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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2022
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to
xrx-20220331_g1.jpg
XEROX HOLDINGS CORPORATION
XEROX CORPORATION
 (Exact Name of Registrant as specified in its charter)
New York001-3901383-3933743
New York001-0447116-0468020
(State or other jurisdiction of incorporation or organization)(Commission File Number)(IRS Employer Identification No.)
P.O. Box 4505, 201 Merritt 7
Norwalk, Connecticut 06851-1056
(Address of principal executive offices)
(203) 849-5216
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Xerox Holdings Corporation
Common Stock, $1 par valueXRXNasdaq Global Select Market
(Title of each class)(Trading Symbol)(Name of each exchange on which registered)
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
Xerox Holdings Corporation Yes ☒ No ☐              Xerox Corporation Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
Xerox Holdings Corporation Yes ☒ No ☐              Xerox Corporation Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.            
Xerox Holdings CorporationXerox Corporation
Large accelerated filer☒Large accelerated filer☐
Accelerated filer☐Accelerated filer☐
Non-accelerated filer☐Non-accelerated filer☒
Smaller reporting company☐Smaller reporting company☐
Emerging growth company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Xerox Holdings Corporation o      Xerox Corporation o
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Xerox Holdings Corporation Yes ☐ No ☒              Xerox Corporation Yes ☐ No ☒
Class Outstanding at April 30, 2022
Xerox Holdings Corporation Common Stock, $1 par value 154,862,456 shares


Forward-Looking Statements
This document, and other written or oral statements made from time to time by management contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “should”, “targeting”, “projecting”, “driving” and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially.
Such factors include but are not limited to: the effects of pandemics, such as the COVID-19 pandemic, on our and our customers' businesses and the duration and extent to which this will impact our future results of operations and overall financial performance; our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; reliance on third parties, including subcontractors, for manufacturing of products and provision of services and the shared service arrangements entered into by us as part of Project Own It; our ability to attract and retain key personnel; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyber attacks or other intentional acts or that cyberattacks could result in a shutdown of our systems; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring and transformation actions; our ability to manage changes in the printing environment like the decline in the volume of printed pages and extension of equipment placements; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; interest rates, cost of borrowing and access to credit markets; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; and any impacts resulting from the restructuring of our relationship with Fujifilm Holdings Corporation.
Additional risks that may affect Xerox’s operations are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this combined Quarterly Report on Form 10-Q, and Xerox Holdings Corporation’s and Xerox Corporation’s combined 2021 Annual Report on Form 10-K, as well as in Xerox Holdings Corporation’s and Xerox Corporation’s Current Reports on Form 8-K filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document or as of the date to which they refer, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.
Throughout this combined Quarterly Report on Form 10-Q (combined Form 10-Q), references to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to “Xerox Holdings Corporation” refer to the stand-alone parent company and do not include its subsidiaries. References to “Xerox Corporation” refer to the stand-alone company and do not include subsidiaries.
Xerox Holdings Corporation's primary direct operating subsidiary is Xerox and therefore Xerox reflects nearly all of Xerox Holdings' operations.

Xerox 2022 Form 10-Q 1

XEROX HOLDINGS CORPORATION
XEROX CORPORATION
FORM 10-Q
March 31, 2022
TABLE OF CONTENTS
 
 Page
For additional information about Xerox Holdings Corporation and Xerox Corporation and access to our Annual Reports to Shareholders and SEC filings, free of charge, please visit our website at www.xerox.com/investor. The content of our website is not incorporated by reference into this combined Form 10-Q unless expressly noted.
 
Xerox 2022 Form 10-Q 2

PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS

XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

 Three Months Ended
March 31,
(in millions, except per-share data)20222021
Revenues
Sales$592 $602 
Services, maintenance and rentals1,023 1,053 
Financing53 55 
Total Revenues1,668 1,710 
Costs and Expenses
Cost of sales435 420 
Cost of services, maintenance and rentals679 651 
Cost of financing24 28 
Research, development and engineering expenses78 74 
Selling, administrative and general expenses455 448 
Restructuring and related costs, net18 17 
Amortization of intangible assets11 15 
Other expenses, net57 4 
Total Costs and Expenses1,757 1,657 
(Loss) Income before Income Taxes and Equity Income(89)53 
Income tax (benefit) expense(31)14 
Equity in net income of unconsolidated affiliates1 — 
Net (Loss) Income(57)39 
Less: Net loss attributable to noncontrolling interests(1)— 
Net (Loss) Income Attributable to Xerox Holdings$(56)$39 
Basic (Loss) Earnings per Share$(0.38)$0.18 
Diluted (Loss) Earnings per Share$(0.38)$0.18 



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Xerox 2022 Form 10-Q 3

XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

 Three Months Ended
March 31,
(in millions)20222021
Net (Loss) Income$(57)$39 
Less: Net loss attributable to noncontrolling interests(1)— 
Net (Loss) Income Attributable to Xerox Holdings(56)39 
Other Comprehensive (Loss) Income, Net(1)
Translation adjustments, net(72)(51)
Unrealized losses, net(11)(7)
Changes in defined benefit plans, net39 55 
Other Comprehensive Loss, Net Attributable to Xerox Holdings(44)(3)
Comprehensive (Loss) Income, Net(101)36 
Less: Comprehensive loss, net attributable to noncontrolling interests(1)— 
Comprehensive (Loss) Income, Net Attributable to Xerox Holdings$(100)$36 
_____________
(1) Refer to Note 19 - Other Comprehensive (Loss) Income for gross components of Other comprehensive loss, net, reclassification adjustments out of Accumulated other comprehensive loss and related tax effects.




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

Xerox 2022 Form 10-Q 4

XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share data in thousands)March 31,
2022		December 31,
2021
Assets
Cash and cash equivalents$1,681 $1,840 
Accounts receivable (net of allowance of $63 and $58, respectively)
807 818 
Billed portion of finance receivables (net of allowance of $3 and $4, respectively)
89 94 
Finance receivables, net1,023 1,042 
Inventories732 696 
Other current assets234 211 
Total current assets4,566 4,701 
Finance receivables due after one year (net of allowance of $117 and $114, respectively)
1,893 1,934 
Equipment on operating leases, net254 253 
Land, buildings and equipment, net350 358 
Intangible assets, net240 211 
Goodwill3,300 3,287 
Deferred tax assets528 519 
Other long-term assets1,951 1,960 
Total Assets$13,082 $13,223 
Liabilities and Equity
Short-term debt and current portion of long-term debt$1,450 $650 
Accounts payable1,183 1,069 
Accrued compensation and benefits costs258 239 
Accrued expenses and other current liabilities878 871 
Total current liabilities3,769 2,829 
Long-term debt2,821 3,596 
Pension and other benefit liabilities1,359 1,373 
Post-retirement medical benefits247 277 
Other long-term liabilities473 481 
Total Liabilities8,669 8,556 
Commitments and Contingencies (See Note 21)
Noncontrolling Interests10 10 
Convertible Preferred Stock214 214 
Common stock156 168 
Additional paid-in capital1,560 1,802 
Treasury stock, at cost(32)(177)
Retained earnings5,532 5,631 
Accumulated other comprehensive loss(3,032)(2,988)
Xerox Holdings shareholders’ equity4,184 4,436 
Noncontrolling interests5 7 
Total Equity4,189 4,443 
Total Liabilities and Equity$13,082 $13,223 
Shares of common stock issued156,358 168,069 
Treasury stock(1,508)(8,675)
Shares of Common Stock Outstanding154,850 159,394 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Xerox 2022 Form 10-Q 5

XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 Three Months Ended
March 31,
(in millions)20222021
Cash Flows from Operating Activities
Net (Loss) Income$(57)$39 
Adjustments required to reconcile Net (loss) income to Cash flows from operating activities
Depreciation and amortization72 86 
Provisions19 20 
Stock-based compensation15 16 
Restructuring and asset impairment charges20 21 
Payments for restructuring(7)(27)
Non-service retirement-related costs(1)
(7)(20)
Contributions to retirement plans(1)
(38)(41)
Decrease in accounts receivable and billed portion of finance receivables13 92 
Increase in inventories(31)(18)
Increase in equipment on operating leases(36)(28)
Decrease in finance receivables41 37 
(Increase) decrease in other current and long-term assets(1)18 
Increase (decrease) in accounts payable111 (31)
Increase (decrease) in accrued compensation(1)
22 (10)
Decrease in other current and long-term liabilities(43)(35)
Net change in income tax assets and liabilities(39)6 
Net change in derivative assets and liabilities7 3 
Other operating, net5 (11)
Net cash provided by operating activities66 117 
Cash Flows from Investing Activities
Cost of additions to land, buildings, equipment and software(16)(17)
Acquisitions, net of cash acquired(54)— 
Other investing, net(5)— 
Net cash used in investing activities(75)(17)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt668 — 
Payments on long-term debt(646)(95)
Dividends(46)(54)
Payments to acquire treasury stock, including fees(113)(162)
Other financing, net(12)(7)
Net cash used in financing activities(149)(318)
Effect of exchange rate changes on cash, cash equivalents and restricted cash10 (12)
Decrease in cash, cash equivalents and restricted cash(148)(230)
Cash, cash equivalents and restricted cash at beginning of period1,909 2,691 
Cash, Cash Equivalents and Restricted Cash at End of Period$1,761 $2,461 
_____________
(1)Captions were changed in 2022 to reflect the inclusion of expense and contributions for our Retiree Health plans, which were previously reported as part of the Increase (decrease) in accrued compensation. There was no change to Net cash provided by operating activities as a result of the reclassification. Prior year amounts have been revised to conform to this presentation. Refer to Note 16 - Employee Benefit Plans for additional information.


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Xerox 2022 Form 10-Q 6

XEROX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

 Three Months Ended
March 31,
(in millions)20222021
Revenues
Sales$592 $602 
Services, maintenance and rentals1,023 1,053 
Financing53 55 
Total Revenues1,668 1,710 
Costs and Expenses
Cost of sales435 420 
Cost of services, maintenance and rentals679 651 
Cost of financing24 28 
Research, development and engineering expenses78 74 
Selling, administrative and general expenses455 448 
Restructuring and related costs, net18 17 
Amortization of intangible assets11 15 
Other expenses, net57 4 
Total Costs and Expenses1,757 1,657 
(Loss) Income before Income Taxes and Equity Income(89)53 
Income tax (benefit) expense(31)14 
Equity in net income of unconsolidated affiliates1 — 
Net (Loss) Income(57)39 
Less: Net loss attributable to noncontrolling interests(1)— 
Net (Loss) Income Attributable to Xerox$(56)$39 









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

Xerox 2022 Form 10-Q 7

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

 Three Months Ended
March 31,
(in millions)20222021
Net (Loss) Income$(57)$39 
Less: Net loss attributable to noncontrolling interests(1)— 
Net (Loss) Income Attributable to Xerox(56)39 
Other Comprehensive (Loss) Income, Net(1)
Translation adjustments, net(72)(51)
Unrealized losses, net(11)(7)
Changes in defined benefit plans, net39 55 
Other Comprehensive Loss, Net Attributable to Xerox(44)(3)
Comprehensive (Loss) Income, Net(101)36 
Less: Comprehensive loss, net attributable to noncontrolling interests(1)— 
Comprehensive (Loss) Income, Net Attributable to Xerox$(100)$36 
_____________
(1) Refer to Note 19 - Other Comprehensive (Loss) Income for gross components of Other comprehensive loss, net, reclassification adjustments out of Accumulated other comprehensive loss and related tax effects.



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

Xerox 2022 Form 10-Q 8

XEROX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions)March 31,
2022		December 31,
2021
Assets
Cash and cash equivalents$1,681 $1,840 
Accounts receivable (net of allowance of $63 and $58, respectively)
807 818 
Billed portion of finance receivables (net of allowance of $3 and $4, respectively)
89 94 
Finance receivables, net1,023 1,042 
Inventories732 696 
Other current assets234 211 
Total current assets4,566 4,701 
Finance receivables due after one year (net of allowance of $117 and $114, respectively)
1,893 1,934 
Equipment on operating leases, net254 253 
Land, buildings and equipment, net350 358 
Intangible assets, net240 211 
Goodwill3,300 3,287 
Deferred tax assets528 519 
Other long-term assets1,939 1,952 
Total Assets$13,070 $13,215 
Liabilities and Equity
Short-term debt and current portion of long-term debt$1,450 $650 
Accounts payable1,183 1,069 
Accrued compensation and benefits costs258 239 
Accrued expenses and other current liabilities833 823 
Total current liabilities3,724 2,781 
Long-term debt1,326 2,102 
Related party debt1,495 1,494 
Pension and other benefit liabilities1,359 1,373 
Post-retirement medical benefits247 277 
Other long-term liabilities473 481 
Total Liabilities8,624 8,508 
Commitments and Contingencies (See Note 21)
Noncontrolling Interests10 10 
Additional paid-in capital3,592 3,202 
Retained earnings3,871 4,476 
Accumulated other comprehensive loss(3,032)(2,988)
Xerox shareholder's equity4,431 4,690 
Noncontrolling interests5 7 
Total Equity4,436 4,697 
Total Liabilities and Equity$13,070 $13,215 





The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 
Xerox 2022 Form 10-Q 9

XEROX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 Three Months Ended
March 31,
(in millions)20222021
Cash Flows from Operating Activities
Net (Loss) Income$(57)$39 
Adjustments required to reconcile Net (loss) income to Cash flows from operating activities
Depreciation and amortization72 86 
Provisions19 20 
Stock-based compensation15 16 
Restructuring and asset impairment charges20 21 
Payments for restructurings(7)(27)
Non-service retirement-related costs(1)
(7)(20)
Contributions to retirement plans(1)
(38)(41)
Decrease in accounts receivable and billed portion of finance receivables13 92 
Increase in inventories(31)(18)
Increase in equipment on operating leases(36)(28)
Decrease in finance receivables41 37 
(Increase) decrease in other current and long-term assets(1)18 
Increase (decrease) in accounts payable111 (31)
Increase (decrease) in accrued compensation(1)
22 (10)
Decrease in other current and long-term liabilities(43)(35)
Net change in income tax assets and liabilities(39)6 
Net change in derivative assets and liabilities7 3 
Other operating, net5 (11)
Net cash provided by operating activities66 117 
Cash Flows from Investing Activities
Cost of additions to land, buildings, equipment and software(16)(17)
Acquisitions, net of cash acquired(54)— 
Net cash used in investing activities(70)(17)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt668 — 
Payments on long-term debt(646)(95)
Distributions to parent(174)(220)
Other financing, net(2)(3)
Net cash used in financing activities(154)(318)
Effect of exchange rate changes on cash, cash equivalents and restricted cash10 (12)
Decrease in cash, cash equivalents and restricted cash(148)(230)
Cash, cash equivalents and restricted cash at beginning of period1,909 2,691 
Cash, Cash Equivalents and Restricted Cash at End of Period$1,761 $2,461 
_____________
(1)Captions were changed in 2022 to reflect the inclusion of expense and contributions for our Retiree Health plans, which were previously reported as part of the Increase (decrease) in accrued compensation. There was no change to Net cash provided by operating activities as a result of the reclassification. Prior year amounts have been revised to conform to this presentation. Refer to Note 16 - Employee Benefit Plans for additional information.


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Xerox 2022 Form 10-Q 10

XEROX HOLDINGS CORPORATION
XEROX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in millions, except per-share data and where otherwise noted)

Note 1 – Basis of Presentation
References to “Xerox Holdings” refer to Xerox Holdings Corporation and its consolidated subsidiaries while references to “Xerox” refer to Xerox Corporation and its consolidated subsidiaries. References herein to “we,” “us,” “our,” the “Company” refer collectively to both Xerox Holdings and Xerox unless the context suggests otherwise. References to "Xerox Holdings Corporation" refer to the stand-alone parent company and do not include its subsidiaries. References to "Xerox Corporation" refer to the stand-alone company and do not include its subsidiaries.
The accompanying unaudited Condensed Consolidated Financial Statements and footnotes represent the respective, consolidated results and financial results of Xerox Holdings and Xerox and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise. This is a combined report of Xerox Holdings and Xerox, which includes separate unaudited Condensed Consolidated Financial Statements for each registrant.
The accompanying unaudited Condensed Consolidated Financial Statements of both Xerox Holdings and Xerox have been prepared in accordance with the accounting policies described in the Combined 2021 Annual Report on Form 10-K (2021 Annual Report), except as noted herein, and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. You should read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements included in the 2021 Annual Report.
In our opinion, all adjustments necessary for a fair statement of financial position, operating results and cash flows for the interim periods presented have been made. These adjustments consist of normal recurring items. Interim results of operations are not necessarily indicative of the results of the full year.
For convenience and ease of reference, we refer to the financial statement caption “(Loss) Income before Income Taxes and Equity Income” as “pre-tax (loss) income”.
Notes to the Condensed Consolidated Financial Statements reflect the activity for both Xerox Holdings and Xerox for all periods presented, unless otherwise noted.
Segments
During the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE) - 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, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.
Refer to Note 4 - Segment Reporting for additional information regarding this change.
Goodwill
Interim Impairment Evaluation
Our goodwill balance was $3.3 billion at March 31, 2022 and December 31, 2021, respectively. The balance at December 31, 2021 reflects a pre-tax impairment charge of $781 recorded in the fourth quarter 2021 after completion of our fourth quarter annual goodwill impairment assessment. We assess goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
As noted above, during the first quarter 2022, the Company made a change to its operating and reportable segments from one operating/reportable segment - Printing - to two operating/reportable segments - Print and Other, and Financing (FITTLE). As a result of the new operating and reportable segments, we also reassessed our reporting units for the evaluation of goodwill. Prior to this change, consistent with the determination that we had one operating/reportable segment, we determined that we had one reporting unit for goodwill assessment purposes. Our
Xerox 2022 Form 10-Q 11

reassessment during the first quarter of 2022 determined that likewise consistent with the determination that we had two operating/reportable segments, we now have two reporting units – Print and Other, and Financing (FITTLE).
As a result of the change in reporting units, effective January 1, 2022, we estimated the fair value of our new reporting units and, based on an assessment of the relative fair values of our new reporting units after the change, we determined that no goodwill was allocable to the Financing (FITTLE) segment. This determination was largely based on the fact that at this stage in the stand-up of the Financing (FITTLE) business, its separate valuation is constrained and limited because the operation is significantly integrated with the Print and Other segment and is primarily an extension or enabler to facilitate the sale of the Company’s products. The change in reporting units was also considered a triggering event indicating a test for goodwill impairment was required as of January 1, 2022 before and after the change in reporting units. The Company performed those impairment tests, which did not result in the identification of an impairment loss as of January 1, 2022.
During the first quarter 2022, the Company encountered significant operational challenges and uncertainties, due to supply chain constraints, inflationary pressure on costs, geopolitical uncertainty in Europe and the threat of additional COVID-19 variants. Despite these uncertainties, the Company expects to maintain its full year 2022 financial outlook since at this stage in the year we do not have enough information or clarity (positive or negative) on these uncertainties to warrant an adjustment in our outlook. Accordingly, based on our interim assessment as of March 31, 2022, we determined that it was more-likely-than-not that the fair value of Print and Other reporting unit (the only reporting unit with goodwill) was still greater than its net book value and that we did not have a “triggering event” requiring a quantitative assessment of Goodwill. Despite indications that our excess fair value is likely reduced as compared to the impairment test as of January 1, 2022, the Company's projections for the full year 2022, reviewed as part of our quantitative analysis, are still within the range of our sensitivity analysis performed as part of our January 1, 2022 interim impairment assessment.
If assumptions or estimates with respect to the Company's future performance vary from what is expected, including those assumptions relating to the supply chain constraints, inflationary pressure on costs, geopolitical uncertainty in Europe and the threat of additional COVID-19 variants, this may impact the impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.
Note 2 – Recent Accounting Pronouncements
Xerox Holdings and Xerox consider the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB). The ASUs listed below apply to both registrants. ASUs not listed below were assessed and determined to be not applicable to the Condensed Consolidated Financial Statements of either registrant.
Accounting Standard Updates to be Adopted:
Financial Instruments
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures - Gross Write-offs. The amendments in this update eliminate the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables. The update is applicable for financing receivables and net investments in leases that are within the scope of ASC 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. This update is effective for our fiscal year beginning on January 1, 2023, but early adoption is permitted. The provisions of this amendment are to be applied on a prospective basis. We are currently evaluating the impact of the adoption of this standard on the Company's consolidated financial statements and related disclosures.
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which provided clarification guidance to ASU 2020-04. These ASUs were effective commencing with our quarter ended March 31, 2020 through December 31, 2022. There has been no impact to date as a result of ASU 2020-04 or ASU 2021-01 and subsequent amendments on reference rate reform. However, we continue to evaluate potential future impacts that may result
Xerox 2022 Form 10-Q 12

from the discontinuation of LIBOR or other reference rates as well as the accounting provided in this update on our financial condition, results of operations, and cash flows.
Accounting Standard Updates Adopted in 2022:
Government Assistance
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. The update increases the transparency surrounding government assistance by requiring disclosure of 1) the types of assistance received, 2) an entity’s accounting for the assistance, and 3) the effect of the assistance on the entity’s financial statements. We adopted this update effective for our fiscal year beginning January 1, 2022. The impact of adoption was not material to our Consolidated Financial Statements. Impacts on future periods will depend on the amounts of government assistance received. Prior to the COVID pandemic, the amounts of government assistance the Company received were not material and since the update is limited to increased disclosures, we do not expect the adoption to have a material impact on our financial condition, results of operations, and cash flows in future periods.
Business Combinations
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. We early adopted this update effective for our fiscal year beginning January 1, 2022. The impact of adopting the new standard will depend on the magnitude of future acquisitions. The standard will not impact contract assets or liabilities acquired in business combinations that occurred prior to the adoption date.
Debt
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). This update simplified the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amended the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and required the application of the if-converted method for calculating diluted earnings per share. We adopted this update effective for our fiscal year beginning January 1, 2022. The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Other Updates
In 2022 and 2021, the FASB also issued the following ASUs, which impact the Company but did not have, or are not expected to have, a material impact on our financial condition, results of operations or cash flows upon adoption. Those updates are as follows:
•Derivatives and Hedging: ASU 2022-01, Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method. This update is effective for our fiscal year beginning January 1, 2023.
•Equity Instruments: ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options). This update is effective for our fiscal year beginning January 1, 2022.
•Leases: ASU 2021-05, Leases - Certain Lease Payments with Variable Lease Payments (ASC 842). This update is effective for our fiscal year beginning January 1, 2022.
Xerox 2022 Form 10-Q 13

Note 3 – Revenue
Revenues disaggregated by primary geographic markets, major product lines, and sales channels are as follows:
Three Months Ended
March 31,
20222021
Primary geographical markets(1):
United States$940 $974 
Europe466 499 
Canada115 93 
Other147 144 
Total Revenues$1,668 $1,710 
Major product and services lines:
Equipment$314 $381 
Supplies, paper and other sales278 221 
Maintenance agreements(2)
429 435 
Service arrangements(3)
486 489 
Rental and other108 129 
Financing53 55 
Total Revenues$1,668 $1,710 
Sales channels:
Direct equipment lease(4)
$135 $147 
Distributors & resellers(5)
261 254 
Customer direct196 201 
Total Sales$592 $602 
_____________
(1)Geographic area data is based upon the location of the subsidiary reporting the revenue.
(2)Includes revenues from maintenance agreements on sold equipment as well as revenues associated with service agreements sold through our channel partners as Xerox Partner Print Services (XPPS).
(3)Primarily includes revenues from our Managed Services arrangements. Also includes revenues from embedded operating leases in our Managed Service arrangements, which were not significant.
(4)Primarily reflects sales through bundled lease arrangements.
(5)Primarily reflects sales through our two-tier distribution channels.
Contract Assets and Liabilities: We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time. Our contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advance billings for maintenance and other services to be performed and were approximately $138 and $144 at March 31, 2022 and December 31, 2021, respectively. The majority of the balance at March 31, 2022 will be amortized to revenue over approximately the next 30 months.
Contract Costs: Incremental direct costs of obtaining a contract primarily include sales commissions paid to sales people and agents in connection with the placement of equipment with associated post sale services arrangements. These costs are deferred and amortized on the straight-line basis over the estimated contract term, which is currently estimated to be approximately four years. We pay commensurate sales commissions upon customer renewals, therefore our amortization period is aligned to our initial contract term.
Incremental direct costs are as follows:
Three Months Ended
March 31,
20222021
Incremental direct costs of obtaining a contract$13 $13 
Amortization of incremental direct costs18 19 
Xerox 2022 Form 10-Q 14

The balance of deferred incremental direct costs net of accumulated amortization at March 31, 2022 and December 31, 2021 was $128 and $132, respectively. This amount is expected to be amortized over its estimated period of benefit, which we currently estimate to be approximately four years.
We may also incur costs associated with our services arrangements to generate or enhance resources and assets that will be used to satisfy our future performance obligations included in these arrangements. These costs are considered contract fulfillment costs and are amortized over the contractual service period of the arrangement to cost of services. In addition, we provide inducements to certain customers in various forms, including contractual credits, which are capitalized and amortized as a reduction of revenue over the term of the contract. As of March 31, 2022 and December 31, 2021, amounts deferred associated with contract fulfillment costs and inducements were $14 and $15, respectively, and the related amortization was $1 and $1 for the three months ended March 31, 2022 and 2021, respectively.
Equipment and software used in the fulfillment of service arrangements, and where the Company retains control, are capitalized and depreciated over the shorter of their useful life or the term of the contract if an asset is contract specific.
Note 4 – Segment Reporting
Our reportable segments are aligned with how we manage the business and view the markets we serve. During the first quarter of 2022, the Company changed to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE) 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. Our two reportable segments are based on the information reviewed by the CODM together with the Company’s management to evaluate performance of the business and allocate resources. As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.
During 2021 we progressed with the standing up of three new businesses: Software (CareAR), Financing (FITTLE) and Innovation (PARC). As a result of this effort, during the first quarter of 2022, we reassessed our operating and reportable segments and determined that, based on the financial information reviewed by our CODM as well as the CEO’s management and assessment of the Company’s operations, we had two operating and reportable segments - Print and Other, and Financing.
•Print and Other - the design, development and sale of document management systems, solutions and services as well as associated technology offerings including IT and software products and services.
•Financing (FITTLE) – primarily provides financing for the sales of Xerox equipment.
We also determined that the other businesses – Software and Innovation - did not meet the requirements to be considered separate operating segments largely due to their continued management through the Print and Other Segment as well as their immateriality to our results at this stage. Accordingly, those groups will continue to be reported as part of the Print and Other Segment.
Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services. The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. This segment also includes IT services and software. Our product groupings range from:
•“Entry,” which includes A4 devices and desktop printers; to
•“Mid-range,” which includes A3 devices that generally serve workgroup environments in mid to large enterprises and includes products that fall into the following market categories: Color 41+ ppm priced at less than $100 thousand and Light Production 91+ ppm priced at less than $100 thousand; to
•“High-end,” which includes production printing and publishing systems that generally serve the graphic communications marketplace and large enterprises.
Customers range from small and mid-sized businesses to large enterprises. Customers also include graphic communication enterprises as well as channel partners including distributors and resellers. Segment revenues also include commissions and other payments from the Financing segment for the exclusive right to provide lease financing for Xerox products. These revenues are reported as part of Intersegment Revenues, which are eliminated in consolidated revenues.
Xerox 2022 Form 10-Q 15

The Financing (FITTLE) segment provides leasing solutions through either bundled or unbundled lease agreements of Xerox products or direct purchases of equipment. These leasing solutions support a wide range of customers, from government to graphic communications and SMB to Enterprise as well as financing for direct channel customer purchases of both Xerox and non-Xerox equipment. Segment revenues primarily includes financing income on sales-type leases, operating lease income (including month to month rentals and extensions) and leasing fees.
Segment Policy
We derive the results of our business segments directly from our internal management reporting system. The accounting policies that the Company uses to derive its segment results are substantially the same as those used by the Company in preparing its consolidated financial statements. The segment results include a significant level of management estimates regarding the allocation of revenues such as finance income in bundled lease arrangements and other leasing revenues and operating lease revenues embedded in our managed services contracts as well as the allocation of expenses for shared selling and administrative services. Accordingly, the financial results for the Financing segment may not be indicative of the results the business would have as on a standalone basis or what might be presented for the business in stand-alone financial statements. The CODM measures the performance of each segment based on several metrics, including segment revenues and profit. The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each segment. The Financing (FITTLE) segment also includes interest expense associated with allocated debt of the Company in support of its Finance assets, while no interest expense is allocated to the Print and Other segment.
Selected financial information for our reportable segments was as follows:
Three Months Ended March 31,
20222021
Print and OtherFinancing (FITTLE)TotalPrint and OtherFinancing (FITTLE)Total
External net revenue$1,513 $155 $1,668 $1,533 $177 $1,710 
Intersegment net revenue(1)
37 3 40 48