodwill impairment, restructuring and related costs and non-service retirement-related costs.
•$158 million decrease from finance receivables primarily due to lower sales of finance receivables partially offset by a higher level of run-off due to lower originations.
•$59 million decrease from accounts receivable primarily due to the timing of collections.
•$169 increase from other current and long-term liabilities primarily due to the timing of payments.
•$147 million increase from accounts payable primarily due to the timing of supplier and vendor payments.
•$39 million increase from accrued compensation due to payments of lower year-end accruals.
•$17 million increase from lower payments associated with restructuring and related costs.
Cash Flows from Investing Activities
Net cash used in investing activities was $694 million for the nine months ended September 30, 2025. The $668 million change from the prior year period was primarily driven by the Lexmark Acquisition and higher capital expenditures offset by higher proceeds from the sale of surplus property and assets in the U.S. and Europe and the sale of non-core business assets offset by lower noncontrolling investments
Cash Flows from Financing Activities
Net cash provided by financing activities was $577 million for the nine months ended September 30, 2025. The $726 million decrease in the use of cash from the prior year period was primarily due to the following:
•$677 million decrease from net debt activity. 2025 reflects net proceeds of $1,199 million from Senior Notes issuances, $100 million from the ABL Facility and $4 million from the TLB Facility offset by payments of $388 million on Senior Notes, $102 million on the TLB Facility, $83 million on secured promissory notes and $72 million on secured financing arrangements. The $1,199 million net proceeds from Senior Notes issuances includes proceeds of $1,257 million offset by deferred debt issuance costs of $41 million, discounts of $17 million. 2024 reflects proceeds of $500 million on Senior Notes and $400 million on Convertible Senior Notes offset by net payments of $658 million on Senior Notes, deferred debt issuance costs of $18 million from Senior Notes issuances, $211 million on secured financing arrangements and $21 million on the Term Loan B facility. The $658 million net payments on Senior Notes includes $300 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.
•$42 million decrease from lower common stock dividends due to dividend reductions.
•$23 million decrease due to no purchases of capped calls in the current year.
•Other financing, net includes $22 million of commitment fees related to the Lexmark Acquisition.
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 operating leases have remaining terms of up to thirty-three years and a variety of renewal and/or termination options. As of September 30, 2025 and December 31, 2024, total operating lease liabilities were $339 million and $188 million, respectively.
Xerox 2025 Form 10-Q 74
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 six years. As of September 30, 2025 and December 31, 2024, total finance lease liabilities were $9 million and $53 million, respectively. The decrease in finance leases since December 31, 2024 is primarily related to the modification of a lease agreement entered into during the first quarter of 2025, which resulted in a change in the lease classification from financing to operating. Accordingly, we remeasured the right of use asset and the corresponding lease liability.
Refer to Note 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:
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Xerox Holdings Corporation | $ | 2,025 | $ | 2,038 | ||||||||||
| Xerox Corporation | 2,485 | 1,343 | ||||||||||||
|
Xerox - Other Subsidiaries(1)(2)
|
3 | 70 | ||||||||||||
| Subtotal - Principal debt balance | 4,513 | 3,451 | ||||||||||||
| Debt issuance costs | ||||||||||||||
| Xerox Holdings Corporation | (22) | (19) | ||||||||||||
| Xerox Corporation | (42) | (11) | ||||||||||||
| Subtotal - Debt issuance costs | (64) | (30) | ||||||||||||
| Net unamortized premium | (43) | (22) | ||||||||||||
| Total Debt | $ | 4,406 | $ | 3,399 | ||||||||||
_____________
(1)As of September 30, 2025, amount reflects debt acquired as a result of the Lexmark Acquisition. Refer to Note 6 - Acquisition for additional information regarding the Lexmark Acquisition.
(2)As of December 31, 2024 amounts reflects secured debt issued by subsidiaries of Xerox Corporation as part of the securitization of Finance Receivables in the prior year. These securitizations were repaid during the first quarter 2025.
Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt.
Finance Assets and Related Debt
The following represents our total finance assets, net associated with our lease and finance operations:
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
|
Total finance receivables, net(1)
|
$ | 1,556 | $ | 1,745 | ||||||||||
| Equipment on operating leases, net | 300 | 245 | ||||||||||||
| Total Finance Assets, net | $ | 1,856 | $ | 1,990 | ||||||||||
_____________
(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.
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:
| (in millions) | September 30, 2025 | December 31, 2024 | ||||||||||||
|
Finance receivables debt(1)
|
$ | 1,361 | $ | 1,527 | ||||||||||
| Equipment on operating leases debt | 263 | 214 | ||||||||||||
| Financing debt | 1,624 | 1,741 | ||||||||||||
| Core debt | 2,782 | 1,658 | ||||||||||||
| Total Debt | $ | 4,406 | $ | 3,399 | ||||||||||
(1)Finance receivables debt is the basis for our calculation of Equipment financing interest expense, which is included in Cost of services, maintenance, rentals and other in the Condensed Consolidated Statements of Loss.
Xerox 2025 Form 10-Q 75
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.
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:
| (in millions) | Xerox Holdings Corporation | Xerox Corporation |
Xerox Other Subsidiaries(1)
|
Total | ||||||||||||||||||||||
| 2025 Q4 | - | 128 | - | 128 | ||||||||||||||||||||||
| 2026 | 125 | 110 | 1 | 236 | ||||||||||||||||||||||
| 2027 | 25 | 90 | 2 | 117 | ||||||||||||||||||||||
| 2028 | 775 | 90 | - | 865 | ||||||||||||||||||||||
| 2029 | 531 | 567 | - | 1,098 | ||||||||||||||||||||||
| 2030 and thereafter | 569 | 1,500 | - | 2,069 | ||||||||||||||||||||||
| Total | $ | 2,025 | $ | 2,485 | $ | 3 | $ | 4,513 | ||||||||||||||||||
_____________
(1)As of September 30, 2025, amount reflects debt acquired as a result of the Lexmark Acquisition. Refer to Note 6 - Acquisition for additional information regarding the Lexmark Acquisition.
Refer to Note 13 - Debt in the Condensed Consolidated Financial Statements for additional information regarding debt.
Warrants
Refer to Note 17 - Shareholders' Equity of Xerox Holdings for additional information regarding the warrants that were issued to a shareholder during the third quarter 2025.
Treasury Stock
Xerox Holdings Corporation made no open-market repurchases of its Common Stock during 2025.
Financial Risk Management
We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. We utilize derivative financial instruments to hedge economic exposures, as well as to reduce earnings and cash flow volatility resulting from shifts in market rates. We enter into limited types of derivative contracts, including interest rate swap agreements, interest rate caps, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage interest rate and foreign currency exposures. Our primary foreign currency market exposures include the Euro, U.K. Pound Sterling and Japanese Yen. The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency exchange rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.
We are required to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. As permitted, certain of these derivative contracts have been designated for hedge accounting treatment. Certain of our derivatives that do not qualify for hedge accounting are effective as economic hedges. These derivative contracts are likewise required to be recognized each period at fair value and therefore do result in some level of volatility. The level of volatility will vary with the type and amount of derivative hedges outstanding, as well
Xerox 2025 Form 10-Q 76
as fluctuations in the currency and interest rate markets during the period. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.
By their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange and interest rate movements is expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. We do not believe there is significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a diversified group of major financial institutions. Further, our policy is to deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.
The current market events have not required us to materially modify or change our financial risk management strategies with respect to our exposures to interest rate and foreign currency risk. Refer to Note 14 - Financial Instruments in the Condensed Consolidated Financial Statements for further discussion and information on our financial risk management strategies.
Non-GAAP Financial Measures
We have reported our financial results in accordance with generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the non-GAAP measures described below. We believe these non-GAAP measures allow investors to better understand the trends in our business and to better understand and compare our results. Management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related income tax effects.
However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth below.
Adjusted Earnings Measures
•Adjusted Net Income and Earnings per Share (EPS)
•Adjusted Effective Tax Rate
The above measures were adjusted for the following items:
Restructuring and related costs, net:Restructuring and related costs, net include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges. Restructuring consists of costs primarily related to severance and benefits paid to employees pursuant to formal restructuring and workforce reduction plans. Asset impairment includes costs incurred for those assets sold, abandoned or made obsolete as a result of our restructuring actions, exiting from a business or other strategic business changes. Additional costs for our transformation programs are primarily related to the implementation of strategic actions and initiatives and include third-party professional service costs as well as one-time incremental costs. All of these costs can vary significantly in terms of amount and frequency based on the nature of the actions as well as the changing needs of the business. Accordingly, due to that significant variability, we will exclude these charges since we do not believe they provide meaningful insight into our current or past operating performance, nor do we believe they are reflective of our expected future operating expenses as such charges are expected to yield future benefits and savings with respect to our operational performance.
Amortization of intangible assets: The amortization of intangible assets is driven by our acquisition activity which can vary in size, nature and timing as compared to other companies within our industry and from period to period. The use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.
Non-service retirement-related costs:Our defined benefit pension and retiree health costs include several elements impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity markets as well as those that are predominantly legacy in nature and related to employees who are no longer providing current service to the Company (e.g. retirees and ex-employees). These elements include (i) interest cost,
Xerox 2025 Form 10-Q 77
(ii) expected return on plan assets, (iii) amortization of prior plan amendments, (iv) amortized actuarial gains/losses and (v) the impacts of any plan settlements/curtailments. Accordingly, we consider these elements of our periodic retirement plan costs to be outside the operational performance of the business or legacy costs and not necessarily indicative of current or future cash flow requirements. This approach is consistent with the classification of these costs as non-operating in Other expenses, net. Adjusted earnings will continue to include the service cost elements of our retirement costs, which are related to current employee service as well as the cost of our defined contribution plans.
Transaction and related costs, net: Transaction and related costs, net are costs and expenses primarily associated with certain major or significant strategic M&A projects. These costs are primarily for third-party legal, accounting, consulting and other similar types of professional services as well as potential legal settlements that may arise in connection with those M&A transactions. These costs are considered incremental to our normal operating charges and were incurred or are expected to be incurred solely as a result of the planned transactions. Accordingly, we exclude these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis.
Discrete, unusual or infrequent items: We exclude these item(s), when applicable, given their discrete, unusual or infrequent nature and their impact on the comparability of our results for the period to prior periods and future expected trends.
•Inventory-related impact - exit of certain production print manufacturing operations
•Goodwill impairment
•Divestitures
•Reinvention-related costs
•Loss (gain) on early extinguishment of debt
•Commitment fee expenses
•Lexmark - pre-existing employment agreements settled post-acquisition
•Lexmark - inventory-related purchase accounting adjustment
•Lexmark - fixed asset-related purchase accounting adjustment
•Lexmark Acquisition financing - escrow interest, net
•Goodwill impairment income tax
•Income tax on PARC Donation
•Deferred tax asset valuation allowance
Adjusted Operating Income and Margin
We calculate and utilize adjusted operating income and margin measures by adjusting our reported pre-tax (loss) income and margin amounts. In addition to the costs and expenses noted above as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses. We exclude these amounts in order to evaluate our current and past operating performance and to better understand the expected future trends in our business.
Constant Currency (CC)
Refer to "Currency Impact" for a discussion of this measure and its use in our analysis of revenue growth.
Free Cash Flow and Adjusted Free Cash Flow
Refer to "Free Cash Flow" and "Adjusted Free Cash Flow" sections below for a discussion of these non-GAAP measures.
Xerox 2025 Form 10-Q 78
Adjusted Net Income (Loss) and EPS reconciliation:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | Net (Loss) Income | Diluted EPS | Net (Loss) Income | Diluted EPS | Net Loss | Diluted EPS | Net (Loss) Income | Diluted EPS | ||||||||||||||||||||||||||||||||||||||||||
|
Reported(1)
|
$ | (760) | $ | (6.01) | $ | (1,205) | $ | (9.71) | $ | (956) | $ | (7.67) | $ | (1,300) | $ | (10.55) | ||||||||||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
Inventory-related impact - exit of certain production print manufacturing operations(2)
|
3 | - | 20 | 44 | ||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill Impairment | - | 1,058 | - | 1,058 | ||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 59 | 56 | 68 | 107 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 30 | 10 | 50 | 30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Divestitures | - | - | (4) | 51 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-service retirement-related costs | 20 | 25 | 57 | 74 | ||||||||||||||||||||||||||||||||||||||||||||||
| Reinvention-related costs | 3 | - | 12 | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Transaction and related costs, net | 23 | (15) | 32 | (38) | ||||||||||||||||||||||||||||||||||||||||||||||
| Loss (gain) on early extinguishment of debt | - | - | 4 | (3) | ||||||||||||||||||||||||||||||||||||||||||||||
|
Commitment fee expenses(3)
|
- | - | 22 | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Lexmark - pre-existing employment agreements settled post-acquisition | 24 | - | 24 | - | ||||||||||||||||||||||||||||||||||||||||||||||
|
Lexmark - inventory-related purchase accounting adjustment(4)
|
102 | - | 102 | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Lexmark - fixed asset-related purchase accounting adjustment | 16 | - | 16 | - | ||||||||||||||||||||||||||||||||||||||||||||||
|
Lexmark Acquisition financing - escrow interest, net(5)
|
- | - | 12 | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill Impairment Income Tax | - | (43) | - | (43) | ||||||||||||||||||||||||||||||||||||||||||||||
|
Income tax on PARC Donation(6)
|
11 | - | 20 | - | ||||||||||||||||||||||||||||||||||||||||||||||
|
Deferred tax asset valuation allowance(7)
|
467 | 161 | 517 | 161 | ||||||||||||||||||||||||||||||||||||||||||||||
|
Income tax on adjustments(8)
|
29 | (13) | (50) | (55) | ||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted | $ | 27 | $ | 0.20 | $ | 34 | $ | 0.25 | $ | (54) | $ | (0.50) | $ | 86 | 86 | $ | 0.60 | |||||||||||||||||||||||||||||||||
|
Dividends on preferred stock used in adjusted EPS calculation(9)
|
$ | 4 | $ | 4 | $ | 11 | $ | 11 | ||||||||||||||||||||||||||||||||||||||||||
|
Weighted average shares for adjusted EPS(9)
|
129 | - | 126 | 126 | 126 | |||||||||||||||||||||||||||||||||||||||||||||
|
Fully diluted shares at September 30, 2025(10)
|
130 | |||||||||||||||||||||||||||||||||||||||||||||||||
(1)For the three months ended September 30, 2025, Net (Loss) and Diluted (Loss) per Share includes an inventory-related purchase accounting adjustment, related to the Lexmark Acquisition, of $85 million ($102 million pre-tax) or $0.67 per diluted share, as well as a tax expense charge of $467 million, or $3.68 per diluted share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. For the three months ended September 30, 2024, Net (Loss) and Diluted (Loss) per Share includes a non-cash goodwill impairment charge of approximately $1.0 billion after-tax (approximately $1.1 billion pre-tax), or $8.16 per diluted share, as well as a tax expense charge of $161 million, or $1.29 per diluted share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. For the nine months ended September 30, 2025, Net (Loss) and Diluted (Loss) per Share includes an inventory-related purchase accounting adjustment, related to the Lexmark Acquisition, of $85 million ($102 million pre-tax) or $0.67 per diluted share, tax expense charges of $517 million, or $4.10 per diluted share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability, financing-related charges, net, of $30 million ($40 million pre-tax), or $0.24 per diluted share, related to financing transactions for the Lexmark Acquisition, repayment of existing borrowings, and general corporate purposes, and tax expense of $28 million, or $0.22 per diluted share, related to interest expense that was not deductible according to tax guidelines in place as of September 30, 2025. For the nine months ended September 30, 2024, Net (Loss) and Diluted (Loss) per Share includes a non-cash goodwill impairment charge of approximately $1.0 billion after-tax (approximately $1.1 billion pre-tax), or $8.16 per diluted share, a tax expense charge of $161 million, or $1.29 per diluted share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability, and Reinvention-related charges of $100 million ($129 million pre-tax), or $0.81 per diluted share, primarily related to the exit of certain production print manufacturing operations and geographic simplification. The tax expense charges related to the establishment of valuation allowances in 2025 and 2024 were excluded due to their unique nature and significant impacts which are not considered part of our core operations.
(2)As a result of the exit of certain production print manufacturing operations, Cost of sales and Cost of services, maintenance, rentals and other excludes inventory-related charges of $3 million and $0 million for the three months ended September 30, 2025 and 2024, respectively, and $19 million and $38 million, for the nine months ended September 30, 2025 and 2024, respectively, as well as the cancellation of related purchase contracts $0 million and $0 million for the three months ended September 30, 2025 and 2024, respectively, and $1 million and $6 million for the nine months ended September 30, 2025 and 2024, respectively.
Xerox 2025 Form 10-Q 79
(3)Primarily reflects fees related to financing transactions for the Lexmark Acquisition, repayment of existing borrowings, and general corporate purposes, which includes: the private offering of $400 million in aggregate principal amount of 10.250% Senior Secured First Lien Notes due 2030 and $500 million aggregate principal amount of 13.500% Senior Secured Second Lien Notes Due in 2031; the private offering of $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.
(4)Reflects a purchase accounting adjustment related to the Lexmark Acquisition, for cost associated with a net inventory write up.
(5)Reflects net interest expense on net proceeds received from debt issuances which were placed in escrow prior to the completion of the Lexmark Acquisition.
(6)Reflects the change in the realizability of the PARC donation tax benefit recognized in the second quarter of 2023.
(7)Reflects the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability.
(8)Refer to Adjusted Effective Tax Rate reconciliation.
(9)For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude the 7 million shares associated with Xerox Holdings Corporation's Series A Convertible preferred stock.
(10)Reflects common shares outstanding at September 30, 2025, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the three and nine months ended September 30, 2025. Excludes potentially dilutive common shares associated with our series A convertible preferred stock, as well as shares granted under stock-based compensation programs, all of which were anti-dilutive as of September 30, 2025.
Adjusted Effective Tax Rate reconciliation:
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | Pre-Tax (Loss) | Income Tax Expense (Benefit) |
Effective Tax Rate |
Pre-Tax (Loss) Income | Income Tax Expense |
Effective Tax Rate |
||||||||||||||||||||||||||||||||
|
Reported(1)
|
$ | (300) | $ | 460 | (153.3) | % | $ | (1,087) | $ | 118 | (10.9) | % | ||||||||||||||||||||||||||
|
Goodwill impairment(2)
|
- | - | 1,058 | 43 | ||||||||||||||||||||||||||||||||||
|
Deferred tax asset valuation allowance(2)
|
- | (467) | - | (161) | ||||||||||||||||||||||||||||||||||
|
Income tax on PARC donation(2)
|
- | (11) | - | - | ||||||||||||||||||||||||||||||||||
|
Non-GAAP Adjustments(3)
|
280 | (29) | 76 | 13 | ||||||||||||||||||||||||||||||||||
|
Adjusted(4)
|
$ | (20) | $ | (47) | 235.0 | % | $ | 47 | $ | 13 | 27.7 | % | ||||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | Pre-Tax (Loss) | Income Tax Expense |
Effective Tax Rate |
Pre-Tax (Loss) Income | Income Tax Expense |
Effective Tax Rate |
||||||||||||||||||||||||||||||||
|
Reported(1)
|
$ | (427) | $ | 529 | (123.9) | % | $ | (1,212) | $ | 88 | (7.3) | % | ||||||||||||||||||||||||||
|
Goodwill impairment(2)
|
- | - | 1,058 | 43 | ||||||||||||||||||||||||||||||||||
|
Deferred tax asset valuation allowance(2)
|
- | (517) | - | (161) | ||||||||||||||||||||||||||||||||||
|
Income tax on PARC donation(2)
|
- | (20) | - | - | ||||||||||||||||||||||||||||||||||
|
Non-GAAP Adjustments(3)
|
415 | 50 | 265 | 55 | ||||||||||||||||||||||||||||||||||
|
Adjusted(4)
|
$ | (12) | $ | 42 | (350.0) | % | $ | 111 | $ | 25 | 22.5 | % | ||||||||||||||||||||||||||
____________________________
(1)Pre-tax (loss) and Income tax expense.
(2)Refer to Adjusted Net Income (Loss) and EPS reconciliation for details.
(3)Reflects the tax impacts of pre-tax adjustments.
(4)The tax impact on the Adjusted Pre‐Tax (Loss) Income is calculated under the same accounting principles applied to the As Reported Pre-Tax (Loss) under ASC 740, which employs an annual effective tax rate method to the results.
Xerox 2025 Form 10-Q 80
Adjusted Operating Income and Margin reconciliation:
|
Three Months Ended September 30, |
||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | (Loss) Profit | Revenue | Margin | (Loss) Profit | Revenue | Margin | ||||||||||||||||||||||||||||||||
|
Reported(1)
|
$ | (760) | $ | 1,961 | $ | (1,205) | $ | 1,528 | ||||||||||||||||||||||||||||||
| Income tax expense | 460 | - | 118 | - | ||||||||||||||||||||||||||||||||||
| Pre-tax loss | $ | (300) | $ | 1,961 | (15.3) | % | $ | (1,087) | $ | 1,528 | (71.1) | % | ||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Goodwill impairment | - | 1,058 | ||||||||||||||||||||||||||||||||||||
|
Inventory-related impact - exit of certain production print manufacturing operations(2)
|
3 | - | ||||||||||||||||||||||||||||||||||||
| Lexmark - inventory-related purchase accounting adjustment | 102 | - | ||||||||||||||||||||||||||||||||||||
| Lexmark - fixed asset-related purchase accounting adjustment | 16 | - | ||||||||||||||||||||||||||||||||||||
| Lexmark - pre-existing employment agreements settled post-acquisition | 24 | - | ||||||||||||||||||||||||||||||||||||
| Reinvention-related costs | 3 | - | ||||||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 59 | 56 | ||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 30 | 10 | ||||||||||||||||||||||||||||||||||||
| Transaction and related costs, net | 23 | - | ||||||||||||||||||||||||||||||||||||
|
Other expenses, net(3)(4)
|
105 | 43 | ||||||||||||||||||||||||||||||||||||
| Adjusted | $ | 65 | $ | 1,961 | 3.3 | % | $ | 80 | $ | 1,528 | 5.2 | % | ||||||||||||||||||||||||||
|
Nine Months Ended September 30, |
||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| (in millions) | (Loss) Profit | Revenue | Margin | (Loss) Profit | Revenue | Margin | ||||||||||||||||||||||||||||||||
|
Reported(1)
|
$ | (956) | $ | 4,994 | $ | (1,300) | $ | 4,608 | ||||||||||||||||||||||||||||||
| Income tax expense | 529 | - | 88 | - | ||||||||||||||||||||||||||||||||||
| Pre-tax loss | $ | (427) | $ | 4,994 | (8.6) | % | $ | (1,212) | $ | 4,608 | (26.3) | % | ||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Goodwill impairment | - | 1,058 | ||||||||||||||||||||||||||||||||||||
|
Inventory-related impact - exit of certain production print manufacturing operations(2)
|
20 | 44 | ||||||||||||||||||||||||||||||||||||
| Lexmark - inventory-related purchase accounting adjustment | 102 | - | ||||||||||||||||||||||||||||||||||||
| Lexmark - fixed asset-related purchase accounting adjustment | 16 | - | ||||||||||||||||||||||||||||||||||||
| Lexmark - pre-existing employment agreements settled post-acquisition | 24 | - | ||||||||||||||||||||||||||||||||||||
| Reinvention-related costs | 12 | - | ||||||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 68 | 107 | ||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 50 | 30 | ||||||||||||||||||||||||||||||||||||
| Divestitures | (4) | 51 | ||||||||||||||||||||||||||||||||||||
| Transaction and related costs, net | 32 | - | ||||||||||||||||||||||||||||||||||||
|
Other expenses, net(3)(4)
|
253 | 120 | ||||||||||||||||||||||||||||||||||||
| Adjusted | $ | 146 | $ | 4,994 | 2.9 | % | $ | 198 | $ | 4,608 | 4.3 | % | ||||||||||||||||||||||||||
(1)Net Loss.
(2)As a result of the exit of certain production print manufacturing operations, Cost of sales and Cost of services, maintenance, rentals and other excludes inventory-related charges of $3 million and $0 million for the three months ended September 30, 2025 and 2024, respectively, and $19 million and $38 million, for the nine months ended September 30, 2025 and 2024, respectively, as well as the cancellation of related purchase contracts of $0 million and $0 million for the three months ended September 30, 2025 and 2024, respectively, and $1 million and $6 million for the nine months ended September 30, 2025 and 2024, respectively.
(3)Includes non-service retirement-related costs.
(4)The three and nine months ended September 30, 2025 includes $80 million and $168 million, respectively, of interest and financing-related charges, net, related to recently completed borrowings in support of the Lexmark Acquisition, repayment of existing borrowings, and general corporate purposes. The three and nine months ended September 30, 2024 includes $15 million and $38 million, respectively, of insurance proceeds from a legal settlement for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020.
Xerox 2025 Form 10-Q 81
Free Cash Flow
To better understand trends in our business, we believe that it is helpful to adjust operating cash flows by subtracting amounts related to capital expenditures. Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. It provides a measure of our ability to fund acquisitions and pay dividends.
Below is a summary of our free cash flow:
| (in millions) | Nine Months Ended September 30, | |||||||||||||
| 2025 | 2024 | |||||||||||||
|
Operating Cash Flow (1)
|
$ | 16 | $ | 160 | ||||||||||
|
Capital expenditures
|
(67) | (27) | ||||||||||||
| Free Cash Flow | $ | (51) | $ | 133 | ||||||||||
_____________
(1)Net cash provided by operating activities.
Adjusted Free Cash Flow Reconciliation
To better understand trends in our business, we believe that it is helpful to adjust operating cash flows, by adding back certain one-time non-recurring cash payments resulting from the Lexmark Acquisition which are included in cash flows from operating activities before subtracting amounts related to capital expenditures. Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. It provides a measure of our ability to fund acquisitions and pay dividends. We believe this metric more closely aligns with our adjusted operating income by excluding the impacts of the Lexmark Acquisition.
Below is a summary of our adjusted operating cash flow and adjusted free cash flow:
| (in millions) | ` | Nine Months Ended September 30, | ||||||||||||
| 2025 | 2024 | |||||||||||||
|
Operating Cash Flow (1)
|
$ | 16 | $ | 160 | ||||||||||
|
One-time non-recurring acquisition costs(2), (3)
|
70 | 0 | ||||||||||||
| Adjusted Operating Cash Flow | 86 | 160 | ||||||||||||
|
Capital expenditures
|
(67) | (27) | ||||||||||||
| Adjusted Free Cash Flow | $ | 19 | $ | 133 | ||||||||||
_____________
(1)Net cash provided by operating activities.
(2)One-time non-recurring acquisition costs include (i) the effective settlement of certain pre-existing relationships between Xerox and Lexmark (ii) cash paid for transaction and related costs and (iii) cash paid for contractual severance payments paid to Lexmark employees as a result of diminution in their duties.
Xerox 2025 Form 10-Q 82
Pro Forma Basis
To better understand the trends in our business, we discuss our 2025 operating results by comparing them against 2024 pro forma results, which include estimated results for both Lexmark and ITSavvy for the comparable period presented. ITSavvy is included in our 2025 reported results as the effective date of acquisition was November 20, 2024. Lexmark is included in our 2025 results as of July 1, 2025, the effective date of acquisition. Accordingly, we have included ITSavvy and Lexmark's 2024 pro forma results for comparable periods presented. We refer to comparisons against these adjusted 2024 results as "pro forma" basis comparisons.
The following pro forma information has been prepared in accordance with Article 11 of Regulation S-X, "Pro Forma Financial Information". The pro forma combined statements of operations for the three and nine months ended September 30, 2025 and 2024 combine the Consolidated Statements of Operations of Xerox giving effect to the Lexmark Acquisition and ITSavvy as if they had occurred on January 1, 2024 and 2023 respectively. The pro forma information is presented to facilitate comparisons with our results following these acquisitions.
The historical results of Xerox, ITSavvy and Lexmark have been adjusted to reflect the costs of financing the transactions, fair value adjustments related to inventory, real and personal property (equipment and computer hardware and software), and intangible assets. In addition, adjustments were made to conform both ITSavvy and Lexmark's accounting policies to those of Xerox, including deferred revenue and inventory. In accordance with Article 11 of Regulation S-X these proforma results exclude adjustments associated with transaction related costs which are already included in the historical financial statements. We believe comparisons on a pro forma basis are more meaningful than the actual comparisons given the size and nature of these acquisitions. We believe the pro forma basis comparisons allow investors to have a better understanding and additional perspective of the expected trends in our business as well as the impact of these acquisitions on the Company's operations.
The adjustments presented in the following pro forma financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company following the transactions and events described above. The pro forma financial information is based upon available information and assumptions that we believe are reasonable and is for illustrative purposes only. The financial results may have been different if the transactions described above had been completed sooner. You should not rely on the pro forma financial information as being indicative of the historical results that would have been achieved if these transactions and events had been completed as of January 1, 2024 and 2023. The pro forma combined financial information below should be read in conjunction with the consolidated financial statements and related notes of the Company included elsewhere in this Form 10-Q. All pro forma adjustments and their underlying assumptions are described more fully below.
The following pro forma combined financial information and associated notes are based on the historical financial statements of Xerox, Lexmark and ITSavvy prior to their acquisitions.
Xerox 2025 Form 10-Q 83
Pro Forma Financial Information
|
Three Months Ended September 30, 2025 |
||||||||||||||||||||||||||
| (in millions, except per-share data) | Xerox Historical | Pro Forma Adjustments | Pro Forma Combined Company | |||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Equipment sales | $ | 383 | $ | - | $ | 383 | ||||||||||||||||||||
| Supplies, paper and other | 445 | - | 445 | |||||||||||||||||||||||
| IT Products | 165 | - | 165 | |||||||||||||||||||||||
| Sales | 993 | - | 993 | |||||||||||||||||||||||
| Services, maintenance, rentals and other | 968 | - | 968 | |||||||||||||||||||||||
| Total Revenues | 1,961 | - | 1,961 | |||||||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||
| Cost of sales | 788 | (92) | a | 696 | ||||||||||||||||||||||
| Cost of services, maintenance, rentals and other | 728 | - | 728 | |||||||||||||||||||||||
| Research, development and engineering expenses | 74 | - | 74 | |||||||||||||||||||||||
| Selling, administrative and general expenses | 477 | - | 477 | |||||||||||||||||||||||
| Restructuring and related costs, net | 59 | - | 59 | |||||||||||||||||||||||
| Amortization of intangible assets | 30 | - | 30 | |||||||||||||||||||||||
| Other expenses, net | 105 | - | 105 | |||||||||||||||||||||||
| Total Costs and Expenses | 2,261 | (92) | 2,169 | |||||||||||||||||||||||
| Loss before Income Taxes | $ | (300) | $ | 92 | $ | (208) | ||||||||||||||||||||
| - | ||||||||||||||||||||||||||
| Total Gross Profit | $ | 445 | $ | 92 | $ | 537 | ||||||||||||||||||||
| Gross Margin | ||||||||||||||||||||||||||
| Equipment | 26.1 | % | nm | 11.6 | % | |||||||||||||||||||||
| Post sale | 21.8 | % | nm | 31.2 | % | |||||||||||||||||||||
| Total Gross Margin | 22.7 | % | nm | a | 27.4 | % | ||||||||||||||||||||
| Segment Revenue | ||||||||||||||||||||||||||
| Print and Other | $ | 1,739 | $ | - | $ | 1,739 | ||||||||||||||||||||
| IT Solutions | 226 | - | 226 | |||||||||||||||||||||||
| Intersegment | (4) | - | (4) | |||||||||||||||||||||||
| Corporate | - | - | - | |||||||||||||||||||||||
| Revenue | $ | 1,961 | $ | - | $ | 1,961 | ||||||||||||||||||||
| Segment Profit | ||||||||||||||||||||||||||
| Print and Other | $ | 64 | $ | - | $ | 64 | ||||||||||||||||||||
| IT Solutions | 18 | - | 18 | |||||||||||||||||||||||
| Intersegment | - | - | - | |||||||||||||||||||||||
| Corporate | $ | (17) | - | $ | (17) | |||||||||||||||||||||
| Profit | $ | 65 | $ | - | $ | 65 | ||||||||||||||||||||
nm - Not meaningful.
a.Reflects the removal of the impact to Cost of sales for the recognition of the inventory fair value adjustment during the three months ended September 30, 2025.
Xerox 2025 Form 10-Q 84
Pro Forma Financial Information
|
Three Months Ended September 30, 2024 |
||||||||||||||||||||||||||||||||||||||
| (in millions, except per-share data) | Xerox Historical | ITSavvy Reclassified | Lexmark Reclassified | Pro Forma Adjustments | Pro Forma Combined Company | |||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 339 | $ | - | $ | 174 | $ | (55) | $ | 458 | ||||||||||||||||||||||||||||
| Supplies, paper and other | 194 | - | 308 | (24) | 478 | |||||||||||||||||||||||||||||||||
| IT Products | 55 | 94 | - | - | 149 | |||||||||||||||||||||||||||||||||
| Sales | 588 | 94 | 482 | (79) | 1,085 | |||||||||||||||||||||||||||||||||
| Services, maintenance, rentals and other | 940 | 21 | 85 | (4) | 1,042 | |||||||||||||||||||||||||||||||||
| Total Revenues | 1,528 | 115 | 567 | (83) | a | 2,127 | ||||||||||||||||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of sales | 390 | 79 | 315 | (69) | a | 715 | ||||||||||||||||||||||||||||||||
| Cost of services, maintenance, rentals and other | 643 | 16 | 70 | 3 | a | 732 | ||||||||||||||||||||||||||||||||
| Research, development and engineering expenses | 45 | - | 32 | - | 77 | |||||||||||||||||||||||||||||||||
| Selling, administrative and general expenses | 370 | 15 | 86 | (2) | b | 469 | ||||||||||||||||||||||||||||||||
| Goodwill impairment | 1,058 | - | - | - | 1,058 | |||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 56 | - | (1) | - | 55 | |||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 10 | 2 | 8 | 14 | c | 34 | ||||||||||||||||||||||||||||||||
| Other expenses, net | 43 | 1 | 23 | 19 | d | 86 | ||||||||||||||||||||||||||||||||
| Total Costs and Expenses | 2,615 | 113 | 533 | (35) | 3,226 | |||||||||||||||||||||||||||||||||
| Loss before Income Taxes | $ | (1,087) | $ | 2 | $ | 34 | $ | (48) | $ | (1,099) | ||||||||||||||||||||||||||||
| Total Gross Profit | $ | 495 | $ | 20 | $ | 182 | $ | (17) | $ | 680 | ||||||||||||||||||||||||||||
| Gross Margin | ||||||||||||||||||||||||||||||||||||||
| Equipment | 28.5 | % | nm | (13.0) | % | nm | 14.6 | % | ||||||||||||||||||||||||||||||
| Post sale | 33.5 | % | 17.4 | % | 52.3 | % | nm | 36.7 | % | |||||||||||||||||||||||||||||
| Total Gross Margin | 32.4 | % | 17.4 | % | 32.1 | % | 20.5 | % | a | 32.0 | % | |||||||||||||||||||||||||||
| Segment Revenue | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 1,442 | $ | - | $ | 567 | $ | (83) | a | $ | 1,926 | |||||||||||||||||||||||||||
| IT Solutions | 86 | 115 | - | - | 201 | |||||||||||||||||||||||||||||||||
| Intersegment | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Corporate | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Total Segment Revenue | $ | 1,528 | $ | 115 | $ | 567 | $ | (83) | $ | 2,127 | ||||||||||||||||||||||||||||
| Segment Profit | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 103 | $ | - | $ | 69 | $ | 1 | $ | 173 | ||||||||||||||||||||||||||||
| IT Solutions | - | 5 | - | - | 5 | |||||||||||||||||||||||||||||||||
| Intersegment | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Corporate | (23) | - | (3) | - | e | (26) | ||||||||||||||||||||||||||||||||
| Total Segment Profit | $ | 80 | $ | 5 | $ | 66 | $ | 1 | $ | 152 | ||||||||||||||||||||||||||||
________
nm - Not meaningful.
a.Represents the elimination of transactions between Xerox and Lexmark, primarily consisting of Lexmark's revenue and Xerox's cost of sales as well as depreciation expense and the impact of conforming certain of Lexmark's accounting policies to those of Xerox.
b.Reflects adjustments for compensation to certain Lexmark employees upon close of the transaction, lease expense, and transaction-related expenses.
c.Reflects the adjustments to Amortization of intangible assets.
d.Reflects adjustments for interest and amortization of debt issuance costs partially offset by an adjustment related to pension benefits (excluding service cost).
e.Reflects the corporate costs of Lexmark not allocated to a segment.
Xerox 2025 Form 10-Q 85
Pro Forma Financial Information
| Six Months Ended June 30, 2025 | Three Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except per-share data) | Xerox Historical | Lexmark Reclassified | Pro Forma Adjustments | Xerox Historical | Pro Forma Adjustments | Pro Forma Combined Company | ||||||||||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 620 | $ | 258 | $ | (54) | $ | 383 | $ | - | $ | 1,207 | ||||||||||||||||||||||||||||||||||||||
| Supplies, paper and other | 344 | 609 | (27) | 445 | - | 1,371 | ||||||||||||||||||||||||||||||||||||||||||||
| IT Products | 258 | - | - | 165 | - | 423 | ||||||||||||||||||||||||||||||||||||||||||||
| Sales | 1,222 | 867 | (81) | 993 | - | 3,001 | ||||||||||||||||||||||||||||||||||||||||||||
| Services, maintenance, rentals and other | 1,811 | 160 | (6) | 968 | - | 2,933 | ||||||||||||||||||||||||||||||||||||||||||||
| Total Revenues | 3,033 | 1,027 | (87) | a | 1,961 | - | 5,934 | |||||||||||||||||||||||||||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 862 | 575 | (50) | a | 788 | (92) | e | 2,083 | ||||||||||||||||||||||||||||||||||||||||||
| Cost of services, maintenance, rentals and other | 1,294 | 138 | (6) | a | 728 | - | 2,154 | |||||||||||||||||||||||||||||||||||||||||||
| Research, development and engineering expenses | 85 | 61 | - | 74 | - | 220 | ||||||||||||||||||||||||||||||||||||||||||||
| Selling, administrative and general expenses | 746 | 200 | (23) | b | 477 | - | 1,400 | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 9 | (1) | - | 59 | - | 67 | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 20 | 16 | 26 | c | 30 | - | 92 | |||||||||||||||||||||||||||||||||||||||||||
| Divestitures | (4) | - | - | - | (4) | |||||||||||||||||||||||||||||||||||||||||||||
| Other expenses, net | 148 | 37 | (2) | d | 105 | - | 288 | |||||||||||||||||||||||||||||||||||||||||||
| Total Costs and Expenses | 3,160 | 1,026 | (55) | 2,261 | (92) | 6,300 | ||||||||||||||||||||||||||||||||||||||||||||
| Loss before Income Taxes | $ | (127) | $ | 1 | $ | (174) | $ | (300) | $ | 92 | $ | (366) | ||||||||||||||||||||||||||||||||||||||
| Total Gross Profit | $ | 877 | $ | 314 | $ | (31) | $ | 445 | $ | 92 | $ | 1,697 | ||||||||||||||||||||||||||||||||||||||
| Gross Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equipment | 25.8 | % | (26.7) | % | 25.9 | % | 26.1 | % | nm | 10.0 | % | |||||||||||||||||||||||||||||||||||||||
| Post sale | 29.7 | % | 49.8 | % | 51.5 | % | 21.8 | % | nm | 33.3 | % | |||||||||||||||||||||||||||||||||||||||
| Total Gross Margin | 28.9 | % | 30.6 | % | 35.6 | % | a | 22.7 | % | nm | e | 28.6 | % | |||||||||||||||||||||||||||||||||||||
| Segment Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 2,660 | $ | 1,027 | $ | (87) | a | $ | 1,739 | $ | - | $ | 5,339 | |||||||||||||||||||||||||||||||||||||
| IT Solutions | 377 | - | - | 226 | - | 603 | ||||||||||||||||||||||||||||||||||||||||||||
| Intersegment | (4) | - | - | (4) | - | (8) | ||||||||||||||||||||||||||||||||||||||||||||
| Corporate | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Total Segment Revenue | $ | 3,033 | $ | 1,027 | $ | (87) | $ | 1,961 | $ | - | $ | 5,934 | ||||||||||||||||||||||||||||||||||||||
| Segment Profit | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 106 | $ | 60 | $ | 44 | e | $ | 64 | $ | - | $ | 274 | |||||||||||||||||||||||||||||||||||||
| IT Solutions | 15 | - | - | 18 | - | - | 33 | |||||||||||||||||||||||||||||||||||||||||||
| Intersegment | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Corporate | (40) | (7) | - | f | (17) | - | (64) | |||||||||||||||||||||||||||||||||||||||||||
| Total Segment Profit | $ | 81 | $ | 53 | $ | 44 | $ | 65 | $ | - | $ | 243 | ||||||||||||||||||||||||||||||||||||||
__________
nm - Not meaningful.
a.Represents the elimination of transactions between Xerox and Lexmark, primarily consisting of Lexmark's revenue and Xerox's cost of sales as well as depreciation expense and the impact of conforming certain of Lexmark's accounting policies to those of Xerox.
b.Reflects adjustments for lease expense, transaction-related expenses.
c.Reflects the adjustments to Amortization of intangible assets.
d.Reflects adjustments for interest and amortization of debt issuance costs partially offset by an adjustment related to pension benefits (excluding service cost).
e.Reflects the related impacts to Cost of sales for the purchase accounting adjustments to recognize inventory and fixed assets at fair value.
f.Reflects the corporate costs of Lexmark not allocated to a segment.
Xerox 2025 Form 10-Q 86
Pro Forma Financial Information
|
Nine Months Ended September 30, 2024 |
||||||||||||||||||||||||||||||||||||||
| (in millions, except per-share data) | Xerox Historical | ITSavvy Reclassified | Lexmark Reclassified | Pro Forma Adjustments | Pro Forma Combined Company | |||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||
| Equipment sales | $ | 985 | $ | - | $ | 469 | $ | (134) | $ | 1,320 | ||||||||||||||||||||||||||||
| Supplies, paper and other | 578 | - | 938 | (76) | 1,440 | |||||||||||||||||||||||||||||||||
| IT Products | 159 | 290 | - | - | 449 | |||||||||||||||||||||||||||||||||
| Sales | 1,722 | 290 | 1,407 | (210) | 3,209 | |||||||||||||||||||||||||||||||||
| Services, maintenance, rentals and other | 2,886 | 61 | 246 | (11) | 3,182 | |||||||||||||||||||||||||||||||||
| Total Revenues | 4,608 | 351 | 1,653 | (221) | a | 6,391 | ||||||||||||||||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||||||||||||||
| Cost of sales | 1,117 | 244 | 936 | 71 | a | 2,368 | ||||||||||||||||||||||||||||||||
| Cost of services, maintenance, rentals and other | 2,033 | 47 | 205 | (137) | a | 2,148 | ||||||||||||||||||||||||||||||||
| Research, development and engineering expenses | 144 | - | 93 | - | 237 | |||||||||||||||||||||||||||||||||
| Selling, administrative and general expenses | 1,160 | 45 | 220 | 16 | b | 1,441 | ||||||||||||||||||||||||||||||||
| Goodwill impairment | 1,058 | - | - | - | 1,058 | |||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 107 | - | (3) | - | 104 | |||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 30 | 5 | 24 | 44 | c | 103 | ||||||||||||||||||||||||||||||||
| Divestitures | 51 | - | - | - | 51 | |||||||||||||||||||||||||||||||||
| Other expenses, net | 120 | 6 | 64 | 81 | d | 271 | ||||||||||||||||||||||||||||||||
| Total Costs and Expenses | 5,820 | 347 | 1,539 | 75 | 7,781 | |||||||||||||||||||||||||||||||||
| Loss before Income Taxes | $ | (1,212) | $ | 4 | $ | 114 | $ | (296) | $ | (1,390) | ||||||||||||||||||||||||||||
| Total Gross Profit | $ | 1,458 | $ | 60 | $ | 512 | $ | (155) | $ | 1,875 | ||||||||||||||||||||||||||||
| Gross Margin | ||||||||||||||||||||||||||||||||||||||
| Equipment | 31.4 | % | nm | (21.3) | % | nm | 19.1 | % | ||||||||||||||||||||||||||||||
| Post sale | 31.7 | % | 17.1 | % | 51.7 | % | nm | 32.0 | % | |||||||||||||||||||||||||||||
| Total Gross Margin | 31.6 | % | 17.1 | % | 31.0 | % | 70.1 | % | a | 29.3 | % | |||||||||||||||||||||||||||
| Segment Revenue | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 4,364 | $ | - | $ | 1,653 | $ | (221) | a | $ | 5,796 | |||||||||||||||||||||||||||
| IT Solutions | 244 | 351 | - | - | 595 | |||||||||||||||||||||||||||||||||
| Intersegment | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Corporate | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Total Segment Revenue | $ | 4,608 | $ | 351 | $ | 1,653 | $ | (221) | $ | 6,391 | ||||||||||||||||||||||||||||
| Segment Profit | ||||||||||||||||||||||||||||||||||||||
| Print and Other | $ | 268 | $ | - | $ | 208 | (52) | e | $ | 424 | ||||||||||||||||||||||||||||
| IT Solutions | - | 15 | - | (2) | e | 13 | ||||||||||||||||||||||||||||||||
| Intersegment | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Corporate | (70) | - | (10) | - | f | (80) | ||||||||||||||||||||||||||||||||
| Total Segment Profit | $ | 198 | $ | 15 | $ | 198 | $ | (54) | $ | 357 | ||||||||||||||||||||||||||||
nm - Not meaningful.
a.Represents the elimination of transactions between Xerox and Lexmark, primarily consisting of Lexmark's revenue and Xerox's cost of sales as well as the related impacts to Cost of sales for the purchase accounting adjustments to recognize inventory and fixed assets at fair value, depreciation expense and the impact of conforming certain of Lexmark's accounting policies to those of Xerox.
b.Reflects adjustments for compensation to certain Lexmark employees upon close of the transaction, lease expense, and transaction-related expenses and depreciation expense.
c.Reflects the adjustments to Amortization of intangible assets.
d.Reflects adjustments for interest and amortization of debt issuance costs partially offset by an adjustment related to pension benefits (excluding service cost).
e.Reflects the related impacts to Cost of sales for the purchase accounting adjustments to recognize inventory and fixed assets at fair value, as well as compensation to certain Lexmark employees upon close of the transaction, and the sale of Lexmark's non-operating assets.
f.Reflects the corporate costs of Lexmark not allocated to a segment.
Xerox 2025 Form 10-Q 87
Pro Forma Non-GAAP Financial Measures
Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods' results against the corresponding prior periods' results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. A reconciliation of these non-GAAP financial measures and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on the following tables:
Pro Forma Adjusted Operating Income and Margin reconciliation
|
Three Months Ended September 30,
|
|||||||||||||||||||||||||||||||||||||||||
| As Reported |
Pro Forma(1)
|
||||||||||||||||||||||||||||||||||||||||
|
2025
|
2024
|
2025
|
2024
|
Change |
Pro Forma(1)Change
|
||||||||||||||||||||||||||||||||||||
| (in millions) |
(Loss)
Profit
|
(Loss)
Profit
|
(Loss)
Profit
|
(Loss)
Profit
|
|||||||||||||||||||||||||||||||||||||
|
Pre-tax loss(2)
|
$ | (300) | $ | (1,087) | $ | (208) | $ | (1,099) | $ | 787 | $ | 891 | |||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||
| Goodwill impairment | - | 1,058 | - | 1,058 | (1,058) | (1,058) | |||||||||||||||||||||||||||||||||||
|
Inventory-related impact - exit of certain production print manufacturing operations(3)
|
3 | - | 3 | - | 3 | 3 | |||||||||||||||||||||||||||||||||||
|
Lexmark - inventory-related purchase accounting adjustment(4)
|
102 | - | 10 | - | 102 | 10 | |||||||||||||||||||||||||||||||||||
|
Lexmark - fixed asset-related purchase accounting adjustment(4)
|
16 | - | 16 | 17 | 16 | (1) | |||||||||||||||||||||||||||||||||||
| Lexmark - pre-existing employment agreements settled post-acquisition | 24 | - | 24 | - | 24 | 24 | |||||||||||||||||||||||||||||||||||
| Lexmark - sales of assets | - | - | - | 1 | - | (1) | |||||||||||||||||||||||||||||||||||
|
Reinvention-related costs
|
3 | - | 3 | - | 3 | 3 | |||||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 59 | 56 | 59 | 55 | 3 | 4 | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 30 | 10 | 30 | 34 | 20 | (4) | |||||||||||||||||||||||||||||||||||
|
Transaction and related costs, net
|
23 | - | 23 | - | 23 | 23 | |||||||||||||||||||||||||||||||||||
|
Other expenses, net (5), (6), (7)
|
105 | 43 | 105 | 86 | 62 | 19 | |||||||||||||||||||||||||||||||||||
| Adjusted | $ | 65 | $ | 80 | $ | 65 | $ | 152 | $ | (15) | $ | (87) | |||||||||||||||||||||||||||||
| Revenue | 1,961 | 1,528 | 1,961 | 2,127 | $ | 433 | $ | (166) | |||||||||||||||||||||||||||||||||
| Pre-tax Loss Margin | (15.3) | % | (71.1) | % | (10.6) | % | (51.7) | % | 55.8 | pts. | 41.1 | pts. | |||||||||||||||||||||||||||||
| Adjusted Operating Income Margin | 3.3 | % | 5.2 | % | 3.3 | % | 7.1 | % | (1.9) | pts. | (3.8) | pts. | |||||||||||||||||||||||||||||
_____________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section above for an explanation of this measure.
(2)Pre-tax loss.
(3)As a result of the exit of certain production print manufacturing operations, Cost of sales and Cost of services, maintenance, rentals and other excludes inventory-related charges of $3 and $0 for the three months ended September 30, 2025 and 2024, respectively.
(4)Reflects the related impacts to Cost of sales for the purchase accounting adjustments to recognize inventory and fixed assets at fair value.
(5)Includes non-service retirement-related costs.
(6)Includes non-financing interest expense of $80 million for the three months ended September 30, 2025, primarily due to interest and financing-related charges, net, related to borrowings made in support of the Lexmark Acquisition. This compares to $31 million of non-financing interest expense included in Other expenses, net for the three months ended September 30, 2024, which was partially offset by insurance proceeds of $15 million from a legal settlement for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020.
(7)Includes pro forma adjustments for interest and amortization of debt issuance costs partially offset by an adjustment related to pension benefits (excluding service cost).
Xerox 2025 Form 10-Q 88
Pro Forma Adjusted Operating Income and Margin reconciliation
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||
| As Reported |
Pro Forma(1)
|
||||||||||||||||||||||||||||||||||||||||
|
2025
|
2024
|
2025
|
2024
|
Change |
Pro Forma(1)Change
|
||||||||||||||||||||||||||||||||||||
| (in millions) |
(Loss)
Profit
|
(Loss)
Profit
|
(Loss)
Profit
|
(Loss)
Profit
|
|||||||||||||||||||||||||||||||||||||
|
Pre-tax loss(2)
|
$ | (427) | $ | (1,212) | $ | (366) | $ | (1,390) | $ | 785 | $ | 1,024 | |||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||
| Goodwill impairment | - | 1,058 | - | 1,058 | (1,058) | (1,058) | |||||||||||||||||||||||||||||||||||
|
Inventory-related impact - exit of certain production print manufacturing operations(3)
|
20 | 44 | 20 | 44 | (24) | (24) | |||||||||||||||||||||||||||||||||||
|
Lexmark - inventory-related purchase accounting adjustment(4)
|
102 | - | 10 | 92 | 102 | (82) | |||||||||||||||||||||||||||||||||||
|
Lexmark - fixed asset-related purchase accounting adjustment(4)
|
16 | - | 54 | 45 | 16 | 9 | |||||||||||||||||||||||||||||||||||
| Lexmark - settlement of pre-existing employment agreements | - | - | - | 19 | - | (19) | |||||||||||||||||||||||||||||||||||
| Lexmark - transaction and related costs, net | - | - | 14 | - | - | 14 | |||||||||||||||||||||||||||||||||||
| Lexmark - pre-existing employment agreements settled post-acquisition | 24 | - | 24 | - | 24 | 24 | |||||||||||||||||||||||||||||||||||
| Lexmark - sales of assets | - | - | - | (40) | - | 40 | |||||||||||||||||||||||||||||||||||
|
Reinvention-related costs
|
12 | - | 12 | - | 12 | 12 | |||||||||||||||||||||||||||||||||||
| Restructuring and related costs, net | 68 | 107 | 67 | 104 | (39) | (37) | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 50 | 30 | 92 | 103 | 20 | (11) | |||||||||||||||||||||||||||||||||||
| Divestiture | (4) | 51 | (4) | 51 | (55) | (55) | |||||||||||||||||||||||||||||||||||
|
Transaction and related costs, net
|
32 | - | 32 | - | 32 | 32 | |||||||||||||||||||||||||||||||||||
|
Other expenses, net (5), (6), (7)
|
253 | 120 | 288 | 271 | 133 | 17 | |||||||||||||||||||||||||||||||||||
| Adjusted | $ | 146 | $ | 198 | $ | 243 | $ | 357 | $ | (52) | $ | (114) | |||||||||||||||||||||||||||||
| Revenue | 4,994 | 4,608 | 5,934 | 6,391 | $ | 386 | $ | (457) | |||||||||||||||||||||||||||||||||
| Pre-tax Loss Margin | (8.6) | % | (26.3) | % | (6.2) | % | (21.7) | % | 17.7 | pts. | 15.5 | pts. | |||||||||||||||||||||||||||||
| Adjusted Operating Income Margin | 2.9 | % | 4.3 | % | 4.1 | % | 5.6 | % | (1.4) | pts. | (1.5) | pts. | |||||||||||||||||||||||||||||
_____________
(1)Reflects the inclusion of Lexmark as if it was acquired on January 1, 2024, and ITSavvy was acquired on January 1, 2023. Refer to the "Pro Forma Basis" section above for an explanation of this measure.
(2)Pre-tax loss.
(3)As a result of the exit of certain production print manufacturing operations, Cost of sales and Cost of services, maintenance, rentals and other excludes inventory-related charges of $19 and $38, for the nine months ended September 30, 2025 and 2024, respectively, as well as the cancellation of related purchase contracts $1 and $6 for the nine months ended September 30, 2025 and 2024, respectively.
(4)Reflects the related impacts to Cost of sales for the purchase accounting adjustments to recognize inventory and fixed assets at fair value.
(5)Includes non-service retirement-related costs.
(6)Includes non-financing interest expense of $168 million for the nine months ended September 30, 2025, primarily due to interest and financing-related charges, net, related to borrowings made in support of the Lexmark Acquisition. This compares to $88 million of non-financing interest expense included in Other expenses, net for the nine months ended September 30, 2024, which was partially offset by insurance proceeds of $38 million from a legal settlement for the reimbursement of certain legal and other professional costs, associated with the terminated proposal to acquire HP Inc. in early 2020.
(7)Includes pro forma adjustments for interest and amortization of debt issuance costs partially offset by an adjustment related to pension benefits (excluding service cost).
Xerox 2025 Form 10-Q 89
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