Q1 2024 Xerox Holdings Corp Earnings Call

Thank you for standing by welcome to the Xerox Holdings Corporation's first quarter 2020 earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Operator: Thank you for standing by. Welcome to the Xerox Holdings Corporation's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

If your question has been answered and you'd like to remove yourself from the queue simply press star one again.

Operator: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Mr. David Beckel, Vice President, Investor Relations. Please go ahead, sir.

Today's program is being recorded and now I'd like to introduce your host for today's program Mr. David Bekele, Vice President Investor Relations. Please go ahead Sir.

David James Beckel: Good morning, everyone I'm, David Becker, Vice President and head of Investor Relations at Xerox Holdings Corporation welcomed.

David James Beckel: Good morning, everyone. I'm David Beckel, Vice President and Head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation first quarter 2024 earnings release conference call hosted by Steve Bandrowczak, Chief Executive Officer. He's joined by John Bruno, President and Chief Operating Officer, and Xavier Heiss, Executive Vice President and Chief Financial Officer.

David James Beckel: Welcome to the Xerox Holdings Corporation first quarter 2024 earnings release Conference call hosted by Steve <unk>, Chief Executive Officer.

David James Beckel: Is joined by John Bruno President and Chief operating Officer.

David James Beckel: <unk> executive.

David James Beckel: Executive Vice President and Chief Financial Officer at.

David James Beckel: At the request of 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. During this call, Xerox executives will refer to slides that are available on the web at www.xerox.com and will make comments that contain forward-looking statements, which by their nature address matters that are in the future and are uncertain At this time, I'd like to turn the meeting over to Mr. Bandrowczak.

David James Beckel: 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.

David James Beckel: During this call Xerox executives will refer to slides that are available on the web at www Dot Xerox Dot com slash investor, who will make comments that contain forward looking statements, which by their nature address matters that are in the future and are uncertain.

Speaker Change: Actual future financial results may be materially different than those expressed herein at this time I would like to turn the meeting over to Mr. <unk>.

Steven John Bandrowczak: Good morning, and thank you for joining us in Q1 2024. This past quarter, our organization implemented one of its most intense periods of structural change. As part of our re-invention, we redesigned and restructured our organization from top to bottom, letting a lot of good people go in the process.

Speaker Change: Good morning, and thank you for joining our Q1 2024 earnings call.

Speaker Change: This past quarter, our organization implemented one of its most intense periods of structural change in recent history.

Speaker Change: As part of reinvention, we redesigned and restructured our organization from top to bottom letting a lot of good people go in the process. This.

Steven John Bandrowczak: This work was hard but necessary to position Xerox for long-term success as we navigate the secular challenges associated with print and reposition our business for long-term success. Summarizing results for the quarter, revenue of $1.5 billion decreased 12.4% in actual; revenue declined mid-single digit. Adjusted EPS was $0.06. $0.43 lower year over year. Free cash flow was the use of $89 million, a decrease of 159 compared to Q1 of last year. And the adjusted operating margin of 2.2% was lower year-over-year by 470 basis points.

Speaker Change: This work was hard but necessary to position Xerox for long term success as we navigate the secular challenges associated with print and repositioning our business for long term sustainable growth.

Speaker Change: Summarizing results for the quarter revenue of $1 5 billion decreased 12, 4% in actual currency and 13, 2% in constant currency.

Speaker Change: Excluding the impact of backlog reductions in the prior year quarter and the intentional de emphasis of certain non strategic businesses revenue declined mid single digits.

Speaker Change: Adjusted EPS was <unk> 43, lower year over year.

Speaker Change: Free cash flow was a use of 89 million a decrease of $159 million compared to Q1 of last year and adjusted operating margin of two 2% was lower year over year by 470 basis points.

Steven John Bandrowczak: Q1 results were below our expectations and are not representative of the operating improvements already observed following the organizational redesign. We experienced a short period of disruption associated with the reorganization. Particularly as it relates to sales of equipment, but momentum in equipment orders and continued strength in services, signings, and activity, along with enhanced operating visibility and speed of decisioning, suggests the structural changes implemented this quarter can deliver the improved in-year revenue trajectory, operating margins, and free cash flow required to achieve our full-year goal.

Speaker Change: Q1 results were below our expectations and are not representative of the operating improvements already observed following the organizational redesign.

Speaker Change: We experienced a short period of disruption associated with the reorganization.

Speaker Change: <unk> as it relates to sales of equipment, but momentum in equipment orders and continued strength in services signings activity, along with enhanced operating visibility and speed of Decisioning suggests the structural changes implemented this quarter can deliver the improved in year revenue.

Speaker Change: The trajectory of operating margins and free cash flow required to achieve our full year guidance.

Steven John Bandrowczak: This past quarter, the employees of Xerox demonstrated the resilience and dedication required to enable a successful multi-year strategic repositioning of the company. I have more confidence than ever that we have the right team and the right strategy in place to execute Xerox's reinvention and deliver our three-year adjusted operating income improvement. We will continue to build on early momentum following the reorganization, guided by a clear focus on the strategic priorities we established to start with a stronger core.

Speaker Change: This past quarter, the employees of Xerox demonstrated the resilience and dedication required to enable a successful multiyear strategic repositioning of the company.

Speaker Change: I have more confidence than ever that we have the right team and the right strategy in place to execute Xerox reinvention and deliver our three year adjusted operating income improvement target.

Speaker Change: We will continue to build on early momentum following the reorganization guided by a clear focus on the strategic priorities, we established to start the year.

Speaker Change: Starting with a stronger core a strong stable print business provides the financial foundation of our investments in new digital and it services capabilities and the strategic platform from which new services can be deployed.

Steven John Bandrowczak: A strong, stable print business provides the financial foundation for investments in new digital and IT services capabilities and the strategic platform from which new services can be deployed. This quarter, we took important steps to strengthen our core business by deploying a business unit rather than a geographic-led operating model. This new model more closely aligns operations with the economic buyer of our products and services, which is critical as we navigate the risks and opportunities presented by an evolving hybrid workforce.

Speaker Change: This quarter, we took important steps to strengthen our core business by deploying a business unit rather than geographic led operating model.

Speaker Change: This new model more closely aligns operations with the economic buyer of our products and services, which is critical as we navigate the risks and opportunities presented by an evolving hybrid workplace.

Steven John Bandrowczak: As part of the realignment, we integrated go-to-market, marketing, service delivery, product development, and engineering teams to ensure client feedback is quickly and accurately incorporated into key product and marketing decisions. We elevated a broader set of go-to-market leaders, representing key customer types, to improve accountability and visibility into the effectiveness of our sales strategy, and we tasked one of the most senior sales leaders to establish a global partner ecosystem, improving indirect channel sales reach and ensuring broader access to Xerox products globally.

Speaker Change: As part of the realignment, we integrated go to market marketing service delivery product development and engineering teams to ensure client feedback as quickly and accurately incorporated into key product and marketing decisions. We elevated a broadest set of go to market leaders representing key.

Speaker Change: Key customer types to improve accountability and visibility into the effectiveness of our sales strategies and we test one of the most senior sales leaders to establish a global partner ecosystem, improving indirect channel sales reach and ensuring broader.

Speaker Change: Access to Xerox products globally.

Steven John Bandrowczak: These organizational changes improve the speed of product and marketing decisions and enhance opportunities to expand client wallets by enabling greater coordination in the sales of digital and IT services to print clients. We expect the new operating model will provide incremental tailwinds to the momentum currently observed in our services business. Print and digital services signings grew double digits again this quarter, and the revenue renewal rate among large clients remained above 100% on a trailing 12-month basis, driven by the cross sale of digital services into existing print clients and vice versa.

Speaker Change: These organizational changes improved speed of product and marketing decisions and enhance opportunities to expand client wallet by enabling greater coordination and the sales of digital and services to print clients.

Speaker Change: We expect the new operating model will provide incremental tailwind to the momentum currently observed in our services business.

Print and digital services signings grew double digits again, this quarter and the revenue renewal rate among large clients remained above 100% on a trailing 12 month basis, driven by the cross sell of digital services into existing print clients and vice versa.

Steven John Bandrowczak: Our portfolio of digital services provides stability to our core print business and drives opportunities for growth as clients seek both digital and physical solutions to address their most important document workflow needs. I'll share an example of the digital service signings we completed this quarter with a large print client in the medical devices space. At this client, we leveraged our print relationship to design a comprehensive, intelligent document process solution that streamlines and automates critical document workflow processes, resulting in an expansion in annual contract value of $35. The solution utilizes AI and RPA to digitize and classify and extract data for automatic integration with important client workflows, including the classification of device-related records, manuals, clinical records, and office documents.

Speaker Change: Our portfolio of digital services provide stability to our core print business and drives opportunities for growth as clients seek both digital and physical solutions to address their most important document workflow needs are.

Speaker Change: I'll share. An example of the digital service signings, we completed this quarter with a large print client in the medical devices space.

Speaker Change: This client we leveraged our print relationship to design a comprehensive intelligent document process solution that streamlines and automates critical document workflow processes, resulting in expansion in annual contract value of 35%.

Speaker Change: This solution utilizes AI and RPI to digitize and classify and extract data for automatic integration with important client workflows, including the classification of device related records manuals clinical records and office documents.

Steven John Bandrowczak: The solution also improves data and process accuracy while lowering the client's labor costs. This is one of the many case studies at Xerox that illustrate our ability to provide digital and print solutions that grow our share of wallet to improve client outcomes. Moving to Structural Cost Improvement. This quarter, we took significant steps to improve our cost structure, most notably through the implementation of a reorganization that is expected to result in a 15% reduction in our employee base. Difficult decisions were made across the organization.

Speaker Change: The solution also improves data and process accuracy, while lowering the client's labor costs.

Speaker Change: This is one of the many case studies of Xerox that illustrate our ability to provide digital and print solutions that grow our share of wallet to improve client outcomes.

Speaker Change: Moving to structural cost improvements this quarter, we took significant steps to improve our cost structure, most notably through the implementation of reorganization that is expected to result in a 15% reduction of our employee base.

Speaker Change: Difficult decisions were made across the organization, but a streamline employee base and simplified operating model positions us better to respond to market opportunities and provide incremental financial capacity to reinvest in our growth businesses.

Steven John Bandrowczak: But a streamlined employee base and simplified operating model positions us better to respond to market opportunities and provide incremental financial capacity to reinvent in our growth business. The financial benefit of these headcount reductions will build throughout the year, with carryover benefits expected in 2021. Operating efficiency remains a focus throughout our reinvention. The newly formed Global Business Services Organization will leverage advanced technologies like machine learning and AI.

Speaker Change: The financial benefit of these head count reductions will build throughout the year with carryover benefits expected in 2025.

Speaker Change: Operating efficiency remains a focus throughout our reinvention.

Speaker Change: The newly formed global business services organization will leverage advanced technologies like machine learning and AI.

Steven John Bandrowczak: Examples already in flight include the use of AI to optimize service pricing, reduce service technician resolution time, and improve the timing and quality of customer service. The financial benefits of these and other productivity initiatives are expected to grow as our business is further simplified through geographic and offering optimization. Accordingly, we took initial actions this quarter to simplify our product offering and global routes to market. We are exploring strategic options for our production print manufacturing operations and have sold or signed agreements to sell our direct operations in four Latin American countries. These and future simplification actions will be key to unlock operational savings throughout our reinvention journey. John will discuss these actions in more detail.

Speaker Change: To drive continuous improvement and productivity across the organization. Examples already in flight include the use of AI to optimize services pricing reduced service technician resolution time, and improve the timing and quality of customer service responses.

Speaker Change: The financial benefit of these and other productivity initiatives are expected to grow as our business is further simplified through geographic and offering optimization.

Speaker Change: Accordingly, we took initial actions this quarter to simplify our product offering and global routes to market.

Speaker Change: We are exploring strategic options for our production print manufacturing operations and sold or signed agreements to sell our direct operations and for Latin American countries. These and future simplification actions will be key to unlock operational savings throughout our reinvention journey.

Speaker Change: John will discuss these actions in more detail.

Steven John Bandrowczak: Finally, balanced capital allocation. Capital allocation priorities for the year remain the payment of our dividend, reduction of debt, and investment in projects and acquisitions with high rates of return on invested capital. This quarter, we executed a series of refinancing transactions that extended the maturity profile of our debt. Xavier will discuss these transactions in more detail. When combined with free cash flow expected from a stronger, more operationally efficient print business, the refinancing enhances near-term flexibility to invest in growing our digital and IT services capabilities. I will now hand the call over to John to provide an update on Reinvention. Thank you, Steve.

Finally balanced capital allocation.

Speaker Change: Capital allocation priorities for the year remain the payment of our dividend reduction of debt and investment in projects and acquisitions with high rates of return on invested capital.

Speaker Change: This quarter, we executed a series of refinancing transactions that extend the maturity profile of our debt.

Speaker Change: Xavier will discuss these transactions in more detail.

Speaker Change: When combined with free cash flow expected from our stronger more operationally efficient print business the refinancing enhances near term flexibility to invest in growing our digital and services capabilities.

Xavier: I'll now hand, the call over to John to provide an update on reinvention.

John Bruno: Thank you Steve.

John Bruno: As Steve mentioned, we implemented a comprehensive and complex organizational redesign this quarter focused on building a stronger, more stable business aligned to the evolving needs of our clients. I'll provide context behind some of these more impactful changes, but thematically, they're all designed to give our sales and delivery organizations more time with clients. The first change was the implementation of a business unit-led operating model, replacing our previous geographic focus.

John Bruno: As Steve mentioned, we implemented a comprehensive and complex organizational redesign this quarter focused on building a stronger more stable business aligned to the evolving needs of our clients I'll provide context behind some of these more impactful changes the thematic Lee they're all designed to provide our sales and delivery organizations.

John Bruno: More time with clients.

John Bruno: <unk> organizational complexity streamline decision rates and create investment capacity for future product development.

John Bruno: The first change was the implementation of a business unit lead operating model, replacing our previous geographic focus. This solution led model incorporates the voice of our clients and partners.

John Bruno: This solution-led model incorporates the voice of our clients and partners, from Initial Engagement through Service Fulfillment, segmented by Economic Buyer profile. To enable this alignment, we integrated all business groups responsible for the design, marketing, sales, development, and delivery of our products and services into one organization.

John Bruno: Some initial engagement through service fulfillment.

John Bruno: <unk> by the economic buyer profile.

John Bruno: To enable this alignment we integrated all business groups responsible for the design marketing sales development and delivery of our products and services into one organization we.

John Bruno: We simplified organizational spans, layers, administrative reporting, and supporting infrastructure formally needed to run the business. Bold changes of this magnitude designed to deliver global operating model simplification come with a high degree of disruption, and we were no exception. We experienced disruption across our organization this quarter as our team acclimated to the changes, which primarily impacted equipment. I make no excuses for that underperformance and was disappointed with our results, as we did not meet our internal expectations.

John Bruno: We simplified organizational spans and layers administrative reporting and supporting infrastructure, formerly needed to run the business.

John Bruno: Bold changes of this magnitude designed to deliver global operating model simplification come with a high degree of disruption and we were no exception.

John Bruno: We experienced disruption across our organization this quarter as our team acclimated to the changes, which primarily impacted equipment sales I make no excuses for that underperformance and was disappointed with our results as we did not meet our internal expectations.

John Bruno: That said, I'm also proud of our team as they adapted to our new operating model better than I expected and are driving the intended outcomes to recover from the self-initiated but necessary disruption. I'm pleased to report we are seeing early indications and positive results from our go-to-market teams in supporting functions as we improve client and partner engagement and drive sales productivity. Thank you.

John Bruno: That said I'm also proud of our team as they adapted to our new operating model better than I expected and are driving the intended outcomes to recover from this self initiated but necessary disruption.

John Bruno: I am pleased to report we are seeing early indications and positive results from our go to market teams and supporting functions as we improve client and partner engagement and drive sales productivity. After a slow start in January and early February equipment orders were up double digits year over year in late February and March growing at.

John Bruno: After a slow start in January and early February, equipment orders were up double digits year over year in late February and March, growing at an expanded rate as we exited. The second major change this quarter was the establishment of global business services, or JVS. GBS will drive continuous enterprise-wide efficiencies and productivity gains by centrally coordinating internal processes through shared capabilities and platforms. GBS was built to complement and support our business unit-led operating model, and its success will be measured through growth enablement and enterprise operating efficiency.

John Bruno: <unk> expanded rate as we exited the quarter.

John Bruno: The second major change this quarter was the establishment of global business services or GBS.

John Bruno: GBS will drive continuous enterprise wide efficiencies and productivity gains by essentially coordinating internal processes through shared capabilities and platforms.

John Bruno: GBS was built to complement and support our business unit operating model and our success will be measured through growth enablement and enterprise operating efficiency.

John Bruno: Among the more significant near term savings opportunities identified by GBS is a reduction of the technological and administrative burden associated with a company with hundreds of legal entities 20, plus ERP systems and more than a thousand business applications the savings opportunity associated with a modern tech stack anymore.

John Bruno: Among the more significant near-term savings opportunities identified by GBS is a reduction in the technological and administrative burden associated with a company with hundreds of legal entities, 20-plus ERP systems, and more than 1,000 business applicants. The savings opportunities associated with a modern tech stack and a more efficient financial reporting structure are substantial and will be key contributors to our net savings target over the next three years. GBS will also be a key enabler of savings associated with geographic and offering simplification.

<unk> financial reporting structure are substantial and will be key contributors to our net savings target over the next three years.

John Bruno: GBS will also be a key enabler of savings associated with the geographic and offering simplification.

We began the process this quarter to systematically optimize the profitability and reach of our geographic distribution and narrow product offerings to those were sufficient rates of return on invested capital can be generated.

John Bruno: We began the process this quarter to systematically optimize the profitability and reach of our geographic distribution and narrow product offerings to those where sufficient rates of return on invested capital can be generated. Starting with geographic optimization in Q1, we sold or signed agreements to sell our direct operations in Argentina, Chile, Ecuador, and Peru, shifting to a partner-led distribution model in each country. We are in negotiations to enact similar changes to our distribution model in parts of Europe.

John Bruno: Starting with geographic optimization in Q1, we sold or signed agreements to sell our direct operations in Argentina, Chile, Ecuador, and Peru shifting to a partner led distribution model in each country.

John Bruno: We are in negotiation to enact similar changes to our distribution model in parts of Europe.

John Bruno: Collectively these arrangements will allow us greater focus on improving the print and digital services capabilities. We offer channel partners, who are best positioned to serve our clients in these regions.

John Bruno: As a reminder, geographic simplification will cause a slight reduction in revenue over time as businesses are transitioned to a partner led model. However, these actions are expected to generate absolute improvements in operating profit as the removal of overhead cost in place to support these geographies more than outweighs the potential reductions in.

John Bruno: Collectively, these arrangements will allow us to focus on improving the print and digital services capabilities we offer channel partners who are best positioned to serve our clients in these regions. As a reminder, geographic simplification will cause a slight reduction in revenue over time as businesses are transitioned to a partner-led model. However, these actions are expected to generate absolute improvements in operating profit as the removal of overhead costs in place to support these geographies more than outweighs the potential reductions in revenue and associated growth.

John Bruno: And associated gross profit.

On offerings simplification this quarter, we decided to explore strategic options for our production equipment manufacturing operations, including exiting manufacturing of certain product families.

John Bruno: By more closely aligning the mix of production products and services with the need of our production clients. We will have greater capacity to offer value added services, such as automation intelligence assistance and personalization.

John Bruno: Our dedication to the production print market remains unchanged and we expect the rationalization of our offering to improve our differentiation and distinctiveness in this important market.

John Bruno: On offering simplification, this quarter, we decided to explore strategic options for our production print equipment manufacturing operations, including ending manufacturing of certain product families. By more closely aligning the mix of production products and services with the needs of our production clients, we will have greater capacity to offer valued services such as automation, intelligence, assistance, and personalization. Our dedication to the production print market remains unchanged, and we expect the rationalization of our offering to improve our differentiation and distinctiveness in this important market. Accordingly, we recently signed an agreement with a third-party provider of high-speed continuous feed inkjet machines to offer their family of inkjet presses for the printing and graphic arts industries to our clients.

John Bruno: Accordingly, we recently signed an agreement with a third party provider of high speed continuous feed inkjet machines to offer their family of inkjet presses for the printing and graphic our industries to our clients.

John Bruno: In summary, Q1 was pivotal for our reinvention and the actions taken this quarter solidified the path to achieve our three year target is $300 million of adjusted operating income improvement above 2023 levels much of the expected improvement in 2024 is associated with the cost reduction actions already taken in <unk>.

John Bruno: <unk> and sales productivity due to the timing of certain actions taken this year a portion of the run rate benefits associated with 2024 actions will be realized in 2025, giving us visibility to another year of progress towards our three year target I'll now hand, the call over to Xavier. Thank.

John Bruno: In summary, Q1 was pivotal for our reinvention, and the actions taken this quarter solidified the path to achieve our three-year target of $300 million of adjusted operating income improvement above 2023 levels. Much of the expected improvement in 2024 is associated with the cost reduction actions already taken and improvement in sales productivity. Due to the timing of certain actions taken this year, a portion of the run rate benefits associated with 2024 actions will be realized in 2025, giving us visibility to another year of progress toward our three-year target. I'll now hand the call over to John. Thank you, John, and good morning, everyone.

Xavier: Thank you John Good morning, everyone as Steve mentioned revenue profits and free cash flow declined year over year due mainly to a reduction of equipment backlog in the prior year quarter on the intentional reduction of non strategic revenue.

Xavier: Excluding these factors revenue would have declined mid single digits.

Xavier: Revenue on adjusted operating profit were below expectations.

Xavier: Due mainly to the effect of organization or trend on our central operations on constraining, therefore device, which affected equipment revenue as well as the <unk>.

Xavier: More Michigan implementation of workforce reduction action, we need to quarter than originally anticipated.

Xavier: Turning to profitability.

Xavier: As part of our offering simplification efforts, we incur up to $36 million of inventory charge associated with the exit of certain production pre manufacturing operation.

Or profitability commentary to follow exclude this impact adjust.

Xavier: Adjusted gross margin declined 240 basis points year over year due to lower revenue, including the termination of <unk> key income on high yield product on freight costs, partially offset by the benefit of structural cost reduction.

Xavier Heiss: As Steve mentioned, revenue, profits, and free cash flow declined year over year due mainly to a reduction in equipment backlog in the prior year quarter and the intentional reduction of non-strategic revenue. Excluding these factors, revenue would have declined mid-single-digit. Revenue on Adjusted Operating Profit was below expectation, due mainly to the effect of organizational change on our sales operations on constraining effort devices, which affected equipment revenue, as well as a more measured implementation of workforce reduction action within the quarter than originally anticipated.

Adjusted operating margin of two 2% declined 470 basis points year on year due to lower gross profit on higher bad debt expense terrific deep in pump.

Xavier: We get released in the prior year period, partially offset by the benefit of structural cost reduction actions.

Xavier: Non selling G&A, excluding bad debt expense declined close to 10% in Q1, reflecting the partial quarter of head count reductions owns a benefit of cost actions implemented in the prior year.

Xavier Heiss: Turning to profitability, as part of our Offering Simplification efforts, we incurred 36 million in inventory charges associated with the exit of certain production print manufacturing operations. All profitability commentary to follow excludes this interview. Adjusted gross margin declined 240 basis points year-over-year due to lower revenue, including the termination of Fuji royalty income on higher product freight costs, partially offset by the benefit of structural cost rates. Adjusted operating margin of 2.2% declined 470 basis points year-over-year due to lower gross profit and higher bad debt expense, which reflected, in part, a reserve release in the prior year period, partially offset by the benefit of structural cost reduction.

Xavier: Adjusted other expenses net were $3 million a year on year over year due to an increase in non finance interest expense, partially offset by the reversal of previously accrued contingent consideration on travel related business tax settlement.

Xavier: Our adjusted tax rate is 22.

Xavier: <unk> <unk> tax benefit as compared to $15 five patent tax expense in the prior year period.

Xavier: The decrease in tax rate reflects additional tax benefit in the current quarter from the Redetermination of Samsung unbroken nice tax position on mix of earnings.

Xavier: Adjusted EPS of <unk> in the first quarter was 43 cents low weapons of prior year, driven by lower operating income on a year of interest expense, partially offset by the benefit of a lower share count on tax rate.

GAAP loss per share of <unk> 94.

Xavier Heiss: Non-selling DNA, excluding bad debt expense, declined close to 10% in Q1, reflecting a partial quarter of headcount reductions on the benefit of cost actions implemented in the prior year. I just did other expenses net, where $3 million a year, year over year, due to an increase in non-finance interest expense, partially offset by the reversal of previously accrued contingent consideration on favourable business tax settings. The adjusted tax rate is a 22.2% tax benefit as compared to a 15.5% tax expense in the prior year.

Xavier: It was $1 37, low welcome to prior year, reflecting lower revenue on gross profit higher interest expense on non service retirement cost as well as roughly under $1 million up to Opex.

Xavier: Our <unk> per share of asset impairment and restructuring related charge associated with our company reinvention, including activity relating to the exit of manufacturing for surface production equipment on the execution of geographic simplification initiative in Latin America.

Xavier: Let me now review revenue and cash flow in more detail.

Xavier: Starting with revenue equipment.

Xavier: Equipment sales of $219 million in Q1 declined to around 26% year over year in actual and constant currency.

So prior year effect of backlog reduction on geographic simplification contributed around 16 percentage points of the year over year decline.

Xavier Heiss: The decrease in tax rates reflects additional tax benefits in the current quarter from the redetermination of certain unrecognized tax positions on a mix of earnings. Adjusted EPS of $0.06 in the first quarter was $0.43 lower than the prior year, driven by lower operating income and higher interest expense, partially offset by the benefit of a lower share count on... Gap loss per share of $0.94 was $1.37 lower than the prior year, reflecting lower revenue on gross profit, higher interest expense on non-service retirement costs, as well as roughly $100 million after tax, or $0.80 per share of asset impairment on restructuring-related Let me now review Robneau and Cashflow in more detail. Starting with a review.

Xavier: <unk> sales were also affected by the organizational changes implemented during this quarter constraining April devices, an accelerated <unk> of competitive Japanese product in advance of communicated price increases for our competitor.

Xavier: As Steve noted despite the slower than anticipated start to the year, we're seeing the intended benefit of our I'll go to the Assurant change on equipment older with year over year growth in order accelerating so how Jakarta.

Xavier: Total equipment revenue outpaced in station activity due to cover a broad product mix.

Xavier: Installation decline across all product due mainly to prior year backlog of reductions on the effect of sense Cross organizational changes, which are now complete.

Xavier: Both sales revenue of $1 2 billion declined eight 5% in actual currency year over year on a nine 3% in constant currency.

Xavier: At <unk> the effect of non strategic lower margin paper on endpoint device placement, which we plan to continue to reduce overtime as communicated in January as well as the effect of geographic simplification. So termination of the Fuji royalty on the absence of box with new parts for new decline.

Xavier Heiss: Equipment sales of 290 million in Q1 declined around 26% year-over-year in both actual and constant currency. The prior year effect of backlog reduction on geographic simplification contributed around 16 percentage points of the year-over-year decline. Equipment sales were also affected by the organizational changes implemented during this quarter, constraints in A4 devices, and accelerated buying of competitive Japanese products in advance of communicated price increases for our competitors. Steve noted that despite a slower than anticipated start to the year, we are seeing the intended benefit of our organizational change on Equipment Orders, with year over year growth in orders accelerating throughout the world. Total equipment revenue outpaced installation activity due to favorable projects. Installation declined across all products due mainly to prior year backlog reductions on the effect of Salesforce organization changes, which are now complete.

Xavier: Lastly.

Xavier: Consistent with last quarter I will provide additional commentary to help clarify underlying trend in our core business, which excludes the effect of step in nonrecurring item.

Xavier: For Q1, so prior year reduction in equipment backlog contributed to around 400 basis point towards a year over year decline in total revenue.

Xavier: No offense on nonstrategic paper on endpoint.

Xavier: Endpoint device contributed around 200 basis points to the decline.

Xavier: The effect of no <unk> royalty revenue on strategic actions taken to simplify our business, including geographic simplification contributed two.

Xavier: 200 points of the decline.

Xavier: When this combined effect I'll remove revenue from our core business declined mid single digit this quarter, mainly reflected the previously noted effect on equipment revenue.

Xavier: To a lesser extent declining printed page volumes.

Xavier: For the remainder of the year, we expect revenue excluding the effect of backlog reduction on declining nonstrategic revenue to be slightly a year on a year over year basis.

Xavier: Let's now review cash flow.

Xavier: Free cash flow was a use of $89 million in Q1, whereby underpinned 59 million year over year.

Xavier: Operating cash flow was a use of $79 million in Q1, a decline of $157 million.

Xavier: The prior year quarter.

Xavier: The decline was mainly driven by lower operating profit.

Xavier: Use of working capital higher payments for incentive compensation accrued in the prior year restricted payment associated with reinvention on higher pension contribution partially offset by net cash outs associated with a reduction in final <unk> bar.

Xavier Heiss: Our sales revenue of 1.2 billion declined 8.5% in actual currency year-over-year on 9.3% in constant currency. Including the effect of non-strategic lower margin paper on IT endpoint device placement, which we plan to continue to reduce over time as communicated in January, as well as the effect of geographic simplification, the termination of the Fuji royalty on the absence of park revenue, and the process revenue decline model. Consistent with last quarter, I will provide additional commentary to help clarify underlying trends in our core businesses, which exclude the effect of certain non-recurring IT.

Finance assets were a source of cash this quarter of <unk> $88 million compared to a source of cash of under $20 million in the prior year, reflecting the benefit of our football program, which hps on lower origination.

Xavier: Working capital was a use of cash of 175 million, resulting in a $69 million year over year decrease in cash driven mainly by an increase in inventory related to a change in contractual came with a large OEM vendor.

Xavier: We expect the inventory level to normalize throughout the year on working capital seasonality to improve during the next three quarters in line with improvement in our operating profit critic Terry.

Xavier: Investing activities were a use of cash of 17 billion consistent with the prior year quarter.

Xavier: Financing activity, where our source of cash of $261 million terrific things the issuance of 900 million of 10 year unsecured on convertible notes, partially offset by around $450 million of cash used to repay outstanding notes purchased a capped call option on paid for detailed.

Xavier Heiss: For Q1, the prior year reduction in equipment backlog contributed around 400 basis points to the year-over-year decline in total work. Lower self-service on non-strategic paper on IT endpoint devices contributed around 200 basis points to the data.

Xavier: The issuance cost along with Amdocs on $32 million of secured debt payment on dividend of $77 million.

Xavier Heiss: The effect of no Fuji royalty revenue on strategic action taken to simplify our business, including geographic simplification, contributed another 200 points to the lead. However, when these combined effects are removed, revenue from our core business declined mid-single GDG quarter, mainly reflecting the previously noted effect on equipment revenue and, to a lesser extent, decline in printed page revenue. For the remainder of the year, we expect revenue, excluding the effect of backlog reduction and decline in non-strategic revenue, to be slightly higher on a year-over-year basis. Let's now review Cash Flow. Free cash flow was a use of $89 million in Q1, lower by $159 million year-over-year.

Xavier: Turning to segment Xerox financial Telesis are hff's origination volume declined 35% year over year, reflecting ex FX change in strategy to return its focus towards captive only financing solutions.

Xavier: <unk> finance receivable balance declined 10% second Tony in actual currency due to the run off of existing finance receivable on the hbf funding of <unk> personal origination.

Xavier: Beauty highlighted.

Xavier: Our finance receivable balance to continue to decline on normalized closer to $1 billion by 2027.

Xavier: In Q1, <unk> revenue was down 11% year over year due to lower finance income on those are fees associated with the decline in ex FX finance receivable balance.

Xavier: Really offset by higher commissions from the central finance receivable asset.

Xavier: Segment profit for ex FX was $18 million lower year over year, mainly due to higher bad debt expense, reflecting a reserve release in the prior year period, which was partially offset by modestly higher gross profit on lower intercompany commissions.

Xavier Heiss: Operating cash flow was a use of $79 million in Q1, a decline of $157 million versus the prior year quarter. The decline was mainly driven by lower operating profit, higher use of working capital, higher payment for incentive compensation accrued in the prior year, restructuring payment associated with reinvention, higher pension contribution, partially offset by higher net cash associated with a reduction in finance risk. Finance assets were a source of cash this quarter of $188 million, compared to a source of cash of $120 million in the prior year.

Xavier: Print on overall revenue fell 13% year over year in Q1 due to lower equipment on post Central Avenue for the reasons previously mentioned print.

Xavier: Print on overall segment profit declined 67 million versus the prior year quarter, driven by lower revenue, partially offset by structural cost efficiencies.

Xavier: Turning to capital structure, we ended Q1 with $772 million of cash cash equivalents unrestricted cash.

Xavier: Around $2 2 billion of the remaining $3 $6 billion of our outstanding debt support our finance asset with the remaining debt of around $1 4 billion attributable to the non leasing business.

Xavier: Total debt consists of 10 year unsecured bonds finance receivable secured borrowing Tam loan debt on our new convertible note.

Xavier: During the quarter, we took advantage of favorable market conditions to refinance our near term debt maturities, which resulted in an extension of our maturity profile at a slightly higher interest rate.

Xavier Heiss: Reflected the benefit of our forward flow program, which SPS, on lower origination. Working capital was a use of cash of $135 million, resulting in a $69 million year-over-year decrease in cash, driven mainly by an increase in inventory related to a change in contractual terms with a large OEM vantage. We expect inventory levels to normalize throughout the year and working capital seasonality to improve during the next quarter, in line with improvement in our operating profit criteria. Investing activities were a use of cash of $17 million, consistent with the prior year.

We raised $900 million of unsecured debt comprised of 500 million in senior unsecured on $400 million in senior convertible note.

Xavier: <unk> deep interest rate of six 6%.

Xavier: Proceeds were used to repay 83 million of outstanding 2020 call notes on $362 million of outstanding 2025 note on for issuance cost, including the purchase of a capped call option to raise the effective price of the convertible note from 'twenty.

Xavier: 84 cents to <unk> 20, a doughnut on 34 cents.

Xavier: Unused proceeds from the debt issuance will be used to repay the outstanding 2024 notes inmate on selectively repay debt balance with IR rate of increase throughout the year.

Xavier Heiss: Financing activities were a source of cash of $261 million, reflecting the issuance of $900 million of senior, unsecured, unconvertible notes, partially offset by around $450 million of cash used to repay outstanding notes, purchase a cap call option on paid for deferred issuance costs, along with $132 million of secured debt payments on dividends of $37 million. Turning to segment, Xerox Financial Services, or XFS, origination volume declined 35% year-over-year, reflecting XFS' change in strategy to return its focus toward captive-only financing. XFS's finance receivable balance declined 10% sequentially in actual currency due to the run-off of existing finance receivables on HPS funding of XFS originators.

Xavier: As a result of the refinancing transaction with no single maturity exceeding $400 million until 2028 greatly enhancing financial flexibility.

Xavier: Execute our reinvention on investing in our digital on it services businesses.

Xavier: As a result of the capped call purchase on our election of net share settlement treatment for the convertible note economic on non-GAAP EPS dilution does not begin until our share price exceeds $28 34.

Speaker Change: Finally, I will address guidance.

Speaker Change: For revenue, we continue to expect a decline of 3% to 5% in constant currency in 2024.

Speaker Change: As a reminder included in this guidance of around 400 basis points of effect from nonrecurring headwind associated with backlog reduction in the prior year strategic exit or <unk> businesses lower paper sales on OSA, all known strategic actions.

Speaker Change: Excluding the community of effect of these items core business revenue is expected to be roughly flat year on year.

Xavier Heiss: As previously highlighted, we expect our finance receivable balance to continue to decline or normalize closer to $1 billion by 2020. In Q1, XFS revenue was down 11% year over year due to lower finance income on other fees associated with the decline in XFS finance receivable balance, partially offset by higher commissions from the sales of finance receivables. Segment profit for XFS was $18 million lower year-over-year, mainly due to higher bad debt expense, reflecting a reserve release in the prior year period, which was partially offset by modestly higher gross profit on lower intercompany commissions. Print-on-order revenue fell 13% year-over-year in Q1 due to lower equipment on post-sales revenue for the reasons previously mentioned.

Speaker Change: Reflected stable print demand growth in digital.

Speaker Change: Services on neutral macroeconomic condition.

Speaker Change: The effect of geographic on offering simplification actions taken to date are not.

Speaker Change: Expect it to be material to 2020 for financial returns.

Speaker Change: As riskier strategic action involving product or geographic simplification not taken on become more material in the aggregate, we will update guidance accordingly.

Speaker Change: In terms of quarterly cadence, we expect sequential improvement in year over year revenue trajectory throughout the year.

Speaker Change: We continue to expect 2024, adjusted operating income margins to be at least seven 5%.

Speaker Change: A significant portion of the expected year over year improvement in adjusted operating income is associated with cost reduction already taken including as already shown in workflow announced in January.

Speaker Change: Our pipeline of near term operating efficiency initiative provide visibility to cost savings sufficient to achieve the full year adjusted operating income target of at least seven 5%.

Similar to revenue.

Speaker Change: Expect quarterly sequential improvement in adjusted operating income margin throughout the year.

Xavier Heiss: Print on other segment profits declined 67 million versus the prior year quarter, driven by lower revenue, partially offset by structural cost efficiency. Turning to Capital Structures. We ended Q1 with $772 million of cash and cash equivalents on Western. Around 2.2 billion of the remaining 3.6 billion of our outstanding debt supports our finance assets, with the remaining debt of around 1.4 billion attributable to the non-leasing business. Total debt consists of senior unsecured bonds, finance receivable secured borrowing, term loan debt, and our new convertible loan.

Speaker Change: Free cash flow is expected to be at least $600 million in 2024, aided by a reduction in our finance receivable balance.

Speaker Change: Cash flow guidance is inclusive of around <unk> million of expected restructuring payment on $50 million of incremental pension payment.

Speaker Change: In summary, Q1 results were affected by difficult prior year compare on the effect of strategic actions taken to drive long term improvement in our operation.

Speaker Change: We are encouraged by the momentum we see following the reorganization.

Speaker Change: And improved debt maturity profile on our capacity to generate chipcom share free cash flow position us well to fund a repositioning of our business toward opportunities with IR rate of underlying growth.

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

Speaker Change: Certainly one moment, ladies and gentlemen for our first question.

Xavier Heiss: During the quarter, we took advantage of favorable market conditions to refinance our near-term debt maturities, which resulted in an extension of our maturity profile at a slightly higher interest rate. We raised 900 million of unsecured debt, comprised of 500 million in senior unsecured and 400 million in senior convertible notes at an effective interest rate of 6.6%.

Speaker Change: And our first question comes from the line of Ananda Baruah from loop capital. Your question. Please.

Ananda Baruah: Yeah. Thanks, guys good morning.

Ananda Baruah: Hey, good morning, guys.

Ananda Baruah: Good morning.

Ananda Baruah: The question sounds like Theres, a lot going on here.

Xavier Heiss: Proceeds were used to repay $83 million of outstanding 2024 notes and $362 million of outstanding 2025 notes and for issuance costs, including the purchase of a cap call option to raise the effective strike price on the convertible note from $20.84 to $28.34. A new Proceed from the debt issuance will be used to repay the outstanding 2024 notes in May on selectively repaid debt balance with a higher rate of interest throughout the year.

Ananda Baruah: Yes.

Ananda Baruah: Have a couple really late.

Ananda Baruah: Really be more clarification.

Ananda Baruah: Yeah.

Ananda Baruah: As I said so.

Ananda Baruah: Selling of the South American.

Ananda Baruah: South American direct.

Ananda Baruah: Business entity, then I think you guys had mentioned that youre going to be.

Ananda Baruah: Something similar.

Ananda Baruah: In Europe.

Ananda Baruah: All of this it sounds like you are doing in the Navy.

Ananda Baruah: Sure.

Ananda Baruah: But can you just touch a little bit more on the breadth of which the initiatives and taking.

Ananda Baruah: And it sounds like this is.

Ananda Baruah: I wanted to just ask a couple questions a question about.

Xavier Heiss: As a result of the refinancing transaction, we have no single maturity exceeding $400 million until 2028, greatly enhancing financial flexibility as we execute our reinvention of investing in our digital and IT services business. As a result of the CapCoal purchase at our election of net share settlement treatment for the convertible note, economic or non-GAAP EPS dilution does not begin until our share price exceeds $28.34. Finally, I will address Kai

Ananda Baruah: Clarification about trade production business strategic actions, you guys hedging as well.

Ananda Baruah: Okay I was taking of the drag that we're really.

Ananda Baruah: Going to the indirect in South America and Europe.

Ananda Baruah: Does that is that really the non production business.

Ananda Baruah: Instead at the office.

Ananda Baruah: And then if we take a step back part of the reinvention, we talked about geography simplification and what we said was we'd look at country by country. Each country has a different set of dynamics. Each country has a different set of partner capabilities in each country has a different set of client set. So we look at each country look at each opportunity and then determine what is there.

Xavier Heiss: For revenue, we continue to expect a decline of 3% to 5% in constant currency in 2020. As a reminder, included in this guidance are around 400 basis points of effects from non-recurring headwinds associated with backlog reduction in the prior year. Strategic Exit or De-Emphasis of Certain Businesses, Lower Paper Sales on Other Non-Strategic, Excluding the cumulative effect of these items, core business revenue is expected to be roughly flat year over year, reflecting stable print demand, growth in digital and IT services, on neutral macroeconomic conditions. The effect of geography on offering simplification action taken to date is not expected to be material to 2024 financial.

Ananda Baruah: Right economics between us being direct versus indirect versus going through a single partner multiple partners. So thats. What you saw in Latam right, where we were not going to provide the best client experience the best capability and the coverage and we felt that a partner in that particular country would better serve the region embedded <unk>.

Ananda Baruah: Our clients. It does two things for US one it gives us more reach of our expansion with a capable client partner in that region, but it also allows us to as we talked about in Geo simplification focus on those growth areas that we could accelerate where we put all of our resources into like digital services dry.

Ananda Baruah: Giving more of the things that our clients need and core countries. So that's why we made the strategic change and we will continue to accelerate that through the balance of Latam and looking at Europe as well.

Xavier Heiss: As future strategic actions involving product or geographic simplification are taken and become more material in the aggregate, we will update guidance accordingly. In terms of quarterly cadence, we expect sequential improvement in year-over-year revenue trajectory throughout the year. We continue to expect 2024 Adjusted Operating Income margins to be at least 7.5%.

Ananda Baruah: This is John I'll just add.

John Bruno: It's the right question with regard to the way you're thinking about mix right. Because we look at offer simplification more from production portfolio of Geo simplification more around cost of sales opportunities today and in the future and what is the partner in those particular countries and can they take both our core our core offering.

John Bruno: As well as our future offerings and can we get greater reach at a lower cost of sales. So we look at our transfer our transfer costs and prices the enablement capabilities and how do you best serve clients because it all starts with what's the who is the economic buyer what are they buying from us today to your point from us equipment or others. What do we expect that they will be buying with the mix shift does.

Xavier Heiss: A significant portion of the expected year-over-year improvement in adjusted operating income is associated with cost reductions already taken, including the reduction in the workforce announced in January. Our pipeline of near-term operating efficiency initiatives provides visibility to cost savings sufficient to achieve the full-year adjusted operating income target of at least $7.5 billion. Similar to revenue, we expect quarterly sequential improvement in the adjusting operating income margin throughout the year. Free cash flow is expected to be at least 600 million in 2024, aided by the reduction in our finance receivable budget. Free cash flow guidance is inclusive of around $130 million of expected restructuring payment and $50 million of incremental pension payment.

John Bruno: Not only those products, but other services that we sell and who's best positioned to bring them to market at the best the most optimized cost to sell that's how we that's how we do it and to your point around scale and reach in development you would expect it to be right along the lines of what you would think about the major geographies in which we are today with the highest penetration and then as your period of those down.

John Bruno: I was just a simple return on invested capital and how we deploy them. We just have a Mendoza line. If you will as to where it is that we want to ensure that we're above that line and we can continue to invest in those partners.

John Bruno: And not and not or I should say and optimize our overall cost of sales in the region.

Operator: In summary, Q1 results were affected by a difficult prior year compared to the effect of strategic action taken to drive long-term improvement in our operations. We are encouraged by the momentum we see following the reorganization. An improved debt maturity profile on our capacity to generate substantial free cash flow positions as well as to fund the repositioning of our business toward opportunities with higher rates of underlying, will now open the line for Q&A. Certainly, one moment, ladies and gentlemen, for our first question.

Speaker Change: I think I'm getting okay. That's super helpful context, guys and then just real quick.

Speaker Change: On the production on the strategic actions around for that you.

Speaker Change: Can you just talk the breadth and depth.

Speaker Change: And potential Optionality I mean could you could you end up selling.

Speaker Change: The entirety of the core production business is that included in that and that option set I guess I guess the answer is always yes.

Speaker Change: Yes.

Speaker Change: Of course of course listen we are committed to the production business full stop I do not want to mislead or anything through these comments that theres somehow are concerned you have to look at the product sets themselves.

Operator: And our first question comes from the line of Ananda Baruah from Loop Capital. Your question, please. Yeah, thanks, guys. Good morning.

Speaker Change: These are products that were invested invented and have been deployed for many many years in this space the evolution of the technology and so forth and the changes. We're just looking at overall, the our manufacturing of certain of those platforms not our commitment to those platforms, both today and going into the future right. So we're still.

Unknown Attendee: Thank you. Morning. Thanks for the question. Sounds like there's a lot going on here. Yeah, I have a couple, but really, really need more clarification.

Ananda Baruah: If I could, but so, selling South American direct, some of South American business sensibilities, and I think you guys did mention that you're gonna be doing something similar in Europe. All of this sounds like you're doing it in the name of simplification, but can you just touch a little bit more on the breadth of which those initiatives could end up taking? And it sounds like this is what I want to I want to just ask a couple questions or a question about clarification about production business, and strategic actions, you guys said you're looking at as well. So is the taking of the direct route, we were really sort of going to the indirect route in South America and turning attention to Europe, is that really non-productive? So that's, you know, here's the office.

Speaker Change: Committed to those platforms for long periods of time from a service and supplies perspective, it's just we're not going to continue to manufacture them.

Speaker Change: The pace in which we believe is not conducive to the market demand is just based on volumes based on needs and based on the changes were also continue to invest around the production platforms in areas that our customers are pushing and you can see that in a very robust portfolio of service offerings, whether it's productivity assessments are free flow core you can see some of our graphics.

Speaker Change: And Pi our store for us there's a lot of demand around the production hardware, we're specifically talking about what we're seeing thing of doing in the manufacturing of those certain products to your question about potential M&A transactions as with anything we're always looking to optimize our portfolio and looking at strategic options and what's the best and right thing to do.

John Bruno: And if we take a step back, you know, part of the reinvention, we talked about geography simplification. And what we said was, we'd look at country by country. Each country has a different set of dynamics.

Speaker Change: For the business, but it's really about growing within that segment, it's not about shrinking within that segment, that's not the design it's about optimization.

John Bruno: Each country has a different set of partner capabilities, and each country has a different set of client sets. So we look at each country, look at each opportunity, and then determine what the right economics is between us being direct versus indirect versus going through a single partner or multiple partners. And that's what you saw in LATAM, right, where we were not going to provide the best client experience, the best capability, and the coverage. And we felt that a partner in that particular country would better serve the region and better serve our clients. It does two things for us.

Speaker Change: We can't be on a path.

Speaker Change: What we're doing around profit optimization operation simplification, if we're not willing to.

Speaker Change: Tire at legacy legacy parts of the manufacturing part of the business, which has a very higher cost to serve as the as the volumes come down without investing in the things that are the future ramp of growth moving forward now on the the other thing I would add is think about we talked about the collision between the physical and the digital world production, you're thinking about it just as print.

Speaker Change: <unk>. The reality is the world is lighting and so what you see in both the physical and the digital album.

Speaker Change: Production environment, our production offering includes more and more digital options you take a look what we are doing go inspire you take a look what we do on exemplify what we do at our large partners in terms of driving demand and web services into store fronts to drive print and vice versa.

John Bruno: One, it gives us more reach and more expansion with a capable client or partner in that region. But it also allows us to, as we talked about in geosimplification, focus on those growth areas that we can accelerate where we put all of our resources into, like IT and digital services, driving more of the things that our clients need in core countries. So that's why we made the strategic change, and we'll continue to accelerate that through the balance of LATAM and looking at Europe as well. And Ananas, this is John.

Speaker Change: And we have a tremendous tremendous growth opportunity in the physical and digital world in production. So, let's just think about it as just output being print.

Speaker Change: That's helpful. That's helpful. Thanks, guys I'll get back in the queue.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Jimmy <unk> from Jpmorgan. Your question. Please.

Jimmy: Yes, hi, Thanks for taking my question, maybe if I can start off with.

Jimmy: The.

John Bruno: I'll just add, it's the right question with regard to the way you're thinking about mix, right? Because we look at offer simplification more from the production portfolio and geosimplification, more around the cost of sales, opportunities today and in the future, and who is the partner in those particular countries? And can they take both our core offering as well as our future offerings? And can we get greater reach at a lower cost of sales? So we look at our transfer costs and prices, the enablement capabilities, and how do you best serve clients? Because it all starts with who's the economic buyer.

Jimmy: Disruption that you saw in the quarter or you mentioned the.

Jimmy: The disruption was primarily around the sales force restructuring that you did.

Jimmy: How much of that was an impact on sort of shipping equipment out versus sort of what you saw in terms of your pipeline and maybe just help US also think about how what steps youre taking to ensure it won't have any more disruptions Opex guide because when you talk about like the opportunity with GBS identifying a lot of savings from the technology.

Jimmy: <unk> as well as the back end.

Jimmy: And then options.

Jimmy: So you're going to take in Europe like all of that.

What's more in terms of you could have similar disruptions in the future. So how are you ensuring that you don't have similar disruptions.

Speaker Change: Quick follow up thank you.

Speaker Change: Yeah. Thanks, So let me start with Brazil, we made significant organizational model changes to drive decision, making to drive velocity and really improve our business over the long term.

John Bruno: What are they buying from us today? To your point about office equipment or others, what do we expect that they will be buying with the mixed shift of not only those products but other services that we sell, and who's best positioned to bring them to market at the best and most optimized cost of sale? That's how we do it. And to your point about scale, reach, and development, you would expect it to be right along the lines of what you would think about the major geographies in which we are today with the highest penetration.

Speaker Change: That <unk> change had a tremendous impact on our sales go to market as you look about the early part of the quarter. We had just tremendous changes several thousand new people were realigned to new organizations aligned to new clients along to align to new go to market and as I've spent time on the road a couple of thing.

Speaker Change: So have happened one is spend time with partners spend time with clients go to market leaders in sales leaders.

John Bruno: And then as you parade those down and then just a simple return on invested capital and how we deploy it, we just have a Mendoza line, if you will, as to where we want to ensure that we're above that line and we can continue to invest in those partners and not, or I should say, optimize our overall cost of sales in the region. I think I'm getting it.

Speaker Change: As we got towards the middle of the quarter, you can see the stability and what we see in terms of order velocity you can see stability in terms of activities funnel building the amount of calls that we were making and so the early part of the quarter clearly disrupted the organization from a sales motion standpoint, and then we start to get.

Speaker Change: Stability towards the middle of the middle of the quarter and then so velocity in order specifically year over year auto volumes on the shipping side on the services side. We saw our SLA is that were normal and we didn't see any disruption.

John Bruno: Okay, that's super helpful context, guys. And then just real quick on production and strategic actions around production print, like, can you just talk to breadth and depth and potential optionality? Could you end up selling, you know, the entirety of the core production business? Was that included in that option set?

Speaker Change: On the services side or disruption in installation of disruption in shipping really was on the sales activity specifically early part of the quarter John wanted to call. It what you say sure.

John Bruno: The only additional color I'd provide is that with any sales organization you monitor things like your pipeline, which our pipeline as youre, leading indicator into what is orders that convert to revenue.

Ananda Baruah: I guess I guess the answer is always yes. Of course, of course. Listen, we are committed to the production business full stop. I do not want to mislead or anything through these comments that there's somehow our concern. You have to look at the product sets themselves.

John Bruno: And <unk>.

John Bruno: While our pipeline has a bit of aging, which you would expect because of the sluggishness in the first two months of the quarter. The sufficiency is holding the quality of the pipeline is holding and so we're starting to see that conversion to revenue again more slowly than we anticipated in the first two months of the quarter, but March march's improvement over February and April to <unk>.

John Bruno: These are products that have been invested in, invented, and have been deployed for many, many years in this space. The evolution of the technology and so forth and the changes, we're just looking at our overall manufacturing of certain of those platforms, not our commitment to those platforms both today and going into the future, correct? So we're still committed to those platforms for long periods of time from a service and supplies perspective. It's just we're not going to continue to manufacture them at a pace which we believe is not conducive to market demands just based on volumes, based on needs, and based on changes.

John Bruno: <unk> improvement over March.

John Bruno: Is giving us encouragement because of what Steve pointed out the engagement with clients is there the partner engagement is there the pipeline sufficient the order and the backlog is there. This is about execution and to Steve's point when you require an organization with 6000 people moving throughout the organization, it's a realignment and youre in Youre consolidating territories by 50% things like that.

John Bruno: To streamline decision rights, we expected a level of disruption, but let me handle on what your question is we have no. Other further actions for the remaining part of this year as substantial as what we did in Q1 anything that we do from here is consistent with the geographic exits are the simplifications, which is much more closer to normal course and speed of change for Xerox.

John Bruno: Not the type of change that we did in Q1 and Thats why we have the confidence that we do around what caused the disruption. It was anticipated unacceptable we understand that we understand what we need to do to course, correct that we look for as much of the signs and the signals.

John Bruno: We're also continuing to invest in production platforms in areas that our customers are pushing, and you can see that in a very robust portfolio of service offerings, whether it's productivity assessments, our free flow core, you can see some of our graphics, XMPie, our store fronts. There's a lot of demand for production hardware.

John Bruno: In our in our business both current moving forward to ensure that we have the confidence necessary that we can operationalize the change and continue to move through it.

Speaker Change: Got it got it thank you.

Speaker Change: My follow up maybe this is fabio.

Speaker Change: <unk>.

Fabio: Project project reinvention.

John Bruno: We're specifically talking about what we're taking over and doing in the manufacturing of those certain products. To your question about, you know, potential M&A transactions, as with anything, we're always looking to optimize our portfolio and looking at strategic options and what's the best and right thing to do for the business, but it's really about growing within that segment. It's not about shrinking within that segment. That's not the plan.

Fabio: The target to get to more than $100 million of savings in fiscal 'twenty. Four. It says can you give an update on sort of when we just look at Q how much.

Fabio: Of that sort of benefit did you see <unk> sort.

Fabio: Sort of how to think about the linearity of the progress I know you mentioned operating margins improved sequentially through the year, but even if the timing because it's more backend loaded versus front end loaded just any thoughts around that but also whats it.

Speaker Change: Are you tracking between one thank you.

Speaker Change: Yes that makes so arena and what I'm trying to get on track. So we.

John Bruno: It's about optimization. We can't be on a path, you know, about what we're doing around profit optimization and operation simplification if we're not willing to retire legacy parts of the manufacturing part of the business, which has a very higher cost to serve as volumes come down without investing in the things that are the future ramp of growth moving forward. Now, the other thing I would add is, you know, think about it. We talked about the collision between the physical and the digital world. Production, you're thinking about it just as print production.

Speaker Change: Implementing <unk>, we plan to do here so the major analyst models at the beginning of the year.

Speaker Change: On just self generated we announce.

Speaker Change: The 15% headcount reduction we started during quarter one to enact the exit Gerald specifically in south angiography.

Speaker Change: You have less limitation to implementation. So so program is on track all of that has us Steve on the agenda you need doing just great zero. So you also mentioned you had also benefit will get not only from the cost reduction, but also with the implementation of the GBS. So.

Speaker Change: Step by step approach <unk> journey, we are enacting all done.

John Bruno: The reality is the world is colliding, and so what you see in both the physical and the digital, our production environment, our production offering includes more and more digital options. You take a look at what we do on GoInspire, you take a look at what we do on XMPie, what we do with our large partners in terms of driving demand and web services into storefronts to drive print, and vice versa, and we have a tremendous, tremendous growth opportunity in the physical and digital worlds of production. So don't just think about it as just the output of being printed.

Speaker Change: <unk> daily rate action.

Speaker Change: Shannon on the activities, we were planning to do that so we don't always you know in some cases general timing different chase on some small actions there, but we are not changing our guidance from our logistics operating margin for this year on year and opinion Europe, our year operating net operating income improvement.

Speaker Change: Thank you thanks for taking my questions.

Speaker Change: Thank you one moment for our next question.

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

Erik William Richard Woodring: Great. Thank you very much guys and good morning, John.

Erik William Richard Woodring: John I was wondering if you could maybe just clarify the comment you just made to stomach.

Ananda Baruah: That's helpful. That's helpful. Thanks, guys. I'll get back in the queue.

Erik William Richard Woodring: About no further actions being taken for the remainder of the year I just I just wanted to make sure I understand that.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Samik Chatterjee from J.P. Morgan. Your question, please? Start off with just the disruption that you saw in the quarter. How much of that was an impact on sort of shipping equipment out? Help us all to think about how, what steps. [inaudible] All of that sound. How are you?

John Bruno: The actions when it comes to geographic simplification offering simplification model simplification.

Interviewer: Are you, saying that those were for what you plan on doing in 2024, those were finalized or completed by the end of <unk>. There is nothing left to do for the remainder of Danone antibody just clarifying that yes sure sure just to be clear.

Interviewer: What I said was to the extent and the size of the action as it related to head count the disruption in the rewiring of our operating model that was done in Q1, the remaining parts of things that we might do.

Samik Chatterjee: Yeah, thanks. Let me start by saying, first of all, we made significant organizational model changes to drive decision making, to drive velocity, and really improve our business over the long term. That change had a tremendous impact on our sales go-to-market strategy. As you talk about the early part of the quarter, we had just tremendous changes; several thousand new people were realigned to new organizations, aligned to new clients, aligned to new markets. And as I've spent time on the road, a couple of things have happened. One, I spend time with partners, spend time with clients, and go to meet market leaders and sales leaders.

Interviewer: With country exits and those types of things they are more surgical interaction in their targeted what we did in Q1 was a top to bottom realignment of our organization and operating model alignment. We did a reduction in workforce realignment of folks that's very very disruptive as you can imagine and what I was saying is that the size limit.

Interviewer: <unk> of what we did was in Q1 the stuff that we will do for the remainder of the year. We will continue to rollout just as you would expect in places in which you have in certain geographies workers counsels et cetera. Those things are timed as our exits in particular countries or if we do further things along our product lines, but thats more mass.

Steven John Bandrowczak: As we got towards the middle of the quarter, you can see the stability in what we see in terms of order velocity. You can see stability in terms of activities, funnel building, the amount of calls we were making. It really focused on sales activity, specifically in the early part of the quarter. John, do you want to give a little call on what you see? Sure.

Interviewer: <unk> within how we run our business consistently as opposed to an event driven thing, which we did in Q1.

Speaker Change: Okay, no very clear and maybe just as a quick follow up to that one.

John Bruno: And the only additional color I can provide is that with any sales organization, you monitor things like your pipeline, which is your leading indicator into what orders will convert to revenue. And while our pipeline had a bit of aging, which you would expect because of the sluggishness in the first two months of the quarter, the sufficiency is holding, and the quality of the pipeline is holding. And so we're starting to see that conversion to revenue.

Speaker Change: Getting your kind of qualitative comments are very clear is there any way that you could help us understand then.

Speaker Change: If we're in a nine inning game.

Speaker Change: How far along we are then and the actions that you need to take it seems like we must be pretty far given all the all of what you did the heavy lifting in <unk>, but how would you kind of clarify that with us.

Speaker Change: Yes, Steve so as we talked about coming into the quarter. We spent a lot of time from a reinvention standpoint looking at the strategy looking at the three year plan and we gave guidance on what we're going to do over the next three years I would say the actions that have been taken so far not result in the P&L, but still need the rollout we've implemented roughly.

John Bruno: We look for as many signs and signals in our business, both current and moving forward, to ensure that we have the confidence necessary that we can operationalize the change and continue to move through it. And for my follow-up, maybe this is more for Xavier. The target to get more than 100 million of savings in fiscal 24 itself, give an update. Xerox Holdings, What timing? Is it more back-end loaded versus front-end loaded?

Speaker Change: Half of the big strategic things that we need to do so we still got a ways to go in terms of things, we need to implement but as John said more structural in terms of they are isolated and there are events that are isolated to individual units or individual countries as opposed to the significant change we made in Q1 and if you think about.

Samik Chatterjee: Just any thoughts around that. Yes, Samik, so your re-invention is on track. So we have implemented the action we plan to do here. The major announcement at the beginning of the year, we made publicly on the 3rd of January the 15% debt contradiction. We started during quarter one to enact the exit there, specifically in certain geographies where you have less limitations, you know, to implement this there. So the program is on track.

Speaker Change: The amount of change within all model redesign the amount of people that we talk about rewired, but really no when I come in who do I report to what's my job did my quota changed and myself territory change all of those things where tremendous disruption in how to get settled down in the first couple of weeks.

Speaker Change: Quarter and all of that is behind us so about 50% into what we're trying to implement and obviously over the next 18 to 24 months, we will implement the balance of the reinvention.

Samik Chatterjee: And as Steve mentioned on the journey you did during the earthquake there, they also mentioned the benefit we'll get not only from the cost reduction but also the implementation of the GBS. So this is, you know, a step by step approach to your journey. We are enacting the delivery of the action on the activities as we were planning to do that there. So we always, you know, in some cases, you know, like timing differences on some small actions there.

Speaker Change: Got it okay that is very clear. Thank you. Thank you both for that color.

Speaker Change: Maybe switching gears.

Speaker Change: I think Steve maybe this is for you, but anyone feel free as the.

Steve: The $49 million of R&D spend this year I think it was the lowest quarterly total I've seen from you guys. In your presentation, you, obviously talked about investing in higher ROIC projects or acquisitions, but with such a pullback in R&D like is there risk that you may be taking it to kind of near term approach to margins at the at.

Xavier Heiss: But we are not changing, you know, our guidance from an existing operating margin for this year on the hundred million year over year operating net operating income improvement. 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. Great. Thank you very much, guys, and good morning.

Steve: The risk of not pulling forward investment to stabilize top line trends can you just help us help us understand how you think about the actions needed on the R&D and kind of innovation front to stabilize top line versus your prioritization of maybe taking some some costs out of the model again to get that margin expansion. How do you think about balancing those.

Erik William Richard Woodring: John, I was wondering if you could maybe just clarify the comments about no further action. I just want to make sure I understand that, you know, the actions when it comes to geographic simplification, offering simplification, and model simplification. Were you saying that those were for what you plan on doing in 2024, those were finalized or completed by the end of 1Q, and there's nothing left to do for the remainder? No, no, no.

Steve: Yes.

Steve: Yes look we when we talk about the reinvention its a balanced execution between what we're doing to drive operational efficiencies and investing in our growth businesses, whether it's organic or inorganic growth the new forthcoming and you saw the names of the nominees and we're all looking at how do we invest in the right areas of this business, whether it's oracle.

Steve: And again Oakley and we absolutely are investing for the long term in our business and we will accelerate that as we free up more cash as we free up more of the balance sheet and the actions that we've already taken and will take will absolutely drive more headroom that will allow us to take those dollars to reinvest back in our business.

John Bruno: Would you mind just clarifying that? Yeah, sure, sure. Just to be clear, what I said was, to the extent and the size of the action related to headcounts of disruption and the rewiring of our operating model, that was done in Q1. The remaining parts of things that we might do with country exits and those types of things, they're more surgical interactions, and they're targeted. What we did in Q1 was a top to bottom realignment of our organization, an operating model alignment. We did a reduction in the workforce, and a realignment of people. That's very, very disruptive, as you can imagine.

Steve: I also think it's important to look at R&D as a as we normalize it because theres a lot in the R&D line year over year with some of the exits that we had arc and some of the divestitures and things like that that have an impact on what's your view.

Steve: But you are you are 100% correct that as you do a mix shift and a realignment of your R&D spend from the type of spend it is we will continue to make investments in the areas in which we see profitable growth capabilities. We just have to do it responsibly and we want to make sure that we can self fund, our innovation and capacity both organically and strength.

John Bruno: And what I was saying is that the size, the majority of what we did, was in Q1. The stuff that we will do for the remainder of the year will continue to roll out, just as you would expect in places where you have, in certain geographies, workers' councils, et cetera. Those things are timed, as are exits in particular countries or if we do further things along our product lines. But that's more manageable within how we run our business consistently, as opposed to an event-driven thing, which we did in Q1. Okay, no, very clear. And maybe just as a quick follow-up to that one.

Steve: And the balance sheet as Avi I talked about through our own infrastructure enhancements to do it inorganically, but that's all part of our execution journey. So so we're very mindful of that we're not cutting our way to prosperity, we're trying to rebalance the company and reinvest in the right categories that we can grow and sustainably grow our brand has the right to play our field distribution has the right to <unk>.

Steve: Liver.

We can be successful in those spaces.

Steve: It's why it's a rebalancing and thats why its an OE driven not just the cost cutting it's an organizational redesign of who we are how we go to market and strengthen our core print and then invest in the adjacencies that can that can.

Erik William Richard Woodring: Again, your kind of qualitative comments are very clear. Is there any way that you could help us understand then, you know, if we're in a nine inning? How far along we are in the actions that, It seems like we must be pretty far given all of what you did, the heavy lifting in one cue. But how would you kind of clarify that? Yeah, Steve.

Steve: Protect our core print business as much as grow within that same customer set.

Speaker Change: Okay very clear and then just one last clarification from my end was just.

Speaker Change: Congrats on the kind of a maturity extension.

Speaker Change: That you guys talked about as we think about capital allocation priorities this year.

Steven John Bandrowczak: So, you know, as we talked about coming into the quarter, we spent a lot of time from a reinvention standpoint, looking at the strategy, looking at the three-year plan, and we gave guidance on what we're going to do over the next three years. I would say the actions that have been taken so far do not result in a P&L but still need to be rolled out. We have probably implemented roughly half of the big strategic things that we need to do.

Debt repayment was number two what other actions do you anticipate taking for the rest of the year that we should be considering on the debt side and that's it for me. Thank you.

Yes.

Speaker Change: Every Q the maturities that we have for this year is quite limited. So we are still so in may we will pay downs the remaining part of the screen.

Speaker Change: That's where <unk> is already in bar, none that were already partially baked some of these sir.

Steven John Bandrowczak: So we still have a ways to go in terms of things we need to implement, but as John said, more structural in terms of them being isolated, and they are events that are isolated to individual units or individual countries, as opposed to the significant change we made in Q1. And if you think about, you know, the amount of change with an organizational redesign, the amount of people that got, we talked about rewired, but really know when I come in, who do I report to? What's my job? Did my quota change? Did my cell territory change?

Speaker Change: We have also had our.

Speaker Change: However, our secured debt repayment, which is going as planned this quarter quarter over quarter to look more like our underpinning a lot of that prediction on the secure upside there. Although we are also looking at our term loan b on how we can improve the condition of the deal currently here nothing materially all of the vast majority of it.

Speaker Change: What we're planning to do Agings are line of what we have seen on web communicated here.

Speaker Change: Perfect. Thank you so much guys.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: And our next question is a follow up from the line of Ananda Baruah from loop capital. Your question. Please.

Steven John Bandrowczak: All those things were tremendous disruptions and how to get settled down in the first couple of weeks of the quarter, and all of that's behind us. So, about 50% of what we're trying to implement, and obviously, over the next 18 to 24 months, we will implement the balance of the reinvention.

Ananda Baruah: Hey, guys. Thanks for the follow up just on GBS it sounded like.

Ananda Baruah: GBS is putting its arms around a number of functions. There could you just could you just sort of go back through that and let us know what the what the Jets Golar GBS is at almost at me like it was a.

Ananda Baruah: Accordant Asian of all things.

Erik William Richard Woodring: Okay, that is very clear. Thank you. Thank you both for that color.

Ananda Baruah: Kind of back office and administrative.

Ananda Baruah: And Ed sort of certain lower level of business processes, but I guess can you just go back in.

Erik William Richard Woodring: Maybe switching gears. Unknown Attendee, Xerox Holdings, Unknown Attendee, Xerox Holdings, Unknown Attendee. In your presentation, you obviously talk about investing in higher ROIC projects or acquisitions. But with such a pullback in R&D, like, is there a risk that you're maybe taking it to kind of a near-term approach to margins at the risk of, you know, not pulling forward investment to stabilize top line trends? Can you just help us understand the actions needed on the R&D and kind of innovation front to stabilize top line versus your prioritization of maybe taking some costs out of the model again to get that?

Ananda Baruah: Put the additional context around that.

Ananda Baruah: Sure.

Ananda Baruah: Sure.

Speaker Change: You got two shafts two bites at the Apple I love it.

Speaker Change: So with GBS is called global business services not shared services for a reason it's a business service function is what our vision is and.

Speaker Change: Both Steve and I have a long track record and history of implementing these types of organization and our previous slides and we understand the potential for them and we know we absolutely have the right later in the right team and across GBS to drive our vision for it is not a back office.

Speaker Change: Only function, but it absolutely will evolve from more of the core administrations in its first part so that you always start with the administrative activities around these.

Erik William Richard Woodring: And how do you think about... Yeah, look, when we talk about the reinvention, it's a balanced execution between what we're doing to drive operational efficiencies and investing in our growth businesses, whether it's organic or inorganic growth. The new board coming in, you saw the names of the nominees. And we are all looking at how do we invest in the right areas of this business, whether it's organic or inorganic.

Speaker Change: These key areas of record to report or order to cash hire to retire these administrative functions, but as we get consolidation of not only systems and platforms in both our tech stack and our BPL and business process operational stack, we're going to continue to push that up into ways in which we can improve our go to market.

Speaker Change: <unk> with <unk>.

Speaker Change: With more services and things that we can have better insight salesforce type tools and enablement and we want to drive better platform things into our area. So we want our finance or HR.

John Bruno: And we absolutely are investing for the long term in the business, and we'll accelerate that as we free up more cash as we free up more of the balance sheet. And the actions that we've already taken and will take will absolutely drive more headroom that allows us to take those dollars to reinvest back in our business. I also think it's important to look at R&D as we normalize it, because there's a lot in the R&D line year over year with some of the exits that we had in park and some of the divestitures and things like that that have an impact on what you're viewing.

Speaker Change: Our legal teams to really focus on policy and strategy initially and have GBS focus on the consolidate operations and platforms and then we'll continue to do the same in cross order management and inventory controls and service management anywhere, where we can get tech stack efficiency and business process operational efficiency through the <unk>.

Speaker Change: Not necessarily.

Speaker Change: Centralization, but the central coordination of activities. Initially is what we're is what we're driving through this team. So it does go broader than administratively, but we absolutely are starting initially in the areas, where we went through the shared services functions.

John Bruno: But you are 100% correct that as you do a mix shift and a realignment of your R&D spend from the type of spend it is, we will continue to make investments in the areas in which we see profitable growth capabilities. We just have to do it responsibly. And we want to make sure that we can self-fund our innovation and capacity, both organically, and strengthen the balance sheet, as Xavier talked about, through our own capital structure enhancements to do it inorganically. But that's all part of our execution journey. So we're very mindful of that. We're not, you know, cutting our way to prosperity.

Speaker Change: In those in those G&A pump and those Geno G&A areas.

Speaker Change: Steve I'll add one more thing and that is as we simplify and get to single end to end processes. We then look at how do you apply technology to both elimination and driving more operational efficiencies, whether it's around RPI, whether it's around AI, whether it's around how do we think about chat GBT going forward. So think of as we see.

Speaker Change: <unk> and as we standardize on processes, we then have and enabling capabilities to drive more operational efficiencies through technology, we've been talking about the journey of RPM for a long time here over the last couple of years, we've been talking about how we are implementing AI and investing more in AI into our processes and so GBS will.

Erik William Richard Woodring: We're trying to rebalance the company and reinvest in the right categories that we can grow and sustainably grow where our brand has a right to play, our field distribution has a right to deliver, and we can be successful in those spaces. And that's why it's a rebalancing. And that's why it's an OD driven, not just cost cutting. It's an organizational redesign of who we are, how we go to market, and strengthen our core print, and then invest in the adjacencies that can protect our corporate business as much as grow within that same customer set.

Speaker Change: B the function that we look at to really drive leading edge technology on our end to end processes and some of those we may actually take the market like we did with <unk> like we're doing with some of the other functions that we're building internally.

Speaker Change: Got it that's super helpful. Thank you.

Speaker Change: Thank you.

This concludes the question and answer session of today's program I'd like to hand, the program back to Steve <unk> for any further remarks.

Erik William Richard Woodring: Okay, very clear. And then just one last clarification from my end was just, you know, congrats on the kind of maturity extension that you guys talked about. As we think about capital allocation priorities this year, debt repayment was number two. What other actions do you anticipate taking for the rest of the year? on the debt side. And that's, Yeah, so Erik, you know, the maturity that we have for this year is quite limited.

Steve: On Earth day, I'd be remiss not to mention our ongoing commitment to providing clients with sustainable products and services.

Steve: I am proud to say, we are recently named an energy star partner of the year in 2024.

Steve: Our fourth year in a row, a global 100, most sustainable corporations from corporate Knights and were included in Cdp's, a list for climate change transparency and performance.

Steve: Recapping today's call Q1 marked an important milestone in our ongoing reinvention with the implementation of comprehensive and strategic operating model changes that more closely aligns our businesses with the needs of our clients the magnitude and speed of changes caused some disruption during the quarter, but the new.

Xavier Heiss: So we are still, so in May, we will pay down the remaining part of the 300 million debt that we have for this. So this is already in the plan for that. We already partially paid some of it off this year.

Xavier Heiss: We have as well our unsecured debt repayment, which is going as planned this quarter, quarter over quarter. So we're more like 100 million in debt reduction on the secure side there. And we are also looking at our term loan B on how we can improve the condition of the deal currently here. Nothing material, the vast majority of, you know, what we're planning to do is in the line of what we have seen in what has been communicated here.

Steve: Operating model has already delivered intended results and as evidenced by momentum in equipment orders and continued strength in our service signings. We look forward to updating you on the reinvention progress in future quarters have a great day.

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

Xavier Heiss: Perfect. Thank you so much, guys. Thank you. All right. Our next question is a follow-up from the line of Ananda Baruah from Loop Capital. Your question, please? Yeah, guys, thanks for the follow-up. Just on GVS, it sounded like GVS is sort of putting its arms around a number of functions there.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Okay.

Ananda Baruah: Could you just sort of go back through that and let us know what the gist of GVS is? It almost sounded to me like it was a coordination of all things, you know, kind of like back-office and administrative and sort of certain lower-level business processes. But I guess, could you just go back and put the additional context around that? Sure. And what do you have? You got two shots, two bites at the apple.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

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Speaker Change: Yes.

John Bruno: I love it. So, look, GBS is called Global Business Services, not Shared Services, for a reason. It's a business service function is what our vision is, and both Steve and I have a long track record and history of implementing these types of organizations in our previous lives, and we understand the potential for them. We know we absolutely have the right leader and the right team across GBS to drive our vision for it. It's not a back office only function, but it absolutely will evolve from more of the core administrations in its first part.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yes.

John Bruno: So, you always start with the administrative activities around these key areas of record to report or order to cash, hire to retire, and these administrative functions. But as we get consolidation of not only systems and platforms in both our tech stack and our BPO and business process operational stack, we're going to continue to push that into ways in which we can improve our go-to-market capabilities with more services and things that we can have better inside Salesforce type tools and enablement, and we want to drive better platform things into our area.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Yes.

Speaker Change: Yes.

Speaker Change: [music].

John Bruno: So, we want our finance, our HR, and our legal teams to really focus on policy and strategy initially and have GBS focus on the consolidated operations and platforms. And then we'll continue to do the same in cross-order management and inventory controls, and service management anywhere where we can get tech stack efficiency and business process operational efficiency through not necessarily centralization, but the central coordination of activities initially is what we're driving through this team. So it does go broader than administratively, but we absolutely are starting initially in the areas where we would through the shared services functions in those GNA areas. And another Steve. I'll add one more thing.

Speaker Change: Thanks.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Yeah.

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Yes.

Speaker Change: Yes.

Speaker Change: [music].

Steven John Bandrowczak: And that is, you know, as we simplify and get to single end-to-end processes, we then look at how do you apply technology to both elimination and driving more operational efficiencies, whether it's around RPA, whether it's around AI, whether it's around, how do we think about chat GBT going forward? So think of as we centralize and as we standardize on processes, we then have an enabling capability to drive more operational efficiencies through technology.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

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Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

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Speaker Change: Okay.

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Speaker Change: Okay.

Steven John Bandrowczak: We've been talking about the journey of RPA for a long time here. Over the last couple of years, we've been talking about how we're implementing AI and investing more in AI into our processes. And so GBS will be the function that we look at to really drive leading-edge technology in our end-to-end processes. And some of those we may actually take to market, like we did with RPA, like we're doing with some of the other functions that we're building internally. That's super helpful.

Speaker Change: Okay.

Speaker Change: Okay.

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Okay.

Speaker Change: Yeah.

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Okay.

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Ananda Baruah: Thank you. Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Steve Bandrowczak for any further remarks. On Earth Day, I'd be remiss not to mention our ongoing commitments to providing clients with sustainable products and services. I am proud to say we were recently named an Energy Star Partner of the Year in 2024. For the fourth year in a row, we have been included in the Global 100 Most Sustainable Corporations from Corporate Knights, and we are included in CDP's A-List for Climate Change Transparency and Performance.

Ananda Baruah: Recapping today's call, Q1 marked an important milestone in our ongoing reinvention with the implementation of comprehensive and strategic operating model changes that more closely align our businesses with the needs of our clients. The magnitude and speed of the changes caused some disruption during the quarter, but the new operating model has already delivered intended results and is evidenced by momentum in equipment orders and continued strength in our service signings.

Speaker Change: Okay.

Speaker Change: Yes.

Okay.

Speaker Change: Okay.

Sure.

Speaker Change: Yes.

Speaker Change: [music].

Steven John Bandrowczak: We look forward to updating you on the reinvention progress in future quarters. Have a great 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 Change: Okay.

Speaker Change: [music].