Q2 2025 Xerox Holdings Corp Earnings Call

Paul you can withdraw your question by pressing star one again at this time I would like to turn the meeting over to Mr. David <unk> Vice President.

Didn't and head of Investor Relations.

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

Welcome to the Xerox Holdings Corporation second quarter 2025 earnings release Conference call hosted by Steve <unk>, Chief Executive Officer.

He is joined by John Bruno President and Chief operating Officer, and Orlando, <unk> Tsai Chief Financial Officer.

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

Other recording <unk> rebroadcast 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 Dot Xerox Dot com slash investor and we will make comments that contain forward looking statements, which by their nature address matters that are in the future and are uncertain.

Steven Bandrowczak: Welcome to the Xerox Holdings Corporation Second Quarter 2025 Earnings Release Conference Call. After the presentation, there will be a question and answer session. To ask your questions at that time, please press star 11 at any time during this call. You can withdraw your question by pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckel, Vice President and Head of Investor Relations.

Actual future financial results may be materially different than those expressed herein at this time I'd like to turn the meeting over to Mr. Bender Shack.

Good morning, and thank you for joining our Q2 2025 earnings conference call.

Welcome to the Xerox Holdings Corporation, second quarter 2025 earnings release conference. Call after the presentation, there will be a question and answer session to ask your questions at that time. Please press star 1 1 at any time. During this call, you can withdraw your question by pressing star 1 1. Again, at this time, I would like to turn the meeting over to Mr. David Beckle, vice president and head of investor relations.

David 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 Second Quarter 2025 Earnings Release Conference Call hosted by Steven Bandrowczak, Chief Executive Officer. He's joined by John Bruno, President and Chief Operating Officer, and Mirlanda Gecaj, Chief Financial Officer. At the request of Xerox Holdings Corporation, today's conference call is being recorded. Other recording and/or rebroadcasting of this call are prohibitive 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/investor and will make comments that contain forward-looking statements, which by their nature address matters that are in the future and are uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I'd like to turn the meeting over to Mr. Bandrowczak.

Closing of the <unk> acquisition in early July marked an important milestone in Xerox reinvention.

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

With this transaction, we unite two industry leaders with complementary sets of operations offering strengths and market reach.

Welcome to the Xerox Holdings Corporation second quarter 2025 earnings release conference call, hosted by Steve Vanderjagt, Chief Executive Officer.

Xerox and lexmark offering will be combined and optimized to enhance client value, providing the foundation from which we can expand the penetration of our solutions and digital services businesses as we help our clients navigate the increasingly digital nature of document workflows and processes.

He is joined by John Bruno, president and Chief Operating Officer and Miranda getai Chief Financial Officer.

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.

I'd like to commend, both Xerox and Lexmark teams, who this quarter navigated a challenging operating environment, while preparing for an accelerated transaction close and integration timeline.

During this call, Xerox, Executives will refer to slides that are available on the web at www.zero.com investor and will make comments that contain 4 looking statements which by their nature, address matters that are in the future and are uncertain.

Summarizing results for the quarter revenue of around 158 billion was roughly flat with the prior year in actual currency and declined one 1% in constant currency inclusive of savvy.

Steven Bandrowczak: Good morning, and thank you for joining our Q2 2025 Earnings Conference Call. The closing of the Lexmont acquisition in early July marked an important milestone in Xerox's reinvention. With this transaction, we unite two industry leaders with complementary sets of operations, offering strengths and market reach. Xerox and the Lexmont offering will be combined and optimized to enhance client value, providing the foundation from which we can expand the penetration of our IT solutions and digital services businesses as we help our clients navigate the increasingly digital nature of document workflows and processes. I'd like to commend both the Xerox and Lexmont teams who this quarter navigated a challenging operating environment while preparing for an accelerated transaction close and integration timeline.

Actual future Financial results. May be materially different than those expressed hearing at this time. I'd like to turn the meeting over to Mr. Banner Jack.

Good morning, and thank you for joining our Q2 2025 earnings conference call.

Adjusted operating income margin of three 7% was lower year over year by 170 basis points.

the closing of the Lex mod acquisition in early, July, and walked in an important milestone in Xerox reinvention,

Free cash flow was a use of cash of $30 million, reflecting in part a delay in the sale of large portfolio of finance receivables and adjusted loss per share of <unk> 64 cents declined 93 year over year due in large part to an unfavorable tax rate.

With this transaction we unite 2 industry Leaders with complimentary sets of operations offering strengths and Market reach.

This quarter demonstrated the improved resiliency of revenue and adjusted operating income afforded by our reinvention.

expand the penetration of Our IT solutions and Digital Services businesses as we help our clients navigate, the increasingly digital nature of document workflows and processes

Specifically the benefits of a more favorable mix of revenue from faster growing businesses and a more flexible and simplified operating structure.

Steven Bandrowczak: Summarizing results for the quarter, revenue of around 1.58 billion was roughly flat with the prior year in actual currency and declined 1.1% in constant currency, inclusive of IT savvy. Adjusted operating income margin of 3.7% was lower year over year by 170 basis points. Free cash flow was a use of cash of $30 million, reflecting in part a delay in the sale of a large portfolio of finance receivables. An adjusted loss per share of $0.64 declined $0.93 year over year, due in large part to an unfavorable tax rate. This quarter demonstrated the improved resiliency of revenue and adjusted operating income afforded by our reinvention. Specifically, the benefits of a more favorable mix of revenue from faster-growing businesses and a more flexible and simplified operating structure.

I’d like to commend both the Xerox and Lexmark teams, who, at their core, navigated a challenging operating environment while preparing for an accelerated transaction, closing, and integration timeline.

In the second quarter strong demand for our cloud enablement services at our it solutions segment helped offset a brief period of softer demand for print equipment in April and May amid peak, those and tariff driven uncertainty.

Summarizing results for the quarter, revenue was around 1.58%, with actual currency declining by 1.1% in constant currency, inclusive of it savvy.

And our relentless focus on cost discipline helped preserve adjusting operating income offsetting the effects of lower than expected sales of print equipment and higher tariff costs.

Adjusted operating income margin of 3.7% was lower year-over-year by 170 basis points.

The improved resiliency demonstrated in Q2 provides an affirmation of our strategic direction the benefits, which are expected to be further enhanced through the acquisition of lexmark.

Pre-cast flow was a use of cash of 30 million reflecting in part of a delay in the sale of large portfolio of Finance receivables.

And adjusted loss per share of 64 cents. Declined, 93% year-over-year due in large part to an unfavorable tax rate,

Our strategic focus this year in anticipation of the close of <unk> acquisition has been the continued execution of reinvention, ensuring the full realization of benefits from the savvy and lexmark acquisition and preserving balance sheet strength.

This quarter, demonstrated the improved resiliency of Revenue and adjusted operating income afforded by our reinvention.

Steven Bandrowczak: In the second quarter, strong demand for cloud-enabled services at our IT solutions segment helped offset a brief period of softer demand for print equipment in April and May amid peak DOGE and tariff-driven uncertainty. And our relentless focus on cost discipline helped preserve adjusting operating income, offsetting the effects of lower-than-expected sales of print equipment and higher tariff costs. The improved resiliency demonstrated in Q2 provides an affirmation of our strategic direction, the benefits which are expected to be further enhanced through the acquisition of Lexmont. Our strategic focus this year, in anticipation of the close of Lexmont acquisition, has been the continued execution of reinvention, ensuring the full realization of benefits from the IT savvy and Lexmont acquisition and preserving balance sheet strength. I'll provide a brief update on this quarter's progress in each of these areas, starting with the execution of reinvention.

Specifically, the benefits of a more favorable mix of revenue from faster growing businesses, and a more flexible and simplified operating structure.

I'll provide a brief update on this quarter's progress in each of these areas.

Starting with the execution of reinvention.

In the second quarter, we advanced a number of reinvention initiatives.

Aimed at optimizing our commercial offering and simplifying operations each of which will provide benefits well beyond the <unk> integration.

In the second quarter, strong demand for cloud enablement services at our IT solutions segment helped offset a brief period of softer demand for print equipment in April and May amid peak dose and tariff-driven uncertainty.

This quarter, we expanded our inside sales program to cover new territories and product lines further, enabling our direct sales force to concentrate on larger client opportunities.

and our Relentless focus on cost, discipline helped, preserve adjusting operating income, offsetting the effects of lower than expected sales of print equipment and higher tariff costs.

We also reduced the time it takes to process orders at our Xps business unit by four days, improving both time to revenue and client satisfaction.

The improved Brazilians, he demonstrated in Q2, provide an affirmation of our strategic direction. The benefits, which are expected to be further enhanced through the acquisition of Lexmark.

<unk> It solutions, we continue to build momentum in the cross sell of advanced offerings in Xerox print client base, an important contributor to this segment's recent strength.

And ongoing operational simplification efforts leveraging technology, driven efficiencies enabled another double digit percentage reduction in adjusted organic operating expenses.

Our strategic Focus this year in anticipation of the clothes of Lex. Smart acquisition has been the continued execution of reinvention, ensuring the full realization of benefits from the it Savvy and lexmod acquisition and preserving balance sheet strength.

I'll provide a brief update on this quarter's progress in each of these areas.

Steven Bandrowczak: In the second quarter, we advanced a number of reinvention initiatives aimed at optimizing our commercial offering and simplifying operations, each of which will provide benefits well beyond the Lexmont integration. This quarter, we expanded our inside sales program to cover new territories and product lines, further enabling our direct sales force to concentrate on larger client opportunities. We also reduced the time it takes to process orders at our XPS business unit by four days, improving both time to revenue and client satisfaction. In IT solutions, we continue to build momentum in the cross-sale of advanced IT offerings in Xerox's print client base, an important contributor to this segment's recent strength. An ongoing operational simplification effort leveraging technology-driven efficiencies enabled another double-digit percentage reduction in adjusted organic operating expenses.

Starting with the execution of reinvention.

We will continue advancing reinvention initiatives currently in flight and those planned for the future as we progress the phasing of our reinvention to now include the integration of Lexmark.

In the second quarter, we advanced a number of reinvention initiatives.

Aimed at optimizing, our commercial offering and simplifying operations. Each of which will provide benefits. Well beyond the Lex smart integration.

Jon will describe the evolution of our reinvention strategy to incorporate <unk> integration in more detail.

Moving to acquisition benefits the integration of savvy is largely complete and we are ahead of schedule in the realization of the planned strategic and financial benefits associated with that acquisition.

This quarter, we expanded our inside sales program to cover new territories and product lines, further enabling our direct sales force to concentrate on larger client opportunities.

The solutions team has embraced the spirit of reinvention and continuous improvement to find operating synergies beyond those originally contemplated.

We also reduced the time it takes to process orders at our XPS business unit by 4 days, improving both time to revenue and client satisfaction.

As an example, Xerox <unk> solutions has consolidated the purchase of Xerox Corporation's assets, which were previously handled by an external partners.

In IT solutions, we continue to build momentum in the cross-sale of advanced IT offerings in Xerox's print client base, which is an important contributor to this segment's recent strength.

The insourcing of Xerox spend reduces the cost of Xerox Corporation's products and result in an improved status with and higher rebates from solutions.

Steven Bandrowczak: We will continue advancing reinvention initiatives currently in flight and those planned for the future as we progress the phasing of our reinvention to now include the integration of Lexmont. John will describe the evolution of our reinvention strategy to incorporate the Lexmont integration in more detail. Moving to acquisition benefits, the integration of IT savvy is largely complete, and we are ahead of schedule in the realization of the planned strategic and financial benefits associated with that acquisition. The IT solutions team has embraced the spirit of reinvention and continuous improvement to find operating synergies beyond those originally contemplated. As an example, Xerox IT Solutions has consolidated the purchase of Xerox Corporation's IT assets, which were previously handled by external partners.

And ongoing operational simplification efforts leveraging technology-driven efficiencies enabled another double-digit percentage reduction in adjusted organic operating expenses.

Solutions OEM partners.

Moving til X months, the integration of <unk> is progressing well aided by the addition of two season Lexmark leaders to Xerox Executive Committee believes spheres, who will lead product development manufacturing and supply chain for the combined business and check Butler, who will run the combined global business.

We will continue advancing reinvention. This is currently in flight, and those planned for the future, as we progress the phasing of our reinvention to now include the integration of Lex marks.

John will describe the evolution of our reinvention strategy, to incorporate the Lex mod integration in more detail.

Service organization detailed integration planning work had been conducted prior to the acquisition close and is now firmly in execution phase as we are progressing work our confidence in realizing synergies has increased.

Moving to acquisition benefits. The integration of IT Savvy is largely complete, and we are ahead of schedule in the realization of the plan, as well as the strategic and financial benefits associated with that acquisition.

The IT solutions team has embraced the spirit of reinvention and continuous improvement to find operating synergies beyond those originally contemplated.

Accordingly, we now expect cost synergies associated with the <unk> acquisition to total more than $250 million from our original estimate of more than $200 million all of which remains realizable within the next two years.

Steven Bandrowczak: The insourcing of Xerox IT spend reduces the cost of Xerox Corporation's IT products and results in an improved status with and higher rebates from IT solutions OEM partners. Moving to Lexmont, the integration of Lexmont is progressing well, aided by the addition of two seasoned Lexmont leaders to the Xerox Executive Committee: Billy Spears, who will lead product development, manufacturing, and supply chain for the combined business, and Chuck Butler, who will run the combined global business service organization. Detailed integration planning work had been conducted prior to the acquisition close and is now firmly in an execution phase. As we have progressed this work, our confidence in realizing synergies has increased. Accordingly, we now expect cost synergies associated with the Lexmont acquisition to total more than $250 million from our original estimate of more than $200 million, all of which remains realizable within the next two years.

As an example, Xerox, IT solutions has Consolidated the purchase of Xerox corporations. It assets which were previously handled by an external partners.

Finally balance sheet strength. The Lexmark acquisition was funded primarily with debt, but results in lower gross debt leverage ratio after accounting for the nearly $300 million of Lexmark acquired EBITDA.

The insourcing of Xerox. Its spend reduces the cost of Xerox Corporation, its products, and results in an improved status with and higher rebates from IT solutions OEM partners.

With the <unk> acquisition now complete our top capital allocation priority is the repayment of debt.

Following the implementation of cost synergies, which require an upfront cash investment we expect improved free cash flow from core operations and more than $600 million of proceeds expected from the reduction of finance receivables between now and the end of 2027 to be deployed to repay debt.

2 Season lexmont leaders to the Xerox executive committee, Billy Spears who will lead product development manufacturing and supply chain for the combined business. And check Butler, who will run the combined Global Business Service organization. Detailed integration planning work had been conducted prior to the acquisition closed, and is now firmly in an execution phase.

This year, we reduced our dividend to place even greater focus on the repayment of debt.

We will reevaluate our dividend policies as Xerox gross debt leverage ratio approaches our medium term target of three times trailing 12 months EBITDA.

Steven Bandrowczak: Finally, balance sheet strength. The Lexmont acquisition was funded primarily with debt but results in a lower gross debt leverage ratio after accounting for the nearly $300 million of Lexmont's acquired EBITDA. With the Lexmont acquisition now complete, our top capital allocation priority is the repayment of debt. Following the implementation of cost synergies, which require an upfront cash investment, we expect improved free cash flow from core operations and more than $600 million of proceeds expected from the reduction of finance receivables between now and the end of 2027 to be deployed to repay debt. This year, we reduced our dividend to place even greater focus on the repayment of debt. We will reevaluate our dividend policies as Xerox's gross debt leverage ratio approaches our medium-term target of three times trailing 12 months EBITDA.

As we have progressed, this work, our confidence in realizing synergies has increased accordingly. We now expect cost, synergies associated with The Lex mod, acquisition to to Total more than 250 million, from our original estimate of more than 200 million, all of, which remains realizable within the next 2 years,

Before I hand, the call to John I'd like to put the Lexmark acquisition in context of our broader reinvention strategy and comment on the improved competitive profile of the combined Xerox and lexmark businesses and.

In 2023, we implemented our reinvention strategy to ensure we are operationally and strategically best position to continuously address the evolving workplace needs of our clients this required reducing or exiting activities and businesses that are not central to our legacy business or.

Finally balance sheet strength. The Lex mod acquisition was funded primarily with debt but results in lower gross debt, leverage ratio after accounting for the nearly 300 million of Lex Smart's acquired ibida.

With the Lex mod acquisition. Now complete our top Capital. Allocation priority is the repayment of debt

<unk> of higher growth value add adjacencies, such as <unk> solutions and digital services.

Last year, we simplified our business model to enable closer alignment between our businesses.

Following the implementation of cost synergies which require an upfront, cash investment, we expect, improved free, cash flow from core operations and more than 600 million of proceeds. Expected from the reduction of Finance receivables, between now, and the end of 2027 to be deployed to repay debt.

<unk> evolving needs of our economic buyer of our workplace solutions.

This year, we reduced our dividend to place even greater focus on the repayment of debt.

We also established a global business service organization or GBS to centralized key processes and drive continuous operating efficiencies throughout our reinvention and beyond.

Steven Bandrowczak: Before I hand the call to John, I'd like to put the Lexmont acquisition in context of our broader reinvention strategy and comment on the improved competitive profile of the combined Xerox and Lexmont businesses. In 2023, we implemented our reinvention strategy to ensure we are operationally and strategically best positioned to continuously address the evolving workplace needs of our clients. This required reducing or exiting activities and businesses that are not central to our legacy business or development of higher growth value-add adjacencies such as IT solutions and digital services. Last year, we simplified our business model to enable closer alignment between our businesses and evolving needs of our economic buyer of our workplace solutions. We also established a global business service organization, or GBS, to centralize key processes and drive continuous operating efficiencies throughout our reinvention and beyond.

We will reevaluate our dividend policies. As Xerox. Growth debt, leverage ratio approaches our medium-term Target of 3 times trailing 12 months ibida.

Greatest strategic focus and a leaner more simplified business model freed up the resources and managerial bandwidth to execute and successfully integrate two transformative acquisitions that will contribute to our reinvention goals of revenue stabilization and a return to double digit adjusted.

Before I hand the call to John, I'd like to put the Lex mod acquisition in context of our broader reinvention strategy and comment on the improved competitive profile of the combined Xerox and Lex Mark businesses.

Adjusted operating income margins.

In 2023, we implemented our reinvention strategy to ensure we are operationally and strategically best positioned to continuously address the evolving workplace needs of our clients.

Savi, which enhances our solutions offering and lexmark, which will strengthen and diversify our print business.

The Lexmark acquisition enhances <unk> position as the leading provider of services led software enabled hybrid workplace solutions.

This required reducing or exiting activities and businesses that are not Central to our Legacy business or development of higher growth value. Add adjacencies such as it Solutions, and Digital Services.

It creates a larger vertically integrated leader in print and managed print services and.

Last year we simplified our business model to enable closer alignment between our businesses and evolving needs of our economic buyer of our workplace Solutions.

<unk> portfolio of value added higher growth Adjacencies.

In it solutions and digital services provides an important point of competitive differentiation relative to our peers.

Steven Bandrowczak: Greater strategic focus and a more simplified business model freed up the resources and managerial bandwidth to execute and successfully integrate two transformative acquisitions that will contribute to our reinvention goals of revenue stabilization and a return to double-digit adjusted operating income margins. IT savvy, which enhances our IT solutions offering, and Lexmont, which will strengthen and diversify our print business. The Lexmont acquisition enhances Xerox's position as the leading provider of services-led software-enabled hybrid workplace solutions. It creates a larger vertically integrated leader in print and managed print services. And Xerox's portfolio of value-added higher growth adjacencies in IT solutions and digital services provides an important point of competitive differentiation relative to our peers. Combined on a pro forma basis, Xerox generated $8.6 billion of revenue and more than $870 million of EBITDA in 2024.

We also established a global Business Services organization (GBS) to centralize key processes and drive continuous operating efficiencies throughout our reinvention and beyond.

Combined on a pro forma basis, Xerox generated $8 6 billion of revenue and more than $870 million of EBITDA in 2020 for around two thirds of revenue comes from recurring sources and more than 10% of the revenue comes from our fastest growing solutions and digital.

Greatest strategic focus and Alina more, simplified business model freed up the resources and managerial bandwidth to execute and successfully integrate 2. Transformative Acquisitions that will contribute to our reinvention goals of Revenue stabilization and a return to double-digit adjusted operating income margins.

Little services businesses.

<unk> is now a top three player in each major print category within its current market with close to half of the print revenue generated from sales and services associated with a four devices.

it Savvy which enhances Our IT solutions offering and lexmont, which will strengthen and diversify our print business,

<unk> is one of the most strategically advantaged pods of the print ecosystem as clients look to refresh their print fleets with smaller more technology advanced machines reinvention is not complete but the assets and operating model are now firmly in place to achieve our reinvention goals.

The lexmont acquisition enhances Xerox position as a leading provider of services. LED software enabled, hybrid workplace Solutions,

It creates a larger vertically integrated leader in print and managed print services.

I will now hand over the call to John who will provide additional context around the strategic advantages of the <unk> acquisition and an update on reinvention and our near term integration priorities. Thank you. Steve. We are very excited to have closed the lexmark acquisition are now in full execution mode with the <unk>.

Xerox's portfolio of evaluated, higher-growth adjacencies in IT solutions and Digital Services provides an important point of competitive differentiation relative to our peers.

Steven Bandrowczak: Around two-thirds of the revenue comes from recurring sources, and more than 10% of the revenue comes from a faster-growing IT solutions and digital services businesses. Xerox is now a top three player in each major print category within its current market, with close to half of the print revenue generated from sales and services associated with A4 devices. A4 is one of the most strategically advantaged parts of the print ecosystem as clients look to refresh their print fleets with smaller, more technology-advanced machines. Reinvention is not complete, but the assets and operating model are now firmly in place to achieve our reinvention goals. I will now hand over the call to John, who will provide additional context around the strategic advantages of the Lexmark acquisition and an update on reinvention and our near-term integration priorities.

Accretion of the two companies.

<unk> strengthens our print business by adding scale and exposure to faster growing parts of the market like April or color. These advantages are expected to improve revenue and gross margin in print as well as accelerate the growth of our it and digital solutions businesses.

Combined and our ProForm of bases Xerox, generated 8.6 billion of Revenue and more than 870 million of ibida. In 2024 around 2/3 of the revenue comes from our current sources and more than 10% of the revenue comes from a faster growing IT solutions and Digital Services businesses.

Your Ox is now a top 3 player in each major print category within its current market, with close to half of the print revenue generated from sales and services associated with A4 devices.

I'll expand on four specific ways in which the lexmark acquisition directly benefits, our near term financial outlook on slide seven starting with the print market share gains we expect to leverage the top three position. We now homes in all major product categories to expand our share appropriately spend with existing and new clients.

A4 is 1 of the most strategically advantaged, parts of the print ecosystem. As clients look to refresh their print fleets with smaller more technology advanced machines,

Lap between Xerox and Lexmark clients and partners is relatively small, enabling the combined company to sell a broader set of offerings into a larger combined client base, including the 43 <unk> product configurations that were not previously offered to Xerox clients and partners. We also expect our combined engineering team.

Reinvention is not complete, but the assets and operating model are now firmly in place to achieve our reinvention goals.

John Bruno: Thank you, Steve. We are very excited to have closed the Lexmark acquisition and are now in full execution mode with the integration of the two companies. Lexmark strengthens our print business by adding scale and exposure to faster-growing parts of the market like A4 color. These advantages are expected to improve revenue and gross margin in print, as well as accelerate the growth of our IT and digital solutions businesses. I'll expand on four specific ways in which the Lexmark acquisition directly benefits our near-term financial outlook on slide seven. Starting with the print market share gain, we expect to leverage the top three position we now hold in all major print categories to expand our share of print-related spend with existing and new clients.

To John who will provide additional context around the Strategic advantages of the lexmont acquisition and an update on reinvention and our near-term integration priorities.

<unk> to advance the pace of innovation of Lexmark fleeting in four and recently launched a three platforms are more diverse and competitive offering is expected to improve win rates.

Thank you Steve. We are very excited to have closed. The Lex Mark acquisition are now in full execution mode with the integration of the 2 companies.

That is supported by the positive feedback and excitement we are hearing from clients in just a month since the transaction closed market expansion opportunities and print are expected to contribute to an improved revenue trajectory, we will leverage lexmark distribution footprint in the Asia Pacific region to begin selling Xerox is eight three and high end products.

Lex Mark strengthens our print business by adding scale exposure to faster growing parts of the market like 84 color. These advantages are expected to improve revenue and growth. Margin in print as well as accelerate the growth of our it and digital Solutions businesses.

I'll expand on four specific ways in which the Lexmark acquisition directly benefits our near-term financial outlook on slide 7, starting with the print market share gains.

As well as our suite of software and services, where until now we had no presence we expect to grow to Lexmark recently launched 83, OEM platform, which addresses a $12 billion print market.

John Bruno: The overlap between Xerox and Lexmark clients and partners is relatively small, enabling the combined company to sell a broader set of offerings into a larger combined client base, including the 43 Lexmark A4 product configurations that were not previously offered to Xerox clients and partners. We also expect our combined engineering teams to advance the pace of innovation of Lexmark's leading A4 and recently launched A3 platforms. A more diverse and competitive offering is expected to improve win rates, a view that is supported by the positive feedback and excitement we are hearing from clients in just a month since the transaction closed. Market expansion opportunities in print are expected to contribute to an improved revenue trajectory.

The Lexmark acquisition also enhances service expansion opportunities, our print and digital service businesses are stable or growing markets and provide differentiation in a competitive environment.

An early focus of our integration efforts will be the standardization and evolution of managed print services Xerox and lexmark combined serve approximately 25% of this $14 billion market.

We expect the sharing of best practices and an optimization of our respective service models to result in a combined managed print offering is more attractive to clients and more profitable to operate.

We expect to leverage the top 3 position. We now hold in all major print categories. To expand our share of pre related spends with existing and new clients, the overlap between Xerox and lexmar clients and partners is relatively small. Enabling the combined companies to sell a broader set of offerings into a larger combined client base, including the 43. Lex Mark, A4 product configurations, that were not previously offered to Xerox clients and partners. We also expect our combined engineering teams to advance the pace of innovation of Lex. Mark's leading A4. And recently, launched A3 platforms, a more diverse and competitive offering is expected to improve win rates. A view that is supported by the positive feedback and excitement, we

Beyond print will accelerate our efforts to promote the cross sell of <unk> digital solution for the combined Xerox and lexmark client basis. Please.

John Bruno: We will leverage Lexmark's distribution footprint in the Asia-Pacific region to begin selling Xerox's A3 and high-end products, as well as our suite of software and services where, until now, we've had no presence. We expect to grow Lexmark's recently launched A3 OEM platform, which addresses a $12 billion print market. The Lexmark acquisition also enhances service expansion opportunities. Our print, IT, and digital service businesses address stable or growing markets and provide differentiation in a competitive environment. An early focus of our integration efforts will be the standardization and evolution of managed print services. Xerox and Lexmark combined serve approximately 25% of this $14 billion market. We expect the sharing of best practices and an optimization of our respective service models to result in a combined managed print offering that is more attractive to clients and more profitable to operate.

These markets in total of more than 10 times the size of the print market.

Cross sales of IP solutions, the legacy Xerox clients, even prior to the acquisition of Lexmark on running ahead of our initial expectations year to date, we have generated in <unk> product and services pipeline and close to $50 million for more than 80 traditional Xerox printer clients.

You're hearing from clients in just a month since the transaction. Closed Market expansion opportunities in prints, are expected to contribute to an improved Revenue. Trajectory we will leverage Lex Mark's distribution footprint in the asia-pacific region to begin selling xerox's 83 and high-end products as well as our suite of software and services. Where until now we've had no presence. We expect to grow Lex marks recently launched, 83, OEM platform which addresses a 12 billion print Market,

We've barely scratched the surface of this opportunity with it solutions penetration of the Xerox print client base currently in the low single digit range.

Select Mark acquisition also enhances service expansion opportunities, our print it and digital service businesses, address stable or growing markets and provide differentiation in a competitive environment.

Lexmark adds around 15000 print clients for our it solutions business to target.

Most importantly.

The Lexmark acquisition provides us with an opportunity to improve profitability with more than $250 million of identified cost synergies realizable within two years.

An early focus of our integration efforts will be the standardization and evolution of managed print services, Xerox and lexmoor combined serve approximately 25% of his 14 billion dollar market.

Many of the expected synergies will address print product costs, enabling improvement in gross margin.

John Bruno: Beyond print, we'll accelerate our efforts to promote the cross-sale of IT and digital solutions to the combined Xerox and Lexmark client bases. These markets in total are more than 10 times the size of the print market. Cross-sales of IT solutions to legacy Xerox clients, even prior to the acquisition of Lexmark, are running ahead of our initial expectations. Year to date, we have generated an IT product and services pipeline of close to $50 million from more than 80 traditional Xerox print clients. We've barely scratched the surface of this opportunity with IT solutions penetration of the Xerox print client base, currently in the low single-digit range. Lexmark adds around 15,000 print clients for our IT solution business to target. Most importantly, the Lexmark acquisitions provide us with an opportunity to improve profitability with more than $250 million of identified cost synergies realizable within two years.

We expect the sharing of best practices and an optimization of our respective service models to result in a combined managed print offering that is more attractive to clients and more profitable to operate.

Among the opportunities with the adoption of the Lexmark <unk> hundred platform, which reduces our landed product cost for this important segment.

Beyond print will accelerate our efforts to promote the cross sale of it and digital solutions to the combined Xerox and Lex Mark client bases.

We also expect product cost improvements from the transition of Lexmark Telenor to Xerox technology, which is 30% more cost effective integration of black box more efficient controller technology into Xerox machines, and the utilization of Lexmark, Mexico facility to optimize global tariff exposure.

These markets in total are more than 10 times, the size of the print Market.

Cross-sales of IT solutions to legacy Xerox clients, even prior to the acquisition of Lex. Mark on running ahead of our initial expectations year-to-date. We have generated an IT product and services pipeline of close to $50 million from more than 80 traditional Xerox print clients.

I'll now provide an update on reinvention and its role driving these cost synergies to realization.

With the Lexmark acquisition complete our reinvention will begin to incorporate the strategic priorities of the combined businesses. The directive as our reinvention remain in place and the guiding principles of operating simplification commercial optimization and growth will continue to influence our approach to the integration of lexmark.

We've barely scratched the surface of this opportunity with it Solutions, penetration of the Xerox print client base currently in the low, single digit range.

Lex Mark adds around 15,000 print clients, for our it solution business to Target.

John Bruno: Many of the expected synergies will address print product costs, enabling improvement in gross margin. Key among the opportunities is the adoption of the Lexmark A3 platform, which reduces our landed product costs for this important segment. We also expect product cost improvements from the transition of Lexmark toner to Xerox technology, which is 30% more cost-effective. The integration of Lexmark's more efficient controller technology into Xerox machines and the utilization of Lexmark's Mexico facility to optimize global tariff exposure. I'll now provide an update on reinvention and its role driving these cost synergies to realization. With the Lexmark acquisition complete, our reinvention will begin to incorporate the strategic priorities of the combined businesses. The directives of our reinvention remain in place, and the guiding principles of operating simplification, commercial optimization, and growth will continue to influence our approach to the integration of Lexmark.

Operational simplification efforts will focus near term unconfined, our operating capabilities, including our respective global business service functions consolidated and corporate organizations, optimizing labor spend and standardizing technology platforms.

Most importantly, The Lex Mark Acquisitions provides us with an opportunity to improve profitability with more than 250 million dollars of identified cost synergies realizable within 2 years.

Many of the expected synergies will address print product costs enabling Improvement in gross, margin key among the opportunities of the adoption of the Lex Mark 83 platform which reduces our landed product costs for this important segment.

Marshall optimization initiatives address the value proposition cost to serve of managed print services the expansion and the diversification of Xerox as print portfolio and the continued optimization of our regional and channel distribution presence.

Product expansion and diversification will be driven by the adoption of <unk> technology and the addition of new high end OEM partnerships, such as the partnership with Kyocera announced today.

We also expect product cost improvements from the transition of Lex, Mark toner to Xerox technology which is 30% more cost effective. The integration of Lex marks more efficient controller technology into Xerox machines. And the utilization of Lex Mark's Mexico facility to optimize Global tariff exposure.

I'll now provide an update on reinvention and its role in driving these costs. Synergies to realization.

This partnership provides <unk> with the ability to offer kyocera is leading cut sheet inkjet products to our production print clients strengthening our suite of production print products, while wrapping xerox's software solutions around a more diverse production print ecosystem.

With the lexmar Acquisitions, complete. Our reinvention will begin to incorporate the Strategic priorities of the combined businesses.

John Bruno: Operational simplification efforts will focus near-term on combining our operating capabilities, including our respective global business service functions, consolidating corporate organizations, optimizing labor spend, and standardizing technology platforms. Commercial optimization initiatives address the value proposition and cost to serve of managed print services, the expansion and the diversification of Xerox's print portfolio, and the continued optimization of our regional and channel distribution presence. Product expansion and diversification will be driven by the adoption of Lexmark's A3 technology and the addition of new high-end OEM partnerships, such as the partnership with Kyocera announced today. This partnership provides Xerox with the ability to offer Kyocera's leading cut sheet inkjet products to our production print clients, strengthening our suite of production print products while wrapping Xerox's software and solutions around a more diverse production print ecosystem.

The directive is of our reinvention remain in place and the guiding principles of operating simplification commercial optimization and growth will continue to influence our approach to the integration of Lexar.

As noted in the previous slide.

Growth initiatives will focus on expanding <unk> presence in higher growth print market, such as APAC, a four color and cut sheet inkjet as well as the continued expansion of Xerox digital solutions into our client base.

Operational simplification efforts will focus near-term on combining our operating capabilities, including our respective Global Business Services functions, consolidating corporate organizations, optimizing labor and spend, and standardizing technology platforms.

The financial objectives of reinvention also remain the same revenue stabilization and return to double digit adjusted operating income margin.

Revenue stabilization will be driven by an improved trajectory in print supported by stronger print business post lexmark and an improved mix of revenue from higher growth businesses.

And the diversification of xerox's print portfolio and the continued optimization of our regional and channel distribution presence.

Services and digital solutions today comprise more than 10% of revenue on a pro forma basis over time, we expect these businesses to comprise more than 20% of our revenue.

Revenue stabilization will in turn allow more savings to fall to the bottom line. We continue to expect putting $700 million of gross cost savings and profit opportunities associated with the reinvention strategy.

John Bruno: As noted in the previous slide, growth initiatives will focus on expanding Xerox's presence in higher growth print markets such as APAC, A4 color, and cut sheet inkjet, as well as the continued expansion of Xerox IT and digital solutions into our client base. The financial objectives of reinvention also remain the same: revenue stabilization and a return to double-digit adjusted operating income margin. Revenue stabilization will be driven by an improved trajectory in print supported by stronger print business post-Lexmark and an improved mix of revenue from higher growth businesses. IT services and digital solutions today comprise more than 10% of revenue on a pro forma basis. Over time, we expect these businesses to comprise more than 20% of our revenue. Revenue stabilization will, in turn, allow more savings to fall to the bottom line.

Product expansion and diversification will be driven by the adoption of Lex. Mark's A3 technology. In the addition of new, high-end OEM Partnerships such as the partnership with koser announced today. This partnership provides Xerox with the ability to offer kio's. Leading cut sheet inkjet products to our production. Print clients, strengthening our suite of production print products while wrapping xerox's software and solutions around a more diverse production, print ecosystem,

When combined with more than $265 million of Lexmark and savvy acquisition related synergies, we expect around $1 billion of savings and profit improvement opportunities to be realized through our reinvention by 2028 with around half of $500 million, which have yet to be realized.

as noted in the previous slide.

Growth initiatives will focus on expanding xerox's presence and higher growth print markets such as aipac. A4 color and cut sheeting jet as well as the continued expansion of Xerox, it and digital Solutions into our client base.

Focusing now on lexmark synergies.

The more than $250 million of gross cost synergies are wide ranging covering our shared services and global support functions service delivery engineering manufacturing and other organizations in 2025, we expect to implement synergies with run rate savings of $100 million to $125 million, which will result in year cash investment.

The financial objectives of reinvention also remain the same: revenue stabilization and a return to double-digit, adjusted operating income margin.

Revenue stabilization will be driven by an improved trajectory in print supported by stronger, print business posts, Lex Mark and an improved mix of revenue from higher growth businesses.

About $50 million to $75 million. These initial synergies will be focused on the elimination of duplicative shared service overheads and technology spend in.

IT services and digital Solutions today. Comprise more than 10% of Revenue on a proforma basis. Over time, we expect these businesses to comprise more than 20% of our Revenue.

In 2026, the focus of synergies, we'll turn to the optimization of our supply chain R&D and certain cost and purchasing advantages afforded by our larger operating scale we have.

John Bruno: We continue to expect more than $700 million of gross cost savings and profit opportunities associated with the reinvention strategy. When combined with more than $265 million of Lexmark and IT savvy acquisition-related synergies, we expect around $1 billion of savings and profit improvement opportunities to be realized through our reinvention by 2028, with around half of $500 million which have yet to be realized. Focusing now on Lexmark synergies, the more than $250 million of gross cost synergies are wide-ranging, covering our shared services and global support functions, service delivery, engineering, manufacturing, and other organizations. In 2025, we expect to implement synergies with run rate savings of $100 to $125 million, which will result in an in-year cash investment of about $50 to $75 million. These initial synergies will be focused on the elimination of duplicative shared service overheads and technology spend.

Expect that most of the run rate synergies will be implemented by the end of 2026.

And in 2020, and we will realize the benefits of our consolidated real estate footprint in it infrastructure and continue to optimize our managed print delivery structure.

Revenue stabilization will in turn allow more savings, to follow the bottom line. We continue to expect more than 700 million of gross cost savings and profit opportunities associated with. The reinvention strategy when combined with more than 265 million of Lex mark, and it Savvy acquisition related synergies. We expect around 1 billion, dollars of savings in profit Improvement opportunities, to be realized through our reinvention by 2028 with around half or 500 million, which have yet to be realized.

To summarize our reinvention through integration has begun the next phase is expected to strengthen our print business and drive improved mix of revenue from higher growth businesses, leading to revenue stabilization and a higher flow through of roughly $500 million of identified cost savings and profit opportunities yet to be realized.

Focusing now on Lex mark synergies.

Now I'll turn the call over to Melinda to discuss this quarter's financial results. Thank.

Thank you John and good morning, everyone.

Revenue this quarter was roughly flat year over year in actual currency or one 1% lower in constant currency.

John Bruno: In 2026, the focus of synergies will turn to the optimization of our supply chain, R&D, and certain costs and purchasing advantages afforded by larger operating scale. We expect that most of the run rate synergies will be implemented by the end of 2026. And in 2027, we will realize the benefits of a consolidated real estate footprint and IT infrastructure and continue to optimize our managed print delivery structure. To summarize, the reinvention through integration has begun. The next phase is expected to strengthen our print business and drive an improved mix of revenue from higher growth businesses, leading to revenue stabilization and a higher flow-through of roughly $500 million of identified cost savings and profit opportunities yet to be realized. I'll now turn the call over to Mirlanda to discuss this quarter's financial results.

The more than 250 million of gross. Cost synergies are wide ranging, covering our shared services and Global support functions, Service, delivery, engineering manufacturing. And other organizations in 2025, we expect to implement synergies with run rate, Savings of 100 to 125 million which will result in in-ear cast investment of about 50 to 75 million. These initial synergies will be focused on the elimination of duplicative, shared service, overheads and Technology. Spent

Organic core revenue, which excludes IP savvy and the effects of currency and Brian mentioned actions declined around 5% this quarter.

This pace of decline was larger than our expectations, reflecting softer print equipment demand in April and May and at peak dose and tariff related uncertainty and to a lesser extent delays in the sales of OEM supplies due to recently implemented tariffs.

In 2026. The focus of synergies will turn to the optimization of our supply chain R&D, and certain costs, and purchasing advantages afforded by larger operating scale.

We expect that most of the Run rate synergies will be implemented by the end of 2026.

And in 2027, we will realize the benefits of a consolidated real estate footprint and IT infrastructure, and continue to optimize our managed print delivery structure.

Despite these unexpected headwinds revenue was in line with our guidance due to stronger than expected results at our it solutions segment, which benefited from an acceleration in demand and momentum in the cross sale of IV solutions to Xerox great clients.

Turning to profitability adjusted gross margin of 29, 3% declined around 420 basis points year over year around.

Mirlanda Gecaj: Thank you, John, and good morning, everyone. Revenue this quarter was roughly flat year over year in actual currency, or 1.1% lower in constant currency. Organic core revenue, which excludes IT savvy and the effects of currency and reinvention actions, declined around 5% this quarter. This pace of decline was larger than our expectations, reflecting softer print equipment demand in April and May amid peak DOGE and tariff-related uncertainty and, to a lesser extent, delays in the sales of OEM supplies due to recently implemented tariffs. Despite these unexpected headwinds, revenue was in line with our guidance due to stronger than expected results at our IT solutions segment, which benefited from an acceleration in demand and momentum in the cross-sale of IT solutions to Xerox print clients. Turning to profitability, adjusted gross margin of 29.3% declined around 420 basis points year over year.

To summarize, the reinvention through integrations began. The next phase is expected to strengthen our print business and drive improvements in revenue from higher growth businesses, leading to revenue stabilization and a higher flow-through of roughly $500 million of identified cost savings and profit opportunities yet to be realized. I'll now turn the call over to Miranda to discuss this quarter's financial results.

Thank you, John. And good morning everyone.

Around 300 basis points of the decline reflected lower financing and other fees associated with intentional reduction of our finance receivable portfolio and higher product costs.

Revenue this quarter was roughly flat year-over-year in actual currency, or 1.1% lower in constant currency.

Around 100 basis points of the year over year decline was due to the inclusion of Phi Tech savvy, which has a lower gross margin, but similar operating margin profile as the print business.

Organic core revenue, which excludes Savvy and the effects of currency and reinvention actions, declined around 5% this quarter.

And nearly 100 basis points of the decline reflected tariff charges net of price related mitigation actions and adverse currency impacts. These effects were partially offset by reinvention related and other cost reductions.

This piece of decline was larger than our expectations, reflecting softer print and equipment demand in April and May. Amit Big Doge mentioned tariff-related uncertainty and, to a lesser extent, delays in the sales of ODM supplies due to recently implemented tariffs.

Adjusted operating margin of three 7% was 170 basis points lower year over year, reflecting lower gross profit and to a lesser extent higher bad debt expense, partially offset by reinvention savings and other cost reduction efforts as well as the inclusion of IP savvy, which carries.

Despite these unexpected headwinds, revenue was in line with our guidance due to stronger than expected results. Our IT solutions segment benefited from an acceleration in demand and momentum in the cross-sale of IT solutions to Xerox Sprint clients.

Mirlanda Gecaj: Around 300 basis points of the decline reflected lower financing and other fees associated with the intentional reduction of our finance receivable portfolio and higher product costs. Around 100 basis points of the year-over-year decline was due to the inclusion of IT savvy, which has a lower gross margin but similar operating margin profile as the print business. And nearly 100 basis points of the decline reflected tariff charges, net of price-related mitigation actions, and adverse currency impacts. These effects were partially offset by reinvention-related and other cost reductions. Adjusted operating margin of 3.7% was 170 basis points lower year over year, reflecting lower gross profit and, to a lesser extent, higher bed debt expense partially offset by reinvention savings and other cost reduction efforts, as well as the inclusion of IT savvy, which carries a lower operating expense base than our print business.

The lower operating expense base than our print business.

Turning to profitability, adjusted gross margin of 29.3% declined around 420, basis points, year-over-year.

Adjusted operating income of $59 million was $4 million below the low end of our Q2 guidance range. Our continued focus on cost control drove operating expenses $32 million lower year over year included in operating expenses in the second quarter were $9 million of reinvention and transaction related costs.

The basis points of the decline reflected lower finance in addition to fees associated with the intentional reduction of our finance receivable portfolio and higher product costs.

Around 100 basis points of the year-over-year decline was due to the inclusion of it Savvy which has a lower gross margin but similar operating margin profile as the print business.

And $14 million of <unk> operating expenses.

Excluding these costs operating expenses declined 55 million a reduction to our operating expense base of around 12% year over year.

These effects were partially offset by reinvention-related and other cost reductions.

Adjusted other expenses net were $41 million 11 million higher year over year, due primarily to higher net interest expense.

Excluded from adjusted other expenses this quarter was $12 million of net interest expense associated with debt financing that was contingent upon the completion of the lexmark acquisition.

Adjusted tax rate of 528% compared to 25, 5% in the same quarter last year. The current year rate reflects an inability to deduct certain losses and expenses, including interest.

Mirlanda Gecaj: Adjusted operating income of $59 million was $4 million below the low end of our Q2 guidance range. A continued focus on cost control drove operating expenses $32 million lower year over year. Included in operating expenses in the second quarter were $9 million of reinvention and transaction-related costs and $14 million of IT savvy operating expenses. Excluding these costs, operating expenses declined $55 million, a reduction to our operating expense base of around 12% year over year. Adjusted other expenses net were $41 million, $11 million higher year over year, due primarily to higher net interest expense. Excluded from adjusted other expenses this quarter was $12 million of net interest expense associated with debt financing that was contingent upon the completion of the Lexmark acquisition. Adjusted tax rate of 528% compared to 25.5% in the same quarter last year.

The adjusted operating margin of 3.7% was 170 basis points lower year-over-year, reflecting lower gross profit and, to a lesser extent, higher bad debt expense. This was partially offset by reinvention savings and other cost reduction efforts, as well as the inclusion of it Savvy, which carries a lower operating expense base than our print business.

Adjusted operating income of $59 million was $4 million below the low end of our Q2 guidance range.

We continue to assess the impact of the Lexmark acquisition and recent tax law changes on our effective tax rate for the remainder of the year.

A continued focus on cost control drove operating expenses. 32 million lower year-over-year.

We expect the Lexmark acquisition and tax law changes to contribute favorably to adjusted operating income and adjusted tax rate in future periods.

In operating expenses in the second quarter, there were $9 million of reinvention and transaction-related costs and $14 million of IT Savvy operating expenses.

Adjusted loss per share of <unk> 64.

Was 93 cents lower than the prior year.

Excluding these costs operating expenses declined, 55 million, a reduction to our operating expense base of around 12% year-over-year.

Primarily due to a higher adjusted tax rate as well as lower adjusted operating income and higher interest expenses.

is net worth 41 million, 11 million higher year-over-year, due primarily to higher net interest expense

GAAP loss per share of <unk> 87.

It was 98 cents lower year over year.

The increase in GAAP loss reflects the higher tax expense.

Lower operating income higher net interest and onetime costs associated with the lexmark transaction in the current year and insurance proceeds related to a legal settlement in the prior year.

Excluded from adjusted other expenses, this quarter was $12 million of net interest expense associated with debt financing that was contingent upon the completion of the Lexmark acquisition.

Mirlanda Gecaj: The current year rate reflects an inability to deduct certain losses and expenses, including interest. We continue to assess the impact of the Lexmark acquisition and recent tax flow changes on our effective tax rate for the remainder of the year. We expect the Lexmark acquisition and tax flow changes to contribute favorably to adjusted operating income and adjusted tax rate in future periods. Adjusted loss per share of $0.64 was $0.93 lower than the prior year, primarily due to a higher adjusted tax rate as well as lower adjusted operating income and higher interest expenses. GAAP loss per share of $0.87 was $0.98 lower year over year. The increase in GAAP loss reflects a higher tax expense, lower operating income, higher net interest, and one-time costs associated with the Lexmark transaction in the current year and insurance proceeds related to a legal settlement in the prior year.

Adjusted tax rate of 528% compared to 25.5% in the same quarter last year.

Let me now review segment results.

The current year rate reflects an inability to deduct certain losses and expenses, including interest.

Q2 equipment sales of $336 million declined five 6% to actual currency and six 7% in constant currency.

We continue to assess the impact of the Lex, Mark acquisition and recent tax flow changes on our effective tax rate for the remainder of the year.

Excluding the effects of reinvention related actions.

Equipment sales declined around 3% compared to a decline of around 1% in Q1.

We expect the Lex Mark acquisition and tax flow changes, to contribute favorably to adjusted operating income and adjusted tax rate in future periods.

The sequential slowdown reflected a period of softer equipment demand in April and May which was partially offset by a recovery and return to normalized demand conditions in June.

Adjusted loss per share of 64 cents was 93 cents lower than the prior year.

Total equipment installation declined 12% due in part to the aforementioned period of demand weakness in the beginning of quarter, two and the effects of prior years reinvention actions, including geographic and offering simplification.

Primarily due to a higher adjusted tax rate, as well as lower adjusted operating income and higher interest expenses.

Gap loss per share of 87 cents, was 98 cents, lower year-over-year.

Increase in gap. Loss. Reflects a higher tax expense.

Andrew installation declined 14% driven in part by a prior year reduction in current year belt in backlog for mono devices.

Midrange installations declined 6% as continued strength in sales of the recently launched Prime like 9200 series was partially offset by slower demand for other products.

Mirlanda Gecaj: Let me now review segment results. Q2 equipment sales of $336 million declined 5.6% to actual currency and 6.7% in constant currency. Excluding the effects of reinvention-related actions, equipment sales declined around 3%, compared to a decline of around 1% in Q1. The sequential slowdown reflected a period of softer equipment demand in April and May, which was partially offset by a recovery and return to normalized demand conditions in June. Total equipment installations declined 12%, due in part to the aforementioned period of demand weakness in the beginning of quarter two and the effects of prior year's reinvention actions, including geographic and offering simplification. Entry installations declined 14%, driven in part by a prior year reduction and current year build in backlog for mono devices.

Lower operating income higher net interest and 1-time costs associated with The Lex Mark transaction in the current year and insurance proceeds related to Illegal settlement in the prior year.

Let me now reuse segment results.

Mid range equipment revenue declined at a slower pace than installations due to a stronger mix of color devices and the benefits of tariff related price actions.

Due to equipment sales of 336 million declined, 5.6% to actual currency and 6.7% in constant currency.

High end equipment installations and revenue both declined year over year, reflecting in part the ongoing evolution of our production portfolio and high end offerings simplification actions taken last year.

Excluding the effects of reinvention related. Actions equipment sales declined. Around 3% compared to a decline of around 1% in q1.

the sequential slowdown reflected a period of software equipment demand in April and May, which was partially offset by recovery and return to normalize demand conditions in June

Brent post sale revenue of around 1 billion declined nine 5% in actual currency and 10, 5% in constant currency exclude.

Excluding the effect of reinvention actions print post sale revenue declined around 6% in constant currency. The declining core print post sale revenue reflects lower supplies and page volumes offset by growth in digital services.

Total equipment installations declined, 12% due in part to the aforementioned period of demand weakness in the beginning of quarter 2 and the effects of Prior years reinvention actions, including Geographic and offering simplification.

Mirlanda Gecaj: Mid-range installations declined 6%, as continued strength in sales of the recently launched PrimeLink 9200 series was partially offset by slower demand for other products. Entry and mid-range equipment revenue declined at a slower pace than installations due to a stronger mix of color devices and the benefits of tariff-related price actions. High-end equipment installations and revenue both declined year over year, reflecting in part the ongoing evolution of our production print portfolio and high-end offering simplification actions taken last year. Print post-sale revenue of around $1 billion declined 9.5% in actual currency and 10.5% in constant currency. Excluding the effect of reinvention actions, print post-sale revenue declined around 6% in constant currency. The declining core print post-sale revenue reflects lower supplies and page volumes offset by growth in digital services.

Entry installations declined 14%, driven in part by a prior reduction and current year belt in backlog for mono devices.

Print segment adjusted gross margin of 31, 2% declined 330 basis points year over year due to higher product costs, including tariff expenses lower financing fees lower managed print volumes and unfavorable equipment channel mix and currency effects, partially offset by reinvention savings.

Mid-range installations declined 6% as continuous strength in sales of the recently launched Prime link 9200 series was partially offset by slower demand for other products.

And other cost reduction efforts.

Angry and mid-range equipment revenue declined at a slower pace than installations due to a stronger mix of color devices and the benefits of tariff-related price actions.

Print segment margin of four 8% declined 240 basis points year over year due to lower revenue and gross profit, partially offset by reinvention savings and other cost controls.

High-end equipment, installations, and revenue both declined year-over-year, reflecting in part the ongoing evolution of our production print portfolio and high-end offering simplification actions taken last year.

Turning to IP solutions results in Q2 it.

Solutions revenue and gross profit increased more than 150% year over year, reflecting the inclusion of IP savvy in segment results and strong organic growth from the legacy <unk> salad business.

Sprint, postal revenue of around $1 billion, the client increased by 9.5% in actual currency and 10.5% in constant currency.

Pro forma for the acquisition of savvy.

IV solutions gross billings are reflection of business activity increased 8% year over year.

Mirlanda Gecaj: Print segment adjusted gross margin of 31.2% declined 330 basis points year over year due to higher product costs, including tariff expenses, lower financing fees, lower managed print volumes, and unfavorable equipment channel mix and currency effects, partially offset by reinvention savings and other cost reduction efforts. Print segment margin of 4.8% declined 240 basis points year over year due to lower revenue and gross profit, partially offset by reinvention savings and other cost controls. Turning to IT solutions results. In Q2, IT solutions revenue and gross profit increased more than 150% year over year, reflecting the inclusion of IT savvy in segment results and strong organic growth from the legacy IT savvy business. Pro forma for the acquisition of IT savvy, IT solutions gross billings, a reflection of business activity, increased 8% year over year compared to an increase of 0.4% in Q1.

Excluding the effect of reinvention actions Print Postal Revenue decline around 6% in constant currency. The declining core print posts their revenue, reflects lower supplies and Paige volumes of set by growth in Digital Services.

They are two an increase of 0.4% in Q1, the sequential improvements in billing growth reflects strong PC sale in part associated with the Windows 11 upgrade cycle and an acceleration in demand for infrastructure and networking products with particular strength in Microsoft Cloud service provider implementation.

Volumes and unfavorable equipment channel, mix, and currency effects.

Partially upset by reinvention savings and other cost reduction efforts.

<unk>.

As Steve and John noted, we're seeing momentum in the cross sale of products and services to existing Xerox sprint clients, which helped contribute to another quarter of double digit growth in gross bookings a measure of forward billings.

Print segment, margin of 4.8%, declined, 240 basis points year-over-year due to lower revenue and gross profit partially offset by reinvention savings and other cost controls.

<unk> solutions gross profit grew $22 million year over year, and gross margin of 16, 4% expanded 90 basis points compared to the prior year, reflecting the inclusion of <unk>.

Don't need to IT solutions results in Q2. IT solutions revenue and growth profit increased more than 150% year-over-year, reflecting the inclusion of IT Savvy in segment results and strong organic growth from the legacy IT Savvy business.

Segment profit grew 9 million year over year due to the inclusion of IP savvy segment profit now reflects the full run rate benefit of annualized synergies.

Pro forma for the acquisition of IT Savvy.

Let's now review cash flow operating cash flow was a use of $11 million compared to a source of $123 million in the prior year quarter.

Mirlanda Gecaj: The sequential improvements in billing growth reflect strong PC sales, in part associated with the Windows 11 upgrade cycle and an acceleration in demand for infrastructure and networking products, with particular strength in Microsoft Cloud Service Provider implementations. As Steven Johnson noted, we're seeing momentum in the cross-sale of IT products and services to existing Xerox print clients, which helped contribute to another quarter of double-digit growth in gross bookings, a measure of forward billings. IT solutions gross profit grew $22 million year over year and gross margin of 16.4% expanded 90 basis points compared to the prior year, reflecting the inclusion of IT savvy. Segment profit grew $9 million year over year due to the inclusion of IT savvy. Segment profit now reflects the full run rate benefit of annualized synergies. Let's now review cash flow.

The reduction in operating cash flow reflects lower pre tax cash net income and lower proceeds from finance receivable, partially offset by ongoing improvement in working capital lower restructuring payments and lower cash taxes.

IT solutions gross billings are a reflection of business activity. They increased 8% year-over-year compared to an increase of 0.4% in Q1. The sequential improvements in billing growth reflect strong PC sales, in part associated with the Windows 11 upgrade cycle, and an acceleration in demand for infrastructure and networking products, with particular strength in Microsoft cloud service provider implementations.

Investing activity was a use of cash of $18 million compared to a use of $2 million in the prior year quarter due primarily to an increase in capital expenditures associated with implementation of a new enterprise wide technology platform and lower proceeds from the sale of assets.

Steven John noted were seen momentum in the cross sale of it products. And services to exist in Xerox. Print clients, which helped contribute to another quarter of double digit growth in Gross, bookings, a measure of forward Billings.

Financing activity resulted in a source of cash of more than $600 million compared to the use of cash in the prior year of $336 million.

IT solutions gross profit grew $22 million year-over-year, with a gross margin of 16.4%, expanding 90 basis points compared to the prior year. This reflects the inclusion of IT Savvy.

Financing activity included proceeds from the sale of first and second lien notes, partially offset by the early redemption of a portion of our 2025 notes the prepayment of a portion of our term loan and quarterly amortization of other secured debt.

Segment profit grew by €9 million a year due to the inclusion of it. Savvy segment profit now reflects the full run rate benefit of annualized synergies.

Mirlanda Gecaj: Operating cash flow was a use of $11 million compared to a source of $123 million in the prior year quarter. The reduction in operating cash flow reflects lower pre-tax cash net income and lower proceeds from finance receivable, partially offset by ongoing improvements in working capital, lower restructuring payments, and lower cash taxes. Investment activity was a use of cash of $18 million compared to a use of $2 million in the prior year quarter, due primarily to an increase in capital expenditures associated with the implementation of a new enterprise-wide technology platform and lower proceeds from the sale of assets. Financing activity resulted in a source of cash of more than $600 million compared to the use of cash in the prior year of $336 million.

Let's now review cash flow. Operating cash flow was a use of $11 million compared to a source of $123 million in the prior year quarter.

Prior year financing activity included the repayment of our 2024 senior unsecured notes and other secured debt payments.

Free cash flow was a use of $30 million in the second quarter of 145 million lower year over year.

The reduction in operating cash flow. Reflects lower pre-tax cash, net income. And lower proceeds from Finance receivable. Partially offset by ongoing improvements in working capital lower restructuring payments, and lower cash taxes,

The reduction in free cash flow reflects in part.

You were than expected proceeds from the sale of finance receivables due to a delay in the sale of roughly $100 million of European finance receivables now expected in quarter three.

In the second half of the year, we expect seasonal improvements in adjusted operating income continued working capital discipline and benefit from the reduction in finance receivables to drive positive free cash flow.

Investing activity was a use of cash of $18 million compared to a use of $2 million in the prior year's quarter, due primarily to an increase in capital expenditures associated with the implementation of a new enterprise-wide technology platform and lower proceeds from the sale of assets.

Mirlanda Gecaj: Current year financing activity included proceeds from the sale of first and second-year notes, partially offset by the early redemption of a portion of our 2025 notes, the prepayment of a portion of our term loan, and quarterly amortization of other secured debt. Prior year financing activity included the repayment of our 2024 senior unsecured notes and other secured debt payments. Free cash flow was a use of $30 million in the second quarter, $145 million lower year over year. The reduction in free cash flow reflects, in part, fewer than expected proceeds from the sale of finance receivables due to a delay in the sale of roughly $100 million of European finance receivables not expected in quarter three.

Financing activity resulted in a source of cash of more than $600 million compared to the use of cash in the prior year of $336 million.

As is typical we anticipate quarter four to be our seasonally strongest quarter of free cash flow generation. However, as noted free cash flow in quarter three is expected to benefit from a higher than normal level of finance receivable sales.

Current year financing activity, included proceeds from the sale of first and second year notes partially offset by the early Redemption of a portion of our 2025 notes.

The prepayment of a portion of our Term Loan and quarterly amortization of other secured debt.

Moving to capital structure.

We ended Q2 with $985 million in cash cash equivalents and restricted cash of which around 500 million reflects proceeds from the sale of second lien notes, which were held in escrow to fund the <unk> acquisition.

Prior year, finance and activity included the repayment of our 2024 senior unsecured notes and other secured debt payments.

Free cash flow was the use of 30 million in the second quarter, 145 million, lower year-over-year.

Total debt of $3 9 billion at quarter end increased by more than $600 million from Q1 levels due primarily to financing activity associated with the lexmark acquisition.

Mirlanda Gecaj: In the second half of the year, we expect seasonal improvements in adjusted operating income, continued working capital discipline, and benefits from the reduction in finance receivables to drive positive free cash flow. As is typical, we anticipate quarter four to be our seasonally strongest quarter of free cash flow generation. However, as noted, free cash flow in quarter three is expected to benefit from a higher than normal level of finance receivable sales. Moving to capital structure, we ended Q2 with $985 million in cash, cash equivalents, and restricted cash, of which around $500 million reflects proceeds from the sale of second-year notes, which were held in escrow to fund the Lexmark acquisition. Total debt of $3.9 billion at quarter end increased by more than $600 million from Q1 levels, due primarily to financing activity associated with the Lexmark acquisition.

In free cash flow. Reflects in part fewer than expected proceeds from the sale of Finance receivables, due to a delay in the sale of roughly 100 million of European Finance receivables. Not expected in quarter 3,

Around one 6 billion of the $3 9 billion of outstanding debt support our finance assets, resulting in core debt of $2 3 billion related to the non financing business.

Adjusted for the Lexmark acquisition, which closed on July one and repayment of the August 2025 unsecured notes total debt was $4 3 billion and total core debt, which excludes financing allocated debt was $2 7 billion.

In the second half of the year, we expect seasonal improvements in adjusted operating income continued working, capital discipline, and benefits from the reduction in finance receivables to drive, positive free cash flow as is typical. We anticipate quarter 4 to be our seasonally strongest quarter of free cash flow generation. However as noted free cash flow in quarter, 3 is expected to benefit from a higher than normal level of Finance, receivable sales,

The Lexmark acquisition increased total debt levels, but resulted in a lower gross debt leverage ratio on a pro forma basis gross debt leverage is five four times trailing 12 months EBITDA.

More than a half turn lower than our Q1 leverage ratio, including the more than $250 million of expected synergies.

Moving to capital structure. We ended Q2 with 985 million in cash, cash equivalents and restricted cash of which around 500 million. Reflects proceeds from the sale of second lean notes which were held in escrow to fund The Lex Mark acquisition.

Debt leverage would be reduced further to four one times trailing 12 months EBITDA.

Mirlanda Gecaj: Around $1.6 billion of the $3.9 billion of outstanding debt support our finance assets, resulting in core debt of $2.3 billion related to the non-financing business. Adjusted for the Lexmark acquisition, which closed on July 1st, and repayment of the August 2025 unsecured notes, total debt was $4.3 billion, and total core debt, which excludes financing allocated debt, was $2.7 billion. The Lexmark acquisition increased total debt levels but resulted in a lower gross debt leverage ratio. On a pro forma basis, gross debt leverage is 5.4 times trailing 12 months EBITDA, more than a half turn lower than our Q1 leverage ratio. Including the more than $250 million of expected synergies, gross debt leverage would be reduced further to 4.1 times trailing 12 months EBITDA.

total debt of 3.9 billion at quarter end increased by more than 600 million from q1 levels, due primarily to finance in activity, associated with The Lex Mark acquisition,

Our top capital allocation priority remains the reduction of debt and we continue to target a gross debt leverage ratio of three times trailing 12 months EBITDA in the medium term.

Finally, I will address fiscal year 2025 guidance, which now includes lexmark expected results beginning July one.

Around $1.6 billion of the $3.9 billion of outstanding debt supports our finance assets, resulting in core debt of $2.3 billion related to the non-finance business.

We expect revenue to grow 16% to 17% in constant currency inclusive of around $1 billion of lexmark revenue as.

As noted we experienced a recovery in equipment demand in June following a period of softer demand in April and May.

Unsecured notes. Total debt, was 4.3 billion and Total Core debt, which excludes financing? Allocated debt was 2.7 billion.

While demand conditions are currently stable and expected to remain stable in the absence of further tariff and trade related disruption our guidance for the second half of the year accounts for a degree of conservatism to reflect the volatile and unpredictable nature of tariff and other government policies.

The Lexmark acquisition increased total debt levels but resulted in a lower gross debt leverage ratio on a pro forma basis.

Gross debt. Leverage is 5.4 times trailing 12 months, ibida, more than a half turn lower than our q1 leverage ratio.

Including the more than 250 million of expected synergies.

For the full year, we expect an adjusted operating income margin of around four 5% inclusive of $100 million to $110 million of adjusted operating income from Lexmark.

Mirlanda Gecaj: Our top capital allocation priority remains the reduction of debt, and we continue to target a gross debt leverage ratio of 3 times trailing 12 months EBITDA in the medium term. Finally, I will address fiscal year 2025 guidance, which now includes Lexmark's expected results beginning July 1st. We expect revenue to grow 16% to 17% in constant currency, inclusive of around a billion of Lexmark revenue. As noted, we experienced a recovery in equipment demand in June following a period of softer demand in April and May. While demand conditions are currently stable and expected to remain stable in the absence of further tariff and trade-related disruption, our guidance for the second half of the year accounts for a degree of conservatism to reflect the volatile and unpredictable nature of tariffs and other government policies.

Gross debt leverage would be reduced further to 4.1 times trailing in 12 months.

<unk> expected contribution excludes $10 million to $15 million of one time intercompany gross profit eliminations.

Our top Capital allocation priority Remains the reduction of debt and we continue to Target. A gross debt. Leverage ratio of 3 times trailing. 12 months evida in the medium term.

Relative to prior Xerox only guidance. This updated guidance reflects $30 million to $35 million of tariff charges net of mitigation efforts.

Finally, I will address fiscal year. 2025 guidance, which now includes Lex marks expected results. Beginning in July 1st,

A delay in the in year realization of certain reinvention related gross cost savings.

We expect Revenue to grow 16 to 17% in constant currency, inclusive of around a billion of flex, Mark Revenue.

On a more conservative outlook for full year equipment demand, partially offset by a modest amount of lexmark synergies.

as noted we experience a recovery in equipment demand in June, following a period of software demand in April and May

As John noted our target for reinvention related growth cost savings and other profit improvement opportunities remains unchanged at more than $700 million. However, we expect to realize fewer reinvention related savings in 2025 than originally expected as we evaluate the pace and scope.

Mirlanda Gecaj: For the full year, we expect an adjusted operating income margin of around 4.5%, inclusive of $100 million to $110 million of adjusted operating income from Lexmark. Lexmark's expected contribution excludes $10 million to $15 million of one-time intercompany gross profit eliminations. Relative to prior Xerox-only guidance, this updated guidance reflects $30 million to $35 million of tariff charges, net of mitigation efforts, a delay in the in-year realization of certain reinvention-related gross cost savings, and a more conservative outlook for full-year equipment demand, partially offset by a modest amount of Lexmark synergies. As John noted, our target for reinvention-related gross cost savings and other profit improvement opportunities remains unchanged at more than $700 million. However, we expect to realize fewer reinvention-related savings in 2025 than originally expected as we evaluate the pace and scope of certain reinvention initiatives relative to Lexmark integration priorities.

While demand conditions are currently stable and expected to remain stable in the absence of further tariff and trade related. Disruption, our guidance for the second half of the Year accounts for a degree of conservatism to reflect the volatile and unpredictable nature of tariff and other government policies.

Of certain reinvention initiatives relative to lexmark integration priorities.

Any delay savings in 2025 are timing related and expected to directly benefit adjusted operating income in 2026 or 2027.

For the full year, we expect an adjusted operating income margin of around. 4.5% inclusive of 100 to 110 million of adjusted operating income from Lex mark.

Lex marks expected contribution, excludes 10 to 15 million of 1-time intercomp. Gross profit, eliminations.

The high end of the 30% to $35 million range of expected tariff expense net of mitigation efforts.

Flex staff rates currently proposed to take effect August 1st.

Relative to Prior Xerox. Only guidance, this updated guidance, reflects 30 to 35 million of tariff charges, net of mitigation efforts.

The full year tariff impact is larger than previously communicated due to a brief period of 145% tariffs applied to goods sourced from China.

Higher than expected increase in transition costs associated with product move from China to Mexico, and a more deliberate rollout of price increases as we await final tariff rates.

A delay in the in-ear realization of certain reinvention related, gross cost savings, and a more conservative outlook. For full year equipment demand, partially offset by a modest amount of flex marks synergies.

Assuming rates remain unchanged, we expect to recover the net impact of 2025 tariff expenses in 2026.

Finally free cash flow is expected to be around $250 million, the roughly 120 funding and a reduction in free cash flow relative to the midpoint of prior guidance reflects higher in year cash tariff expenses and $50 million to $75 million of expected cash payments associated.

Mirlanda Gecaj: Any delayed savings in 2025 are timing-related and expected to directly benefit adjusted operating income in 2026 or 2027. The high end of the $30 million to $35 million range of expected tariff expense net of mitigation efforts reflects tariff rates currently proposed to take effect August 1st. The full-year tariff impact is larger than previously communicated due to a brief period of 145% tariffs applied to goods sourced from China, a higher than expected increase in transition costs associated with product moved from China to Mexico, and a more deliberate rollout of price increases as we await final tariff rates. Assuming rates remain unchanged, we expect to recover the net impact of 2025 tariff expenses in 2026. Finally, free cash flow is expected to be around $250 million.

As John noted, our Target for reinvention related, growth cost, savings and other profit Improvement opportunities remains unchanged at more than 700 million. However, we expect to realize fewer reinvention related Savings in 2025 than originally expected. As we evaluate the pace and scope of certain reinvention initiatives, relative to Lex Mark integration priorities.

Any delayed Savings in 2025 our timing related and expected, to directly benefit adjusted operating income in 2026 or 2027.

With an accelerated implementation of lexmark synergies.

These headwinds are offset by expected improvements in working capital and mild in year free cash flow accretion from lexmark net of incremental interest expense, we continue to aggressively manage working capital to improve the conversion of free cash flow from adjusted operating income pretty.

Free cash flow associated with the Lexmark acquisition is expected to improve in future periods as run rate synergies outpaced implementation costs.

The high end of the 30 to 35 million range of expected. Tariff expense. Net of mitigation efforts. Reflects tariff rates currently proposed to take effect August 1st, the full year. Tariff impact is larger than previously communicated due to a brief period of 145% tariffs, applied to good source from China a higher than expected increase in transition costs associated with product moved, from China to Mexico and a more deliberate roll out of price increases as we await final tariff rates.

It is important to note that expected free cash flow in 2025 will be impacted by certain one time items that are not expected to recur in future years.

Assuming rates remain unchanged, we expect to recover the net impact of the 2025 tariff expenses in 2026.

Current year cash tariff outlays net of mitigation efforts of 60 to 65 million are expected to be recouped over time through future price increases.

Mirlanda Gecaj: The roughly $125 million reduction in free cash flow relative to the midpoint of prior guidance reflects higher in-year cash tariff expenses and $50 million to $75 million of expected cash payments associated with an accelerated implementation of Lexmark synergies. These headwinds are offset by expected improvements in working capital and mild in-year free cash flow accretion from Lexmark net of incremental interest expense. We continue to aggressively manage working capital to improve the conversion of free cash flow from adjusted operating income. Free cash flow associated with the Lexmark acquisition is expected to improve in future periods as run rate synergies outpace implementation costs. It is important to note that expected free cash flow in 2025 will be impacted by certain one-time items that are not expected to recur in future years.

Synergy implementation costs of $50 million to $75 million in 2025 are expected to decline in 2026, and we reduced to less than $25 million in 2027.

Finally free cash flow is expected to be around 250 million, the roughly 125 million reduction in free cash flow relative to the midpoint of Prior guidance. Reflects higher in-ear, cash tariff expenses and 50 to 75 million of expected. Cash payments associated with an accelerated implementation of flex. Mark synergies.

And this year, we incurred a roughly 50 million one time cash flow headwind associated with changes in inventory ownership terms with a large supplier partner <unk>.

Excluding the impact of these items.

These headwinds are offset by expected. Improvements in working capital and Mild in year. Free cash flow accretion from Lex. Mark net of incremental interest expense.

Excess pension payments and the expected contribution of finance receivable proceeds free cash flow conversion from adjusted operating income would approach xerox's target range of 35% to 40%. This year a range that is expected to be further supported in future periods as adjusted operating income increases in interest expense.

We continue to aggressively manage working capital to improve the conversion of free cash flow from adjusted operating income.

Free cash flow associated with The Lex. Mark acquisition is expected to improve in future periods as run rate synergies, outpaced implementation costs.

Decreases.

For purposes of modeling results between quarters in the second half of 2025, we expect stronger than typical seasonal operating income generation in Q4 due to the consolidation of Lexmark, which has a heavier weighting of operating income in Q4 than the legacy Xerox business and the cumulative benefits of tariff mitigate.

Mirlanda Gecaj: Current year cash tariff outlays, net of mitigation efforts of $60 million to $65 million, are expected to be recouped over time through future price increases. Synergy implementation costs of $50 million to $75 million in 2025 are expected to decline in 2026 and be reduced to less than $25 million in 2027. And this year, we incurred a roughly $50 million one-time cash flow headwind associated with changes in inventory ownership terms with a large supplier partner. Excluding the impact of these items, excess pension payments, and the expected contribution of finance receivable proceeds, free cash flow conversion from adjusted operating income would approach Xerox's target range of 35% to 40% this year, a range that is expected to be further supported in future periods as adjusted operating income increases and interest expense decreases.

It is important to note that expected free cash flow in 2025, will be impacted by certain 1-time items that are not expected to recur in future years.

Current year. Cash tariff, outlays net of mitigation efforts of 60 to 65 million are expected to be recouped over time through future price increases.

<unk> reinvention and synergy savings, which are expected to be more heavily weighted to quarter four.

And be reduced to less than 25 million in 2027.

Moving to 2026.

To help model results for the combined companies, we are providing preliminary operating expectations for 2026.

And this year, we incurred a roughly 50 million, 1-time cash flow headwind, associated with changes in inventory ownership terms with a large supplier partner.

Starting with revenue, we expect the legacy Xerox print business to decline at roughly the pace of the broader <unk> market, which we assume to be low to mid single digits consistent with recent trends.

This expectation reflects the ongoing benefits of various reinvention related sales productivity and service renewal initiatives as well as market share growth opportunities afforded by the lexmark acquisition offset by a degree of conservatism associated with future integration planning.

Mirlanda Gecaj: For purposes of modeling results between quarters, in the second half of 2025, we expect stronger than typical seasonal operating income generation in Q4 due to the consolidation of Lexmark, which has a heavier weighting of operating income in Q4 than the legacy Xerox business, and the cumulative benefits of tariff mitigation, reinvention, and synergy savings, which are expected to be more heavily weighted to quarter four. Moving to 2026, to help model results for the combined companies, we are providing preliminary operating expectations for 2026. Starting with revenue, we expect the legacy Xerox print business to decline at roughly the pace of the broader print market, which we assume to be low to mid-single digits, consistent with recent trends.

Excluding the impact of these items excess pension payments and the expected contribution of Finance. Receivable proceeds, free cash, flow conversion from adjusted operating income would approach xerox's. Target range of 35 to 40% this year. Arrange that is expected to be further supported in future periods as adjusted operating income increases and interest expense decreases.

<unk> revenue is expected to be relatively flat year over year, resulting in another $950 million of revenue net of intercompany eliminations in 2026.

And our it and digital solution businesses are expected to grow faster than their respective markets. As we continue to benefit from growth in the penetration of both types of services within the legacy Xerox Sprint and now the lexmark print client basis.

For purposes of modeling results between quarters in the second half of 2025, we expect stronger than typical seasonal, operating income generation in Q4, due to the consolidation of flex Mark, which has a heavier weighting of operating incoming Q4 than the Legacy Xerox business. And the cumulative benefits of tariff, mitigation reinvention and Synergy savings, which are expected to be more heavily weighted to quarter 4.

Moving to 2026.

To help model results for the combined companies, we are providing preliminary operating expectations for 2026.

We expect significant year over year growth in adjusted operating income, resulting from the inclusion of flex Mark synergy realization and further reinvention related savings.

Mirlanda Gecaj: This expectation reflects the ongoing benefits of various reinvention-related sales productivity and service renewal initiatives, as well as market share growth opportunities afforded by the Lexmark acquisition, offset by a degree of conservatism associated with future integration planning. Lexmark revenue is expected to be relatively flat year over year, resulting in another $950 million of revenue net of intercompany eliminations in 2026. And our IT and digital solution businesses are expected to grow faster than their respective markets as we continue to benefit from growth in the penetration of both types of services within the legacy Xerox print and now the Lexmark print client bases. We expect significant year-over-year growth in adjusted operating income resulting from the inclusion of Lexmark, synergy realization, and further reinvention-related savings.

Starting with Revenue, we expect the Legacy Xerox print business to decline at roughly, the pace of the broader print Market, which we assume to be low to mid single digits consistent with recent trends.

Addressing items contribute to adjusted operating income we expect the full year consolidation of lexmark to add around 50 basis points to 20, 25% to achieve gross margin in 2026, reflecting lexmark gross margin of around 35% excluding intercompany revenue.

This expectation reflects the ongoing benefits of various reinvention related sales, productivity and service renewal initiatives.

As well as market share growth opportunities afforded by The Lex, mark acquisition offset by a degree of conservatism associated with future integration planning.

Adjusted operating income growth is expected to be further supported by at least $250 million of year over year cost reductions from acquisition synergies reinvention savings and ongoing cost discipline.

Lex, Mark revenue is expected to be relatively flat year-over-year. Resulting in another 950 million of Revenue. Net of intercompany eliminations in 2026.

Moving below operating income interest expense is expected to be around $300 million, reflecting the additional debt used to finance the lexmark acquisition.

Offset by the pay down of more than $200 million of debt in 2026.

And our IT and digital solutions. Businesses are expected to grow faster than their respective markets as we continue to benefit from growth in the penetration of both types of services within the legacy Xerox, Sprint, and now the Lexmark print client basis.

Further adjusted tax rate is expected to be around 35% as we benefit from improved adjusted operating income and recent changes in tax policy.

Mirlanda Gecaj: Addressing items that contribute to adjusted operating income, we expect the full-year consolidation of Lexmark to add around 50 basis points to 2025 to achieve gross margin in 2026, reflecting Lexmark's gross margin of around 35%, excluding intercompany revenue. Adjusted operating income growth is expected to be further supported by at least $250 million of year-over-year cost reductions from acquisition synergies, reinvention savings, and ongoing cost discipline. Moving below operating income, interest expense is expected to be around $300 million, reflecting the additional debt used to finance the Lexmark acquisition, offset by the paydown of more than $200 million of debt in 2026. Further, adjusted tax rate is expected to be around 35% as we benefit from improved adjusted operating income and recent changes in tax policy. Finally, free cash flow.

We expect significant year-over-year growth in adjusted operating income. Resulting from the inclusion of flex. Mark, Synergy realization and further reinvention related savings.

Finally free cash flow in 2026, we expect free cash flow to benefit from around $400 million of cash from the reduction of finance receivables and as noted better conversion of adjusted operating income to free cash flow, excluding finance receivable benefits.

Addressing items that contribute to adjusted operating income.

We expect the full year consolidation of Lex Mark to add around 50 basis points to 2025 to Chief gross margin in 2026 reflecting, Lex Mar's, gross margin of around 35% excluding intercomp Revenue

To conclude I am excited to welcome the lexmark team to Xerox Lexmark improves our competitive positioning in print and will be an important contributor to reinventions financial targets of revenue stabilization and double digit adjusted operating income margins.

Adjusted operating income growth is expected to be further supported by at least 250 million of year-over-year cost reductions from acquisition synergies, reinvention savings and ongoing cost discipline.

Moving below operating income.

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

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.

Interest expense is expected to be around $300 million, reflecting the additional debt used to finance the Lexmark acquisition, offset by the paydown of more than $200 million of debt in 2026.

Our first question comes from Ananda Baruah with loop capital you May proceed.

Hey, guys. Yeah. Thanks, good morning, and thanks for taking the question I have is.

Further adjust the tax rate is expected to be around 35% as we benefit from improved adjusted, operating income and recent changes in tax policy.

Mirlanda Gecaj: In 2026, we expect free cash flow to benefit from around $400 million of cash from the reduction of finance receivables and, as noted, better conversion of adjusted operating income to free cash flow, excluding finance receivable benefits. To conclude, I'm excited to welcome the Lexmark team to Xerox. Lexmark improves our competitive position in print and will be an important contributor to reinvention's financial targets of revenue stabilization and double-digit adjusted operating income margins. We'll now open the line for Q&A.

Probably three if I could.

And thanks for all the great detail I guess the first one is.

Is the <unk>. So you mentioned June July slowdown.

You mentioned it stabilized I think you guys mentioned in the tear remarks at that sort of you mentioned those and tariffs and so.

Finally free cash flow in 2026. We expect free cash flow to benefit from around 400 million of cash from the reduction of finance receivables. And as noted better conversion of adjusted operating income to free cash flow,

Excluding Finance, receivable benefits.

Was there just does related was there a meaningful.

Sort of federal component to the softness that you guys had.

And then I guess.

The tariff comments.

David Beckel: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Ananda Barua with Loop Capital. You may proceed.

To conclude, I'm excited to welcome the Lex, Mark team to Xerox. Lex Mark improves, our competitive position in imprint and will be an important contributor to reinventions financial targets of Revenue stabilization and double-digit adjusted. Operating income margins will now open the line for Q&A.

Is that sort of speak to there was that there is broader sort of pricing pressure. You had mentioned tariffs are a little bit more owners than you had anticipated.

So do you think it was sort of.

Specific pricing that caused it.

Thank you. As a reminder, to ask a question, please press star 1, then 1 on your telephone and wait for your name to be announced to withdraw your question. Please press star 1, then 1 again. One moment for questions.

Or do you think your customers are just sort of like in wait and see mode generally speaking and not related to us.

Ananda Baruah: Hey, guys. Yeah, thanks. Good morning. Thanks for taking the question. I have probably three if I could. And thanks for all the great detail. I guess the first one is the June. So you mentioned June, July slowdown. You mentioned it stabilized. And I think you guys mentioned in the fair remarks that sort of you mentioned DOGE and tariffs. And so was there just DOGE-related? Was there a meaningful, you know, sort of federal component to the softness that you guys had? And then I guess the tariff comment, that sort of speaks to that there was broader, you know, sort of pricing pressure. You had mentioned tariffs were a little bit more onerous than you had anticipated. So do you think it was, you know, sort of print-specific pricing that caused it?

Our first question comes from Ananda barua with loop capital. You may proceed.

Pricing.

Hey guys. Yes thanks. Good morning. Thanks for taking the question. I have I have

Top level follow ups. Thanks.

Alright, no promise John and.

Now youre spot on the timing I just want to be clear was May June.

And she is actually SMA with the June recovery My apologies.

Probably 3 if I could, um, and thanks for all the great detail. I guess the, the first 1 is, uh, is the June. So, you mentioned, June July, slow down,

Youre correct in your last component.

You have a lot of these these environments sled and fed that are dependent upon funding alright, and so on.

All of those dose and dose related issues, just causing pause nothing has come out as a cancellation we've seen no cancellations in the pipeline just a delay.

Got in the tariff.

The tariff piece for in the tariff piece for sure but.

Was there just those related, was there a meaningful, uh, you know, sort of federal component to the softness that you guys had. Um, and then I guess the, the Tariff comment

But the tariff piece is not as much as the cost flow through in those particular months as it has an impact of people, making decisions as they look at landed cost in the type. We had done the same you can imagine we did the same when we didn't understand what the destination in the source was on the tariff related products, we had to hold and make some decisions before we let things get shipped to us.

Ananda Baruah: Or do you think your customers were just sort of like in wait-and-see mode, generally speaking, and not related to the pricing? Thanks. And I got a couple of follow-ups. Thanks.

We had no idea what we were applying to that actual cost basis. So we wanted to hold until we started getting clarity and that has been consistent throughout the industry, we've seen and heard that with consistency that's not unique to us but those types of things is what gives you the softness in that kind of April may timeframe and that's why we saw such a June such a stronger June recovery against.

John Bruno: That's all right. No problem, John. And no, you're spot on. The timing, I just want to be clear, was May, June.

Is that sort of speak to there? Was that there was broader, you know, sort of pricing pressure. You had mentioned tariffs were a little bit more owners than you would anticipated. Uh, so do you think it was, you know, sort of print specific pricing that caused it? Um, or do you think your customers were just sort of like in wait and see mode generally speaking and and not related to uh, the pricing? Thanks and I got a couple couple follow-ups. Thanks.

Ananda Baruah: Yeah.

John Bruno: And she's actually up for May with the June recovery. My apologies. And you're correct in your last component. You have a lot of these environments, FLED and FED, that are dependent upon funding. Right? And so all of those DOGE and DOGE-related issues just cause them to pause. Nothing has come out as a cancellation. We've seen no cancellations in the pipeline, just a delay.

That's all right. No problem is John. And um no you're you're spot on the timing. I just want to be clear. Was May June?

Both of those related issues.

I appreciate that.

And then.

This is more of a clarification.

Ivy related.

The it solutions segment results slide.

And yeah, and like she's actually in for May with the June recovery, my apologies. Um, and you're correct in in your last component you you have a lot of these these environments LED and fed that are dependent upon funding. All right. And so all of those Doge and Doge related issues, just causing pause, nothing has come out as a cancellation. We've seen? No cancellations in the pipeline just a delay.

Ananda Baruah: Got it.

John Bruno: And the tariff piece.

Ananda Baruah: That's powerful.

John Bruno: And the tariff piece for sure. But the tariff piece is not as much as a cost flow-through in those particular months as it is an impact of people making decisions as they look at landed costs and the type. We had done the same. You can imagine we did the same. When we didn't understand what the destination and the source was on the tariff-related products, we had to hold and make some decisions before we let things get shipped to us because we had no idea what we were applying to that actual cost basis. So we wanted to hold until we started getting clarity. And that has been consistent throughout the industry. We've seen and heard that with consistency. That's not unique to us. But those types of things are what give you the softness in that kind of April, May time frame.

Savi impact of 154%.

Absent currency growth.

That against the total revenue growth in that I guess is that to say John that.

That the entirety of the growth was it savvy related.

Got it therapy and the Tariff piece for, and the Tariff piece for sure. Um, but the Tariff piece is not as much as it cost to flow through in those particular months, as it is, an impact of people making decisions as they look at landed costs and the type we had done the same. You can imagine we did the same when we didn't understand what the destination and the

I'm just trying to foot.

It's sort of what I'm trying to understand the question, you're saying are you, saying because I mean, we had we had very significant gross billings growing year over year in that space. So to answer your question yes.

At the core it savvy piece of it or the again as well as the legacy part of our business combined is what combines to give you that growth. So we saw strong gross bookings increase and strong gross billings increase against that and that is against the revenue, yes that is correct that <unk>.

John Bruno: That's why we saw such a stronger June recovery against both of those related issues.

Ananda Baruah: Appreciate that. And then this is more of a clarification IT savvy-related. On the IT solutions segment results slide, the IT savvy impact of 154%, constant currency growth, is that against the total revenue growth? And I guess is that to say, John, that the entirety of the growth was IT savvy-related? I'm just trying to foot sort of what the conversation is.

Source was on the Tariff related products. We had to hold and make some decisions. Before we let things get shipped to us because we had no idea what we were applying to that actual cost basis. So we wanted to hold until we started getting Clarity and that has been consistent throughout the industry. We've seen and heard that with consistency that's not unique to us, but those types of things is what gives you the softness and that kind of April, May time frame. That's why we saw such a June, such a stronger June recovery against both of those related issues.

Appreciate that. And then

Huntington, 50% growth that you see there it's purely driven to IP savvy, we do not give guidance for the full <unk> solutions.

This is more of a clarification, it Savvy related. Um the IT solutions segment results slides.

The.

Segment, but if you were just to look at the legacy <unk> solution revenue declined 3%. So the 150% growth came off from <unk>, including our results in Q2, 2025, I will say, though to add to that and this is why I think this is important while that is true that we were we declined 3% our legacy gross billings actually grew 13% year on year.

It Savvy impact of 154% toxic currency growth.

Is that against the total revenue growth and that I guess is that to say John that that the entirety of the growth was it Savvy related?

John Bruno: I'm trying to understand the question.

I'm just trying to foot.

<unk>.

Ananda Baruah: Yeah.

John Bruno: Are you saying because I mean, we had very significant gross billings growing year over year in that space. So the answer to the question is yes. The IT, the core IT savvy piece of it, and as well as the legacy part of our business combined, is what combines to give you that growth. So we saw a strong gross bookings increase and strong gross billings increase against that.

Really due to strong activities in Canada, and Thats why we have been trying to focus mostly on our pro forma gross billings and.

And our order activity because thats, an indicator of future billings in both a robust which is why we provide that number that's right and yes, and John gross billings grew actually 8%, which are an indicator of activity gross book and as you said you've grown even more in Q2 2025, that's right.

Ananda Baruah: Yeah. And that.

John Bruno: That is against the revenue.

Ananda Baruah: Yeah, that's correct. And our 150% growth that you see there, it's purely driven through IT savvy. We do not give guidance for the full IT solutions segment. But if you were just to look at the legacy IT solution revenue, decline 3%. So the 150% growth came all from IT savvy, including our results in Q2 2025.

Sort of what the I'm trying to understand the question. You said are you saying? Because I mean we had we had very significant gross Billings growing year-over-year in that space. So the answer question is yes. Um the it the core it Savvy piece of it or the end as well as the Legacy part of of our business. Combined is what combines to give you that growth. So, we saw a strong gross, bookings, increase, and strong gross Billings. Increase against that.

Yes, thanks for that clarification, that's helpful and then.

Did I hear accurately that John you said mid <unk> for it savvy mid single digit penetration only Anthony Xerox customer base low and no no. It's actually low while yes, Scott sub 5% I mean, that's why we're so encouraged I mean, we have.

John Bruno: I will say, though, to add to that, and this is why I think this is important, while that is true that we declined 3%, our legacy gross billings actually grew 13% year on year. And that was really due to strong activities in Canada. And that's why we've been trying to focus mostly on our performer gross billings and our order activity because that's an indicator of future billings, and both are robust, which is why we provide that number.

The cross sell activities have really been embraced by our investment thesis has always been that our direct sellers across our xps units would would be able to open doors across the thresholds of so many accounts and they built a pretty robust pipeline now greater than $50 million of these types of activities.

And we're just seeing the traction we had hoped for and it's great to see it become realizing it and that's what's driving this growth in the back end.

Yeah, and it is against the revenue. Yeah, that's correct that and I know our uh, the 150% growth that you see there, it's purely driven to it Savvy. We do not give guidance for the full IT solutions, uh, segment. But if you were just to look at the Legacy, it solution, Revenue declined, 3%. So the 150% growth came off from its Savvy. Including our results in Q2 2025. I will say, though to add to that. And this is why I think this is important. While that is true that we were, we declined, 3% our Legacy growth Billings actually grew 13% year on Year, and that was, was really due to strong activities in Canada. And that's why we've been trying to focus mostly on our performer gross Billings.

Ananda Baruah: That's right. And yeah, and John, gross billings grew actually 8%, which are an indicator of activity with gross bookings. As you said, you've grown even more in Q2 2025.

Okay, great. Thanks, I'll stop there guys I appreciate it.

Thank you.

Our next question comes from Erik Woodring with Morgan Stanley You May proceed.

John Bruno: That's right.

Ananda Baruah: Yeah, thanks for that clarification. That's helpful. And then did I hear accurately that, John, you said mid for IT savvy, mid-single-digit penetration only into the Xerox customer base?

And our order activity because that's an indicator of future Billings in both the robust, which is why we provide that number, that's, that's right. And and yeah. And John grows Billings grew actually 8% which are an indicator of activity with gross booking. As you said, you grow an even more uh, in Q2 2025, that's right.

Awesome. Good morning, everyone. It's my on for Eric.

Yes, thanks for that clarification. That's helpful. And then

I was wondering if you could maybe unpack some of that weakness you saw in April and May you know.

Broad based across customer segments are more prevalent and like SMB for example, and across geographies as well and then does your full I understand some conservatism baked into the back half of the year with your updated outlook does that assume you know.

John Bruno: It's low. No, no, it's actually low.

Ananda Baruah: Low.

John Bruno: Yeah, it's sub 5%. I mean, that's why we're so encouraged. I mean, we have the cross-sale activities have really been embraced by our investment thesis had always been that our direct sellers across our XPS units would be able to open doors across the thresholds of so many accounts. And they've built a pretty robust pipeline now, greater than $50 million of these types of activities. And we're just seeing the traction we had hoped for. And it's great to see it become real, realizing it. And that's what's driving this growth in the back end.

Did I hear accurately that John you said mid for it Savvy mid single digit penetration only into the Xerox customer base low. No, no, no, it's actually low. Wow. Yeah, it's sub 5%. Wait, that's why we're so encouraged. I mean, we have, um,

Demand remains stable and doesn't improve from the end of June or does that take into account an incremental softness in demand from where you exited the quarter.

Well I'll start with just a little bit choppy, but but it's more enterprise was relatively stable we saw more of a fed.

Ananda Baruah: OK, great. Thanks. I'll stop there, guys. I appreciate it.

And sled accounts is where we saw more of the pressure.

The cross sale activities have really been embraced by our our investment thesis. Had always been that our direct sellers across our XPS units would would be able to open doors across the thresholds of so many accounts and they built a pretty robust pipeline now greater than 50 million dollars of these types of activities. Um and we're just seeing the traction, we had hoped for um and it's great to see it become real realizing it and that's what's driving this growth in the back end.

John Bruno: No worries.

Inside the business and what we really focused on is our installations.

Okay, great thanks. I'll stop there, guys. I appreciate it. Thank you. No worries.

David Beckel: Thank you. Our next question comes from Eric Woodring with Morgan Stanley. You may proceed.

This is changes between quarters, and some sequential slowdowns, but when I look at it between our entry products at our mid products.

Thank you.

Maya: Hi. Awesome. Good morning, everyone. It's Maya on for Eric. I was wondering if you could maybe unpack some of that weakness you saw in April and May, you know, broad-based across customer segments or more prevalent in like SMB, for example, and across geographies as well. And then, you know, does your full I understand some conservatism baked into the back half of the year with your updated outlook. Does that assume, you know, demand remains stable and doesn't improve from the end of June, or does that take into account, you know, an incremental softness in demand from where you exited the quarter?

Our next question comes from Eric Woodring with Morgan Stanley. You may proceed.

The entry products was really changes in our backlog, where our mid tier clients was really just that softness in April and may but that was offset as rolando pointed out with very strong growth in our private <unk> installs, which was 30% plus so we expect to at least hold our share.

Hi, awesome. Good morning, everyone. It's Maya on for Eric. Um, I was wondering if you could maybe unpack some of that weakness you saw in April and May, you know,

The market in future periods and in the high end declines, which we which is self inflicted. These are the ones that we did on purpose basically reflecting the areas of our print print product portfolio in the places in which we exited so we intentionally exit certain segments to reintroduce ourselves back into these segments with the right products. So that's why the <unk>.

John Bruno: Well, I'll start with it's a little bit choppy, but it's more you know, enterprise was relatively stable. We saw more FED and FLED accounts is where we saw more of the pressure inside the business. And what we really focused on is our installations. A lot of this is changes between quarters and some sequential slowdowns. But when I look at it between our entry products and our mid products, the entry products was really changes in our backlog where our mid declines was really of just that softness in April and May. But that was offset, as Mirlanda pointed out, with very strong growth in our PrimeLink installs, which was 30% plus. So we expect to at least hold our share, you know, in the market in future periods.

Broad-based across customer segments or more prevalent in like SMB, for example, and across geographies as well. And then, you know, does your full? I understand some conservatives and baked in to the back half of the year with your updated Outlook. Does that assume, you know, demand remains stable and doesn't improve from the end of June or does that take into account, you know, an incremental softness and demand from where you exited the quarter?

Era.

This <unk> announcement. This morning was so important because this cut sheet inkjet part of production. We wanted to shrink the production portfolio down on products that were declining with higher cost to make ourselves available to go after and if you look at the market data there cut sheet inkjet is.

Greater than 13% on a compounded annual growth rate forecasted by expert external analysts between 2025 and 2030. So you would take that product at our free flow are finishing a remote services branding and you add that and stabilizing mid this is why the book ends of this strategy. We've talked about so much is critically important and a four.

Well, I'll start with this a little bit choppy, but but to it's more, you know, Enterprise was relatively stable, we saw more fed. Uh, and sled accounts is where we saw more of the pressure uh inside the business. And what we really focused on is our installations. A lot of this is changes between quarters and some sequential slowdowns. But when I look at it between our entry products and our mid products

Color and of course cut sheet inkjet on the high end of production. So that's kind of the choppiness that we saw through their both market and product.

John Bruno: And the high-end declines, which is self-inflicted, these are the ones that we did on purpose, basically, and reflecting the areas of our print product portfolio and the places in which we exited. So we intentionally exit certain segments to reintroduce ourselves back into these segments with the right products. So that's why the Kyocera this Kyocera announcement this morning was so important because this cut sheet inkjet part of production, we wanted to shrink the production portfolio down on products that were declining with higher costs to make ourselves available to go after. And if you look at the market data there, cut sheet inkjet is about greater than 13% on a compounded annual growth rate forecasted by external analysts between 2025 and 2030.

The entry products was really changes in our backlog where our mid declines was really, um, of just that softness in April and May, but that was offset as Manda pointed out with very strong growth in our Prime link installs, which was 30% plus. So we expect to at least hold our share, you know, in the market in future periods and in the high-end declines, which we, which is so

But.

Also to add to John's right, you clearly pointed out and we mentioned in our prepared remarks, our guidance for the rest of the year has some conservatism around it like we saw that softness.

And we build that into our equipment demand for the rest of the year.

Got it.

So its marcel on the equipment side is where that yeah yeah.

I'm talking to San Francisco restaurants.

Great. Thank you and then just one last one for me.

I apologize if I missed it but can you remind me did.

Did you guys actually end up implementing price increases over the quarter I know you guys talked about doing so at earnings last quarter.

John Bruno: So you take that product, add our free flow, our finishing, our remote services, branding, and you add that and stabilizing mid, this is why the bookends of this strategy we've talked about so much is critically important in A4 color and, of course, cut sheet inkjet on the high end of production. So that's kind of the choppiness that we saw through there, both market and product.

And if so you know where they just for specific products in the U S market or is it across the board globally and what are you hearing from customers on.

Even the.

Potential future price increases.

Ananda Baruah: Yeah. But Maya, also to add to John's, right, you clearly pointed out, and we mentioned in our prepared remarks, our guidance for the rest of the year has some conservatism in it, right? We saw that softness, and we build that into our equipment demand for the rest of the year.

Self-inflicted. These are the ones that we did on purpose basically and and reflecting the areas of our print print product portfolio in the places in which we exited. So we intentionally exit, certain segments to reintroduce ourselves back into these segments with the right products. So that's why the kasera. Um, this this kasera announcement, this morning was so important because this cut sheet inkjet part of production, we want it to shrink the production portfolio down on products that were declining with higher costs to make ourselves available to go after. And if you look at the market data there, cut sheet inkjet is about greater than 13% on a compounded annual growth rate forecasted by X external analyst between 2025 and 2030. So, you take that product at our free flow. Our finishing, our remote Services branding and you add that and stabilizing mid, this is why the book ends of this strategy we've talked about so much is critically important in A4, uh, color. And of course, cut sheet inkjet on a high end of production. So that's kind of the choppiness that we saw through their both Market.

While we were very consistent with our price increases and yes, we did implement them to partially offset.

And product.

Some of the tariff related issues as we came into the period.

Theres lots of discussions in the industry, whether we could apply a tariff surcharge or whether we had taken in price and you know all of the headwinds with regard to potential calling out tariff surcharges and so we followed suit with price increases in the places in which we could.

Yeah, but but my also to add to John's, right? You you clearly pointed out and and we mentioned enough with bare remarks, our guidance for the rest of the year, has some conservatives on it, right? We saw that softness um and we build that into our equipment demand for the rest of the year.

Maya: Got it. So it's more so on the equipment side is where that, you know, incremental conservatism comes from.

Had some pushback in the areas of contractual price increases as you would imagine.

John Bruno: That's correct.

Maya: Great. Thank you. And then just one last one from me. Apologies if I missed it, but can you remind me, you know, did you guys actually end up implementing price increases over the quarter? I know you guys talked about doing so at earnings last quarter. And if so, you know, were they just for specific products in the US market, or is it across the board globally? And, you know, what are you hearing from customers on even the potential future price increases?

Got it. Um so it's more. So on the equipment side as well that yeah, you know, incremental conservative correct.

From customers in our post sale environments, but on our equipment part of our revenue we apply them as judiciously as we can and we're going to continue to do that as we go through the period, because we could not we could not adjust the headwinds with price increases in the period, that's going to take time to recover that's going to take us out of 2025 and into 2026, which is precisely why.

Um great, thank you and then just 1 last 1 from me. Um,

We've provided the guidance there on what we did because these are the pressures on the operating income it really comes down to.

Apologies, if I missed it. But can you remind me? You know, did you guys actually end up implementing price increases, um, over the quarter? I know you guys talked about doing so at earnings last quarter. Um, and if so you know, were they just for specific products in the US market? Or is it across the board globally? And you know, what are you hearing from customers on?

The timing of which we can gain price increases the tariff related impact of the slowdowns et cetera, and some of the intentional things that we did but but fundamentally we have applied those price increases and we have been able to pull them through from an equipment and a transactional revenue perspective.

John Bruno: Well, we were very consistent with our price increases. And yes, we did implement them to partially offset some of the tariff-related issues. As we came into the period, there's lots of discussions in the industry whether we could apply a tariff surcharge or whether we had to take it in price. And you know all the headwinds with regard to potential calling out tariff surcharges. And so we followed suit with price increases in the places in which we could. We had some pushback in the areas of contractual price increases, as you'd imagine, from customers in our post-sale environments. But on our equipment part of our revenue, we apply them as judiciously as we can. And we're going to continue to do that as we go through the period because we could not adjust the headwinds with price increases in the period.

Even the potential future price increases.

Well, we were very consistent with our price increases and yes we did Implement them to partially offset.

Got it thank you so much.

Thank you.

Our next question comes from semi strategy with Jpmorgan you May proceed.

Hi, This is priyanka hopper on for Chad.

Chip.

Got a couple of questions on Lexmark one of them is why is the outlook for <unk> revenue in 2026 expected to be flat when they're exposed to growth markets and at least stronger growth markets than legacy Xerox print.

John Bruno: That's going to take time to recover. That's going to take us out of 2025 and into 2026, which is precisely why we've provided the guidance there on what we did because these are the pressures on the operating income. It really comes down to the timing of which we can gain price increases, the tariff-related impact of the slowdowns, et cetera, and some of the intentional things that we did. But fundamentally, we have applied those price increases, and we have been able to pull them through from an equipment and a transactional revenue perspective.

Some of the Tariff related issues as we came into the period, there's lots of discussions in the industry, whether we could apply a tariff surcharge or whether we had to take it in price and, you know, of the headwinds with regard to potential calling out tariff, search charges. And so, we filed a suit with price increases and the places in which we could, we had some push back in the areas of contractual price increases as you'd imagine from customers in our post-sale environments. But on our equipment part of our Revenue, we apply them as judiciously as we can. And we're going to continue to do that as we go through the period. Because we could not, we could not adjust the headwinds with price increases in the period that's going to take time to recover. That's going to take us out of 2025.

Yes, I could answer that so from a lexmark perspective, our expectation of lexmark being flat that is better than the industry, which we expect it's reducing by 3%.

And into 2026, which is precisely why we've provided the guidance there on what we did, because these are the pressures on the operating income. It really comes down to.

What drives that is lexmark is very well our position in the <unk> market, which is an area that is growing to say the least 80% of their revenue is basically annuity base and gives them an upper hand as it relates to the print market in 2025 and going forward.

Maya: Got it. Thank you so much.

Um, the timing of, which we can gain price increases, the Tariff related impact of the slowdowns ETC and some of the intentional things that we did. But but fundamentally we have applied those price increases and we have been able to pull them through from an equipment, in a transactional revenue perspective.

Got it. Thank you so much.

David Beckel: Thank you. Our next question comes from Somic Chatterjee with JP Morgan. You may proceed.

Thank you.

Alright, and what is the driver of operating margins declining to four 5% for the full year and 25.

Priyanka Sapa: Hi. This is Priyanka Sapa on for Somic Chatterjee. I've got a couple of questions on Lexmark. One of them is, why is the outlook for Lexmark's revenue in 2026 expected to be flat when they're exposed to growth markets and at least stronger growth markets than legacy Xerox print?

All right, next question comes from strategy with JP Morgan. You may proceed.

Priyanka, Sapa on for Sonic chattery.

Versus before.

Yes, So let me unpack a little bit of the operating margin for 2025, when we start with the revenue.

We are talking about revenue in 2025, growing 16% to 17%, which kind of includes a $1 billion of lexmark revenue.

Ananda Baruah: Yeah. I could answer that. So from a Lexmark perspective, our expectation of Lexmark being flat, that is better than industry, which we expect is reducing by 3%. What drives that is Lexmark is very well positioned in the A4 market, which is an area that is growing, to say the least. 80% of their revenue is basically annuity-based and gives them an upper hand as it relates to the print market in 2025 and going forward.

Got a couple questions on Lexmark, 1 of them, is why is the outlook for Lex Mark's Revenue in 2026? Expected to be flat when they're exposed to growth markets and at least stronger growth markets than Legacy Xerox print

What that means is if we were to go back now to the Xerox legacy.

That anticipates, roughly a 150 basis point lower than prior guidance, which as we mentioned previously has a degree of conservatism in the equipment outlook.

Given the demand softness that we saw in April and May.

Also want to remind again that our full year zero to legacy guidance includes 400 basis points of headwind from the reinvention initiatives that we took in the prior year and are flowing through in 2020 five.

I could answer that. So from a Lex Mark perspective, our expectation of flex Mark being flat, that is better than the industry, which we expect, it's reducing by 3%. Uh, What uh, drives that is Lex. Mark is very well uh, positioned in the A4 Market which is an area that is growing to say the least 80% or their revenue is basically a new device and gives them an upper hand as it relates to the print Market in 2025 and going forward.

Priyanka Sapa: All right. And what is the driver of operating margins declining to 4.5% for the full year in '25 versus 5% before?

All right.

As a result, our implied core revenue will be in a range of Xerox team to 4% a slight improvement from the prior year of 4% declined and we expect to continue to improve that Xerox legacy revenue trajectory.

And what is the driver of operating margins declining to 4.5% for the full year and 25?

Ananda Baruah: Yeah. So let me unpack a little bit of the operating margin for 2025. When we start with the revenue, we are talking about revenue in 2025 growing 16% to 17%, which kind of includes $1 billion of Lexmark revenue. What that means is if we were to go back now to the Xerox legacy, that anticipates roughly 150 basis points lower than prior guidance, which, as we mentioned previously, has a degree of conservatism in the equipment outlook given the demand softness that we saw in April and May. Also, I want to remind again that our full year Xerox legacy guidance includes 400 basis points of headwind from the reinvention initiatives that we took in the prior year and are flowing through in 2025.

Versus 5% before.

Driven by market share gains growth in digital legacy solutions, so with that that has an impact into our into our 2025.

Gross.

And adjusted profit margin four 5% in 2025 in relation to the adjusted profit is driven by mainly this declining topline revenue our gross margin is expected to be between 29% 30%.

Yeah. So let me unpack a little bit of the operating margin for 2025 when we start with the revenue. Uh, we uh, are talking about, uh, Revenue in 2025 growing, uh, 16 to 17% which kind of includes uh 1 billion of flex, Mark Revenue, what that means is if we were to go back now to the Xerox Legacy.

um,

And the tariffs right when we think about sort of the biggest drivers.

That anticipates, roughly 150 basis point lower than prior guidance, which, as we mentioned previously, uh, has a degree of conservatism in the equipment Outlook. Uh, given the demand softness that we saw in April and May

Tariffs is expected to impact our adjusted operating margins, 30% to $35 million.

And that is net of our initiatives that is higher than we initially had.

Discussed in Q1 related to some of our products coming in from China, 145% tariffs some of them slipped through we have higher cost expected for moving our supply chain from China to Mexico as well as as we're going through our price increase as John mentioned, we've been very balanced in passing those price.

Ananda Baruah: As a result, our implied core revenue will be in a range of, you know, Xerox 3% to 4%, a slight improvement from the prior year 4% decline. And we expect to continue to improve that Xerox legacy revenue trajectory driven by market share gains, growth in digital legacy IT solutions. So with that, that has an impact into our 2025 gross and adjusted profit margin. 4.5% in 2025 in relation to the adjusted profit is driven by mainly this decline in top line revenue. Our gross margin is expected to be between 29% and 30%. And the tariffs, right, when we think about sort of the biggest drivers, tariffs are expected to impact our adjusted operating margins 30% to 35 million. And that is net of our initiatives.

Increases to the customers.

Two thirds of the decline on the operating profit margin. So one third let's say tariffs.

Third it would be our slowdown and intentional delays into our reinvention actions as we are preparing to integrate and preparing for the synergies with lexmark. We intentionally are reviewing certain reinvention initiatives and so those will get posted 26 and 27 and then the piece of it.

Also want to remind again, that our 4 years zero Legacy guidance includes 400 basis points of headwind, uh, from the reinvention initiatives that we took in the prior year and our flowing through in 2025, uh, as a result. Yeah, our implied core Revenue will be in a range of, you know, Xerox, 3 to 4% the slight improvement from the prior year, 4%, declined. And we expect to continue to improve that Xerox Legacy Revenue trajectory, uh, driven by market share gains growth in digital Legacy, IT solutions. So, with that, that has an impact into our into our, uh, 2025, um, gross, um, and and adjusted profit margin 4.5% in 2025, in relation to the adjusted profit is driven by, uh, mainly this decline in Topline Revenue. Our gross margin is expected to be between 29 and 30% and the tariffs right? When we think about sort of

Related to our demand softness macro and some of the.

Of the biggest drivers.

Conservatism that I mentioned, we're building into the equipment sales and revenue top line for the rest of 2025.

Ananda Baruah: That is higher than we initially had discussed in Q1 related to some of our products coming in from China at 145% tariffs. Some of them slipped through. We have higher costs expected for moving our supply chain from China to Mexico, as well as as we're going through our price increases. John mentioned we're being very balanced in passing those price increases to the customers. Two thirds of the decline on the operating profit margin. So one third, let's say, tariffs. One third would be our slowdown and intentional delays into our reinvention actions. As we are preparing to integrate and preparing for the synergies with Lexmark, we intentionally are reviewing certain reinvention initiatives. And so those will get pushed to '26 and '27.

That was very helpful. Thank you.

Thank you I would now like to turn the call back over to Mr. <unk> for any closing remarks.

Yeah.

Thank you everybody recapping today's call. The addition of Lexmark advances our reinvention by strengthening our print businesses are stronger print business improved Xerox revenue trajectory and provides a platform from which we can accelerate the growth of <unk> solutions in our portfolio of digital services offered.

Tariffs is expected to impact or adjusted operating margins 30 to 35 million. Um, and that is net of our initiatives. That is higher than we initially had, um, discussed in q1 related to some of our products coming in, from China, at 145% tariffs. Some of them slip through, uh, we have higher cost expected for moving. Our supply chain from China to Mexico as well as as we're going through. Our price. Increase is John mentioned. We're being very balanced uh in passing those price increases to the customers.

As demonstrated this quarter.

Leading to revenue stabilization and revenue stabilization as key to realizing the value of our roughly $500 million of identified gross savings and operating income and we target a return of double digit adjusted operating income and substantially higher free cash flow generation. Thank.

Ananda Baruah: And then a piece of it was related to our demand softness macro and some of the conservatism that I mentioned we're building into the equipment sales and revenue top line for the rest of 2025.

Thank you everybody and have a great day.

Thank you. This concludes the conference. Thank you for your participation you may now disconnect.

Priyanka Sapa: That was very helpful. Thank you.

2/3 of the, uh, decline on the operating profit margin. So 1/3, let's say, tariffs 1/3 would be our slowdown and uh intentional delays in Dorian vention actions, as we are preparing to integrate and preparing for the synergies, with Lex Mark, we intentionally are reviewing certain reinvention initiatives and so those will get posted to 26 and 27. And then a piece of it was uh, related to our demands softness macro and some of the, um, uh, conservatism that I mentioned, we're building into the, uh, equipment sales and revenue top line for the rest of 2025.

That was very helpful. Thank you.

David Beckel: Thank you. I would now like to turn the call back over to Mr. Bandrowjak for any closing remarks.

Thank you. I would now like to turn the call back over to Mr. Vanderjagt, for any closing remarks

Steven Bandrowczak: Thank you, everybody. Recapping today's call, the addition of Lexmark advances our reinvention by strengthening our print businesses. A stronger print business improves Xerox revenue trajectory and provides a platform from which we can accelerate the growth of IT solutions and our portfolio of digital services offered, as demonstrated this quarter, leading to revenue stabilization. And revenue stabilization is key to realizing the value of our roughly $500 million of identified gross savings in operating income. And we targeted a return of double-digit adjusted operating income and substantially higher free cash flow generation. Thank you, everybody, and have a great day.

Thank you, everybody recapping today's call, the addition of Lex, muck advances, our reinvention, by strengthening our print businesses, a strong imprint business improves, Xerox, Revenue trajectory and provides a platform from which we can accelerate the growth of IT solutions and our portfolio of digital services offered as demonstrated this quarter.

Leading to revenue stabilization, and revenue stabilization is key to realizing the value of roughly $500 million of identified growth savings in operating income. We target a return of double-digit adjusted operating income and substantially higher free cash flow generation.

John Bruno: Thank you.

Thank you, everybody, and have a great day.

David Beckel: This concludes the conference. Thank you for your participation. You may now disclosures.Welcome

This concludes the conference. Thank you for your participation. You may now disconnect.

Steven Bandrowczak: to the Xerox Holdings Corporation Second Quarter 2025 Earnings Release Conference Call. After the presentation, there will be a question and answer session. To ask your questions at that time, please press star 11 at any time during this call. You can withdraw your question by pressing star 11 again. At this time, I would like to turn the meeting over to Mr. David Beckel, Vice President and Head of Investor Relations.

Welcome to the Xerox Holdings Corporation second quarter to 2025 earnings release conference. Call after the presentation, there will be a question and answer session to ask your questions at that time. Please press star 1 1 at any time. During this call, you can withdraw your question by pressing star 1 1. Again, at this time, I would like to turn the meeting over to Mr. David Beckle, vice president and head of investor relations.

David 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 Second Quarter 2025 Earnings Release Conference Call hosted by Steven Bandrowczak, Chief Executive Officer. He is joined by John Bruno, President and Chief Operating Officer, and Mirlanda Gecaj, Chief Financial Officer. 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/investor and will make comments that contain forward-looking statements, which by their nature address matters that are in the future and are uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I'd like to turn the meeting over to Mr. Bandrowczak.

Good morning, everyone. I'm David Beckle, vice president and head of investor relations at Xerox Holdings Corporation.

Welcome to the Xerox Holdings Corporation. Second quarter, 2025 earnings release conference call hosted by Steve vanderjagt, chief executive officer.

He's joined by John Bruno, president and Chief Operating Officer and Miranda gutsy Chief Financial Officer.

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.zero.com investor. And we'll make comments that contain forward-looking statements, which by their nature, address matters that are in the future and are uncertain.

Steven Bandrowczak: Good morning, and thank you for joining our Q2 2025 Earnings Conference Call. The closing of the Lexmount acquisition in early July marked an important milestone in Xerox reinvention. With this transaction, we unite two industry leaders with complementary sets of operations, offering strengths and market reach. Xerox and the Lexmount offering will be combined and optimized to enhance client value, providing the foundation from which we can expand the penetration of our IT solutions and digital services businesses as we help our clients navigate the increasingly digital nature of document workflows and processes. I'd like to commend both the Xerox and Lexmount teams who this quarter navigated a challenging operating environment while preparing for an accelerated transaction close and integration timeline.

Actual future Financial results. May be materially different than those expressed hearing at this time. I'd like to turn the meeting over to Mr. Banner Jack.

Good morning, and thank you for joining our Q2 2025 earnings conference call.

the closing of the lexmont acquisition in early, July, and walked in an important milestone in Xerox reinvention,

With this transaction we unite 2 industry Leaders with complimentary sets of operations offering strengths and Market reach.

Xerox. And the lexmont offering will be combined and optimized to enhance client value. Providing the foundation, from which we can expand the penetration of Our IT solutions and Digital Services businesses. As we help our clients navigate, the increasingly digital nature of document workflows and processes

Steven Bandrowczak: Summarizing results for the quarter, revenue of around 1.58 billion was roughly flat with the prior year in actual currency and declined 1.1% in constant currency, inclusive of IT savvy. Adjusted operating income margin of 3.7% was lower year over year by 170 basis points. Free cash flow was a use of cash of $30 million, reflecting in part a delay in the sale of a large portfolio of finance receivables. An adjusted loss per share of $0.64 declined $0.93 year over year, due in large part to an unfavorable tax rate. This quarter demonstrated the improved resiliency of revenue and adjusted operating income afforded by our reinvention, specifically the benefits of a more favorable mix of revenue from faster-growing businesses and a more flexible and simplified operating structure.

I like to commend both the Xerox and Lex Mark teams, who this core to navigated a challenging operating environment while preparing for an accelerated transaction. Closed and integration timeline.

Summarizing results for the quarter revenue of around 1.588%. In constant, currency inclusive of it savvy.

7% was lower year-over-year by 170 basis points.

Free cash flow was the use of cash of 30 million reflecting in part a delay in the sale of large portfolio of Finance receivables.

and adjusted loss per share of 64 cents, declined, 93 cents year-over-year due in large part to an unfavorable tax rate,

This quarter demonstrated, the improved resilience here, revenue and adjusted operating income afforded by our reinvention.

Steven Bandrowczak: In the second quarter, strong demand for cloud-enabled services at our IT solutions segment helped offset a brief period of softer demand for print equipment in April and May amid peak DOGE and tariff-driven uncertainty. And our relentless focus on cost discipline helped preserve adjusting operating income, offsetting the effects of lower-than-expected sales of print equipment and higher tariff costs. The improved resiliency demonstrated in Q2 provides an affirmation of our strategic direction, the benefits which are expected to be further enhanced through the acquisition of Lexmount. Our strategic focus this year, in anticipation of the close of Lexmount acquisition, has been the continued execution of reinvention, ensuring the full realization of benefits from the IT savvy and Lexmount acquisition and preserving balance sheet strength. I'll provide a brief update on this quarter's progress in each of these areas. Starting with the execution of reinvention.

Specifically, the benefits of a more favorable mix of revenue from faster growing businesses, and a more flexible and simplified operating structure.

In the second quarter, strong demand for cloud. Enablement services at Our IT solutions segment helped offset a brief period of softer demand for print equipment in April and May amid Peak dose and tariff driven uncertainty

And our relentless focus on cost discipline helped preserve adjusted operating income, offsetting the effects of lower-than-expected sales of print equipment and higher tariff costs.

The improved Brazilians, he demonstrated in Q2 provides an affirmation of our strategic Direction. The benefits, which are expected to be further enhanced through the acquisition of lexmont.

Our strategic Focus this year in anticipation of the close of lexmod acquisition has been the continued execution of reinvention, ensuring the full realization of benefits from the it Savvy and lexmod acquisition and preserving balance sheet strength.

I'll provide a brief update on this quarter's progress in each of these areas.

Steven Bandrowczak: In the second quarter, we advanced a number of reinvention initiatives aimed at optimizing our commercial offering and simplifying operations, each of which will provide benefits well beyond the Lexmount integration. This quarter, we expanded our inside sales program to cover new territories and product lines, further enabling our direct sales force to concentrate on larger client opportunities. We also reduced the time it takes to process orders at our XPS business unit by four days, improving both time to revenue and client satisfaction. In IT solutions, we continue to build momentum in the cross-sale of advanced IT offerings in Xerox print client base, an important contributor to this segment's recent strength. And ongoing operational simplification efforts leveraging technology-driven efficiencies enabled another double-digit percentage reduction in adjusted organic operating expenses.

Starting with the execution of reinvention.

In the second quarter, we Advanced a number of reinvention initiatives.

Aimed at optimizing, our commercial offering and simplifying operations. Each of which will provide benefits. Well beyond the Lex smart integration.

This quarter, we expanded our inside sales program to cover new territories and product lines. Further enabling our direct sales force to concentrate on larger client opportunities.

We also reduced the time, it takes to process orders at our XPS business unit by 4 days. Improving both time to revenue and client satisfaction.

In IT solutions we continue to build momentum in the cross sell of advanced IT offerings in Xerox print client base. An important contributor to this segment's recent strength.

Steven Bandrowczak: We will continue advancing reinvention initiatives currently in flight and those planned for the future as we progress the phasing of our reinvention to now include the integration of Lexmount. John will describe the evolution of our reinvention strategy to incorporate the Lexmount integration in more detail. Moving to acquisition benefits, the integration of IT savvy is largely complete, and we are ahead of schedule in the realization of the planned strategic and financial benefits associated with that acquisition. The IT solutions team has embraced the spirit of reinvention and continuous improvement to find operating synergies beyond those originally contemplated. As an example, Xerox IT Solutions has consolidated the purchase of Xerox Corporation's IT assets, which were previously handled by external partners.

An ongoing operational simplification effort leveraging technology-driven efficiencies enabled another double-digit percentage reduction in adjusted organic operating expenses.

We will continue to advance reinvention. This is currently in flight, and those plans for the future are progressing as we phase our reinvention to now include the integration of Lexmark.

John will describe the evolution of our reinvention strategy, to incorporate the Lex mod integration in more detail.

Moving to acquisition benefits. The integration of it Savvy is largely complete and we are ahead of schedule in the realization of the plan, strategic and financial benefits associated with that acquisition.

The IT solutions team has embraced the spirit of reinvention and continuous Improvement to find operating synergies Beyond those originally contemplated.

Steven Bandrowczak: The insourcing of Xerox IT spend reduces the cost of Xerox Corporation's IT products and results in an improved status with and higher rebates from IT solutions OEM partners. Moving to Lexmount, the integration of Lexmount is progressing well, aided by the addition of two seasoned Lexmount leaders to the Xerox Executive Committee: Billy Spears, who will lead product development, manufacturing, and supply chain for the combined business, and Jeff Butler, who will run the combined global business service organization. Detailed integration planning work had been conducted prior to the acquisition close and is now firmly in an execution phase. As we have progressed this work, our confidence in realizing synergies has increased. Accordingly, we now expect cost synergies associated with the Lexmount acquisition to total more than $250 million from our original estimate of more than $200 million, all of which remains realizable within the next two years.

As an example, Xerox, IT solutions has Consolidated the purchase of Xerox corporations. It assets which were previously handled by an external partners.

The insourcing of Xerox. It spend reduces the cost of Xerox corporation's, it products and results in an improved status with and higher rebates from IT solutions OEM partners.

Moving till next month, the integration of lexma is progressing. Well aided by the addition of 2 Season, lexmont leaders to the Xerox executive committee, Billy Spears who will lead product development manufacturing and supply chain for the combined business. And check Butler, who will run the combined Global Business Service organization. Detailed integration planning work had been conducted prior to the acquisition closed, and is now firmly in an execution phase.

Steven Bandrowczak: Finally, balance sheet strength. The Lexmount acquisition was funded primarily with debt but results in a lower gross debt leverage ratio after accounting for the nearly $300 million of Lexmount's acquired EBITDA. With the Lexmount acquisition now complete, our top capital allocation priority is the repayment of debt. Following the implementation of cost synergies, which require an upfront cash investment, we expect improved free cash flow from core operations and more than $600 million of proceeds expected from the reduction of finance receivables between now and the end of 2027 to be deployed to repay debt. This year, we reduced our dividend to place even greater focus on the repayment of debt. We will reevaluate our dividend policies as Xerox's gross debt leverage ratio approaches our medium-term target of three times trailing 12 months EBITDA.

Years.

Finally balance sheet strength. The Lex mod acquisition was funded primarily with debt but results in lower gross debt, leverage ratio after accounting for the nearly 300 million of Lex Smart's acquired ibida.

With the Lex mod acquisition. Now complete our top Capital. Allocation priority is the repayment of debt

Following the implementation of cost synergies which require an upfront, cash investment, we expect, improved free, cash flow from core operations and more than 600 million of proceeds. Expected from the reduction of Finance receivables, between now, and the end of 2027 to be deployed to repay debt.

This year, we reduced our dividend to place. Even greater focus on the repayment of debt.

Steven Bandrowczak: Before I hand the call to John, I'd like to put the Lexmount acquisition in context of our broader reinvention strategy and comment on the improved competitive profile of the combined Xerox and Lexmount businesses. In 2023, we implemented our reinvention strategy to ensure we are operationally and strategically best positioned to continuously address the evolving workplace needs of our clients. This required reducing or exiting activities and businesses that are not central to our legacy business or development of higher growth value-add adjacencies such as IT solutions and digital services. Last year, we simplified our business model to enable closer alignment between our businesses and evolving needs of our economic buyer of our workplace solutions. We also established a global business service organization, or GBS, to centralize key processes and drive continuous operating efficiencies throughout our reinvention and beyond.

We will reevaluate our dividend policies. As Xerox. Growth debt, leverage ratio approaches our medium-term Target of 3 times trailing 12 months ibida.

Before I hand the call to John, I'd like to put the Lex mod acquisition in context of our broader reinvention strategy and comment on the improved competitive profile of the combined Xerox and Lex mod businesses.

In 2023, we implemented our reinvention strategy to ensure we are operationally and strategically best positioned to continuously address the evolving workplace needs of our clients.

This required reducing or exiting activities and businesses that are not Central to our Legacy business or development of higher growth value. Add adjacencies such as it Solutions, and Digital Services.

Last year we simplified our business model to enable closer alignment between our businesses and evolving needs of our economic buyer of our workplace Solutions.

Steven Bandrowczak: Greater strategic focus and a more simplified business model freed up the resources and managerial bandwidth to execute and successfully integrate two transformative acquisitions that will contribute to our reinvention goals of revenue stabilization and a return to double-digit adjusted operating income margins. IT savvy, which enhances our IT solutions offering, and Lexmount, which will strengthen and diversify our print business. The Lexmount acquisition enhances Xerox's position as the leading provider of services-led software-enabled hybrid workplace solutions. It creates a larger vertically integrated leader in print and managed print services, and Xerox's portfolio evaluated higher growth as years.

We also established a global Business Service organization or GBS to centralize key processes and drive, continuous operating efficiencies throughout our reinvention and Beyond

Greatest strategic focus and alignment on a more simplified business model freed up the resources and managerial bandwidth to execute and successfully integrate two transformative acquisitions that will contribute to our reinvention goals of revenue stabilization and a return to double-digit adjusted operating income margins.

it Savvy which enhances Our IT solutions offering and lexmont, which will strengthen and diversify our print business,

The lexmont acquisition enhances Xerox position as a leading provider of services-led software enabled, hybrid workplace Solutions.

It creates a larger vertically, integrated leader in print and managed print services.