Q3 2023 Xerox Holdings Corp Earnings Call

October 24, 2023

Okay.

Speaker 1: Welcome to the Xerox Holdings Corporation, third quarter, 2023 earnings release conference call. After the presentation, there will be a question and answer session to ask your questions at that time. Please press star 11 at any time during this call. You can withdraw your question by simply pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckle, vice president of Investor Relations. Please go ahead, Sarah.

Welcome to the Xerox Holdings Corporation third quarter 2023 earnings release conference call. After the presentation, there will be a question and answer session.

Ask your questions at that time, Please press star one one at any time. During this call you can withdraw your question by simply pressing star one one again at this time I would like to turn the meeting over to Mr. David <unk>, Vice President of Investor Relations. Please go ahead Sir.

Speaker 2: Good morning everyone. I'm David Bechel, Vice President and Head of Investor Relations at Zürak's Holdings Corporation.

Good morning, everyone I'm, David Backhaul, Vice President and head of Investor Relations at Xerox Holdings Corporation.

Speaker 2: Welcome to the Zero Arts Holdings Corporation. Third quarter, 2023 earnings release conference call hosted by Steve Banderzak, Chief Executive Officer.

Welcome to the Xerox Holdings Corporation third quarter 2023 earnings release Conference call hosted by Steve <unk>, Chief Executive Officer.

Speaker 2: He's joined by Zavea Heist, executive vice president and chief financial officer.

He is joined by Doug Hi.

Executive Vice President and Chief Financial Officer.

At the request of Xerox Holdings Corporation today's conference call is being recorded.

Speaker 2: After requested Zerox holding scoreperation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of Zerox.

Recording and or rebroadcast of this call are prohibited without the expressed permission of Xerox.

Speaker 2: During this call, Zerox executives will refer to slides that are available on the web at www.Zerox.com slash investor. We will make comments that contain four looking statements, which, by their nature, address matters that are in the future and uncertain.

During this call Xerox executives will refer to slides that are available on the web at www Dot Xerox Dot com slash investor.

Comments that contain forward looking statements, which by their nature address matters that are in the future and uncertain.

Actual future financial results may be materially different than those expressed herein.

Speaker 2: Actual future financial results may be materially different than those expressed here in. At this time, I'd like to turn the meeting up.

At this time I'd like to turn the meeting over to Mr. <unk> good.

Speaker 3: Good morning, and thank you for joining out Q3 2023 earnings call. Before I get to this court as results, I would like to start today's call by acknowledging the tragic events unfolding in the Middle East. Our thoughts and prayers are with the victims and their families, which include our local employees, clients, and partners. We are all hoping for a peaceful resolution.

Good morning, and thank you for joining our Q3 2023 earnings call before I get to this quarter's results I would like to start today's call by acknowledging the tragic events unfolding in the middle East our thoughts and prayers are with the victims and their families which include our local employees clients and partners. We are all.

Hoping for a peaceful resolution.

Speaker 3: In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income, EPS, and pre-cash flow.

In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income.

And free cash flow.

Speaker 3: summarizing results for the quarter, revenue of 1.65 billion declined, 5.7% in actual currency, and 7.4% in constant currency.

Summarizing results for the quarter revenue of 165 billion declined five 7% in actual currency and seven 4% in constant currency.

Speaker 3: Adjusted EPS was 46 cents, 27 cents higher year over year.

Adjusted EPS was <unk> 46 cents.

27, <unk> higher year over year.

Speaker 3: Free cash flow was 112 million compared to a use of 18 million in the prior year quarter.

Free cash flow was $112 million compared to a use of $18 million in the prior year quarter.

Speaker 3: and adjusted operating margin of 4.1% was higher year over year by 40 basis point.

And adjusted operating margin of four 1% was higher year over year by 40 basis points.

Well I've never pleased to report a decline in revenue. This quarter's top line results were largely anticipated the.

Speaker 3: While I'm never pleased to report a decline in revenue, this court's top-line results were largely anticipated. The decline in revenue reflects a relatively stable demand environment for our products and services offset by declines in certain cyclical low-module and post-sale revenue categories, as well as declines in revenues associated with strategic actions put in place to simplify our business.

The decline in revenue reflects a relatively stable demand environment for our products and services offset by declines in certain cyclical low margin post sale revenue categories as well as declines in revenues associated with strategic actions put in place to simplify our business.

Speaker 3: Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year-over-year base.

Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year over year basis. This growth is due to a reduction in costs associated with recent business simplification efforts, our ability to offset product cost increases with higher prices.

Speaker 3: This growth is due to reduction in costs associated with recent business simplification efforts, our ability to offset product costs increases with higher prices, and the purposeful avoidance of revenue opportunities bearing low levels of profitability.

And the purpose of avoidance of revenue opportunities bearing low levels of profitability.

As I will discuss we expect the continued simplification of our business to drive substantial incremental improvement in profit margin and profit levels over the next few years.

Speaker 3: As I will discuss, we expect the continued simplification of our business to drive substantial, incremental improvement in profit margin and profit levels over the next few years.

Free cash flow improved $130 million year over year in Q3, and as it increased by more than $330 million year to date.

Speaker 3: Re-catchful improved the 130 million Euro be year in Q3 and has increased by more than 330 million year today.

Speaker 3: Growth and free cash flow was due in part to a change in fiddle strategy and it's approached to funding new originations, which we expect will generate meaningful amounts of incremental free cash flow for many years to come. As always, we remain focused on our three strategic priorities, client success, profitability, and shareholder returns.

Growth in free cash flow was due in part to a change in <unk> strategy and its approach to funding new originations, which we expect will generate meaningful amounts of incremental free cash flow for many years to come.

Unknown Executive: Welcome to the Xerox Holdings Corporation, 3rd quarter of 2023 earnings release conference call. After the presentation, there will be a question and answer session to ask your questions at that time. Please press star 11 at any time during this call. You can withdraw your question by simply pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckel, vice president of Investor Relations. Please go ahead, sir.

Operator: Welcome to the Xerox Holdings Corporation, 3rd quarter of 2023 earnings release conference call. After the presentation, there will be a question and answer session to ask your questions at that time. Please press star 11 at any time during this call. You can withdraw your question by simply pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckel, vice president of Investor Relations. Please go ahead, sir.

Always we remain focused on our three strategic priorities client success profitability and shareholder returns.

Speaker 3: Client success is a strategic imperative for Xerox, our ability to solve clients' most challenging workplace productivity needs, and offset the effects of rising inflation, labor constraints, and higher costs of capital with productivity enhancing solutions. Helps us not only gain market share and print, but expand client-loyalty through incremental service.

Client success is a strategic imperative for Xerox, our ability to solve clients' most challenging workplace productivity needs and offset the effects of rising inflation labor constraints and the higher cost of capital with productivity enhancing solutions helps us not only gain market share in print.

Unknown Executive: Good morning, everyone. I'm David Beckel, vice president and head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation, 3rd quarter 2023 earnings release conference call, hosted by Steve Bandrowczak, Chief Executive Officer. He joined by Zave Heiss, Executive Vice President and Chief Financial Officer. After a question, Xerox Holdings Corporation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of Xerox.

Operator: Good morning, everyone. I'm David Beckel, vice president and head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation, 3rd quarter 2023 earnings release conference call, hosted by Steve Bandrowczak, Chief Executive Officer. He joined by Zave Heiss, Executive Vice President and Chief Financial Officer. After a question, Xerox Holdings Corporation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of Xerox.

But expand client wallet share through incremental services.

This quarter Xerox was recognized as a leader in the IDC market Scapes worldwide transformation vendor assessment for our breath of transformative workplace technology solutions, both related to and adjacent to print.

Speaker 3: This Court has Xerox was recognized as a leader in IDC, market scapes, worldwide print transformation, vendor assessment for our breadth of transformative workplace technology solutions, both related to and adjacent to print.

Speaker 3: Our advanced solutions provide us a distinct advantage as we compete for new and renewal business.

Our advanced solutions provide us a distinct advantage as we compete for new and renewal business.

Unknown Executive: During his call, Xerox executives will refer to slides that are available on the web at www. Xerox.com slash Investor. We will make comments that contain forward-looking statements which, by their nature, address matters that are in the future and uncertain. Actual future financial results may be materially different than those expressed herein.

Operator: During his call, Xerox executives will refer to slides that are available on the web at www. Xerox.com slash Investor. We will make comments that contain forward-looking statements which, by their nature, address matters that are in the future and uncertain. Actual future financial results may be materially different than those expressed herein.

Speaker 3: This quarter and year-to-date service signings grew double digits in constant currency, led by growth in digital services.

This quarter and year to date service signings grew double digits in constant currency led by growth in digital services.

Speaker 3: Increasingly, digital services such as advance customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients renew.

Increasingly digital services, such as advanced customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients renew.

Steven Bandrowczak: At this time, I'd like to turn the meeting over to Mr. Bandrowczak. Good morning, and thank you for joining our Q3 2023 earnings call.

David Beckel: At this time, I'd like to turn the meeting over to Mr. Bandrowczak. Good morning, and thank you for joining our Q3 2023 earnings call.

Steven Bandrowczak: Before I get to this court as results, I would like to start today's call by acknowledging the tragic events unfolding in the Middle East. Our thoughts and prayers are with the victims and their families, which include our local employees, clients and partners. We are all hoping for a peaceful resolution. In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income, EPS, and pre-cash flow.

Year to date, the revenue replacement rate for a majority of renewed service contract is 100% or higher despite the ongoing consolidation of print demand as companies adapt to more permanent hybrid workplace arrangements.

Speaker 3: Year to date, the revenue replacement rate for a majority of renewed service contract is 100% or higher, despite the ongoing consolidation of print demand as companies adapt to more permanent hybrid workplace arrangements.

Speaker 3: Moving to profitability. In Q3, we took additional actions to simplify our operations and improve the efficiency of our cost structure.

Moving to profitability in Q3, we took additional actions to simplify our operations and improve the efficiency of our cost structure.

Speaker 3: In August , we sold out 3D print business, LMATIV solutions to ATITEC and in September , we announced the expansion of our relationship with peak solutions and a affiliate of HBS investment partners to include the provision of leasing services to Fittles network of independent dealers.

In August we saw about <unk> print business, Alan additive solutions to added Tech and in September we announced the expansion of our relationship with peak solutions and affiliate of Hps investment partners to include the provision of leasing services to bid those network of independent dealers.

Steven Bandrowczak: Summarizing results for the quarter, revenue of 1.65 billion declined, 5.7% in actual currency, and 7.4% in constant currency. Adjusted EPS was 46 cents, 27 cents higher year-over-year. Pre-cash flow was 112 million compared to a use of 18 million in the prior year quarter. An adjusted operating margin of 4.1% was higher year-over-year by 40 basis points. While I'm never pleased to report a decline in revenue, this quarter's top-line results were largely anticipated.

Speaker 3: Both actions improve the flexibility of our cost-based while enabling greater focus on our core capabilities in and around print, digital and IT service.

Both actions improved our flexibility about cost base, while enabling greater focus on our core capabilities in and around print digital and it services.

Speaker 3: Finally, shareholder returns a few weeks ago. We repurchased the roughly 34 million shares previously owned by call icon and affiliates, resulting in a reduction of our share count of around 22%.

Finally shareholder returns.

Few weeks ago, we repurchased roughly 34 million shares previously owned by Carl Icahn and affiliates, resulting in a reduction of our share count of around 22%.

Steven Bandrowczak: The decline in revenue reflects a relatively stable demand environment for our products and services, offset by declines in certain cyclical low-modge and post-sale revenue categories, as well as declines in revenues associated with strategic actions could in place to simplify our business. Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year-over-year basis. This growth is due to reduction in costs associated with recent business simplification efforts, our ability to offset product costs increases with higher prices, and the purposeful avoidance of revenue opportunities bearing low levels of profitability.

Speaker 3: The decision to repurchase these shares was consistent with the capital allocation and shareholder return philosophy, which is to deploy cash in areas, providing the highest return for shareholders.

A decision to repurchase the shares was consistent with the capital allocation and shareholder return philosophy, which is to deploy cash in areas, providing the highest return for shareholders Matt.

Speaker 3: Management and the Board of Directors believe this transactional creates substantial value for shareholders over time. As the reduction of shares allows equity holders greater participation in the expected earnings growth associated with our transformation, which I will discuss shortly.

Management and the board of Directors believe this transaction will create substantial value for shareholders overtime.

As the reduction of shares allows equity holders greater participation in the expected earnings growth associated with our transformation, which I will discuss shortly.

Speaker 3: The transaction is expected to be EPS accretive while preventing the type of market overhang, normally associated with an open market disposal of significant equity state.

The transaction is expected to be EPS accretive, while preventing the type of market overhang normally associated with an open market disposal of significant equity states.

Steven Bandrowczak: As I will discuss, we expect the continued simplification of our business to drive substantial, incremental improvement in profit margin, and profit levels over the next few years. Free cash flow improved 130 million year-over-year in Q3, and has increased by more than 330 million year-to-date. Growth and free cash flow was due in part to a change in fiddle strategy, and its approach to funding new originations, which we expect will generate meaningful amounts of incremental free cash flow for many years to come.

Speaker 3: Our three strategic priorities have been instrumental in laying the groundwork for our direction moving forward.

Our three strategic priorities have been instrumental in laying the groundwork for our direction moving forward.

Speaker 3: On our Q2 call, we provided examples of the ways in which we are simplifying our business to refocus on our core operations of print, digital and IT service.

On our Q2 call. We provided examples of the ways in which we are simplifying our business to refocus on our core operations of print digital and it services.

Those actions were critical enablers of an even more significant transformation of our business.

Speaker 3: Those actions were critical in ableers of an even more significant transformation of our business.

Speaker 3: For the past year with the help of outside experts, we have analyzed our business model, competitive strengths, and market opportunities to define an optimal strategic path. And today, we are sharing with investors the preliminary framework for a multi-year strategic transformation plan, which we refer to as reinvention. First, let me define what reinvention means to zero.

For the past year with the help of outside experts, we have analyzed our business model competitive strengths and market opportunities to define an optimal strategic path and today, we are sharing with investors the preliminary framework for a multi year strategic transformation plan.

Steven Bandrowczak: As always, we remain focused on our three strategic priorities, client success, profitability, and shareholder returns. Client success is a strategic imperative for Xerox, our ability to solve clients' most challenging workplace productivity needs, and offset the effects of rising inflation, labor constraints, and higher costs of capital with productivity enhancing solutions. Helps us not only gain market share and print, but expand client-loyalty through incremental services. This court has Xerox was recognized as a leader in IDC, market scapes, worldwide print transformation, vendor assessment, for our breadth of transformative workplace technology solutions, both related to and adjacent to print.

We referred to as reinvention.

First let me define what reinvention means to Xerox Green.

Speaker 3: Reinvention is a comprehensive and operational simplification about business, resulting in a strategic repositioning of the company to take advantage of favorable macro trends, including the digitalization of document workflows associated with the power of AI while managing the sector where headwinds associated with traditional prints.

Reinvention is a comprehensive and operational simplification of our business, resulting in a strategic repositioning of the company to take advantage of favorable macro trends, including the digitalization of document workflows associated with the power of AI while man.

<unk> the secular headwinds associated with traditional print.

Reinvention does not mean, we're abandoning our core crane business, which we expect to continue generating strong profits and cash flow for many years reinvention means building new capabilities on top of a solid print core.

Speaker 3: Reinvention does not mean we are abandoning our core print business, which we expect to continue generating strong profits and cash flow for many years.

Steven Bandrowczak: Our advanced solutions provide us a distinct advantage as we compete for new and renewal business. This quarter and year-to-date service signings grew double digits in constant currency, led by growth in digital services, increasingly digital services such as advanced customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients for new. Year-to-date, the revenue replacement rate for a majority of renewed service contract is 100% or higher despite the ongoing consolidation of print demand as companies adapt to more permanent hybrid workplace arrangements.

Speaker 3: Re-invention means building new capabilities on top of a solid print core.

Speaker 3: Management and the board believe the most direct and probable path to sustainable growth in profit, free cash flow and shaleholder returns requires a structural redesign of our operations combined with selected reinvestment in capability is essential to addressing clients most challenging workplace productivity needs.

Management and the board believes the most direct and probable path to sustainable growth and profit free cash flow and shareholder returns requires a structural redesign of our operations combined with selected reinvestment in capability is essential to addressing clients most challenging work.

Place productivity needs.

Speaker 3: The workplace has evolved and Girox is evolving with it to ensure we power the productive workplace of today and tomorrow.

Workplace has evolved and Xerox is evolving with it to ensure we power the productive workplace of today and tomorrow.

The ultimate goal of reinvention is to facilitate Xerox shifts from a leader in print technology to an unparalleled technology and service provider.

Speaker 3: The ultimate goal of reinvention is to facilitate Xerox shift from a leader in print technology to an unparalleled technology and service provider.

Steven Bandrowczak: Moving to profitability, in Q3 we took additional actions to simplify our operations and improve the efficiency of our cost structure. In August, we sold out 3D print business, LM additive solutions to add a tech and in September, we announced the expansion of our relationship with peak solutions and affiliate of HBS investment partners to include the provision of leasing services to fiddle's network of independent dealers. Both actions improve the flexibility of our cost-based while enabling greater focus on our core capabilities in and around print, digital and IT services.

There are three primary components of the reinvention first is a geographic optimization, which entails taking a more selective approach to direct operations in certain markets and when appropriate shifting to a partner led distribution model.

Speaker 3: There are three primary components of the reinvention. First is a geographic optimization, which entails taking a more selective approach to direct operations in certain markets and when appropriate, shifting to a partner-led distribution model.

Speaker 3: This optimization of our go-to-market approach is expected to result in lower revenue initially, but provide a stronger and more profitable foundation for which to grow revenue going forward.

This optimization of our go to market approach is expected to result in lower revenue initially, but provide a stronger and more profitable foundation from which to grow revenue going forward.

Speaker 3: Second is the optimization of our product offering and pricing models. Through the reinvention, we will streamline our product offerings to maximize profitability and allow greater internal focus on the delivery of products and services that address the evolving needs of a hybrid workplace.

Second is the optimization of our product offering and pricing models through the reinvention, we will streamline our product offerings to maximize profitability and allow greater internal focus on the delivery of products and services that address the evolving needs of our hybrid workplace.

Steven Bandrowczak: Finally, shareholder returns, a few weeks ago we repurchased the roughly 34 million shares previously owned by call icon and affiliates, resulting in a reduction of our share count of around 22%. The decision to repurchase these shares was consistent with the capital allocation and shareholder return philosophy, which is to deploy cash in areas providing the highest return for shareholders. Management and the board of directors believe this transactional creates substantial value for shareholders over time as the reduction of shares allows equity holders greater participation in the expected earnings growth associated with our transformation, which I will discuss shortly.

We will introduce a more consumer like touchless experience to improve client satisfaction and will simplify our pricing models to deliver faster and more effective decisioning when pursuing new and renewal business the.

Speaker 3: We will introduce a more consumer-like touchless experience to improve client satisfaction. And we'll simplify our pricing models to deliver faster and more effective decisioning when pursuing new and renewal business.

Speaker 3: The optimization of our geographic footprint, product offerings and pricing models will in turn enable an end-to-end organizational and structural simplification of our business, unlocking the third component of the reinvention, operating efficiencies across IT, business support functions, and the supply chain.

The optimization of our geographic footprint product offerings and pricing models will in turn enable an end to end organizational and structural simplification of our business unlock in the third component of the reinvention operating efficiencies across it.

Business support functions and the supply chain.

Steven Bandrowczak: The transaction is expected to be EPS accretive while preventing the type of market overhang normally associated with an open market disposal of significant equity states. Our three strategic priorities have been instrumental in laying the groundwork for our direction moving forward. On our Q2 call, we provided examples of the ways in which we are simplifying our business to refocus on our core operations to print digital and IT services. Those actions were critical enablers of an even more significant transformation of our business. For the past year, with the help of outside experts, we have analyzed our business model, competitive strengths, and market opportunities to define an optimal strategic path.

While the reinvention is expected to result in a more profitable and streamlined organization. It is not simply a cost cutting program.

Speaker 3: While the reinvention is expected to result in a more profitable and streamlined organization, it is not simply a cost-cutting program. Equally important, if not more so, is zero-oxibility to transition over time to become a services-led software-enabled provider of advanced workplace solutions.

Really important if not more so is <unk> ability to transition over time to become a services led software enabled provider of advanced workplace solutions.

Steven Bandrowczak: Our three strategic priorities have been instrumental in laying the groundwork for our direction moving forward. On our Q2 call, we provided examples of the ways in which we are simplifying our business to refocus on our core operations to print digital and IT services. Those actions were critical enablers of an even more significant transformation of our business. For the past year, with the help of outside experts, we have analyzed our business model, competitive strengths, and market opportunities to define an optimal strategic path.

A transition of this magnitude requires select investment in organic and inorganic growth opportunities.

Speaker 3: These investments are expected to be self-funded and will target opportunities to grow our share of wallet in print and print services, as well as high growth, adjacent markets where we have a clear path to win, such as managed IT services for small and mid-size clients and digital services.

These investments are expected to be self funded and we'll target opportunities to grow our share of wallet in print and print services as well as high growth adjacent markets, where we have a clear path to win such as managed it.

Services for small and midsized clients and digital services.

Steven Bandrowczak: And today, we are sharing with investors the preliminary framework for a multi-year strategic transformation plan, which we refer to as reinvention. First, let me define what reinvention means to Xerox. Reinvention is a comprehensive and operational simplification about business resulting in a strategic repositioning of the company to take advantage of favorable macro trends, including the digitalization of document workflows associated with the power of AI, while managing the sector of our headwinds associated with traditional print.

Speaker 3: In total, reinvention is expected to generate substantial improvement in operating income and income margin over the next few years. By 2026, we expect to deliver an improvement to 2023 adjusted operating income of at least 300 million, resulting in return to double digit adjusted operating income margin.

In total reinvention is expected to generate substantial improvement in operating income and income margin over the next few years.

2026, we expect to deliver an improvement to 2023 adjusted operating income of at least $300 million, resulting in a return to double digit adjusted operating income margins.

Speaker 3: Importantly, this improvement is inclusive of investments in growth, which are expected to drive a more diversified revenue mix with greater exposure to markets with high rates of growth.

Importantly, this improvement is inclusive of investments in growth, which are expected to drive a more diversified revenue mix with greater exposure to markets with high rates of growth.

Steven Bandrowczak: Reinvention does not mean we are abandoning our core print business, which we expect to continue generating strong profits and cash flow for many years. Reinvention means building new capabilities on top of a solid print core. Management and the board believe the most direct and probable path to sustainable growth in profit, free cash flow, and shareholder returns, requires a structural redesign of our operations combined with selected reinvestment in capabilities essential to addressing clients most challenging workplace productivity needs.

We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarters.

Speaker 3: We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarter.

To recap we are confident in our ability to successfully execute this reinvention project own. It has instilled in this company a culture of continuous operating improvement.

Speaker 3: To recap, we are confident in our ability to successfully execute this reinvention. Project ONIT has instilled in this company a culture of continuous operating improvement. Our management team is more than capable of delivering a transformation of this magnitude and our brand, client relationships, and history of innovation give us the right to play and win in digital and managed IT services.

Management team is more than capable of delivering a transformation of this magnitude and our brand client relationships and history of innovation give us the right to play and win in digital and managed it services <unk>.

Speaker 3: Reinvent you will not only improve Xerox profitability, but reposition the company for long-term sustainable growth. And with strong free cash flow supporting our dividend, investors will be rewarded as the strategy progresses. I will now hand-

Reinvention will not only improve xerox profitability, but reposition the company for long term sustainable growth.

And with strong free cash flows supporting our dividend investors will be rewarded as the strategy progresses.

I will now hand over to Xavier <unk>.

Speaker 4: Thank you Steve, on good morning everyone. Steve mentioned we deliver another quarter of growth in adjusted operating income on income margin despite a decline in revenue, evidencing our ability to manage profitability amid fluctuation in revenue.

Thank you, Steve and good morning, everyone as Steve mentioned, we delivered another quarter of growth in adjusted operating income and income margin. Despite a decline in revenue. If you don't see our ability to manage profitability amid trip tuition in revenue.

Steven Bandrowczak: There are three primary components of the reinvention. First is a geographic optimization, which entails taking a more selective approach to direct operations in certain markets and when appropriate shifting to a partner led distribution model. This optimization of our go-to-market approach is expected to result in lower revenue initially, but provide a stronger and more profitable foundation from which to grow revenue going forward. We will introduce a more consumer-like, touchless experience to improve client satisfaction and will simplify our pricing models to deliver faster and more effective decisioning when pursuing new and renewal business.

Speaker 4: The year of a year decline in Rob News' quarter was driven mainly by decline in transactional, non-contractual post-cells for new components. Equipment of new decline modestly relative to the prior year, you enlarge part to a reduction in equipment backlog in the prior year quarter. Turning to profitability. We deliver a first-consecretive quarter year of a year improvement in growth on operating profit markets.

So year over year decline in revenues this quarter was driven mainly by declines in transactional non contractual posts, hence revenue components equipment revenue declined modestly relative to the prior year due in large part to a reduction in equipment backlog is a prior year quarter turning to profitability.

We did a <unk> consecutive quarter of year over year improvement in gross and operating profit margin.

Speaker 4: Rosmargin improved 60-base-point over the prior year quarter, mainly due to the benefit associated with pricing increases on cost efficiency actions, partially offset by your 50-base-point edwin from the termination of Fuji volume.

Gross margin improved 60 basis points over the prior year quarter, mainly due to the benefit associated with pricing increases on cost efficiency actions, partially offset by a 50 basis point headwind from the combination of Fuji royalties.

Speaker 4: Increases in product cost were more than upset by improvement in supply-generated expense on pricing access.

Encourage you can project costs were more than offset by improvement in supply chain related expense on pricing actions.

Adjusted operating margin of four 1% increased 40 basis points year over year as the effects of lower gross profit along with higher compensation and bad debt expenses were offset by close to 400 basis points of improvement from ongoing operating efficiencies and pricing actions.

Speaker 4: adjusted operating margin of 4.1% increased 40 basis points year over year. As the effect of lower revenue on growth profit, along with higher compensation on bad debt expenses, were offset by close to 100 basis points of improvement from ongoing operating efficiencies on pricing.

Steven Bandrowczak: The optimization of our geographic footprint, product offerings and pricing models will in turn enable an end-to-end organizational and structural simplification of our business, unlocking the third component of the reinvention, operating efficiencies across IT, business support functions, and the supply chain. While the reinvention is expected to result in a more profitable and streamlined organization, it is not simply a cost-cutting program. Equally important, if not more so, is Xerox ability to transition over time to become a services-led software-enabled provider of advanced workplace solutions.

Adjusted other expenses net were 29 million lower year over year due to higher gains from the sense of noncore business asset on low well known financing interest expense.

Speaker 4: Adjust the other expenses net where 29 million lower year over year due to higher gains from the sets of non-core business asset on lower known financing interest

Speaker 4: I just think tax rate was 7.3% compared to 42.1% in the same quarter last year, largely due to the tax benefit associated with the release of uncertain tax positions on the remurgeonment of different tax assets in the current year period, as well as a non-recurring unfavorable effect of changes in certain tax addictions in the prior year period.

Adjusted tax rate was seven 3% compared to 42, 1% same quarter last year.

Jody due to tax benefits associated with the release of uncertain tax positions on the remeasurement of deferred tax assets into the current year period as well as the nonrecurring unfavorable effect of changes in certain tax elections in the prior year period.

Steven Bandrowczak: A transition of this magnitude requires select investment in organic and inorganic growth opportunities. These investments are expected to be self-funded and will target opportunities to grow our share of wallet in print and print services, as well as high-growth adjacent markets where we have a clear path to win, such as managed IT services for small and mid-sized clients. In total, reinvention is expected to generate substantial improvement in operating income and income margin over the next few years.

Speaker 4: I just did EPS of 46 cent in the software was 27 cents a year and a prior year given by an increase in the sale of non-core business asset on the lower tax rate.

Adjusted EPS of <unk> 46 cents in the third quarter was 27% a year and the prior year driven by an increase in the sale of non core business asset on the lower tax rate.

Speaker 4: GAPPS of 28 cents was $2.76 a year than the prior year, mainly due to an after-attacks, non-cash-good-will-in-perman child of $395 million, or $2.54 per share in the prior year.

GAAP EPS of <unk> 28 was $2 76, a year from the prior year, mainly due to <unk> tax noncash goodwill impairment charge of $395 million or $2 54 per share in the prior year.

Speaker 4: So we'll know EPS Impact Disco order associated with the recent repurchase of share from Carl Ikan on a feed.

So we will no EPS impact this quarter associated with our recent repurchase of share from Carl Icahn on Ips.

Steven Bandrowczak: By 2026, we expect to deliver an improvement to 2023 adjusted operating income of at least 300 million, resulting in return to double-digit adjusted operating income margins. Importantly, this improvement is inclusive of investments in growth, which are expected to drive a more diversified revenue mix with greater exposure to markets with high rates of growth. We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarters.

Speaker 4: Let me know review revenue on cashflow in more details.

Let me now review revenue on cash flow in more detail.

Turning to revenue equipment sales of $386 million in Q3 declined 1% year over year in actual currency or 2% in constant currency.

Speaker 4: Turning to revenue, equipment sales of $300 on 86 million in 2-3 decline one person year over a year in actual currency or two percent in constant currency.

Speaker 4: The decline in equipment for new reflects cable demand conditions offset by the effect of EME backlog reductions in the prior.

So declining equipment towards new reflex cable demand conditions offset by the effect of EMEA backlog reductions in the prior year.

Speaker 4: consistent with recent quarter, revenue trend out base equipment insertion activity, due to favorable product on geographic mix, as well as higher price.

Consistent with recent quarter.

Our revenue trend outpace equipment and settlement activity due to favorable product and geographic mix as well as higher prices.

Steven Bandrowczak: To recap, we are confident in our ability to successfully execute this reinvention. Project ONIT has instilled in this company a culture of continuous operating improvements. Our management team is more than capable of delivering a transformation of this magnitude and our brand, client relationships, and history of innovation give us the right to play and win in digital and managed IT services. Reinvention will not only improve Xerox profitability but reposition the company for long term sustainable growth and with strong free cash flow supporting our dividend, investors will be rewarded as the strategy progresses.

Speaker 4: This was particularly true with our H3 product, which experienced unfavorable geographic mix effect in the prior year due to backlog reduction in the ME.

Was particularly true with our <unk> product, which experienced unfavorable geographic mix affecting the prior year due to backlog reduction in EMEA.

Speaker 4: And 3A4 installation will lower again this quarter due to the ongoing normalization of work from home trend.

<unk> four integration were lower again this quarter due to the ongoing normalization of work from home trends.

<unk> revenue of $1 3 billion declined 9% in constant currency year over year on 7% in actual currency.

Speaker 4: Concert revenue of 1.3 billion declined 9% in constant currency year over year on 7% in actual goods.

Speaker 4: As noted, Post-SELD decline were mainly driven by reduction in cycle core, transactional items, most notably a significant decline in low margin paper cells on lower IT and point device plays.

As Nookie posted declines were mainly driven by a reduction in cyclical transactional items, most notably a significant decline in low margin paper sales on lower IP endpoint device placements.

Speaker 4: What's set from you was further impacted by the culmination of foodie royalties on the effect of specific strategic action, which resulted in lower financing on parkour.

Well central New was Charles are impacted by determination of Fuji royalties on the effect of specific strategic action rich treasure, keeping low wealth financing on pumps.

Xavier Heiss: I will now hand over to Xavier.

Xavier Heiss: I will now hand over to Xavier. Thank you Steve and good morning everyone. Steve mentioned we deliver another quarter of growth in adjusted operating income on income margin, despite a decline in revenue, evidencing our ability to manage profitability amid fluctuation in revenue. The year of a year decline in revenue this quarter was driven mainly by decline in transactional non-contractual post-sense revenue components. Equipment of new decline modestly relative to the prior year due in large part to a reduction in equipment backlog in the prior year quarter.

Xavier Heiss: Thank you Steve and good morning everyone. Steve mentioned we deliver another quarter of growth in adjusted operating income on income margin, despite a decline in revenue, evidencing our ability to manage profitability amid fluctuation in revenue. The year of a year decline in revenue this quarter was driven mainly by decline in transactional non-contractual post-sense revenue components. Equipment of new decline modestly relative to the prior year due in large part to a reduction in equipment backlog in the prior year quarter.

Speaker 4: Revenue from contractual print on digital services declined slightly. As digital and managed IT services revenue growth was upset by decline in print services for production clients, which have generally been more affected by macroeconomic pressure than office clients. Geographically, both region declined in actual non-constant currency.

Revenues from contract to our print on digital services declined slightly as digital on managed it services revenue growth was offset by declining print services for production clients, which have generally been more affected by macroeconomic pressure.

Clients geographically both region declining next year and on constant currency. So.

Speaker 4: The decline in the AMIA was more pronounced given the substantial reduction in the AMIA backlog in the prior year of quarter on the weekening macro economic out.

The decline in EMEA was more pronounced given the substantial reduction in EMEA backlog in the prior year quarter on the weakening macro economic outlook.

Xavier Heiss: Turning to profitability. We deliver a first one-secretive quarter year over year improvement in growth on operating profit margin. Most margin improved 60 basis point over the prior year quarter, mainly due to the benefit associated with pricing increases on cost efficiency actions, partially offset by your 50 basis point Edwin from the termination of foodie royalties. Increases in product cost were more than offset by improvement in supply generated expense on pricing actions. Adjusted operating margin of 4.1 percent increased 40 basis point year over year as the effect of lower revenue on growth profit along with higher compensation on bad debt expenses were offset by close to 400 basis point of improvement from ongoing operating efficiencies on pricing actions.

Speaker 4: In the Americas, an increase in equipment review was more than upset by decline in poor sales revenue, you impart to lower sales of the aforementioned cyclicals' transactional items. Yes.

<unk> an increase in equipment revenue was more than offset by declining <unk> revenue due in part to lower cents of the aforementioned cyclical transactional items, let's now review cash flow.

Speaker 4: Freakashlaw was on the 1012 million in Q3, higher by 130 million year over year.

Free cash flow was $112 million in Q3 higher by $130 million year over year.

Speaker 4: operating cash flow was under 24 million in Q3 compared to a use of 8 million in Q3 2020.

Operating cash flow was under $24 million in Q3 compared to a use of $8 million in Q3 2022.

Speaker 4: Improvement were mainly driven by a net source of cash associated with financing asset on an improvement in working capital.

Improvements were mainly driven by a net source of cash associated with financing asset on an improvement in working capital.

Speaker 4: Finance asset activity was a source of cash discordor of 51 million compared to use of cash of 54 million in the prior year, reflecting the benefit of our forward flow program with HPS, partially offset by higher original.

Finance asset activity was a source of cash this quarter of 51 million compared to a use of cash of $54 million in the prior year, reflecting the benefit of our <unk> program with hps, partially offset by higher origination.

Xavier Heiss: Adjusted other expenses net were 29 million lower year over year due to higher gains from the sets of known core business asset on lower known financing interest expense. Adjusted tax rate was 7.3 percent compared to 42.1 percent in the same quarter last year, largely due to the tax benefit associated with the release of uncertain tax positions on the remurgeonment of different tax assets in the current year period as well as a non recurring unfavorable effect of changes in certain tax addictions in the prior year period.

Speaker 4: Working Capital was a source of cash of 27 million, resulting in a 41 million year earlier, increasing cash, even mainly by your reduction in inventory.

Working capital was a source of cash of 27 million <unk> in the $41 million year over year increase in cash driven mainly by a reduction in inventory.

Speaker 4: Investing activity was source of cash of 25 million compared to a use of cash of 33 million in the prior year Due to higher proceeds from cell of non-corb business asset in the current quarter on the prior year acquisition of Go Inspire

Investing activity were a source of cash of 25 million compare to a use of cash of $33 million of prior year due to higher proceeds from sale of non core business asset in the current quarter under prior year acquisition of inspire.

Financing activity consumed $94 million of cash this quarter.

Speaker 4: Financing activity consume 94 million of cash is quarter, which includes the payment of around 60 million of secure debt on dividend totaling 43 million.

Which includes a payment of around $60 million of secured debt on dividend totaling $43 million.

Xavier Heiss: Adjusted EPS of 46 cent in the software was 27 cents higher than the prior year, driven by an increase in the sale of known core business asset on the lower tax rate. Adjusted EPS of 28 cents was $2.76 higher than the prior year mainly due to an after tax non cash good with impairment child of $395 million or $2.54 share in the prior year. So we have no EPS impact this quarter associated with the recent repurchase of share from color icon on affiliates.

Speaker 4: In addition, we secured a 555 million bridge loan facility, the procedure of which we are used to work with shares from Carl Icon on the field.

In addition, we secured a 555 million bridge loan facility. The proceeds of which were used to work purchase share from Carl Icahn on a few years. This facility is expected to be replaced into need them with an alternative debt instrument turning to segment detail on.

Speaker 4: His facility is expected to be replaced in the near-term with an alternative depth instrument. Turning to segments.

Speaker 4: after firing. general

Origination volume grew 9% year over year.

Speaker 4: Captive product origination were up 24% while non-captive channel origination, which includes third-party dealers on non-zero-x vendor, cell 8%, a reflection of the recent change in fitter strategy to return its focus to a more captive-only financing solution.

Captive product origination were up 24%, while non captive channel origination, which includes third party dealers on Luna Xerox vendor H.

Xavier Heiss: Let me know review revenue on cash flow in more details. Turning to review equipment sales of 300 on 86 million in two three decline one percent year over a year in actual currency or two percent in constant currency. The decline in equipment review reflects cable demand conditions offset by the effect of EME backlog reductions in the prior year. Together, consistent with recent quarter, revenue trend outpace equipment insertion activity, due to favorable product on geographic mix as well as higher prices.

8%.

Reflection of the recent change and fit our strategy to a retail needs focus towards captive only financing solutions.

Speaker 4: As expected, FITAL finance receivable were down roughly 4% secondally in actual currency, reflecting the runoff of existing firearms receivable on HPS funding of more than 50% of FITAL Q3 originates.

As expected Peter Finance receivable were down roughly 4% sequentially in actual currency.

Things are run off of existing switching reward on hps funding of more than 50% of Q3 originations.

Speaker 4: As a result of the change in federal strategy, we expect its financial civil balance to decline on normalize closer to 1 billion by 2027. Federal review was flat year over year in Q3 as higher commission from the sales of finance receivable asset, where offset by lower finance income on other fees associated with the decline in federal financial receivable asset base.

As a result of the change in future strategy, we expect each finance receivables balance to decline on normalized closer to $1 billion by 2027 Pizza revenue was flat year over year in Q3.

Xavier Heiss: This was particularly true with our H3 product, which experienced unfavorable geographic mix effect in the prior year, due to backlog reduction in EME. And 3A4 installation will lower again this quarter due to the ongoing normalization of work from home trends. Post-self revenue of 1.3 billion declined 9% in constant current year over a year on 7% in actual currency. As noted, post-self decline were mainly driven by reduction in cyclical, transactional items, most notably a significant decline in low margin paper sales on lower IT and point device placement.

Are you a commission from the sense of finance receivable asset were offset by lower finance income on Ftes associated with a decline in fetal finance receivable asset base.

Speaker 4: Segment profit for FITOL was 4 million, up to 2 million year over year, primarily due to lower budget expense on lower income company commission.

Segment profit for fetal was $4 million up 2 million year over year, primarily due to lower bad debt expense on lower intercompany commissions.

Speaker 4: As previously indicated, we expect further improvement to bad debt expanse going forward as our final structural book, the class.

As previously indicated we expect further improvement to bad debt expense going forward.

Our finance receivable book decline.

Print on those are revenue fell 6% year over year in Q3, primarily due to lower post sales revenue.

Speaker 4: Print on other revenue fell 6% over a year in Q3, primarily to lower post-self-run.

Xavier Heiss: Post-self revenue was further impacted by the combination of foodie royalties on the effect of specific strategic action, which resulted in lower financing on park revenue. Revenue from contractual print on digital services declined slightly as digital on managed IT services revenue growth was offset by decline in print services for production clients, which have generally been more affected by macroeconomic pressure than office clients. Geographically, both region declined in actual on constant currency. The decline in EME was more pronounced given the substantial reduction in EME backlog in the prior year quarter on a weakening macroeconomic algorithm.

Print on those our segment profit improved by around 2% versus the prior year quarter, Rachel King in a 30 basis point expansion in segment profit margin year over year, driven by the benefit of price and cost actions, partially offset by lower revenue.

Speaker 4: Print on other segment property improved by around two person versus the prior year quarter. Redulking in a certain basis point expansion in segment profit margin year over year, driven by the benefit of price and cost actions partially offset by lower revenue. Turning to capital street.

Turning to capital structure.

Speaker 4: We ended Q3 with approximately 620 million of cash, cash equity balance on restricted cash.

We ended Q3 with approximately $620 million of cash cash equivalents unrestricted cash.

Speaker 4: Roughly 2.5 billion of the remaining sweet point six billion of our outstanding debt support our final asset with the remaining debt of around 1.1 billion attributable to the non-leasing business.

Roughly $2 5 billion of the remaining $3 6 billion of our outstanding debt to support our finance asset with a remaining debt of around the $1 1 billion attributable to the non leasing business.

Speaker 4: Total debt consists of senior on secure bonds, finance asset securitization, the bridge loan associated with the Q3 share repurchase on borrowing under our asset back credit facilities.

Total debt consists of senior unsecured bonds finance asset securitization, So bridge loan associated with our Q3 share repurchase on borrowing under our asset backed credit facility.

Xavier Heiss: In the Americas, an increase in equipment review was more than offset by decline in post-self revenue due in part to lower sales of the aforementioned cyclical, transactional items. Let's now review cash flow. Free cash flow was under 1012 million in Q3, higher by 130 million year over earlier. Operating cash flow was under 24 million in Q3 compared to a use of 8 million in Q3 2022. Improvement were mainly driven by a net source of cash associated with financing asset on an improvement in working capital.

Speaker 4: We maintain the balance bone maturity ladder over the next few years.

We maintain a balanced bond maturity ladder, although in the next few years.

Speaker 4: Finally, I will address guidance. Our outlook for full year of review remained unchanged at flat to down, low single digit at constant current.

Finally, I would address guidance our outlook for full year revenue remained unchanged at flat to down low single digits at constant currency.

Speaker 4: We continue to see momentum in demand for our product and services, particularly in the Americas, on for our faster growing digital services. However, in the past three months, we have seen a mild softening of demand for print services on equipment in our European market, reflecting weakening macroeconomic conditions.

We continue to see momentum in demand for our product and services, particularly in GM breakout on for our faster growing digital services.

Xavier Heiss: Finance asset activity was a source of cash this quarter of 51 million compared to use of cash of 54 million in the prior year, reflecting the benefit of our forward flow program with HPS, partially offset by higher origination. Working capital was a source of cash of 27 million, resulting in a 41 million year over a year increasing cash, even mainly by a reduction in inventory. Investing activity was a source of cash of 25 million compared to a use of cash of 30 million in the prior year due to higher proceeds from sell of non-core business asset in the current quarter on the prior year acquisition of Go Inspire.

<unk> in the past three months, we have seen a softening of demand for print services on equipment in our European market, reflecting a weakening macroeconomic condition.

Speaker 4: As a result, we now expect for your review to come in at the lower end of our guided range.

As a result, we now expect full year revenue to come in at the lower end of our guided range. As a reminder, we face a difficult equipment revenue compare in Q4 due to a significant reduction in backlog in the prior year.

Speaker 4: As a reminder, we face a difficult equipment for new compare in Q4 due to a significant reduction in backlog in the prior year.

Speaker 4: Further, we expect some of the Edwin effective post-sale for view in Q3 to persist in Q4.

Further we expect some of the headwinds affecting post central in Q suite to persist in Q4, despite a slight reduction to our revenue outlook, we maintain our guidance for full year adjusted operating margin of five 5% to 6% due to the successful implementation of ongoing cost efficiency program on the other you don't sell below.

Speaker 4: Despite a slight reduction to our work-of-work new outlook, we maintain our guidance for full-year adjusted operating margin of 5.5 to 6% due to the successful implementation of ongoing cross-efficiency program on the other events of low or unprofitable revenue opportunity.

Xavier Heiss: Financing activity consumed 94 million of cash is quarter, which includes the payment of around 60 million of secured debt on dividend totaling 43 million. In addition, we secured a 555 million bridge loan facility, the proceed of which we are used to work with share from Cali Canada. Heiss Facility is expected to be replaced in the new term with an alternative depth instrument.

<unk> or unprofitable revenue opportunities.

Speaker 4: Q4 operating margin is expected to improve, secondly, but will be lower your earlier as margins in the prior year are benefited from an unusual high mix of highly profitable as we equipment in.

Q4 operating margin is expected to improve sequentially, but will be lower year over year as margins in the prior year benefited from an unusually high mix of highly profitable a suite equipment in store.

Speaker 4: As noted by Steve, we expect significant improvement in operating in emerging in future years as we progress along our reinvention. Finally, we maintain our free cash flow guidance of at least 600 million.

As noted by Steve We expect significant improvement in operating income margin in future years, as we progress along our reinvention finally, we maintain our free cash flow guidance of at least $600 million.

Xavier Heiss: Turning to segment, Peter's organization volume grew 9% year over a year. Captive product origination were up 24% while non-captive channel origination, which include third-party dealers on non-zerox vendor, cell 8%, a reflection of the recent change in fetal strategy to return its focus toward captive only financing solutions. As expected, fetal finance receivable were down roughly 4% secondally in actual currency, reflecting the runoff of existing firearms receivable on HPF funding of more than 50% of fetal Q3 originations.

Speaker 4: In summary, we remain on track to deliver our foodier guy down as we balance a dynamic microeconomic backdrop with a rigorous approach to managing operating.

In summary, we remain on track to deliver our full year guidance as we balance of dynamic microeconomic backdrop, we did a rigorous approach to managing operating costs.

Speaker 5: The one work is being laid for multi-year improvement in profit and working mix, including a return to double digit operating profit margin, the detail of which we will share in the coming year. We'll now open the line for Q&A.

So one work is being laid for a multiyear improvement in profit on revenue mix, including a return to double digit operating profit margin. So details of which we would share in the coming year.

We'll now open the line for Q&A.

Certainly one moment, ladies and gentlemen for your first question.

Xavier Heiss: As a result of the change in fetal strategy, we expect each finance receivable balance to decline on normalize closer to 1 billion by 2027. Feetal revenue was flat year over a year in Q3 as higher commission from the cells of finance receivable asset were offset by lower finance income on other fees associated with the decline in fetal finance receivable asset base. Segment profit for fetal was 4 million up 2 million year over a year, primarily due to lower bad debt expense on lower income company commissions.

Speaker 1: And our first question comes from the line of Anaya Bruja from Loop Capital. Your question, please.

And our first question comes from the line of <unk> from loop capital. Your question. Please.

Hey, good morning, guys and thanks for taking the question I.

Speaker 6: Good morning guys and thanks for taking the question. So I guess there's a bunch of near-term and bigger picture stuff that sort of get into. I guess I'll start with bigger picture.

I guess theres, a bunch of near term and bigger picture stuff.

So to get into.

I guess I'll start with bigger take care.

Speaker 6: just with regards to reinvention. Can you talk to?

Just with regards to reinvention can can you talk to.

Speaker 6: Any degree to which you're getting a bit of out, I guess I'll call it like a running start into the revenue component and the reinvention. The Steve, I think you kind of referred to it as software and services enabled or software and services led.

Any degree to which you are getting a bit about I guess I'll call. It like a running start.

Xavier Heiss: As previously indicated, we expect further improvement to bad debt expense going forward as our finance receivable book declines. Print on other revenue fell 6% year over a year in Q3 primarily due lower post self-review. Print on other segment profit improved by around 2% versus prior year quarter, resulting in a 30 basis point expansion in segment profit margin year over a year driven by the benefit of price and cost actions partially offset by lower revenue.

To the <unk>.

The revenue component in the reinvention that Steve I think you've kind of afraid through their software software and services enabled by software and services lag.

So what.

Speaker 6: you know, sort of what's going on there already that we may not be super aware of, you know, that might sort of lend itself to reinvention. And then I know you talked about.

What's going on there already that we may not be super aware of.

<unk>.

That might.

Lend itself to reinvention.

And then I know you talked about making comments.

Speaker 6: in the future about what rev potential looks like, but can you give it to any set those?

In the future about what potential looks like but can you give us any sense of.

Xavier Heiss: Turning to capital structure, we ended Q3 with approximately 620 million of cash cash equivalence unrestricted cash. Roughly 2.5 billion of the remaining 3.6 billion of our outstanding debt support our finance asset with the remaining debt of around 1.1 billion attributable to the non leasing business. Total debt consists of senior on secure bonds, finance asset securitization, the bridge loan associated with the Q3 share repurchase, on borrowing under our asset back credit facility. We maintain a balanced bond maturity ladder over the next few years.

Speaker 6: You know, maybe with like the the rev growth rates of the areas of the services market and software market, you know, the PAM I guess looks like today. So at least we get a sense of what you guys are shooting against from a PAM perspective.

They would like.

The Rev growth rate.

The areas of the services market and software market.

The Tam I guess.

It looks like today, so at least we get a sense of what you guys are achieving again from a pan perspective.

I guess I'll start with that.

Yeah, Great question. So let me make a couple of comments. So first of all from a reinvention standpoint really looking at a comprehensive and structural simplification of our business right with strategically reposition is going forward. What does that mean, we're looking at focus areas around geographic optimization, where we can think.

Speaker 3: Yeah, great question. So let me make a couple of comments. So first of all, from a reinvention standpoint, really looking at a comprehensive and structural simplification of our business, right? What strategically reposition is going forward? What does that mean? We're looking at focus areas around geographic optimization, where we can think about how we sell direct versus indirect use a partner led distribution model in sub-scale areas.

About how we sell direct versus indirect use a partner led distribution models and subscale areas focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas as we accelerate that and then operating efficiency is really looking at our business end to end.

Xavier Heiss: Finally, our address guidance, our outlook for full year revenue remained unchanged at flat to down low single digit at constant currency. We continue to see momentum in demand for our product on services, particularly in the America on for our faster growing digital services. However, in the past three months, we have seen a mild softening of demand for print services on equipment in our European market, reflecting weakening macro economic condition. As a result, we now expect full year revenue to come in at the lower end of our guided range.

Speaker 7: Focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas, as we accelerate that.

Speaker 7: And then operating efficiencies, really looking at our business end to end.

Speaker 7: from order to cash to, you know, hire to retire all across our entire business and really thinking about both simplification as well as.

From order to cash to hire to retire all across our entire business and really thinking about both simplification as well as enabling technology in each one of those processes. You've heard me talk about where we've embedded AI and augment reality and we're seeing significant not only in terms of productivity, but differentiation.

Speaker 7: enabling technology in each one of those processes. You've heard me talk about where we've embedded AI and augmented reality, and we're seeing significant, not only in terms of productivity, but differentiation in our service model and our service offerings we go forward. So I sent that as the foundation, right? And from a high level, right? Delivering double digit operating income margins, getting back to that. We thought it was really important.

Xavier Heiss: As a reminder, we face a difficult equipment revenue compared in Q4 due to a significant reduction in backlog in the prior year. Further, we expect some of the Edwin affecting post-self review in Q3 to persist in Q4. Despite a slight reduction to our revenue outlook, we maintain our guidance for full year adjusted operating margin of 5.5 to 6% due to the successful implementation of ongoing cost efficiency program. On the other end of low or unprofitable revenue opportunity.

And our service model and our service offerings as we go forward. So I set that as the foundation right and from a high level delivering double digit operating income margins getting back to that we thought it's really important that we have to go drive and we get back to double digit operating income margins of $300 million of operating income by 2020.

Speaker 7: that we have to go drive and we get back to double digit operating income margins of 300 million of operating income by 2026.

Speaker 7: What have we already started and what do you see in terms of the run rate and some of the acceleration going into 2024? We've obviously been working on and I've talked about this for a while now. How do we expand our wild share inside of our existing clients with new products and services, IT services, digital services?

What are we already started and what do you see in terms of the run rate in some of the acceleration going into 2024, we've obviously been working on and I've talked about this for a while now how do we expand our wallet share inside of our existing clients with new products and services It services digital services.

Xavier Heiss: Q4 operating margin is expected to improve, secondly, but will be lower year-over-year as margins in the prior year are benefited from an unusual high mix of highly profitable S3 equipment installed. As noted by Steve, we expect significant improvement in operating income margin in future years as we progress along our reinvention.

Speaker 7: And we talked about client success, really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity help significantly, specifically in areas like we see in health care, we see in education, we see inside of law firms and driving very specific solution.

And we talked about client success really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity helped significantly specifically in areas like we see in healthcare, we see in education, we see inside of law firms and driving very specific.

Xavier Heiss: Finally, we maintain our free cash flow guidance of at least 600 million. In summary, we remain on track to deliver our full-year guidance as we balance a dynamic micro-economic backdrop with a rigorous approach to managing operating costs.

<unk> solutions, we are seeing direct results of that strategy and our renewals when we talked about it we are seeing our new rate revenue renewal rate over 100% now what does that mean that means that as we're seeing some of the secular decline in some of our clients in terms of renewals will now topping it up with new products and services.

Speaker 3: We are seeing direct results of that strategy in our renewals. When we talked about it, we're seeing our new revenue rate over 100% now. What does that mean?

Xavier Heiss: The one work is being laid for multi-year improvement in profit on what new mix, including a return to double digital operating profit margin, the detail of which we would share in the coming year.

That are very specifically led and driven by client success either in it services and auto what endpoints are talking about services like <unk> and security as well as digital services, which help them with productivity. So that's given us a both a run rate improvement in terms of our revenue and growing inside of existing accounts.

Unknown Executive: We now open the line for Q&A. Certainly one moment, ladies and gentlemen, if you're first question.

Operator: We now open the line for Q&A. Certainly one moment, ladies and gentlemen, if you're first question.

Speaker 4: driven by client success, either in IT services, and I'm not talking about endpoints, I'm talking about services like RPA and security, as well as digital services, which help them with productivity. So that's given us a both a run rate improvement in terms of revenue and growing inside those Dixie accounts, and it's also given us a running start in productivity in areas like supply chain, areas like service delivery, areas like our ordering process and order the cash process. Do I have any other comments? Yeah, just I am on that just to comment on the, you know, the revenue side on the revenue shift we are expecting here. So we know, you know, they're trying to print.

Ananda Baruah: And our first question comes from the line of Ananda Baruah from Loop Capital. Your question please. Hey, good morning, guys. And thanks for taking the question. So I guess there's a bunch of near-term and bigger picture stuff that sort of get into. I guess I'll start with bigger picture just with regards to reinvention. Can you talk to any degree to which you're getting a bit of I guess I'll call it like a running start into the revenue component and reinvention.

And it's also given us a running start in productivity in areas like supply chain areas like service delivery areas like our ordering process in order to cash process Saba ended the comments just to digest.

Speaker 4: David, any other comments? Yeah, just, I am on that. Just to comment on the, you know, the revenue side, on the revenue shift we are expecting here. So we know, you know, they're trying to print business, it's still a strong business for us, generate a lot of margin on profit on cash share. At the same time, you know that we have started the foundation on the developing IT services on digital services there.

Just to comment on the revenue side on the revenue shift we are expecting here. So we know what our trend on print to print business is still a strong business for us generates lots of margin on profit on cash here.

Same time, you know that we have started a foundation on longer than looking at San Francis on digital services Sir.

Ananda Baruah: Steve, I think you kind of referred to it as software services enabled or software services led. What's going on there already that we may not be super aware of that might sort of lend itself to reinvention. And then I know you talked about making comments in the future about what rev potential looks like. But can you give us any sense of maybe what like the rev growth rates of the areas of the services market and software market, you know, the TAM I guess looks like today. So at least we get a sense of what you guys are shooting against from a TAM perspective. I guess I'll start with that. Yeah, thanks. Yeah, great question. So let me make a couple comments.

Speaker 4: The market growth or the time is large. This is large time since this market, IT service is about 600 billion due to the services in the range of 70 billion. And when we look at the data from this market, we are between 5% to 10% growth.

Market growth of the company's largest is large patterns in this market <unk> above 600 billion digital savvy seasons, Orange, a 70 billion on when we look at the data from this market. We are between 5% to 10% growth. So at yesterday, what we are planning to do with re intervention is to drive the revenue shaped from a P.

Speaker 4: So, at the other day, what we are planning to do with Reenvention is to drive the revenue shape from a print only or print-and-crick company. Into a company, we are print will still be present, but also targeting higher-term, ongoing market that will give the revenue or influence or revenue trajectory of the company, not relying only on print.

Print only or print centric company into a company where print would still be present, but also targeting higher.

And growing market that will give a revenue improved the revenue trajectory of the company.

Number one on the upfront.

Thats all really helpful context.

Speaker 6: appreciate all of that that's super helpful. And then I guess as a quick follow up, you know,

Appreciate all of that that's Super helpful. And then I guess as a quick follow up.

The.

Speaker 6: sort of the revenue environment for the September quarter that you guys talked about. Sounds like Europe may have been a little softer than your father was going into the quarter. You're not the first one that we heard that from.

Sort of the revenue environment for the September quarter that you guys talked about sounds like Europe may have been a little softer than you thought it was going into the quarter you are not the first ones that we.

Steven Bandrowczak: So first of all, from a reinvention standpoint, really looking at a comprehensive and structural simplification of our business, right? What's strategically repositioned as going forward? What does that mean? We're looking at focus areas around geographic optimization, where we can think about how we sell direct versus indirect use a partner led distribution models in sub-scale areas, focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas as we accelerate that.

Tried that problem.

Speaker 6: So that seems to be kind of foundational. Anything other than Europe that was softer than in...

That seems to be kind of foundational.

Anything anything other than Europe .

It was softer than anticipated.

Speaker 6: that you saw during the quarter and I guess is sort of any meaningful leverage.

During the quarter and I guess.

Sort of any meaningful leverage impacts you got from the software revenue you guys. Drew grew grew margin 40 basis points year over year, but I guess would it have been stronger a year over year growth margin growth.

Speaker 6: impact you got from the software revenue.

Speaker 6: You guys grew margin 40 basis points every year, but I guess wouldn't have been stronger the year-to-year growth, margin growth.

Steven Bandrowczak: And then operating efficiencies, really looking at our business end to end from order to cash to, you know, higher to retire all across our entire business and really thinking about both simplification as well as enabling technology in each one of those processes. You heard me talk about where we've embedded AI and augmented reality and we're seeing significant not only in terms of productivity, but differentiation in our service model and our service offerings we go forward.

Speaker 6: or expansion, it's not for the softer revenue. Thanks, so that's the thing.

Our expansion, it's not for us for the softer revenue. Thanks.

Yes, I don't know Ron that you.

Speaker 4: You know, no, I don't know that the new comment of, you know, fair here. So Europe has been a little bit worse at what we were thinking here. However, at the same time, on you know, that since we have implemented on it, only DNA still within the company, we have created what we call flexible cost space. And we have been as well being able to adjust, you know, some of the cost, but also being selective in the type of renew we are targeting there.

You will come out of.

So Europe has been solid.

So a little bit with what we're thinking here.

Over at the same time on you know that since we have implemented coordinate only DNA tandem within the company. We have created one quarter flexible cost base, although we have been as well being able to adjust some of the cost but also of being selective in the type of revenue. We are targeting there I'll give you an example.

Steven Bandrowczak: So I sent that as the foundation, right? And from a high level, right? Delivering double-digit operating income margins, getting back to that. We thought it was really important that we have to go drive and we get back to double-digit operating income margins, about 300 million of operating income by 2026. What have we already started and what do you see in terms of the run rate and some of the acceleration going into 2024?

We saw certain erosion on margin all know I've called up non cyclical.

Contractual type of business simpler example, paper and those are my knees pinpoint solution in.

Steven Bandrowczak: We've obviously been working on and I've talked about this for a while now. How do we expand our wild share inside of our existing clients with new products and services, IT services, digital services? And we talked about client success really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity help significantly, specifically in areas like we see in health care, we see in education, we see inside of law firms and driving very specific solutions.

It services, we are looking at Brexit and going after.

Or like a revenue only with no profitability.

This team.

Is driven by a very balanced execution mindset model zero, although we have a disciplined driving our investment on our new coal based on the street retail.

Speaker 8: on the driving our investment on our what you call based on the street return, or higher hair or L.O.I.C. or culture. So paper, I can quote it here because the paper market is very different to what it was before and we're not willing as an example to go after a paper deal with no margin. That's great. Great context. Thanks a lot guys. Appreciate it. Thank you. Thank you, Ananda. Thank you one moment for our next question. And our next question comes from the line of Eric Woodring from Morgan Stanley . Your question please. Hi guys. This is my aunt for Eric. Thanks for having me. Maybe a first question for Steve. Can you talk a little bit?

The higher ROIC.

ROIC project so pay.

Paper icon quoted here because the paper market is very different to what it was before on wellness willing has an example to go after a paper deal with no margin.

Steven Bandrowczak: We are seeing direct results of that strategy in our renewals and we talked about it. We're seeing our new revenue revenue rate over 100% now. What does that mean? That means that as we're seeing some of the sector with the client and some of our clients in terms of renewals, we're now topping it up with new products and services that are very specifically led and driven by client success, either in IT services and I want to point to talking about services like RPA and security as well as digital services which help them with productivity.

That's great.

Speaker 4: Thank you. Thank you, Ananda. Thank you, one.

Great context, thanks, a lot guys I appreciate it. Thank you. Thank you Ronda.

Thank you one moment for our next question.

Speaker 1: And our next question comes from the line of Eric Woodring from Morgan Stanley . Your question, please. Hi, guys. This is my own fair.

And our next question comes from the line of Erik Woodring from Morgan Stanley . Your question. Please.

Hi, guys. This is my on for Eric Thanks for having me.

Speaker 8: Maybe a first question for Steve. Can you talk a little bit about the change in strategy with fiddle?

Maybe first question for Steve can you talk a little bit about the change in strategy with fed all early earlier. This year, we were talking about expanding the portfolio tomorrow third parties, but now its reverting back to kind of a captive financing solution. So my first question is how that impacts your receivable factoring program.

Steven Bandrowczak: So that's given us a both a run rate improvement in terms of revenue and growing inside of those existing accounts and it's also given us a running start in productivity in areas like supply chain, areas like service delivery, areas like our ordering process and order to cash process. David, any other comments? Yeah, just I am on that. Just to comment on the revenue side, on the revenue shift we are expecting here.

Speaker 8: Earlier this year, we were talking about expanding the portfolio to more third parties, but now it's reverting back to kind of a captive financing solution. So my first question is how that impacts your receivable factoring program. And second, there was once a thought that you could sell the fiddle business, but given it's now becoming a captive financing business, that seems less likely. Is that correct? That fiddle would likely no longer be for sale? Thank you, and I will follow up.

Ken.

It was once the thought that you could sell the federal business, but given it is now becoming a captive financing business that seems less likely is that crack that fit all likely no longer be for sale. Thank you and I have a follow up.

Steven Bandrowczak: So we know the trend on print business is still a strong business for us. Generate a lot of margin on profit on cash share. But at the same time, you know that we have started the foundation on the developing IT services on digital services. The market growth or the term is large. This is large terms in this market. IT services are both 600 billion digital services in the range of 70 billion.

Speaker 7: Yeah, so let me, and I stated it, I think, in previous calls with the changing.

Yes, So let me see.

I think in previous calls with the changing.

Speaker 7: interest rate environment. It was no longer a palatable for us to leverage our balance sheet in the leasing business. And we changed the strategy mid to late last year. And we were no longer going to use Xerox balance sheet for this business. And we were going to look for other sources of capital to help us with that business. However, it was extremely important.

Interest rate environment. It was no longer palatable for us to leverage our balance sheet and the leasing business and we changed the strategy mid to late last year.

Steven Bandrowczak: And when we look at the data from this market, we are between 5 to 10% growth. So at the other day, what we are planning to do with reinvention is to drive the revenue shift from a print only or print and click company into a company. We are print will still be present, but also targeting higher time on growing markets that will give the revenue or the revenue trajectory of the company, not relying on the own print.

And we were no longer going to use your balance sheet for this business and we will then look for other sources of capital to help us with that business. However, it was extremely important that it is a big component of driving our value in the field that we have the ability to be able to do leasing and bundle pricing in the field with leasing and so we turned to hps.

Speaker 4: that it is a big component of driving out value in the field that we have the ability to be able to do leasing and bundle pricing in the field with leasing. And so we turn to HBS and peak and we are being and using them strategically so that we don't leverage our balance sheet. You're absolutely right. Two years ago, we were trying to target growing that business and potentially it would have been an operation that potentially would have been out of the shell. We have reversed that. It is now going back to an internal captive business and we're not expanding beyond just supporting our business. So, you said it Steve there on the my other focus that we have there is to make it you know, an offer that support our business rather than looking at it as a pure separated business here.

And peak and we're being and using them strategically so that we don't leverage our balance sheet Youre absolutely right.

Steven Bandrowczak: That's all really helpful context. I appreciate all of that. That's super helpful. And then I guess as a quick follow up, you know, the sort of the revenue environment from the September quarter that you guys talked about. Sounds like Europe may have been a little softer than you thought it was going into the quarter. You're not the first one that we've heard that from. So that seems to be kind of foundational.

Two years ago, we were trying to target growing that business and potentially would have been in operation that potentially would have been up for sale. We have reversed that it is now going back to an internal captive business and we're not expanding beyond just supporting our business savvy.

You said it does tapes that are on there.

Okay. So that we have <unk> to make it.

Enough for such support our business, whether we're looking at it as a pure separated business here.

Steven Bandrowczak: You know, anything, anything other than Europe that was softer than anticipated that you saw during the quarter. And I guess it's sort of any meaningful leverage impact you got from from the softer revenue. You guys grew, grew, grew margin 40 basis points here every year, but, but I guess wouldn't have been stronger. You're the year we are grows margin growth. Yeah, or expansion. It's not for the softer revenue. Thanks. So that's the scenario.

Speaker 4: Steve mentioned it as well. Our volunteers, the current interest rate on the environment, you know, make us, you know, more than two years ago, making these decisions here. And as the other day, if I look at the current free cash flow being generated, maybe you spot it when we, I commented, you know, what will be the benefit of this transaction. Until 2027, we're expecting, you know, the financial receivable balance to decrease up to one billion.

As Steve mentioned, it as well our balance sheet our current.

Interest rate Onvia hormone it'll make us more.

More of a two years ago, making this decision here.

The end of the day, if I look at the current free cash flow being generated on that maybe you spotted when we I commented what will be the benefit of this transaction until 2027 were expecting.

Finance receivable balance to decrease up to $1 billion on if you look at the current situation to six LNP going down there. This will be over time free cash flow being generated supporting on driving.

Speaker 4: And if you look at the current situation to point it currently going down there, this will be over time free cash flow being generated, supporting on driving, you know, the case for also the reinvention that we're building at this time. So at the end of the day, the good decision was made two years ago. This decision, you know, is helping us currently from a balance point of view. And we have kept this ability to be captive on the development of our business without hurting.

Steven Bandrowczak: Yeah, no, no, I don't know that you comment off, you know, fair here. So Europe has been a little bit worse at what we were thinking here. However, at the same time on you know that since we've implemented on it only DNA still within the company, we have created what we call flexible cosplays. And we've been as well being able to adjust some of the cost, but also being selective in the type of new we are targeting there.

Case for all sorts of Reinventions that where do you think at this time. So at the end of the day a good decision was made two years ago. This decision is helping US currently from a balance sheet point of view on do we have kept this ability to be captive on develop our business without hurting it.

Got it thank you.

Speaker 8: Got it, thank you. So maybe just if we take a step back, printing is a secular declining market. And while I realize that you're leading into IT digital service to try and offset some of those pressures, this business is still overwhelmingly print focused, but there's a huge tam and Asia that's untapped for Xerox.

Steven Bandrowczak: I give you an example. We saw certain erosion on margin on I call that non cyclical, not contract contractual type of business. Simple example in paper, another one is end point solution in IT services. We are not interested in going after, you know, like revenue only with no profitability as you know it. This team is driven by a very balanced execution mindset model there. And we have a discipline on the driving our investment on our work you call based on the street return.

Maybe Joseph we take a step back printing is circularly declining market and while I realize that you're leaning into digital service to try and offset some of those pressures. This business is still overwhelmingly focus, but there's a huge tam in Asia, that's untapped for Xerox.

With no licensing restrictions in place now so why not go after the Asia market and what are the barriers to entry there.

Speaker 8: place now. So why not go after the Asian market and what are kind of the barriers to entry there?

Speaker 7: I think of the couple of different things. First of all, I've stated a couple of times. I think we can grow in our existing account with our existing tam today, both in the Amir region and here in the America region. And so we've got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share, there's a significant share growth opportunity, even inside a print. And I believe our service is differentiation and our product differentiation. If we execute, we can actually grow tam.

And I think there's a couple of different things first of all I've stated a couple of times I think we can grow in our existing accounts with our existing Tam today, both in the EMEA region and here in the <unk>.

Steven Bandrowczak: I have a hair or I see a project. So paper I can quote it here because the paper market is very different to what it was before and we're not willing as an example to go after a paper deal with no margin here. That's great. Great context. Thanks a lot guys. Appreciate it. Thank you. Thank you one moment for our next question.

Americas region, and so we've got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share does a significant share growth opportunity even inside of print and I believe our services differentiation and a product differentiation. If we execute we can actually grow Tam to go expand into Asia.

Speaker 7: To go expand into Asia and to other markets, you have to go build a supply chain. You've got to go build a go to market. You've got to go build a logistics infrastructure in and around spare parts. It's a significant capital outlay to go expand in those margins. Even if you go with partner led strategy, you still have significant cash and capital outlay. We believe that the focus that we have on the capital that we already have, we could expand and grow operating margins. We've shared with you significantly faster. If we do it in the Americas and Namia and not expand into that reach.

Other markets you have to go build the supply chain. We've got to go build the go to market you've got to go build a logistics infrastructure in and around spare parts. It's a significant capital outlay to go expand in those margins. Even if you go with partner led strategy you still have significant cash and capital outlay, we believe that the focus that we have.

Erik Woodring: And our next question comes from the line of Eric Woodring from Morgan Stanley your question please. Hi guys, this is my on for Eric. Thanks for having me.

Steven Bandrowczak: Maybe a first question for Steve, can you talk a little bit about the change in strategy with fiddle earlier this year we were talking about expanding the portfolio to more third parties. But now it's reverting back to kind of a captive financing solution. So my first question is how that impacts your receivable factoring program. And second, there was once a thought that you could sell the fiddle business, but given it's now becoming a captive financing business that seems less likely. Is that correct that fiddle would likely no longer be for sale? Thank you. And I will follow up.

On the capital that we already have we could expand and grow operating margin as we've shared with you a significantly faster if we do it in the Americas, and EMEA and not expand into that region.

Speaker 9: The

Got it thank you.

Q1 moment for our next question.

And our next question comes from the line of semi Chatterji from Jpmorgan. Your question. Please.

Speaker 1: And our next question comes from the line of semi-chatter G from JP Morgan. Your question, please. Hi, good morning.

Xavier Heiss: Yeah, so let me and I stated it, I think in previous calls with the changing. Interest Rate Environment. It was no longer a palatable for us to leverage our balance sheet in the leasing business, and we changed the strategy mid to late last year, and we were no longer going to use Xerox balance sheet for this business, and we were going to look for other sources of capital to help us with that business.

Hi, good morning, and thanks for taking my questions I guess, if I can start on project reinvention.

Speaker 10: I guess if I can start on project reinvention, can you just help us understand when you're thinking about 300 million of improvement there? How should we think about

Can you just help us understand when youre thinking about $300 million of improvement there.

How should we think about impact on profitability of a sale or essentially benefit to cost of goods sold or gross profit relative to how much of this is improvement on opex.

Speaker 10: impact on profitability of a sale or essentially benefit to cost of good sold or gross profit rate of two. How much of this is improvement on op-ex and any thoughts on how long these changes on the go to market take for you and how.

Xavier Heiss: However, it was extremely important that it is a big component of driving our value in the field that we have the ability to be able to leasing and bundle pricing in the field with leasing, and so we turned to HBS and Peak, and we are being and using them strategically so that we don't leverage our balance sheet. You're absolutely right. Two years ago, we were trying to target growing that business, and potentially it would have been an operation that potentially would have been out of the shell.

Any thoughts around how long these changes on the go to market take for you and how sort of the timing of these three of the $300 million should we be expecting in terms of the linearity of the.

Speaker 10: So the timing of these 300 million should we be expecting in terms of the linearity of the improvement through the next couple of three years. Thank you, and I have a follow.

Improvements to the next couple of three years, Thank you and I have a follow up thank you.

Yes. Thanks Semicon, Thanks for asking a question on the re intervention because this is where you're doing a strategic movement for the company. We're pleased to unveil more.

Speaker 4: Yes, thanks, Tommy. Thanks for asking a question on the reinvention because this is really a strategic movement for the company, and we are pleased to unveil more on this strategy here.

On this strategy here so from a profit point of view as we mentioned it we are expecting roughly double.

Xavier Heiss: We have reversed that. It is now going back to an internal captive business, and we're not expanding beyond just supporting our business, Sabi. You said it, Steve, there on the my other focus that we have there is to make it an offer that supports our business rather than looking at it as a pure separated business here. Steve mentioned it as well. Our balance sheet, the current interest rate environment, you know, make us more than two years ago making these decisions here, and at the end of the day, if I look at the current free cash flow being generated, and maybe you spot it when we I commented, you know, what will be the benefit of this transaction.

Speaker 4: So from a profit point of view as we mentioned it, we are expecting roughly to double, you know, like the operating margins that we have on profitability until 2026. So it will be like three years journey that will continue beyond 2026, but we want it to plant a seed, and give you, you know, numbers. So you can, I would say, model on the look at the trajectory of the profitability here.

Where that goes.

<unk> margins that we have on profitability until 2026, so it will be like a three.

<unk> that will continue beyond 2026, but we wanted to compensate on give you a number. So you can I would say model on the look at the trajectory of profitability here, we're expecting the vast majority of that benefit to be in opex.

Speaker 4: We're expecting the vast majority of the benefit to be in OPEC.

Speaker 4: And some of it will be in cost of goods, but it will be mainly in NOPEX because this is where we will rewire entirely the company and look at not only like the key function or some of the function like go-to market, you have heard about geosimplification. At the end of the day what those geosimplification is again back to this concept of a balance execution on very disciplined way of looking at high air, is where should we be present? It does not mean leaving geographies here, but what is the best go-to market model we should have in all the countries that we are present here?

Some of it will be in cost of goods sold but it will be mainly in opex. Because this is where we will not be wire on priority as a company on look at not only like the key function of some of the functions like a go to market you have heard about our geos simplification at the end of the day what does Dr. Simplification is again back to this concept.

Xavier Heiss: Until 2027, we are expecting, you know, the finance receivable balance to decrease up to one billion. And if you look at the current situation to point it currently, going down there, this will be over time free cash flow being generated, supporting on driving, you know, the case for also the reinvention that we are building at this time. So at the end of the day, the good decision was made two years ago. This decision, you know, is helping us currently from the balance sheet point of view, on we have kept this ability to be captive on the developed our business without hurting it. Not it, thank you.

Of our balanced execution on very disciplined way of looking at high <unk> is where should we be present. It does not mean, leaving geographies there, but what is the best go to market model, which would add in the older countries that were present here representing here. So opex will be a key driver out there.

Obviously, we're expecting combined with the benefit of it our free cash flow go up significantly as we mentioned it as well we are expecting this initiative to be self funded so we are not expecting to have Rick.

Steven Bandrowczak: So maybe just if we take a step back, printing is a secularly declining market. And while I realize that you're leading into IT digital service to try and offset some of those pressures, this business is still overwhelmingly print focused, but there's a huge tam and Asia that's untapped for Xerox with no licensing restrictions in place now. So why not go after the Asia market? And what are kind of the barriers to entry there?

There are more oriented as a company here.

We have just completed the transaction with Carl Icahn, we are always.

Opportunistic when we are looking at.

Creative on value accretive acquisition at the same time, we have a journey on a critic target which is model now that will create.

Speaker 7: are now that we create this profit improvement on the 300 million operating profits that we mentioned. Yes, and for my follow-up, you did mention the weakness you're seeing in the transactional business and I think particularly in e-mia is what you're calling out. I just want to understand the nature of what you're hearing from your customers. Is it really a budget consideration and pushing some of those sales out to next year or are they rethinking sort of their install base or something else on a more structural basis on the devices or print or print any insights there? Please, thank you. Yeah, let me start. And so you think about the headwinds that we see in macro headwinds around inflation, around interest rates, around labor.

Profit improvement on a $300 million operating profit that we mentioned earlier.

Steven Bandrowczak: I think there's a couple of different things. First of all, I've stated a couple of times, I think we can grow in our existing accounts with our existing tam today, both in the Amir region and here in the Americas region. And so we've got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share, there's a significant share growth opportunity even inside a print.

Got it got it and for my follow up you did mentioned the weakness youre seeing in the transactional business and I think particularly in EMEA is what youre calling out.

Speaker 10: And for my follow up, you did mention the weakness you're seeing in the transactional business. And I think particularly in e-mails, what you're calling out. I just want to understand the nature of what you're hearing from your customers. Is it really a budget consideration and pushing some of those sales out to next year or are they rethinking sort of their install base or something else on a more structural basis on the devices or a printer front, any insights there?

Wanted to understand the nature of what are you hearing from your customers is it really a budget conciliation and pushing some of those sales out for the next deal or are they rethinking sort of their installed base or something else more on a more structural basis.

Steven Bandrowczak: And I believe our service is differentiation and our product differentiation. If we execute, we can actually grow tam. To go expand into Asia and into other markets, you have to go build a supply chain, you've got to go build to go to market, you've got to go build a logistics infrastructure in and around spare parts. It's a significant capital outlay to go expand in those margins. Even if you go with partner-led strategy, you still have significant cash and capital outlay.

The devices are printer front any insights there. Please thank you.

Yes, let me start and so you think about the headwinds that we're seeing macro headwinds around inflation around interest rates around labor and so what we hear from our clients and aligns really well with our strategy and that is we've got to drive their success through our solutions and products and services and Thats why I talk about <unk>.

Speaker 7: Yeah, let me start. And so you think about the headwinds that we see in macro headwinds around inflation, around interest rates, around labor. And so what we hear from our clients and aligns really well with our strategy. And that is we've got to drive their success through our solutions and products and services.

Speaker 7: That's why I talk about we could expand in existing clients today. And that's why we're seeing our new rate higher. So things like robotics is a service, things like digital workflow in terms of driving productivity inside a very specific vertical. So where we are aligning what we're hearing from our clients number one is they're looking to help to be able to offset some of these macro trends and drive more productivity, helping them with the challenges around labor, helping them with the challenge around higher cost the capital things like as a service and subscription model, all of those are actually playing very well into new products and services that we can bring into our clients to help them offset some of the challenge.

Could expand in existing clients today, and that's why we're seeing our renewal rate higher so things like robotics as a service things like digital workflow in terms of driving productivity inside a very specific verticals. So where we are aligning what we hear from our clients number. One is they are looking for help to be able to offset some of these macro trends.

Steven Bandrowczak: We believe that the focus that we have on the capital that we already have, we could expand and grow operating margins. We've shared with you a significantly faster if we do it in the Americas and Namia and not expand into that reach.

Unknown Executive: Thank you. One moment for our next question.

Operator: Thank you. One moment for our next question.

Trends and drive more productivity, helping them with the challenges around labor, helping them with the challenge about higher cost of capital things like as a service and subscription model all of those are actually playing very well into new products and services that we can bring into our clients to help them offset some of the challenges Debbie yes.

Samik Chatterjee: And our next question comes from the line of Samik Chatterjee from JP Morgan. Your question, please. Hi, good morning and thanks for taking my questions.

Xavier Heiss: I guess if I can start on project reinvention, can you just help us understand when you're thinking about 300 million of improvement there, how should we think about impact on profitability of a sale or essentially benefit to cost of goods sold or gross profit rate of two? How much of this is improvement on OPEX? And any thoughts on how long these changes on the go-to market take for you and how the timing of these 300 million should be expecting in terms of the linearity of the improvement through the next couple of three years.

Speaker 11: Dabby

The.

Speaker 5: but also to your point, Stanley K, from a macro point of view, so Europe , we are not the only one quoting it there, a little bit of sustenance, this is not, I call that a food decline or more, really more than what we're expecting, but we're seeing the sustenance there. What we've seen as well, I mentioned the paper business, the paper business just also to clarify, this is not a significant business for the Rocks, this is like a very low single digit number in revenue, but compared to last year, where this paper business, with certainly some scarcity of paper, we have been able to benefit from it here, this year is not as good, and we see more flow of Asian paper, of content in the market, putting pressure on prices there.

But <unk> so to your point 70 care from a macro point of view for Europe .

One continued there a little bit of softening is not.

<unk>.

Of course at the Hoover decline.

More and more really more than what we were expecting but we have seen a softening there what we have seen as well.

I mentioned the paper business the paper business.

To clarify this is not a significant business folks that Rockford is like very low single digit number in revenue, but compared to last year, whereas newspaper business.

Xavier Heiss: Thank you. And I have a follow. Thank you. Yes, thanks, Samik. Thanks for asking a question on reinvention because this is really a strategic movement for the company and we are pleased to unveil more on this strategy here. So from the profit point of view as we mention it, we are expecting roughly to double, you know, like the operating margins that we have on profitability until 2026. So it will be like a three years journey that will continue beyond 2026, but we want it, you know, to plant a seed and give you, you know, numbers.

Secondly, some scarcity of paper, we have been able to benefit from later this year is not as good on we see more flow of AGM Paypal continental market, putting pressure on prices there.

Speaker 4: The other element we monitor in currently is on the IP and production business.

Element, we are monitoring currently is only.

Prediction business <unk> business.

Speaker 4: This business obviously is highly connected to GDP evolution on the trend on the market, but also on the access to capital for our high-end production customer. And what we have seen recently is a little bit due to interest rate increasing, a little bit more scarcity on the ability or the capacities that this customer have to invest in this equipment.

Obviously.

Is a highly connected to updated GDP evolution on our trend on their market share, but also access to.

Xavier Heiss: So you can, I would say, model on the look at the trajectory of the profitability here. We're expecting, you know, the vast majority of the benefit to be in OPEX. Some of it will be in cost of goods sold but it will be mainly in OPEX because this is where we will rewire entirely the company and look at the, not only, you know, like the key function or, you know, some of the function like go-to-market.

Capital for our <unk>.

<unk> production customer on what we have seen recently is a little bit due to interest rate, increasing a little bit more scarcity on.

The ability also to capacities at this customer have to invest in equipment.

Speaker 4: Not highly concerned at this stage, but this is something that we are monitoring and we will provide updates during the quarter. All of this, everything that I'm describing here is included in our new guidance. And we also expect that, you know, we will be able to deliver the profitability and free practical guidance that we maintain compared to prior quarter.

Any concerns at this stage, but it is something that we're monitoring there we'll provide updates during the quarter. All of this everything that I'm describing here is included in our revenue guidance. Although we also expect that.

Xavier Heiss: You have heard about geosimplification. At the end of the day, what does geosimplification is again, back to this concept of balance execution on very disciplined way of looking at high air air is where should we be present? It does not mean leaving geographies here, but what is the best go-to-market model we should have in all the countries that were present here? So OPEX will be a key director on, obviously, we're expecting combined with the benefit of free cash flow to go up significantly.

We will be able to deliver the profitability on free cash flow guidance.

We have maintained compared to prior year quarter.

Got it alright, thank you.

Thank you.

Speaker 1: Thank you. This does conclude the question and answer session of Perry's program. I'd like to hand the program back to Steve for a-

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Steve.

For any further remarks.

Speaker 7: Thank you for listening to our earnings conference call this morning. Balanced execution about strategic priorities has resulted in a simplified, more profitable Xerox. And reinvention is the next step along our journey towards sustainable improvement in profits and revenue. We look forward to sharing our progress along that journey in future quarters. Have a wonderful day.

Thank you for listening to our earnings conference call. This morning balanced execution of our strategic priorities has resulted in a simplified more profitable Xerox and reinvention as the next step along our journey towards sustainable improvement in profits and revenue, we look forward to sharing our progress along that journey and fuel.

Xavier Heiss: As we mentioned it as well, we are expecting this initiative to be self-funded. So we are not expecting, you know, to leverage, you know, further or more, you know, the company here. As, you know, it will just complete the transaction with car like Anne. We are always, you know, opportunistic when we are looking at the accretive on value, accretive, you know, accretion. But at the same time, we have a journey on the trajectory, which is model now that will create, you know, this profit improvement on the 300 million operating profits that we mentioned here. Got it.

Each of quarters.

Wonderful day.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Speaker 1: Thank you, ladies and gentlemen, for your participation in today's conference. This does include the program. You may now disconnect. Good day.

Alright.

Samik Chatterjee: And for my follow-up, you did mention the weakness you're seeing in the transactional business, and I think particularly in EMEA is what you're calling out. I just want to understand the nature of what you're hearing from your customers. Is it really a budget consideration and pushing some of those sales out to next year, or are they rethinking sort of their install base or something else on a more structural basis on the devices or printer front, any insights there?

Okay.

Hmm.

Yes.

Okay.

Samik Chatterjee: Thank you. Yeah, let me start. And so you think about the headwinds that we see in macro headwinds around inflation, around interest rates, around labor. And so what we hear from our clients and aligns really well with our strategy. And that is we've got to drive their success through our solutions and products and services. And that's why I talk about we could expand and existing clients today. And that's why we're seeing our new rate higher.

Samik Chatterjee: So things like robotics as a service, things like digital workflow in terms of driving productivity inside a very specific vertical. So where we are aligning what we hear from our clients number one is they're looking to help to be able to offset some of these macro trends and drive more productivity, helping them with the challenges around labor, helping them with the challenge around higher cost the capital things like as a service and subscription model.

Yes.

Okay.

Yes.

Yeah.

Okay.

Yes.

Okay.

Yes.

Samik Chatterjee: All of those are actually playing very well into new products and services that we can bring into our clients to help them offset some of the challenges, David. Yeah, from the, you know, back to also to your point of some of the care from a macro point of view. So Europe, we are not the only one quoting it there a little bit of sustenance. This is not, you know, I call that the food decline or, you know, more, more really more than what we're expecting, but we're seeing the sustenance there.

Samik Chatterjee: What we've seen as well, you know, I mentioned the paper of business, the paper of business just also to clarify. This is not the significant business. For the rock, this is like a very low single digit number in revenue, but compared to last year, where this paper business with certainly some scarcity of paper, we've been able to benefit from it. This year is not as good on, we see more flow of Asian paper of content in the market, putting pressure on prices there.

Samik Chatterjee: The other element we are monitoring currently is on the high end production business business, you know, obviously is highly connected to the GDP abolition on the, you know, the trend on the market here, but also on the access to capital for our high end production customer on what we have seen recently is a little bit due to interest rate increasing a little bit more scarcity. And, you know, the ability or the capacities that this customer have to invest in this equipment, not highly concerned at this stage, but this is something that we are monitoring on the will provide updates during the quarter.

[music].

Samik Chatterjee: All of this everything that I'm describing here is included in our new guidance. And we also expect that, you know, we will be able to deliver the profitability on free cashflow guidance that we have maintained compared to prior quarter. Thank you. Thank you, Senator. Thank you. This does conclude the question and answer session of areas program.

Yes.

Steven Bandrowczak: I'd like to hand the program back to Steve for any further remarks. Thank you for listening to our earnings conference call this morning, balanced execution about strategic priorities has resulted in a simplified more profitable Xerox. And reinvention is the next step along our journey towards sustainable improvement in profits and revenue. We look forward to sharing our progress along that journey in future quarters. Have a wonderful day. Thank you, ladies and gentlemen for your participation in today's conference. This does include the program. You may now disconnect. Good day. Thank you.

Yes.

Uh huh.

Okay.

[music].

Thanks.

Okay.

Yes.

Yeah.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Yes.

Okay.

Speaker 1: Welcome to the Xerox Holding Corporation, third quarter, 2023 earnings release conference call. After the presentation, there will be a question and answer session to ask your questions at that time. Please press star 11 at any time during this call. You can withdraw your question by simply pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckle, vice president of Investor Relations. Please go ahead, sir.

Welcome to the Xerox Holdings Corporation third quarter 2023 earnings release conference call. After the presentation. There will be a question and answer session to ask your questions at that time. Please press star one one at any time. During this call you can withdraw your question by simply pressing star one again.

At this time I would like to turn the meeting over to Mr. David <unk>, Vice President of Investor Relations. Please go ahead Sir.

Good morning, everyone I'm, David <unk>, Vice President and head of Investor Relations at Xerox Holdings Corporation.

Speaker 2: Good morning everyone. I'm David Bechel, Vice President and Head of Investor Relations at Zürak's Holdings Corporation.

Speaker 2: Welcome to the Zero Arts Holdings Corporation. Third quarter, 2023 earnings release conference call hosted by Steve Bandersack, Chief Executive Officer.

Welcome to the Xerox Holdings Corporation third quarter 2023 earnings release Conference call hosted by Steve <unk>, Chief Executive Officer.

Speaker 2: He's joined by Zavea Heist, executive vice president and chief financial officer.

He is joined by <unk> Executive Vice President and Chief Financial Officer.

Speaker 2: After requested ZRx holding corporation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of ZRx.

At the request of Xerox Holdings Corporation today's conference call is being recorded.

Other recording and or rebroadcast of this call are prohibited without the express permission of Xerox.

Speaker 2: During this call, Zerox executives will refer to slides that are available on the web at www.zerox.com slash investor. We'll make comments that contain four looking statements, which, by their nature, address matters that are in the future and uncertain.

During this call Xerox executives will refer to slides that are available on the web at www Dot Xerox Dot com slash investor and we will.

Make comments that contain forward looking statements, which by their nature address matters that are in the future and uncertain.

Speaker 2: Actual future financial results may be materially different than those expressed here in. At this time, I'd like to turn the meeting over.

Actual future financial results may be materially different than those expressed herein.

At this time I'd like to turn the meeting over to Mr. <unk> <unk>.

Speaker 3: Good morning, and thank you for joining out Q3 2023 earnings call. Before I get to this court as a result, I would like to start today's call by acknowledging the tragic events unfolding in the Middle East. Our thoughts and prayers are with the victims and their families, which include our local employees, clients and partners. We are all hoping for a peaceful resolution.

<unk> for a peaceful resolution.

Speaker 3: In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income, EPS, and pre-cash flow.

In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income EPS and free cash flow.

Speaker 3: summarizing results for the quarter, revenue of 1.65 billion declined, 5.7% in actual currency, and 7.4% in constant currency.

Summarizing results for the quarter revenue of 165 billion declined five 7% in actual currency and seven 4% in constant currency.

Speaker 3: Adjusted EPS was 46 cents, 27 cents higher year over year.

Adjusted EPS was <unk> 46 cents.

27, <unk> higher year over year.

Speaker 3: Free cash flow was 112 million compared to a use of 18 million in the prior year quarter.

Free cash flow was $112 million compared to a use of $18 million in the prior year quarter and.

Speaker 3: and adjusted operating margin of 4.1% was higher year over year by 40 basis point.

And adjusted operating margin of four 1% was higher year over year by 40 basis points.

Speaker 3: While I'm never pleased to report a decline in revenue, this court's top-line results were largely anticipated. The decline in revenue reflects a relatively stable demand environment for our products and services offset by declines in certain sector low-module and post-seal revenue categories, as well as declines in revenues associated with strategic actions put in place to simplify our business.

While im never pleased to reported decline in revenue. This quarter's top line results were largely anticipated the decline.

And revenue reflects a relatively stable demand environment for our products and services offset by declines in certain cyclical low margin post sale revenue categories as well as declines in revenues associated with strategic actions put in place to simplify our business.

Speaker 3: Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year-over-year basis.

Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year over year basis. This growth is due to reduction in costs associated with recent business simplification efforts, our ability to offset product cost increases with higher prices.

And the purpose of avoidance of revenue opportunities bearing low levels of profitability.

Speaker 3: As I will discuss, we expect the continued simplification of our business to drive substantial, incremental improvement in profit margin and profit levels over the next few years.

As I will discuss we expect the continued simplification of our business to drive substantial incremental improvement in profit margin and profit levels over the next few years.

Speaker 3: Recatch will improve the 130 million Euro be year in Q3 and as the increase by more than 330 million year today

Free cash flow improved $130 million year over year in Q3, and as the increased by more than $330 million year to date.

Speaker 3: Growth and free cash flow was due in part to a change in fiddle strategy and It's approached to funding new originations which we expect will generate meaningful amounts of incremental free cash flow for many years to come As always we remain focused on our three strategic priorities client success profitability and shareholder returns

Unknown Executive: Welcome to the Xerox Holdings Corporation, 3rd quarter of 2023 earnings release conference call. After the presentation, there will be a question and answer session to ask your questions at that time. Please press star 11 at any time during this call. You can withdraw your question by simply pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckel, Vice President of Investor Relations. Please go ahead, sir.

Operator: Welcome to the Xerox Holdings Corporation, 3rd quarter of 2023 earnings release conference call. After the presentation, there will be a question and answer session to ask your questions at that time. Please press star 11 at any time during this call. You can withdraw your question by simply pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckel, Vice President of Investor Relations. Please go ahead, sir.

Success profitability and shareholder returns.

<unk> success is a strategic imperative for Xerox, our ability to solve clients' most challenging workplace productivity needs and offset the effects of rising inflation labor constraints and higher cost of capital with productivity enhancing solutions helps us not only gain market share in print.

Unknown Executive: Good morning, everyone. I'm David Beckel, Vice President and Head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation, 3rd quarter 2023 earnings release conference call, hosted by Steve Banderjak, Chief Executive Officer. He's joined by Zavea Heiss, Executive Vice President and Chief Financial Officer. After a question, Xerox Holdings Corporation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of Xerox.

Operator: Good morning, everyone. I'm David Beckel, Vice President and Head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation, 3rd quarter 2023 earnings release conference call, hosted by Steve Banderjak, Chief Executive Officer. He's joined by Zavea Heiss, Executive Vice President and Chief Financial Officer. After a question, Xerox Holdings Corporation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of Xerox.

But expand client wallet share through incremental services.

This quarter Xerox was recognized as a leader in IDC market Scapes worldwide print transformation vendor assessment for our breath of transformative workplace technology solutions, both related to and adjacent to print.

Speaker 3: Our advanced solutions provide us a distinct advantage as we compete for new and renewal business.

Our advanced solutions provide us a distinct advantage as we compete for new and renewal business.

Unknown Executive: During this call, Xerox executives will refer to slides that are available on the web at www. Xerox.com slash investor. We will make comments that contain four looking statements which, by their nature, address matters that are in the future and uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I'd like to turn the meeting over to Mr. Banderjak.

Operator: During this call, Xerox executives will refer to slides that are available on the web at www. Xerox.com slash investor. We will make comments that contain four looking statements which, by their nature, address matters that are in the future and uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I'd like to turn the meeting over to Mr. Banderjak.

Speaker 3: This quarter and year-to-date service signings grew double digits in constant currency, led by growth in digital services.

This quarter and year to date service signings grew double digits in constant currency led by growth in digital services in.

Speaker 3: Increasingly, digital services such as advance customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients for new.

Increasingly digital services, such as advanced customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients renew.

Steven Bandrowczak: Good morning, and thank you for joining our Q3 2023 earnings call. Before I get to this court as a result, I would like to start today's call by acknowledging the tragic events unfolding in the Middle East. Our thoughts and prayers are with the victims and their families, which include our local employees, clients and partners. We are all hoping for a peaceful resolution. In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income, EPS and pre-cash flow, summarizing results for the quarter, revenue of 1.65 billion declined, 5.7% in actual currency, and 7.4% in constant currency.

David Beckel: Good morning, and thank you for joining our Q3 2023 earnings call. Before I get to this court as a result, I would like to start today's call by acknowledging the tragic events unfolding in the Middle East. Our thoughts and prayers are with the victims and their families, which include our local employees, clients and partners. We are all hoping for a peaceful resolution. In Q3, the successful execution of our strategic priorities resulted in another quarter of growth in adjusted operating income, EPS and pre-cash flow, summarizing results for the quarter, revenue of 1.65 billion declined, 5.7% in actual currency, and 7.4% in constant currency.

Speaker 3: Moving to profitability. In Q3, we took additional actions to simplify our operations and improve the efficiency of our cost structure.

Moving to profitability in Q3, we took additional actions to simplify our operations and improve the efficiency of our cost structure.

In August we sold our <unk> print business element out of solutions to added Tech and in September we announced the expansion of our relationship with peak solutions and affiliate of Hps investment partners to include the provision of leasing services to bid those network of independent dealers.

Steven Bandrowczak: Adjusted EPS was 46 cents, 27 cents higher year-over-year. Pre-cash flow was 112 million compared to a use of 18 million in the prior year quarter. An adjusted operating margin of 4.1% was higher year-over-year by 40 basis points. While I'm never pleased to report a decline in revenue, this quarter's top-line results were largely anticipated. The decline in revenue reflects a relatively stable demand environment for our products and services offset by declines in certain sector low-modge and post-sale revenue categories, as well as declines in revenues associated with strategic actions put in place to simplify our business.

David Beckel: Adjusted EPS was 46 cents, 27 cents higher year-over-year. Pre-cash flow was 112 million compared to a use of 18 million in the prior year quarter. An adjusted operating margin of 4.1% was higher year-over-year by 40 basis points. While I'm never pleased to report a decline in revenue, this quarter's top-line results were largely anticipated. The decline in revenue reflects a relatively stable demand environment for our products and services offset by declines in certain sector low-modge and post-sale revenue categories, as well as declines in revenues associated with strategic actions put in place to simplify our business.

Speaker 3: Both actions improve the flexibility of our cost-based while enabling greater focus on our core capabilities in and around print, digital and IT service.

Both actions improved our flexibility about cost base, while enabling greater focus on our core capabilities in and around print.

Digital and it services.

Speaker 3: Finally, she'll hold the returns. A few weeks ago, we repurchased the roughly 34 million shares previously owned by Call Icon and Affiliate, resulting in a reduction about share count of around 22%. The decision to repurchase the shares was consistent with the capital allocation and she'll hold the return philosophy, which is to deploy cash in areas providing the highest return for share.

Finally shareholder returns.

Two weeks ago, we repurchased roughly 34 million shares previously owned by Carl Icahn and affiliates, resulting in a reduction of our share count of around 22%.

A decision to repurchase the shares was consistent with the capital allocation and shareholder returns philosophy, which is to deploy cash in areas, providing the highest return for shareholders.

Management and the board of Directors believe this transaction will create substantial value for shareholders overtime as the reduction of shares allows equity holders greater participation in the expected earnings growth associated with our transformation, which I will discuss shortly.

Steven Bandrowczak: Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year-over-year basis. This growth is due to reduction in costs associated with recent business simplification efforts, our ability to offset product costs increases with higher prices, and the purposeful avoidance of revenue opportunities bearing low levels of As I will discuss, we expect the continued simplification of our business to drive substantial, incremental improvement in profit margin, and profit levels over the next few years.

David Beckel: Despite a reduction in revenue in Q3, we once again grew operating income and operating income margin on a year-over-year basis. This growth is due to reduction in costs associated with recent business simplification efforts, our ability to offset product costs increases with higher prices, and the purposeful avoidance of revenue opportunities bearing low levels of As I will discuss, we expect the continued simplification of our business to drive substantial, incremental improvement in profit margin, and profit levels over the next few years.

Speaker 3: The transaction is expected to be EPS accretive while preventing the type of market overhang, normally associated with an open market disposal of significant equity state.

The transaction is expected to be EPS accretive, while preventing the type of market overhang normally associated with an open market disposal of significant equity states of <unk>.

Speaker 3: Our three strategic priorities have been instrumental in laying the groundwork for our direction moving forward.

Three strategic priorities have been instrumental in laying the groundwork for our direction moving forward.

Steven Bandrowczak: Free cash flow improved 130 million year-over-year in Q3, and has increased by more than 330 million year-to-date. Growth in free cash flow was due in part to a change in fiddle strategy, and its approach to funding new originations, which we expect will generate meaningful amounts of incremental free cash flow for many years to come. As always, we remain focused on our three strategic priorities, client success, profitability, and shareholder returns. Client success is a strategic imperative for Xerox, our ability to solve clients' most challenging workplace productivity needs, and offset the effects of rising inflation, labor constraints, and higher costs of capital with productivity enhancing solutions.

David Beckel: Free cash flow improved 130 million year-over-year in Q3, and has increased by more than 330 million year-to-date. Growth in free cash flow was due in part to a change in fiddle strategy, and its approach to funding new originations, which we expect will generate meaningful amounts of incremental free cash flow for many years to come. As always, we remain focused on our three strategic priorities, client success, profitability, and shareholder returns. Client success is a strategic imperative for Xerox, our ability to solve clients' most challenging workplace productivity needs, and offset the effects of rising inflation, labor constraints, and higher costs of capital with productivity enhancing solutions.

Speaker 3: On our Q2 call, we provided examples of the ways in which we are simplifying our business to refocus on our core operations of print, digital and IT service.

On our Q2 call. We provided examples of the ways in which we are simplifying our business to refocus on our core operations of print digital and services.

Speaker 3: Those actions were critical enablers of an even more significant transformation of our business.

Those actions were critical enablers of an even more significant transformation of our business.

We refer to as reinvention.

First let me define what reinvention means to Xerox Green.

Speaker 3: Reinvention is a comprehensive and operational simplification of our business, resulting in a strategic repositioning of the company to take advantage of favorable macro trends, including the digitalization of document workflows associated with the power of AI while managing the sector where headwinds associated with traditional prints.

Steven Bandrowczak: Helps us not only gain market share and print, but expand client-loyalty through incremental services. This code is Xerox was recognized as a leader in IDC market scapes worldwide print transformation vendor assessment for our breadth of transformative workplace technology solutions, both related to and adjacent to print. Our advanced solutions provide us a distinct advantage as we compete for new and renewal business. This quarter and year-to-date service signings grew double digits in constant currency, led by growth in digital services, increasingly digital services such as advanced customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients renew. Year-to-date, the revenue replacement rate for a majority of renewed service contract is 100 percent or higher, despite the ongoing consolidation of print demand as companies adapt to more permanent hybrid workplace arrangements.

David Beckel: Helps us not only gain market share and print, but expand client-loyalty through incremental services. This code is Xerox was recognized as a leader in IDC market scapes worldwide print transformation vendor assessment for our breadth of transformative workplace technology solutions, both related to and adjacent to print. Our advanced solutions provide us a distinct advantage as we compete for new and renewal business. This quarter and year-to-date service signings grew double digits in constant currency, led by growth in digital services, increasingly digital services such as advanced customer engagement and intelligent document processing are replacing traditional print demand as contracts with existing clients renew. Year-to-date, the revenue replacement rate for a majority of renewed service contract is 100 percent or higher, despite the ongoing consolidation of print demand as companies adapt to more permanent hybrid workplace arrangements.

<unk> the secular headwinds associated with traditional print.

Speaker 3: Reenvention does not mean we are abandoning our core print business, which we expect to continue generating strong profits and cash flow for many years.

Reinvention does not mean, we're abandoning our core print business, which we expect to continue generating strong profits and cash flow for many years reinvention means building new capabilities on top of a solid print core.

Speaker 3: Re-invention means building new capabilities on top of a solid print core.

Speaker 3: Management and the board believe the most direct and probable path to sustainable growth in profit, free cash flow and shalehold returns requires a structural redesign of our operations combined with selected reinvestment in capability is essential to addressing clients most challenging workplace productivity needs.

Management and the board believes the most direct and probable path to sustainable growth and profit free cash flow and shareholder returns requires a structural redesign of our operations combined with selected reinvestment in capabilities are essential to addressing clients most challenging work.

Place productivity needs.

Speaker 3: The workplace has evolved and Girox is evolving with it to ensure we power the productive workplace of today and tomorrow.

Workplace has evolved and Xerox is evolving with it to ensure we power the productive workplace of today and tomorrow.

Speaker 3: The ultimate goal of reinvention is to facilitate Xerox shift from a leader in print technology to an unparalleled technology and service provider.

The ultimate goal of reinvention is to facilitate Xerox shifts from a leader in print technology to an unparalleled technology and service provider.

Steven Bandrowczak: Moving to profitability, in Q3 we took additional actions to simplify our operations and improve the efficiency of our cost structure. In August, we sold out 3D print business LMATIV solutions to ATITEC and in September, we announced the expansion of our relationship with peak solutions and a affiliate of HBS investment partners to include the provision of leasing services to Fittles Network of Independent and Dealers. Both actions improved the flexibility of our cost-based while enabling greater focus on our core capabilities in and around print, digital and IT services.

Speaker 3: There are three primary components of the reinvention. First is a geographic optimization, which entails taking a more selective approach to direct operations in certain markets and, when appropriate, shifting to a partner-led distribution model.

This optimization of our go to market approach is expected to result in lower revenue initially, but provide a stronger and more profitable foundation from which to grow revenue going forward.

Speaker 3: Second is the optimization about product offering and pricing models. Through the reinvention, we will streamline our product offerings to maximize profitability and allow greater internal focus on the delivery of products and services that address the evolving needs of a hybrid workplace.

Steven Bandrowczak: Finally, shareholder returns a few weeks ago, we repurchased the roughly 34 million shares previously owned by call icon and affiliate, resulting in a reduction of our share count of around 22 percent. The decision to repurchase the shares was consistent with the capital allocation and shareholder return philosophy, which is to deploy cash in areas providing the highest return for shelves. Management and the Board of Directors believe this transactional creates substantial value for shareholders over time as the reduction of shares allows equity holders greater participation in the expected earnings growth associated with our transformation, which I will discuss shortly.

Speaker 3: The optimization of our geographic footprint, product offerings and pricing models will in turn enable an end-to-end organizational and structural simplification of our business. Unlike in the third component of the reinvention, operating efficiencies across IT, business support functions, and the supply chain.

Business support functions and the supply chain.

Steven Bandrowczak: The transaction is expected to be EPS a creative while preventing the type of market overhang normally associated with an open market disposal of significant equity states. Our three strategic priorities have been instrumental in laying the groundwork for our direction moving forward. On our Q2 call, we provided examples of the ways in which we are simplifying our business to refocus on our core operations of print, digital and IT services. Those actions were critical enablers of an even more significant transformation of our business. For the past year with the help of outside experts, we have analyzed our business model, competitive strengths and market opportunities to define an optimal strategic path.

While the reinvention is expected to result in a more profitable and streamlined organization. It is not simply a cost cutting program.

Really important if not more so is <unk> ability to transition over time to become a services led software enabled provider of advanced workplace solutions.

A transition of this magnitude requires select investment in organic and inorganic growth opportunities.

Speaker 3: A transition of this magnitude requires select investment in organic and in organic growth opportunities.

These investments are expected to be self funded and we'll target opportunities to grow our share of wallet in print and print services as well as high growth.

Jason markets, where we have a clear path to win such as managed services for small and mid sized clients and digital services.

Steven Bandrowczak: And today we are sharing with investors the preliminary framework for a multi-year strategic transformation plan, which we refer to as reinvention. First, let me define what reinvention means to Xerox. Reinvention is a comprehensive and operational simplification about business, resulting in a strategic repositioning of the company to take advantage of favorable macro trends, including the digitalization of document workflows associated with the power of AI while managing the circular headwinds associated with traditional print.

In total reinvention is expected to generate substantial improvement in operating income and income margin over the next few years.

Steven Bandrowczak: Reinvention does not mean we are abandon our core print business, which we expect to continue generating strong profits and cash flow for many years. Reinvention means building new capabilities on top of a solid print core. Management and the board believe the most direct and probable path to sustainable growth in profit, free cash flow and shareholder returns requires a structural redesign of our operations combined with selected reinvestment in capabilities essential to addressing clients most challenging workplace productivity needs.

2026, we expect to deliver an improvement to 2023 adjusted operating income of at least $300 million, resulting in a return to double digit adjusted operating income margins.

Importantly, this improvement is inclusive of investments in growth, which are expected to drive a more diversified revenue mix with greater exposure to markets with high rates of growth.

Speaker 3: We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarter.

We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarters.

To recap we are confident in our ability to successfully execute this reinvention project own. It has instilled in this company a culture of continuous operating improvement.

Steven Bandrowczak: The workplace has evolved and Xerox is evolving with it to ensure we power the productive workplace of today and tomorrow. The ultimate goal of reinvention is to facilitate Xerox shifts from a leader in print technology to an unparalleled technology and service provider. There are three primary components of the reinvention. First is a geographic optimization, which entails taking a more selective approach to direct operations in certain markets and, when appropriate, shifting to a partner led distribution model.

Reinvention will not only improve xerox profitability, but reposition the company for long term sustainable growth.

And with strong free cash flows supporting our dividend investors will be rewarded as the strategy progresses.

I will now hand over to Xavier <unk>.

Speaker 4: Thank you Steve, on good morning everyone. I'll still mention we deliver another quarter of growth in adjusted operating income on income margin, despite a decline in revenue, evidencing our ability to manage profitability, amid fluctuation in revenue.

Steven Bandrowczak: There are three primary components of the reinvention. First is a geographic optimization, which entails taking a more selective approach to direct operations in certain markets and, when appropriate, shifting to a partner led distribution model. This optimization of our go-to-market approach is expected to result in lower revenue initially, but provide a stronger and more profitable foundation for which to grow revenue going forward. Second is the optimization of our product offering and pricing models.

Speaker 4: The year of a year decline in Rob News' quarter was driven mainly by decline in transactional, non-contractual post-cels for new components. Equipment of new decline modestly relative to the prior year, due in large parts to a reduction in equipment backlog in the prior year quarter. Turning to profitability. We deliver a first-consecretive quarter or year of a year improvement in laws on operating profit markets.

So year over year decline in revenue this quarter was driven mainly by declines in transactional non contractual post sales revenue components equipment revenue declined modestly relative to the prior year due in large part to a reduction in equipment backlog in the prior year quarter turning to profitability.

Steven Bandrowczak: This optimization of our go-to-market approach is expected to result in lower revenue initially, but provide a stronger and more profitable foundation for which to grow revenue going forward. Second is the optimization of our product offering and pricing models. Through the reinvention we will streamline our product offerings to maximize profitability and allow greater internal focus on the delivery of products and services that address the evolving needs of a hybrid workplace. We will introduce a more consumer-like, touchless experience to improve client satisfaction.

We deliver our fourth consecutive quarter of year over year improvement in gross and operating profit margin.

Steven Bandrowczak: Through the reinvention we will streamline our product offerings to maximize profitability and allow greater internal focus on the delivery of products and services that address the evolving needs of a hybrid workplace. We will introduce a more consumer-like, touchless experience to improve client satisfaction. And we'll simplify our pricing models to deliver faster and more effective decisioning when pursuing new and renewal business. The optimization of our geographic footprint product offerings and pricing models will in turn enable an end-to-end organizational and structural simplification of our business.

Speaker 4: Both margin in full 60 basis point over the prior year quarter, mainly due to the benefit associated with pricing increases on cost efficiency actions, partially offset by your 50 basis point edwin from the termination of Fuji volume.

Speaker 4: Increasing product cost were more than upset by improvement in supply-generated expense on pricing access.

Increases in product costs were more than offset by improvement in supply chain related expense on pricing actions.

Steven Bandrowczak: And we'll simplify our pricing models to deliver faster and more effective decisioning when pursuing new and renewal business. The optimization of our geographic footprint product offerings and pricing models will in turn enable an end-to-end organizational and structural simplification of our business. This is just unlocking the third component of the reinvention operating efficiencies across IT, business support functions, and the supply chain. While the reinvention is expected to result in a more profitable and streamlined organization, it is not simply a cost-cutting program.

Speaker 4: Adjusted operating margin of 4.1% increased 40 basis points year over year, as the effect of lower revenue on growth profit along with higher compensation on bad debt expenses were offset by close to 100 basis points of improvement from ongoing operating efficiencies on pricing X.

Adjusted operating margin of four 1% increased 40 basis points year over year as the effect of lower revenue and gross profit along with higher compensation on bad debt expenses were offset by close to 400 basis points of improvement from ongoing operating efficiencies and pricing actions.

Steven Bandrowczak: This is just unlocking the third component of the reinvention operating efficiencies across IT, business support functions, and the supply chain. While the reinvention is expected to result in a more profitable and streamlined organization, it is not simply a cost-cutting program. Equally important, if not more so, is Xerox ability to transition over time to become a services led software enabled provider of advanced workplace solutions. A transition of this magnitude requires select investment in organic and in organic growth opportunities.

Speaker 4: Adjusted those are expenses net where 29 million lower year over a year due to higher gains from the sets of non-core business asset on lower known financing interest.

Adjusted other expenses net were $29 million lower year over year due to higher gains from the sense of noncore business asset on low well known financing interest expense.

Steven Bandrowczak: These investments are expected to be self-funded and will target opportunities to grow a share of wallet in print and print services, as well as high-growth adjacent markets where we have a clear path to win, such as managed IT services for small and mid-sized clients and digital services. In total, reinvention is expected to generate substantial improvement in operating income and income margin over the next few years. By 2026, we expect to deliver an improvement to 2023 adjusted operating income of at least 300 million, resulting in return to double digit adjusted operating income margins.

Speaker 4: I just think tax rate was 7.3% compared to 42.1% in the same quarter last year, largely due to the tax benefit associated with the release of uncertain tax positions on the remuragement of different tax assets in the current year period, as well as the non-recurring unfavorable effects of changes in certain tax addictions in the prior year period.

Adjusted tax rate was seven 3% compared to 42, one percentage the same quarter last year, largely due to tax benefits associated with the release of uncertain tax positions on the re measurement of deferred tax asset in the current year period as well as a nonrecurring unfavorable FX.

Steven Bandrowczak: Equally important, if not more so, is Xerox ability to transition over time to become a services led software enabled provider of advanced workplace solutions. A transition of this magnitude requires select investment in organic and in organic growth opportunities. These investments are expected to be self-funded and will target opportunities to grow a share of wallet in print and print services, as well as high-growth adjacent markets where we have a clear path to win, such as managed IT services for small and mid-sized clients and digital services.

Our changes in certain tax elections in the prior year period.

Speaker 4: I just did EPS of 46 cent in the software was 27 cents a year and a prior year, driven by an increase in the sale of known core business asset on the lower tax rate.

Adjusted EPS of 46% in the third quarter was 27% a year tens of prior year driven by an increase in the sale of non core business asset on the lower tax rate.

Speaker 4: The FPS of 28 cents was $2.76 a year than the prior year, mainly due to an after-attacks, non-cash-good-mid-interment chart of $395 million, or $2.54 per share in the prior year.

GAAP EPS of <unk> 28 was $2 76, a year Thunder prior year, mainly due to an after tax noncash goodwill impairment charge of $395 million or $2 54 per share in the prior year.

Steven Bandrowczak: In total, reinvention is expected to generate substantial improvement in operating income and income margin over the next few years. By 2026, we expect to deliver an improvement to 2023 adjusted operating income of at least 300 million, resulting in return to double digit adjusted operating income margins. Importantly, this improvement is inclusive of investments in growth which are expected to drive a more diversified revenue mix with greater exposure to markets with high rates of growth. We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarters.

Speaker 4: So we'll know EPS Impact Disco order associated with the recent repurchase of share from Carl Ikan on a feed.

So we will no EPS impact this quarter associated with our recent repurchase of share from Carl Icahn that pdx.

Speaker 4: Let me know review revenue on cashflow in more detail.

Let me now review revenue on cash flow in more detail.

Speaker 4: Turning to revenue, equipment sales of $300 on 86 million in 2-3 decline one person year over a year in actual currency or two percent in constant currency.

Turning to revenue equipment sales of $386 million in Q3 declined 1% year over year in actual currency or 2% in constant currency.

Steven Bandrowczak: Importantly, this improvement is inclusive of investments in growth which are expected to drive a more diversified revenue mix with greater exposure to markets with high rates of growth. We will provide more specifics and the phasing of operating income improvements as specific actions are taken in future quarters. To recap, we are confident in our ability to successfully execute this reinvention. Project ONIT has instilled in this company a culture of continuous operating improvement.

Speaker 4: The decline in equipment for new reflects cable demand conditions offset by the effect of EME backlog reductions in the prior.

So declining equipment towards new reflects cable demand conditions offset by the effect of EMEA backlog reductions in the prior year.

Speaker 4: consistent with recent quarter, revenue trend out base equipment insertion activity, YouTube favorable product on geographic mix, as well as all your price.

Consistent with recent quarter.

Revenue trends outpaced equipment and settlement activity due to favorable product and geographic mix as well as higher prices.

Steven Bandrowczak: To recap, we are confident in our ability to successfully execute this reinvention. Project ONIT has instilled in this company a culture of continuous operating improvement. Our management team is more than capable of delivering a transformation of this magnitude and our brand, client relationships and history of innovation give us the right to play and win in digital and managed IT services. Reinvention will not only improve Xerox profitability but reposition the company for long-term sustainable growth and with strong free cash flow supporting our dividend, investors will be rewarded as the strategy progresses.

Speaker 4: This was particularly true with our H3 product, which experienced unfavorable geographic mixed effect in the prior year due to backlog reduction in the ME.

Was particularly true with our <unk> product, which experienced unfavorable geographic mix affecting the prior year due to backlog reduction in EMEA.

Speaker 4: And 3A4 Intellation will lower again this quarter due to the ongoing normalization of work from home trend.

Three April integration were lower again this quarter due to the ongoing normalization of work from home trends.

Steven Bandrowczak: Our management team is more than capable of delivering a transformation of this magnitude and our brand, client relationships and history of innovation give us the right to play and win in digital and managed IT services. Reinvention will not only improve Xerox profitability but reposition the company for long-term sustainable growth and with strong free cash flow supporting our dividend, investors will be rewarded as the strategy progresses.

Speaker 4: Concert revenue of 1.3 billion declined 9% in constant currency year over year on 7% in actual goods.

Wholesale revenue of $1 3 billion declined 9% in constant currency year over year on 7% in actual currency.

Speaker 4: As noted, Post-SELD decline were mainly driven by reduction in cycle core, transactional items, most notably a significant decline in low margin paper sales on lower IT and point device plays.

As noted posted declines were mainly driven by a reduction in cyclical transactional items, most notably a significant decline in low margin paper sales on lower endpoint device placements.

Speaker 4: What's set from you was further impacted by the termination of foodie royalties on the effect of specific strategic action, which resulted in lower financing on

Xavier Heiss: I will now hand over to Xavier.

Xavier Heiss: I will now hand over to Xavier. Thank you, Steve, on good morning, everyone. As Steve mentioned, we deliver another quarter of growth in adjusted operating income on income margin, despite a decline in revenue, evidencing our ability to manage profitability amid fluctuation in revenue.

Well central New was further impacted by determination of Fuji royalties on the effect of specific strategic action rich treasure, keeping lower financing on Park Avenue.

Xavier Heiss: Thank you, Steve, on good morning, everyone. As Steve mentioned, we deliver another quarter of growth in adjusted operating income on income margin, despite a decline in revenue, evidencing our ability to manage profitability amid fluctuation in revenue. The year of a year of decline in revenue, this quarter was driven mainly by declining in transactional, non-contractual, post-sense revenue components. Equipment of new decline modestly relative to the prior year, due in large part to a reduction in equipment backlog in the prior year quarter.

Speaker 4: Revenue from contractual print on digital services declined slightly. As digital on managed IT services revenue growth was upset by decline in print services for production clients, which have generally been more affected by macro economic pressure than office clients. Geographically, both region declined in actual non-constant current.

Revenues from contract to our print on digital services declined slightly as digital on managed it services revenue growth was offset by decline in print services for production clients, which have generally been more affected by macroeconomic pressure done.

Xavier Heiss: The year of a year of decline in revenue, this quarter was driven mainly by declining in transactional, non-contractual, post-sense revenue components. Equipment of new decline modestly relative to the prior year, due in large part to a reduction in equipment backlog in the prior year quarter.

Clients geographically most region declining next year and on constant currency. So.

Speaker 4: The decline in the AMIA was more pronounced given the substantial reduction in the AMIA backlog in the prior year of quarter on the weekening macro economic out.

The decline in EMEA was more pronounced given the substantial reduction in EMEA backlog in the prior year quarter on a weakening macro economic outlook.

Xavier Heiss: Turning to profitability. We deliver a first-point security quarter or year-over-year improvement in growth on operating profit margin. Both margin improved 60 basis point over the prior year quarter, mainly due to the benefit associated with pricing increases on cost efficiency actions, partially offset by your 50 basis point, Edwin, from the termination of 3G royalties. Increases in product cost were more than upset by improvement in supply generated expense on pricing actions. Adjusted operating margin of 4.1% increased 40 basis point year over a year, as the effect of lower revenue on growth profit, along with higher compensation on bad debt expenses, were offset by close to 400 basis point of improvement from ongoing operating efficiencies on pricing actions.

Speaker 4: In the Americas, an increase in equipment review was more than upset by decline in process review, you impart to lower sets of the aforementioned cyclicals' relevant surveillance of software by accident.

<unk> an increase in equipment revenue was more than offset by declining <unk> revenue due in part to lower sales of the aforementioned cyclical transactional items, let's now review cash flow.

Speaker 4: Freak as low was on the 1012 million in Q-suite, higher by 100.3 billion year over a year.

Free cash flow was $112 million in Q3 higher by $130 million year over year.

Speaker 4: operating cash flow was under 24 million in Q3 compared to a use of 8 million in Q3 2020.

Operating cash flow was under 24 million in Q3 compared to a use of $8 million in Q3 2022.

Speaker 4: Improvement were mainly driven by a net source of cash associated with financing asset on an improvement in working capital.

Improvements were mainly driven by a net source of cash associated with financing asset on an improvement in working capital.

Finance asset activity was a source of cash this quarter of 51 million compared to a use of cash of $54 million in the prior year, reflecting the benefit of our forward through a program with hps, partially offset by higher origination.

Xavier Heiss: Adjusted other expenses net were 29 million lower year over a year, due to higher gains from the sets of non-core business assets on lower non-financing interest expense. Adjusted tax rate was 7.3% compared to 42.1% in the same quarter last year, largely due to the tax benefit associated with the release of uncertain tax positions on the remersionment of different tax assets in the current year period, as well as the non-recurring unfavorable effect of changes in certain tax addictions in the prior year period.

Speaker 4: Working Capital was a source of cash of 27 million, renting in a 41 million year over a year, increasing cash, even mainly by your reduction in inventory.

Working capital was a source of cash of $27 million, resulting in a $41 million year over year increase in cash driven mainly by a reduction in inventory.

Investing activity were a source of cash of 25 million compare to a use of cash of 33 million in the prior year due to higher proceeds from sale of non core business asset in the current quarter under prior year acquisition of inspire.

Financing activity consumed $94 million of cash this quarter, which includes a payment of around $60 million of secured debt on dividend totaling $43 million.

Speaker 4: Financing activity consume 94 million of cash is quarter, which includes the payment of around 60 million of secure debt on dividend totaling 43 million.

Xavier Heiss: Adjusted EPS of 46 cents in the software was 27 cents a year than the prior year, driven by an increase in the sale of non-core business assets on the lower tax rate. The EPS of 28 cents was $2.76 a year than the prior year, mainly due to an after-of-tax non-cash good willing payment chart of $395 million or $2.54 per share in the prior year. So we have no EPS impact this quarter associated with the recent repurchase of share from Cal ICANN on affidians.

Speaker 4: In addition, we secured a 555 million bridge loan facility, the procedure of which we are used to work to share from Carl Icon on a field.

In addition, we secured a 555 million bridge loan facility. So proceeds of which were used to repurchase share from Carl Icahn owned affiliates.

Speaker 4: His facility is expected to be replaced in the near term with an alternative depth instrument. Turning to Figma.

This facility is expected to be replaced in the new Kim with an alternative debt instrument turning to segment.

Speaker 4: Other honesty

<unk> volume grew 9% year over year.

Xavier Heiss: So we have no EPS impact this quarter associated with the recent repurchase of share from Cal ICANN on affidians.

Speaker 4: Captive product origination were up 24% while non-captive kernel origination, which includes third-party dealers on non-zerox vendor, cell 8%, a reflection of the recent change in fitter strategy to return its focus to work captive only financing solutions.

Captive product origination were up 24%, while non captive channel origination, which includes third party dealers on Luna Xerox vendor fell 8%.

Xavier Heiss: Let me know review, revenue, on cash flow in more details. Turning to revenue, equipment sets of 386 million in 2-3 decline 1% year over year in actual currency or 2% in constant currency. The decline in equipment for new reflects cable demand conditions, offset by the effect of EME backlog reductions in the prior year. Consistent with recent quarter, revenue trend outpace equipment insertion activity due to favorable product on geographic mix as well as higher prices.

A reflection of the recent change and fit our strategy to a retail needs focused towards captive only financing solutions.

Speaker 4: As expected, FITAL finance receivable were down roughly 4% secondally in actual currency, reflecting the runoff of existing firearms receivable on HPF funding of more than 50% of FITAL Q3 originates.

As expected Peter Finance receivable were down roughly 4% sequentially in actual currency, reflecting the run off of existing firearms richly reward on hps funding of more than 50% of Q3 originations.

Speaker 4: As a result of the change in federal strategy, we expect its financial civil balance to decline on normalize closer to 1 billion by 2027. Federal New was flat year over year in Q3 as higher commission from the sets of finance receivable assets were offset by lower finance income on other fees associated with the decline in federal financial receivable asset base.

As a result of the change in future strategy, we expect each finance receivable balance to decline on normalized closer to $1 billion by 2027 figure revenue was flat year over year. In Q3 has a higher commission from the sense of finance receivable asset were offset by lower finance income on <unk>.

Xavier Heiss: This was particularly true with our H3 product, with the experience unfavorable geographic mix effect in the prior year, due to backlog reduction in EME, and 3A4 installation will lower again this quarter, due to the ongoing normalization of work from home trends. Postel from New of 1.3 billion declined 9% in constant current year over a year on 7% in actual currency. As noted, Postel declined were mainly driven by reduction in cyclical, transactional items, most notably a significant decline in low margin paper cells on lower IT and point device placement.

Our fees associated with a decline in fetal finance receivable asset base.

Speaker 4: Segment profit for FITOL was 4 million, up to 2 million year over year, primarily due to lower budget expense on lower income company commissions.

Xavier Heiss: Postel from New of 1.3 billion declined 9% in constant current year over a year on 7% in actual currency. As noted, Postel declined were mainly driven by reduction in cyclical, transactional items, most notably a significant decline in low margin paper cells on lower IT and point device placement. Postel from New was further impacted by the termination of foodie royalties on the effect of specific strategic action, which resulted in lower financing on park revenue.

<unk> profit for fetal was $4 million of 2 million year over year, primarily due to lower bad debt expense on lower intercompany commissions.

Speaker 4: As previously indicated, we expect further improvement to bad debt expense going forward as our final suitable book, the class.

As previously indicated we expect further improvement to bad debt expense going forward as our final switchable book decline.

Speaker 4: Print on other revenue fell 6% over a year in Q3, primarily to lower post sales revenue.

Print on those are revenue fell 6% year over year in Q3, primarily due to lower post sales revenue.

Xavier Heiss: Postel from New was further impacted by the termination of foodie royalties on the effect of specific strategic action, which resulted in lower financing on park revenue. Revenues from contractual print on digital services declined slightly, as digital on managed IT services revenue growth was upset by decline in print services for production clients, which have generally been more affected by macroeconomic pressure than office clients. Geographically, both region declined in actual on constant currency. The decline in EME was more pronounced given the substantial reduction in EME backlog in the prior year quarter, on a weakening macroeconomic algorithm.

Speaker 4: Print another segment property improved by around two person versus the prior year quarter, resulting in a certain basis point expansion in segment profit margin year over year, driven by the benefit of price and cost actions partially offset by lower revenue. Turning to capital street.

Xavier Heiss: Revenues from contractual print on digital services declined slightly, as digital on managed IT services revenue growth was upset by decline in print services for production clients, which have generally been more affected by macroeconomic pressure than office clients.

Turning to capital structure.

Speaker 4: We ended Q3 with approximately 600 on 20 million of cash, cash equity balance on restricted cash.

We ended Q3 with approximately $620 million of cash cash equivalents unrestricted cash.

Roughly $2 5 billion of the remaining $3 6 billion of our outstanding debt support our finance asset with a remaining debt of around the $1 1 billion attributable to the non leasing business.

Xavier Heiss: Geographically, both region declined in actual on constant currency. The decline in EME was more pronounced given the substantial reduction in EME backlog in the prior year quarter, on a weakening macroeconomic algorithm.

Speaker 4: Total debt consists of senior on secure bonds, finance asset secortization, the bridge loan associated with the Q-suite share repurchase, on borrowing under our asset back credit facility.

Total debt consists of senior unsecured bonds.

Xavier Heiss: In the Americas, an increase in equipment review was more than upset by decline in Postel from New, due in part to lower sales of the aforementioned cyclical, transactional items. Let's now review cash flow. 3 cash flow was under 1012 million in Q3, higher by 130 million year over a year. Operating cash flow was under 24 million in Q3 compared to a use of 8 million in Q3 2022. Improvement were mainly driven by a net source of cash associated with financing asset on an improvement in working capital.

Finance asset securitization, so bridge loan associated with our Q3 share repurchase on borrowing under our asset backed credit facility.

Speaker 4: We maintain the balance-bound maturity ladder over the next few years.

We maintain a balanced bond maturity ladder, although over the next few years.

Speaker 4: Finally, I will address guidance. Our outlook for full year review remains unchanged at flat to down, low single digit at constant current.

Finally, I will address guidance our outlook for full year revenue remained unchanged at flat to down low single digit at constant currency.

We continue to see momentum in demand for our product and services, particularly in <unk> and for our faster growing digital services.

Xavier Heiss: Finance asset activity was a source of cash this quarter of 51 million compared to use of cash of 54 million in the prior year, reflecting the benefit of our forward flow program with HPS, partially offset by higher origination. Working capital was a source of cash of 27 million, resulting in a 41 million year over a year increasing cash, even mainly by a reduction in inventory. Investing activity was a source of cash of 25 million compared to use of cash of 33 million in the prior year, due to higher proceeds from sell of non-core business asset in the current quarter, on the prior year acquisition of Go Inspire.

<unk> in the past three months, we have seen a softening of demand for print services on equipment in our European market, reflecting a weakening macroeconomic conditions.

Speaker 4: As a result, we now expect for your review to come in at the lower end of our guided range.

As a result, we now expect full year revenue to come in at the lower end of our guided range.

Speaker 4: As a reminder, we face a difficult equipment for new compare in Q4 due to a significant reduction in backlog in the prior year.

As a reminder, we face a difficult equipment revenue compare in Q4 due to a significant reduction in backlog in the prior year.

Further we expect some of the headwinds affecting <unk> in Q3 to persist in Q4, despite a slight reduction to our revenue outlook, we maintain our guidance for full year adjusted operating margin of five 5% to 6% due to the successful implementation of ongoing cost efficiency program on the other you don't suffer.

Speaker 4: Despite a slight reduction to our revenue outlook, we maintain our guidance for full year adjusted operating margin of 5.5 to 6% due to the successful implementation of ongoing cross-efficiency program on the other events of low or unprofitable revenue opportunity.

Xavier Heiss: Financing activity consumed 94 million of cash is quarter, which includes the payment of around 60 million of secured debt on dividend totaling 43 million. In addition, we secured a 555 million bridge loan facility, the proceed of which were used to work purchase share from car like anonymity yet. This facility is expected to be replaced in the near term with an alternative debt instrument.

Xavier Heiss: Financing activity consumed 94 million of cash is quarter, which includes the payment of around 60 million of secured debt on dividend totaling 43 million. In addition, we secured a 555 million bridge loan facility, the proceed of which were used to work purchase share from car like anonymity yet.

Low or unprofitable revenue opportunities.

Q4 operating margin is expected to improve sequentially, but will be lower year over year as margins in the prior year benefited from an unusually high mix of highly profitable.

Xavier Heiss: This facility is expected to be replaced in the near term with an alternative debt instrument.

<unk> equipment in store.

As noted by Steve We expect significant improvement in operating income margin in future years as well.

Xavier Heiss: Turning to Figma. Petal origination volume grew 9% year over the year. Captive product originations were up 24% while non-captive kernel originations, which include third-party dealers on non-Zerox vendor, cell 8%, a reflection of the recent change in fetal strategy to return its focus toward captive-only financing solutions. As expected, fetal finance receivable were down roughly 4% secondally in actual currency, reflecting the runoff of existing firearms receivable on HPS funding of more than 50% of fetal Q3 originations.

Progress along our reinvention finally, we maintain our free cash flow guidance of at least $600 million.

Speaker 4: In summary, we remain on track to deliver our foodier guy down as we balance a dynamic microeconomic backdrop with a rigorous approach to managing operating.

In summary, we remain on track to deliver our full year guidance as we balance of dynamic microeconomic backdrop with a rigorous approach to managing operating costs.

Speaker 5: So one work is being laid for multi-year improvement in profit on what new makes, including a return to double digit operating profit margin, the detail of which we will share in the coming year. We'll now open the line for Q&A.

So run work is being laid for multiyear improvement in profit on revenue mix, including a return to double digit operating profit margin. So details of which we would share in the coming year.

We'll now open the line for Q&A.

Certainly one moment, ladies and gentlemen for your first question.

Xavier Heiss: As a result of the change in fetal strategy, we expect its financial receivable balance to decline on normalize closer to 1 billion by 2027. Feetal revenue was flat year over year in Q3 as higher commission from the cells of finance receivable asset were offset by lower finance income on other fees associated with the decline in fetal final receivable asset base. Segment profit for fetal was 4 million up 2 million year over year, primarily due to lower bad debt expense on lower income company commissions. As previously indicated, we expect further improvement to bad debt expense going forward as our finance receivable book declined.

Speaker 1: And our first question comes from the line of Anaya Bruja from Loop Capital. Your question, please.

And our first question comes from the line of <unk> from loop capital. Your question. Please.

Speaker 6: Good morning guys and thanks for taking the question. So I guess there's a bunch of near-term and bigger picture stuff that sort of get into. I guess I'll start with bigger picture.

Hey, good morning, guys and thanks for taking the questions. Jeff I guess, there is a bunch of near term and bigger picture stuff.

Sort of get into.

I guess I'll start with bigger tech care.

Speaker 6: just with regards to reinvention. Can you talk to?

Just with regards to reinvention can can you talk to.

Speaker 6: Any degree to which you're getting a bit of out, I guess I'll call it like a running start into the revenue component and the reinvention. The Steve, I think you kind of refer to it as software and services enabled or software and services led.

Any degree to which you are getting a bit about I guess I'll call. It like a running start into the <unk>.

The revenue component reinvention that Steve I think you can kind of afraid to the software software and services enabled by software and services led.

Xavier Heiss: Printal no other revenue fell 6% year over year in Q3, primarily due lower post-cells revenue. Printal no other segment profit improved by around 2% versus prior year quarter, resulting in a certain basis point expansion in segment profit margin year over year driven by the benefit of price and cost actions partially offset by lower revenue.

Yes, so what what's going on there already that we may not be super aware of.

Speaker 6: you know, sort of what's going on there already that we may not be super aware of, you know, that might sort of lend itself to reinvention. And then I know you talked about.

Out of that.

So it lends itself to reinvention.

And then I know you talked about making carnage.

Speaker 6: in the future about what rev potential looks like, but can you give us any sense of

In the future about what potential looks like but can you give us any sense of.

Xavier Heiss: Turning to capital structure, we ended Q3 with approximately 620 million of cash cash equity balance on restricted cash. Roughly 2.5 billion of the remaining sweet 0.6 billion of our outstanding debt support of our finance asset with the remaining debt of around 1.1 billion attributable to the non-leasing business. Total debt consists of senior on secure bonds, finance asset securitization, the bridge loan associated with the Q3 share refreshes, on borrowing under our asset back credit facility. We maintained a balanced bond maturity ladder over the next few years.

Speaker 6: You know, maybe with like the the rev growth rates of the areas of the services market and software market, you know, the PAM, I guess, looks like today. So at least we get a sense of what you guys are shooting against from a PAM perspective.

They would like.

The Rev growth rate of the.

Of the areas of the services market and software market.

The Tam I guess.

Looks like today, so at least we get a sense of what you guys are achieving again from a pan perspective.

I guess I'll start with <unk>.

Speaker 7: Yeah, great question. So let me make a couple of comments. So first of all, from a reinvention standpoint, really looking at a comprehensive and structural simplification of our business, right? What strategically reposition is going forward? What does that mean? We're looking at focus areas around geographic optimization, where we can think about how we sell direct versus indirect use a partner led distribution model in sub-scale areas.

How we sell direct versus indirect use a partner led distribution models and subscale areas focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas as we accelerate that and then operating efficiency is really looking at our business end to end.

Xavier Heiss: Finally, our address guidance. Our outlook for full year revenue remained unchanged at flat to down, low single digit at constant currency. We continued to see momentum in demand for our product on services, particularly in the America's on for our faster growing digital services. However, in the past three months, we have seen a mild softening of demand for print services on equipment in our European market, reflecting weakening macroeconomic condition. As a result, we now expect full year revenue to come in at the lower end of our guided range.

Speaker 7: focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas. As we accelerate that.

Speaker 7: And then operating efficiencies, really looking at our business end to end.

Speaker 7: from order to cash to, you know, hire to retire all across our entire business and really thinking about both simplification as well as.

From order to cash to hire to retire all across our entire business and really thinking about both simplification as well as enabling technology in each one of those processes. You heard me talk about where we've embedded AI and augment reality and we're seeing significant not only in terms of productivity, but differentiation.

Xavier Heiss: As a result, we now expect full year revenue to come in at the lower end of our guided range. As a reminder, we faced a difficult equipment revenue compared in Q4 due to a significant reduction in backlog in the prior year. Further, we expect some of the Edwin effective post-self review in Q3 to persist in Q4. Despite a slight reduction to our revenue outlook, we maintained our guidance for full year adjusted operating margin of 5.5 to 6% due to the successful implementation of ongoing cross-efficiency programs on the other events of low or unprofitable revenue opportunities. Q4 operating margin is expected to improve, secondly, but will be lower year-over-year as margins in the prior year are benefited from an unusual high mix of highly profitable S3 equipment installed.

Xavier Heiss: As a reminder, we faced a difficult equipment revenue compared in Q4 due to a significant reduction in backlog in the prior year. Further, we expect some of the Edwin effective post-self review in Q3 to persist in Q4. Despite a slight reduction to our revenue outlook, we maintained our guidance for full year adjusted operating margin of 5.5 to 6% due to the successful implementation of ongoing cross-efficiency programs on the other events of low or unprofitable revenue opportunities.

Speaker 7: that we have to go drive and we get back to double digit operating income margins. And obviously we talked about 300 million of operating income by 2026.

By 2026, what are we already started and what do you see in terms of the run rate in some of the acceleration going into 2024, we've obviously been working on and I've talked about this for a while now how do we expand our wallet share inside of our existing clients with new products and services It services digital.

Services, and we talked about client success really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity helped significantly specifically in areas like we see in health care, we see in education, we see inside of law firms and driving very soon.

Speaker 7: And we talked about client success, really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity help significantly, specifically in areas like we see in healthcare, we see in education, we see inside of law firms, and driving very specific solutions.

Xavier Heiss: As noted by Steve, we expect significant improvement in operating income margin in future years as we progress along our reinvention.

Xavier Heiss: Finally, we maintain our free cash flow guidance of at least 600 million. In summary, we remain on track to deliver our full year guidance as we balance the dynamic micro-economic backdrop with a rigorous approach to managing operating costs.

Ossific solutions, we are seeing direct results of that strategy and our renewals when we talked about it we are seeing our new rate revenue renewal rate over 100% now what does that mean that means that as we're seeing some of the secular decline in some of our clients in terms of renewals without tapping it up with new.

Speaker 3: We are seeing direct results of that strategy in our renewals. When we talked about it, we're seeing our new revenue rate over 100% now. What does that mean?

Xavier Heiss: The one work is being laid for multi-year improvement in profit on what new mix, including a return to double-digit operating profit margin, the detail of which we would share in the coming year.

And services that are very specifically led and driven by client success either in it services and auto what endpoints are talking about services like RPI and security as well as digital services, which help them with productivity. So that's given us a both a run rate improvement in terms of our revenue and growing inside of <unk>.

Unknown Executive: We'll now open the line for Q&A. Certainly, one moment, ladies and gentlemen, if you're first question.

Operator: We'll now open the line for Q&A. Certainly, one moment, ladies and gentlemen, if you're first question.

Speaker 4: driven by client success, either in IT services and I'm not talking about endpoints, I'm talking about services like RPA and security, as well as digital services, which help them with productivity. So that's given us both a run rate improvement in terms of revenue and growing inside those Dixie accounts and it's also given us a running start in productivity in areas like supply chain, areas like service delivery, areas like our ordering process and order the cash process. David, any other comments? Yeah, just I had on that just to comment on the you know the revenue side on the revenue shift we are expecting here. So we know you know they're trying to print.

Ananda Baruah: And our first question comes from the line of Anaya Baruah from Loop Capital. Your question, please. Hey, good morning guys, and thanks for taking the question. So, I guess there's a bunch of near-term and bigger picture stuff that sort of get into, I guess I'll start with bigger picture just with regards to reinvention. Can you talk to any degree to which you're getting a bit of all, I guess I'll call it like a running start into the revenue component and reinvention.

<unk> accounts and it's also given us a running start in productivity in areas like supply chain areas like service delivery areas like our ordering process in order to cash process. Saba ended the comments just to Ireland just to comment on the revenue side on the revenue shift we are expecting here. So we know that.

Speaker 4: David, any other comments? Yeah, just, I am on that. Just to comment on the, you know, the revenue side, on the revenue shift we are expecting here. So we know, you know, they're trying to print business, they still have some business for us, generate a lot of margin on profit on cash share. At the same time, you know that we have started the foundation on the developing IT services on digital services here.

And on Prem to print business is still a strong business for us generates lots of margin on profit on cash share at the same time, you know that we have started a foundation on longer developing ITC emphasis on digital services there.

Ananda Baruah: Steve, I think you kind of referred to it as software services enabled or software services led, sort of what's going on there already that we may not be super aware of, you know, that the might sort of lend itself to reinvention. And then I know you talked about making comments in the future about what rev potential looks like, but can you give us any sense of, you know, maybe we'd like to, the rev growth rates of the areas of the services market and software market, you know, the TAM I guess looks like today. So, at least we get a sense of what you guys are shooting against from a TAM perspective. I guess I'll start with that. Yeah, thanks. Yeah, great question. So, let me make a couple of comments.

Speaker 4: The market growth or the time is large. This is large time since this market, IT service is about 600 billion digital services in the range of 70 billion. And when we look at the data from this market, we are between 5 to 10% growth.

Market growth of the company's largest is large patterns in this market. It seven days above 600 billion digital savvy seasons, Orange, a 70 billion on when we look at the data from this market. We are between 5% to 10% growth. So at yesterday, what we are planning to do with re intervention is to drive the revenue shape from a printer.

Speaker 4: So, at the other day, what we are planning to do with ReInvention is to drive the revenue shift from a print only or print-and-crick company into a company where print will still be present but also targeting higher time-on-growing markets that will give the revenue or improve the revenue trajectory of the company, not relying on the own print.

Our print centric company into a company, where print would still be present, but also targeting higher.

Ongoing market that will give a revenue improve the revenue trajectory of the company.

Not rely only on print.

Thats all really helpful context.

Speaker 6: appreciate all of that that's super helpful. And then I guess as a quick follow up, you know,

Appreciate all of that that's Super helpful. And then I guess as a quick follow up.

The.

Speaker 6: sort of the revenue environment from the September quarter that you guys talked about. Sounds like Europe may have been a little softer than your father was going into the quarter. You're not the first one that we've heard that from.

Sort of the revenue environment for the September quarter that you guys talked about sounds like Europe may have been a little softer than you thought there was going into the quarter you are not the first ones that we.

Steven Bandrowczak: So, first of all, from a reinvention standpoint, really looking at a comprehensive and structural simplification of our business, right? What's strategically re-position as going forward? What does that mean? We're looking at focus areas around geographic optimization, where we can think about how we sell direct versus indirect use a partner led distribution models in sub-scale areas, focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas as we accelerate that.

Ananda Baruah: So, first of all, from a reinvention standpoint, really looking at a comprehensive and structural simplification of our business, right? What's strategically re-position as going forward? What does that mean? We're looking at focus areas around geographic optimization, where we can think about how we sell direct versus indirect use a partner led distribution models in sub-scale areas, focusing on simplification of both our product offering and pricing, which will generate more revenue and generate more demand in those areas as we accelerate that.

Tried that problem, so that seems to be kind of foundational.

Speaker 6: So that seems to be kind of sound-based or anything, anything other than...

Anything anything other than Europe that was softer than anticipated that.

Speaker 6: that was softer than anticipated, that you saw during the quarter. And I guess it's sort of any meaningful leverage.

That you saw during the quarter and I guess.

Sort of any meaningful leverage impacts you got from the software revenue you guys drew.

Speaker 6: impact you got from from the software revenue. You guys grew grew margin 40 basis points year over year, but I guess wouldn't have been stronger year over year growth, margin growth.

Steven Bandrowczak: And then operating efficiencies, really looking at our business end-to-end from order to cash to, you know, hire to retire all across our entire business. And really thinking about both simplification as well as enabling technology in each one of those processes. You've heard me talk about where we've embedded AI and augmented reality. And we're seeing significant, not only in terms of productivity, but differentiation in our service model and our service offerings we go forward.

Ananda Baruah: And then operating efficiencies, really looking at our business end-to-end from order to cash to, you know, hire to retire all across our entire business. And really thinking about both simplification as well as enabling technology in each one of those processes. You've heard me talk about where we've embedded AI and augmented reality. And we're seeing significant, not only in terms of productivity, but differentiation in our service model and our service offerings we go forward.

Drew grew margin 40 basis points year over year, but I guess would it had been stronger a year over year growth margin growth.

Speaker 6: or expansion if not for the softer revenue. Thanks, so that's the thing.

Our expansion if not for up for the softer revenue thanks to that decision.

Speaker 4: You know, no, I don't know if you comment off, you know, fair here. So Europe has been a little bit worse at what we were thinking here. However, at the same time, on you know that since we have implemented on it, on it DNA is still within the company, we have created what we call flexible cost pays on the we've been as well being able to adjust, you know, some of the cost, but also being selective in the type of new we are targeting there.

No no no right on that.

Youll come out of.

So Europe has been strong.

Little bit worth of what we were thinking here a waiver at the same time on you know that since we have implemented coordinate only DNA is generally seen as a company. We have created what we call a flexible cost base, although we have been as well being able to adjust some of the costs, but also being selective in the type of revenue.

Steven Bandrowczak: So, I sent that as the foundation, right? And from a high level, right, delivering double digit operating income margins, getting back to that. We thought it's really important that we have to go drive and we get back to double digit operating income margins. And obviously, we talked about 300 million of operating income by 2026. What have we already started? And what do you see in terms of the run rate and some of the acceleration going into 2024?

Ananda Baruah: So, I sent that as the foundation, right? And from a high level, right, delivering double digit operating income margins, getting back to that. We thought it's really important that we have to go drive and we get back to double digit operating income margins. And obviously, we talked about 300 million of operating income by 2026. What have we already started? And what do you see in terms of the run rate and some of the acceleration going into 2024?

We are targeting there I'll give you. An example, we saw Hilton erosion on margin all know our cored up non cyclical.

Contractual type of business simpler example, paper and those moneys pinpoint solution in.

Steven Bandrowczak: We've obviously been working on, and I've talked about this for a while now. How do we expand our wild share inside of our existing clients with new products and services, IT services, digital services? And we talked about client success, really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity help significantly, specifically in areas like we see in healthcare, we see in education, we see inside of law firms, and driving very specific solutions.

Ananda Baruah: We've obviously been working on, and I've talked about this for a while now. How do we expand our wild share inside of our existing clients with new products and services, IT services, digital services? And we talked about client success, really focusing on how do we drive outcomes for our clients in many areas that we see in terms of verticals that need productivity help significantly, specifically in areas like we see in healthcare, we see in education, we see inside of law firms, and driving very specific solutions.

It services, we are not compressing going after.

Like our revenue only with no profitability has generated this team.

Is driven by a very balanced execution mindset model zero, although we have a disciplined non driving our investment on our revenue call based on the street retail.

Speaker 8: on the driving our investment on our what you call based on the street return, or higher hair or L.O.I.C.O. project. So paper, I can quote it here because the paper market is very different to what it was before and we're not willing as an example to go after a paper deal with no margin here. That's great. Great context. Thanks a lot guys. Appreciate it. Thank you. Thank you, Ananda. Thank you. You one moment for our next question. And our next question comes from the line of Eric Woodring from Morgan Stanley . Your question please. Hi guys. This is my aunt for Eric. Thanks for having me. Maybe a first question for Steve. Can you talk a little?

The IAA or Ico project so paper.

Paper icon quoted here because the paper market is very different to what it was before on the Walnut willing as an example to go after a paper deal with no margin.

Steven Bandrowczak: We are seeing direct results of that strategy in our renewals. And we talked about it. We're seeing our new revenue, revenue, renewal rate, over 100 percent now. What does that mean? That means that as we're seeing some of the sector with the client and some of our clients in terms of renewals, we're now topping it up with new products and services that are very specifically led and driven by client success, either in IT services.

Ananda Baruah: We are seeing direct results of that strategy in our renewals. And we talked about it. We're seeing our new revenue, revenue, renewal rate, over 100 percent now. What does that mean? That means that as we're seeing some of the sector with the client and some of our clients in terms of renewals, we're now topping it up with new products and services that are very specifically led and driven by client success, either in IT services.

That's great.

Speaker 12: Great context. Thanks a lot guys. Appreciate it. Thank you. Thank you Ananda. Thank you one.

Great context, thanks, a lot guys I appreciate it. Thank you. Thank you Ananda.

Thank you one moment for our next question.

And our next question comes from the line of Erik Woodring from Morgan Stanley . Your question. Please.

Speaker 1: And our next question comes from the line of Eric Woodring from Morgan Stanley . Your question, please. Hi, guys. This is my own fair.

Steven Bandrowczak: And I'm not talking about endpoints, I'm talking about services like RPA and security, as well as digital services which help them with productivity. So that's given us a both a run rate improvement in terms of revenue and growing inside those existing accounts. And it's also given us a running start in productivity in areas like supply chain, areas like service delivery, areas like our ordering process and order the cash process. David, any other comments?

Ananda Baruah: And I'm not talking about endpoints, I'm talking about services like RPA and security, as well as digital services which help them with productivity. So that's given us a both a run rate improvement in terms of revenue and growing inside those existing accounts. And it's also given us a running start in productivity in areas like supply chain, areas like service delivery, areas like our ordering process and order the cash process. David, any other comments?

Hi, guys. This is my on for Eric Thanks for having me.

Speaker 8: Maybe a first question for Steve. Can you talk a little bit about the change in strategy with fiddle?

Maybe first question for Steve can you talk a little bit about the change in strategy with federal early earlier. This year, we were talking about expanding the portfolio tomorrow third parties, but now its reverting back to kind of a captive financing solution for my first question is how that impacts your receivable factoring program and such.

Ken.

David Beckel: Yeah, just to comment on the revenue side, on the revenue shift we are expecting here. So we know, you know, they're trying to print business, they're still a strong business for us, generate a lot of margin on profit on cash share. At the same time, you know that we have started the foundation on the developing IT services on digital services there. Market growth. So the time is large. This is large times in this market.

Ananda Baruah: Yeah, just to comment on the revenue side, on the revenue shift we are expecting here. So we know, you know, they're trying to print business, they're still a strong business for us, generate a lot of margin on profit on cash share. At the same time, you know that we have started the foundation on the developing IT services on digital services there. Market growth. So the time is large. This is large times in this market.

It was once the thought that you could sell the federal business, but given it is now becoming a captive financing business that seems less likely is that crack laugh at all would likely no longer be for sale. Thank you and I have a follow up.

Speaker 7: Yeah, so let me and I stated it I think in previous calls with the changing.

Yes, So let me and I stated I think in previous calls with the changing.

Interest rate environment. It was no longer palatable for us to leverage our balance sheet and the leasing business and we changed the strategy mid to late last year.

David Beckel: IT services are both 600 billion digital services in the range of 70 billion. And when we look at the data from this market, we are between 5 to 10 percent growth. So at the end of the day, what we are planning to do with Reenvention is to drive the revenue shift from a print only or print and click company. Into a company where print will still be present, but also targeting higher time on growing market that will give, you know, the revenue or info, the revenue trajectory of the company, not relying on the own print.

Ananda Baruah: IT services are both 600 billion digital services in the range of 70 billion. And when we look at the data from this market, we are between 5 to 10 percent growth. So at the end of the day, what we are planning to do with Reenvention is to drive the revenue shift from a print only or print and click company. Into a company where print will still be present, but also targeting higher time on growing market that will give, you know, the revenue or info, the revenue trajectory of the company, not relying on the own print.

And we were no longer going to use <unk> balance sheet for this business and we will then look for other sources of capital to help us with that business. However, it was extremely important that it is a big component of driving our value in the field that we have the ability to be able to do leasing and bundle pricing in the field with leasing and so we turn to <unk>.

Speaker 4: that it is a big component of driving out value in the field that we have the ability to be able to leasing and bundle pricing in the field with leasing. And so we turn to HBS and peak and we are being and using them strategically so that we don't leverage our balance sheet. You're absolutely right. Two years ago, we were trying to target growing that business and potentially it would have been an operation that potentially would have been out of the shell. We have reversed that. going back to an internal captive business and we're not expanding beyond just supporting our business. Savi? You said it Steve, my other focus that we have there is to make it an offer that's business. Water under, you know, looking at it as a pure separated business here.

And peak and we're being and using them strategically so that we don't leverage our balance sheet Youre absolutely right.

David Beckel: That's all really helpful context. I appreciate all of that. That's super helpful. And then I guess as a quick follow up, you know, the sort of the revenue environment from the September quarter that you guys talked about. Sounds like Europe may have been a little softer than you thought it was going into the quarter. You're not the first ones that we've heard that from. So that seems to be kind of foundational.

Ananda Baruah: That's all really helpful context. I appreciate all of that. That's super helpful. And then I guess as a quick follow up, you know, the sort of the revenue environment from the September quarter that you guys talked about. Sounds like Europe may have been a little softer than you thought it was going into the quarter. You're not the first ones that we've heard that from. So that seems to be kind of foundational.

David Beckel: Anything other than Europe that was softer than anticipated that you saw during the quarter. And I guess it's sort of any meaningful leverage impact you got from from the softer revenue. You guys grew grew margin 40 basis points every year, but but I guess what it has been stronger. You're the year we are grows margin growth or expansion. It's not for the softer revenue. Thanks. So that's the scenario. Yeah, no, no, I don't know if you comment off, you know fair here.

Ananda Baruah: Anything other than Europe that was softer than anticipated that you saw during the quarter. And I guess it's sort of any meaningful leverage impact you got from from the softer revenue. You guys grew grew margin 40 basis points every year, but but I guess what it has been stronger. You're the year we are grows margin growth or expansion. It's not for the softer revenue. Thanks. So that's the scenario. Yeah, no, no, I don't know if you comment off, you know fair here.

You said it does teams around them.

So to focus that we have <unk> to make it.

Enough for such support our business further and looking at it as a pure separated business here.

Speaker 4: As Steve mentioned it as well, our volunteers, the current interest rate environment, you know, make us, you know, more than two years ago, making these decisions here. And at the end of the day, if I look at the current free cash flow being generated and maybe you spot it when we, I commented, you know, what will be the benefit of this transaction. Until 2027, we are expecting, you know, the financial receivable balance to decrease up to one billion.

As Steve mentioned, it as well our balance sheet our current.

Interest write downs.

Make us.

More than two years ago, making this decision here.

The end of the day, if I look at the current free cash flow being generated on that maybe you spotted when we I commented what will be the benefit of this transaction until 2027 were expecting.

Finance receivable balance to decrease up to $1 billion on if you look at the current situation to see currently going down there. This will be over time free cash flow being generated supporting on driving.

Speaker 4: If you look at the current situation to point 6 currently going down there, this will be over time free cash flow being generated.

David Beckel: So Europe has been a little bit worse at what we were thinking here. However, at the same time on you know that since we have implemented on it only DNA still within the company. We have created what we call flexible cosplays under we have been as well being able to adjust you know some of the cost, but also being selective in the type of new we are targeting there. I give you an example.

Ananda Baruah: So Europe has been a little bit worse at what we were thinking here. However, at the same time on you know that since we have implemented on it only DNA still within the company. We have created what we call flexible cosplays under we have been as well being able to adjust you know some of the cost, but also being selective in the type of new we are targeting there. I give you an example.

Speaker 4: supporting on driving, you know, the case for also the reinvention that we're building at this time. So at the end of the day, the good decision was made two years ago. This decision, you know, is helping us currently from the balance point of view. On we have kept this ability to be captive on the development of our business without hurting.

Got it thank you.

Speaker 8: Got it, thank you. So maybe just if we take a step back, printing is a secularly declining market. And while I realize that you're leading into IT digital service to try and offset some of those pressures, this business is still overwhelmingly print focused, but there's a huge tam and Asia that's untapped for Xerox.

David Beckel: We saw certain erosion on margin on a call that known cyclical not contract contractual type of business. Simple example is paper and other one is end point solution in IT services. We are not interested in going after. You know, like revenue only with no profitability as you know it. This team is driven by a very balanced execution mindset mother there on we have a discipline on the driving our investment on our what you call based on the street return.

Ananda Baruah: We saw certain erosion on margin on a call that known cyclical not contract contractual type of business. Simple example is paper and other one is end point solution in IT services. We are not interested in going after. You know, like revenue only with no profitability as you know it. This team is driven by a very balanced execution mindset mother there on we have a discipline on the driving our investment on our what you call based on the street return.

Speaker 8: place now. So why not go after the Asian market and what are kind of the barriers entry there?

So why not go after the Asia market and what are the barriers to entry there.

But I think there's a couple of different things first of all I've stated a couple of times I think we can grow in our existing accounts with our existing Tam today, both in the EMEA region and here in the <unk>.

Speaker 7: I think of the couple of different things. First of all, I've stayed at a couple of times. I think we can grow in our existing accounts with our existing TAM today, both in the Amir region and here in the Americas region. And so we've got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share, there's a significant share of growth opportunity, even inside a print. And I believe our service is differentiation and our product differentiation. If we execute, we can actually grow TAM.

David Beckel: I have a hair or I see a photo. So paper I can quote it here because the paper market is very different to what it was before on well not willing as an example to go after a paper deal with no margin here. That's great. Great context. Thanks a lot guys. Appreciate it. Thank you.

Ananda Baruah: I have a hair or I see a photo. So paper I can quote it here because the paper market is very different to what it was before on well not willing as an example to go after a paper deal with no margin here. That's great. Great context. Thanks a lot guys. Appreciate it. Thank you.

Unknown Executive: One moment for our next question.

Operator: One moment for our next question.

Americas region, and so we've got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share. It has a significant share growth opportunity even inside of print and I believe our services differentiation and a product differentiation. If we execute we can actually grow Tam to go expand into Asia into us.

Speaker 7: To go expand into Asia and to other markets, you have to go build a supply chain. You've got to go build a go to market. You've got to go build a logistics infrastructure in and around spare parts. It's a significant capital outlay to go expand in those margins. Even if you go with partner lead strategy, you still have significant cash and capital outlay. We believe that the focus that we have on the capital that we already have, we could expand and grow operating margins. We've shared with you significantly faster. If we do it in the Americas and Namia and not expand into that reach.

The markets you have to go build the supply chain. We've got to go build the go to market you've got to go build a logistics infrastructure in and around spare parts. It's a significant capital outlay to go expand in those margins. Even if you go with partner led strategy you still have significant cash and capital outlay, we believe that the focus that we have.

Erik Woodring: And our next question comes from the line of Eric Woodring from Morgan Stanley your question please. Hi guys. This is my on for Eric. Thanks for having me. Maybe a first question for Steve. Can you talk a little bit about the change in strategy with fiddle earlier this year we were talking about expanding the portfolio to more third parties. But now it's reverting back to kind of a capital financing solution. So my first question is how that impacts your receivable factoring program.

Erik Woodring: And second there was once the thought that you could sell the fiddle business. But given it's now becoming a capital financing business that seems less likely. Is that correct that fiddle would likely no longer be for sale. Thank you. And I will follow up.

On the capital that we already have we can expand and grow operating margin as we've shared with you a significantly faster if we do it in the Americas, and EMEA and not expand into that region.

Speaker 9: Thank you.

Got it thank you.

Q1 moment for our next question.

And our next question comes from the line of semi <unk> from Jpmorgan. Your question. Please.

Speaker 1: And our next question comes from the line of semi-chatter G from JP Morgan. Your question, please. Hi, good morning.

Steven Bandrowczak: Yeah so let me and I stated it I think in previous calls with the changing. Interest Rate Environment. It was no longer a palatable for us to leverage our balance sheet in the leasing business and we changed the strategy mid to late last year and we were no longer going to use Xerox balance sheet for this business and we were going to look for other sources of capital to help us with that business.

Hi, good morning, and thanks for taking my questions I guess, if I can start on project reinvention.

Speaker 10: I guess if I can start on project reinvention, can you just help us understand when you're thinking about 300 million of improvement there? How should we think about

Steven Bandrowczak: However, it was extremely important that it is a big component of driving our value in the field that we have the ability to be able to do leasing and bundle pricing in the field with leasing and so we turned to HBS and Peak and we are being and using them strategically so that we don't leverage our balance sheet. You're absolutely right. Two years ago, we were trying to target growing that business and potentially it would have been an operation that potentially would have been out of the shell.

Can you.

Just help us understand when youre thinking about $300 million of improvement there.

How should we think about impact on profitability of a sale or essentially benefit to cost of goods sold or gross profit relative to how much of this is improvement on opex and any thoughts around how long. These changes on the go to market take for you and how sort of the timing of these three of the $300 million should we be expecting in terms of.

Speaker 10: impact on profitability of a sale or essentially benefit to cost of goods sold or gross profit rate of two. How much of this is improvement on OPEX and any thoughts on how long these changes are going to market take for you and how.

Speaker 10: So the timing of these 300 million should we be expecting in terms of the linearity of the improvement through the next couple of three years. Thank you. And I have a follow.

The linearity of the <unk>.

Movement through the next couple of three years, Thank you and I have a follow up thank you.

Speaker 4: Yes, thanks, Tommy. Thanks for asking a question on reinvention, because this is really a strategic movement for the company, and we are pleased to unveil more on this strategy here.

Yes, Thanks, Patrick and thanks for asking a question on the re intervention because this is really a strategic movement for the company, we're pleased to unveil more.

On this strategy here so from a profit point of view as we mentioned it we are expecting roughly <unk> <unk>.

Steven Bandrowczak: We have reversed that. It is now going back to an internal captive business and we're not expanding beyond just supporting our business, are we? You said it Steve there on my other focus that we have there is to make it an offer that supports our business rather than looking at it as a pure separated business here. As Steve mentioned it as well, our balance sheet, current interest rate environment, it will make us more than two years ago making these decisions here and at the end of the day, if I look at the current free cash flow being generated, maybe you spotted when we commented what will be the benefit of this transaction.

Speaker 4: So from a profit point of view as we mentioned it, we are expecting roughly to double, you know, like the operating margins that we have on profitability until 2026. So it will be like three years during this, that will continue beyond 2026, but we want it to plant a seed and give you, you know, numbers. So you can, I would say, model on the look at the trajectory of the profitability here.

Likewise operating margins that we have on profitability until 2026, so it will be like a three year journey that will continue beyond 2026, but we wanted to plant a seed don't give you a number. So you can I would say model on their look at the trajectory of profitability here we are.

Speaker 4: We're expecting the vast majority of the benefit to be in OPEC.

We're expecting the vast majority of the benefit to be in Opex.

Speaker 4: And some of it will be in cost of goods, but it will be mainly in NOPEX because this is where we'll rewire entirely the company and look at not only the key function or some of the function like go-to market. You have heard about geosimplification. At the end of the day, what those geosimplification is, again, back to this concept of a balance execution on very disciplined way of looking at high air air. Is where should we be present? It does not mean leaving geographies here, but what is the best go-to market model we should have in all the countries that we are present here?

It will be in cost of goods sold but it will be mainly in opex. Because this is where we will not be wire on priority as a company on look at the not only you know we're like the key function of some of the functions like a go to market you have heard about our geos simplification at the M&A. What does your simplification is again back to this concept.

Steven Bandrowczak: Until 2027, we are expecting the finance receivable balance to decrease up to 1 billion. If you look at the current situation, going down there, this will be over time free cash flow being generated, supporting on driving the case for also the reinvention that we are building at this time. At the end of the day, the good decision was made two years ago. This decision is helping us currently from the balance sheet point of view on we have kept this ability to be captive on the developed business without hurting it. Got it, thank you.

Our balanced execution on very disciplined way of looking at high <unk> is where should we be present. It does not mean, leaving geographies there, but what is the best go to market model, which would add in all the countries that were present here representing here. So opex will be a key driver or is there an obvious.

<unk>, we're expecting combined with the benefit of return free cash flow to go up significantly as we mentioned at Azuela. We are expecting this initiative to be self funded so we are not expecting to have Rick further I'm oriented as a company here.

Maybe just if we take a step back, printing is a secularly declining market. While I realize that you're leading into IT digital service to try and offset some of those pressures, this business is still overwhelmingly print focused, but there's a huge tam and Asia that's untapped for Xerox with no licensing restrictions in place now. So why not go after the Asia market, and what are kind of the barriers to entry there?

Steven Bandrowczak: Maybe just if we take a step back, printing is a secularly declining market. While I realize that you're leading into IT digital service to try and offset some of those pressures, this business is still overwhelmingly print focused, but there's a huge tam and Asia that's untapped for Xerox with no licensing restrictions in place now. So why not go after the Asia market, and what are kind of the barriers to entry there?

As you know it we have just completed the transaction with Carl Icahn, we are always.

Opportunistic when we are looking at.

Accretive on value accretive acquisition at the same time, we have a journey on their trajectory, which is model now that we create this profit improvement on a $300 million operating profit that we mentioned earlier.

Speaker 7: model now that we create this profiting improvement on the 300 million operating profits that we mentioned. And for my follow up, you did mention the weakness you're seeing in the transactional business, and I think particularly in e-mails what you're calling out. I'm just want to understand the nature of what you're hearing from your customers. Is it really a budget consideration and pushing some of those sales out to next year or are they rethinking sort of their install base or something else on a more structural basis on the devices or printer front, any insights there please. Thank you.

Steven Bandrowczak: I think of the couple of different things. First of all, I've stated a couple of times. I think we can grow in our existing accounts with our existing tam today, both in the region and here in the Americas region. So we've got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share, there's a significant share of growth opportunity, even inside a print, and I believe our services differentiation and our product differentiation, if we execute, we can actually go tam.

Speaker 10: And for my follow-up, you did mention the weakness you're seeing in the transactional business and I think particularly in e-mails what you're calling out. I just want to understand the nature of what you're hearing from your customers. Is it really a budget consideration and pushing some of those sales out to next year or are they rethinking sort of their install base or something else on a more structural basis on the devices or printer front any insights there please.

Got it got it.

And for my follow up you did mentioned the weakness youre seeing in the transactional business and I think particularly in EMEA is what youre, calling out just wanted to understand the nature of what are you hearing from your customers is it really a budget conservation and pushing some of those sales out to next year or are they rethinking sort of their installed base or something else more on a more structural.

<unk> on the devices a printer front any insights there. Please thank you.

Speaker 7: Yeah, let me start. And so you think about the headwinds that we see in macro headwinds around inflation, around interest rates, around labor. And so what we hear from our clients and aligns really well with our strategy and that is we've got to drive their success through our solutions and products and services.

Steven Bandrowczak: To go expand into Asia and to other markets, you have to go build a supply chain, you've got to go to market, you've got to go build a logistics infrastructure in around spare parts. It's a significant capital outlay to go expand in those margins. Even if you go with partner-led strategy, you still have significant cash and capital outlay. We believe that the focus that we have on the capital that we already have, we could expand and grow operating margins. We've shared with you significantly faster if we do it in the Americas and Namia and not expand into that reach. Thank you.

Speaker 7: That's why I talk about we could expand in existing clients today. And that's why we're seeing our new rate higher. So things like robotics is a service, things like digital workflow in terms of driving productivity inside a very specific vertical. So where we are aligning what we're hearing from our clients number one is they're looking to help to be able to offset some of these macro trends and drive more productivity, helping them with the challenges around labor, helping them with the challenges around higher cost like as a service and subscription model, all of those are actually playing very well into new products and services that we can bring into our clients to help them offset some of the challenges.

We could expand in existing clients today, and that's why we're seeing our renewal rate higher so things like robotics as a service things like digital workflow in terms of driving productivity inside a very specific vertical so where we are aligning what we hear from our clients number. One is they are looking for help to be able to offset some of these macro.

Trends and drive more productivity, helping them with the challenges around labor, helping them with the challenge about higher cost of capital being bike as a service and subscription model all of those are actually playing very well into new products and services that we can bring into our clients to help them offset some of the challenges Debbie yes.

Operator: One moment for our next question.

Samik Chatterjee: And our next question comes from the line of Samik Chatterjee from JP Morgan. Your question, please. Hi, good morning and thanks for taking my questions.

Samik Chatterjee: I guess if I can start on project reinvention, can you just help us understand when you're thinking about 300 million of improvement there? How should we think about impact on profitability of a sale or essentially benefit to cost of good sold or gross profit rate of two? How much of this is improvement on OPEX? And any thoughts on how long these changes on the go-to market take for you and how the timing of these 300 million should we be expecting in terms of the linearity of the improvement through the next couple of three years? Thank you. And I have a follow. Thank you. Thanks, Samik.

Speaker 13: i

On the.

Speaker 4: but actually to your point, Stanley K, from a macro point of view, so Europe , we are not the only one quoting it there, but a little bit of sustenance, this is not, I call that a food decline or more, really more than what we're expecting, but we're seeing the sustenance there. What we've seen as well, I mentioned the paper business, the paper business just also to clarify, this is not a significant business for the rock, it's just like a very low single digit number in revenue, but compared to last year, where this paper business, we certainly some scarcity of paper, we have been able to benefit from it there. This year is not as good, and we see more flow of Asian paper, of content in the market, putting pressure on prices there.

So to your point some of the care from a macro point of view for Europe , you already won quoting it there a little bit of softening is not.

Sure.

I suppose that the decline or more really more than what we were expecting but we have seen a softening there what we have seen azuela.

I mentioned the paper business. The paper business. Just also to clarify this is not a significant business from Xerox is this like a <unk>.

Very low single digit number in revenue as compared to last year, whereas newspaper business.

Xavier Heiss: Thanks for asking a question on reinvention because this is really a strategic movement for the company and we are pleased to unveil more on this strategy here. So from a profit point of view as we mentioned it, we are expecting roughly to deliver, you know, like the operating margins that we have on profitability until 2026. So it will be like a three years journey that will continue beyond 2026 but we want it, you know, to plant a seed and give you, you know, number so you can, I would say model on the look at the trajectory of the profitability here.

We certainly have some scarcity of paper, we have been able to benefit from later this year is not the US go down we see more flow of Asian, Paypal continental market, putting pressure on prices there.

Speaker 4: The other element we monitor in currently is on the IN production business.

The older element, we are monitoring currently is on the <unk>.

Prediction business he's business obviously.

Speaker 4: This business obviously is highly connected to the GDP evolution and the trend on the market, but also on the access to capital for our high end production customer. What we have seen recently is a little bit due to interest rate increasing, a little bit more scarcity on the ability or the capacity that this customer has to invite changes Realty judgment. object Sparing Terms

Is the highly connected to obtain GDP evolution on the trend on their market share, but also on the access to.

Capital for our high end production customer on what we have seen recently is a little bit due to interest rates, increasing a little bit more scarcity on.

Xavier Heiss: We're expecting, you know, the vast majority of the benefit to be in OPEX and some of it will be in cost of good sold but it will be mainly in OPEX because this is where we will rewire entirely the company and look at not only, you know, like the key function or, you know, some of the function like a go to market, you have heard about geosimplification. At the end of the day, what does geosimplification is again, back to this concept of balance execution on very disciplined way of looking at high air, air is where should we be present.

The ability also to capacities at this customer have to invest in equipment.

Speaker 4: Not highly concerned at this stage, but this is something that we are monitoring and we will provide updates during the quarter. All of this, everything that I'm describing here is included in our new guidance. And we also expect that, you know, we will be able to deliver the profitability and free cash flow guidance that we have maintained compared to prior quarter.

Any concerns at this stage, but it is something that we're monitoring that.

We'll provide updates during the quarter all of this everything that I'm describing here is included in our revenue guidance. Although we also expect that.

We will be able to deliver the profitability on free cash flow guidance.

We have maintained compared to prior year quarter.

Xavier Heiss: It does not mean leaving geographies here but what is the best go to market model we should have in all the countries that we are present here, the present thing here. So OPEX will be a key director and obviously we're expecting combined with the benefit of free cash flow to go significantly. As we mentioned it as well, we are expecting this initiative to be self-funded so we are not expecting, you know, to leverage, you know, further or more, you know, the company here, as, you know, it will just complete the transaction with car like and we are always, you know, opportunistic when we are looking at a creative on value, a creative, you know, acquisition, but at the same time, we have a journey on the trajectory, which is model now that we create, you know, this profit improvement on the 300 million operating profits that we mentioned here.

Got it alright, thank you.

Thank you.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Steve.

Speaker 1: Thank you. This does conclude the question and answer session of Perry's program. I'd like to hand the program back to Steve for a-

For any further remarks.

Each of quarters.

Wonderful day.

Speaker 1: Thank you, ladies and gentlemen, for your participation in today's conference. This does include the program. You may now disconnect. Good day.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Steven Bandrowczak: And for my follow-up, you did mention the weakness you're seeing in the transactional business and I think particularly in EMEA is what you're calling out. I just want to understand the nature of what you're hearing from your customers. Is it really a budget consideration and pushing some of those sales out to next year or are they rethinking sort of their install base or something else on a more structural basis on the devices or printer front, any insights there please.

Steven Bandrowczak: Thank you. Yeah, let me start. And so you think about the headwinds that we see in macro headwinds around inflation, around interest rates, around labor. And so what we hear from our clients and aligns really well with our strategy. And that is we've got to drive their success through our solutions and products and services. And that's why I talk about we could expand and existing clients today. And that's why we're seeing our new rate higher.

Steven Bandrowczak: So things like robotics is a service. Things like digital workflow in terms of driving productivity inside a very specific vertical. So where we are aligning what we hear from our clients number one is they're looking to help to be able to offset some of these macro trends and drive more productivity, helping them with the challenges around labor, helping them with the challenge around higher cost, the capital things like as a service and subscription model.

Steven Bandrowczak: All of those are actually playing very well into new products and services that we can bring into our clients to help them offset some of the challenges, don't you? Yeah, I found that, you know, but actually also to your point, something clear from a macro point of view.

Xavier Heiss: So Europe, we are not the only one quoting it there a little bit of sustenance. This is not, you know, I thought that the food decline or, you know, more, more really more than what we're expecting, but we've seen the softening there. What we've seen as well, you know, I mentioned the paper business, the paper business just goes for to clarify. This is not the significant business. For the rock, this is like a very low single digit number in revenue, but compared to last year, where this paper business, we certainly are some scarcity of paper, we have been able to benefit from it. This year is not as good on, we see more flow of Asian paper of content, the market, putting pressure on prices there.

Xavier Heiss: The other element we are monitoring currently is on the high end production business. This business, you know, obviously is highly connected to the GDP evolution on the trend on the market here, but also on the access to capital for our high end production customer on what we have seen recently is a little bit due to interest rate increasing a little bit more scarcity. And, you know, the ability or the capacity that this customer have to invest in this equipment, not highly concerned at this state, but this is something that we are monitoring on the will provide updates during the quarter.

Xavier Heiss: All of this everything that I'm describing here is included in our new guidance, and we also expect that, you know, we will be able to deliver the profitability and free cashflow guidance that we have maintained compared to prior quality. Thank you. Thank you, Senator. Thank you. This does include the question and answer session of areas program.

Steven Bandrowczak: I'd like to hand the program back to Steve for any further remarks. Thank you for listening to our earnings conference call this morning, balanced execution about strategic priorities has resulted in a simplified more profitable Xerox. And reinvention is the next step along our journey towards sustainable improvement in profits and revenue. We look forward to sharing our progress along that journey in future quarters of a wonderful day. Thank you, ladies and gentlemen for your participation in today's conference. This does include the program. You may now disconnect. Good day.

Q3 2023 Xerox Holdings Corp Earnings Call

Request a DemoDemo

XRX

Xerox Holdings

Earnings