XRX - Earnings call 4 2023 | Xerox Holdings Corporation

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Operator

Welcome to the Xerox Holdings Corporation's Fourth Quarter 2023 Earnings Release Conference Call. After the presentation, there will be a question-and-answer session. [Operator Instructions] At this time, I would like to turn the meeting over to Mr. David Beckel, Vice President of Investor Relations. Please go ahead, sir.

David Beckel

everyone. morning, Good Vice Xerox Beckel, Head Investor of I'm Corporation. President at Holdings Relations David and Welcome Holdings Chief the Call to Xerox hosted Release XXXX by Conference Earnings Steve Bandrowczak, Executive Corporation Officer. Fourth Quarter Heiss, John Bruno, Financial Chief and and He's joined Executive President President by Vice Operating and Officer; Xavier Officer. Chief Corporation, of is conference being recorded. At the today's request Xerox Holdings call Other permission of expressed recording without prohibited the and/or rebroadcasting are of this call Xerox.

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

Steven Bandrowczak

cash income, challenging and morning, cash environment. start income slightly adjusted delivering Good the macroeconomic flow like growth year I'd our thank the half amid team XXXX joining weaker-than-expected for of margin Xerox free operating for and despite guidance second flow and earnings full strong QX year. a call. XXXX conditions you EPS We operating by in in free the and achieved macro commending to uneven adjusted

in which $X.XX and through and year. currency the billion been to overcome years a currency. discipline, Summarizing top culture forged of full X.X% Our recent is ability and challenges. in and in operational line meet has declined flow company's actual results profit operating Revenue of targets headwinds strengthened and cash year testament macroeconomic this X.X% for constant to

IT would however. this and services performed businesses Our than result much suggest, top line corporate better digital

year operations, challenges and of point solutions-based be greater to foundational of accepting reinvention to Client CEO a address of beginning focus and actions workplace. the transformative improve August $XXX prior simplify accomplishments core nonstrategic All Free X% products out client set after $X.XX, structural certain describe $X.XX year-over-year. simplification XXX declined and and full cash basis less will was year higher multiyear year of over $XXX growth adjusted intentional was for effects our first reductions the reinvention. an for margin businesses. businesses took efforts sustainable current in million in and and increase call, was million, XXXX our of XXXX Adjusted revenue the for Xavier our of later the flow within backlog of de-emphasis call As year, XXXX for a the in to always team the adjusting towards operating while, delivered success marked and in pivotal profits. Starting revenue points higher than reposition by we Which structural more Xerox more the long-term XXXX. and and differentiation of my position actions a in We reinvention guidance for that year-over-year to business and business. client will this operational productivity resulting Since and on momentum strong a provided maintaining services is the in of for with is the Xerox I emphasis competitive strategic directed our clear at beyond. path XXXX, success. stable outcomes hybrid our a which priorities and the strategy foundational EPS range. X.X% we and put XXXX, key and was a in print

PARC, take of took digital investment our and sales Xerox year, of Peak repeatability to trends. a operational client support Xerox print, advantage of focus partnerships to exclusively printing technology equipment market position total outcomes of complete remain solidifies outcomes adviser HPS We divested Canada focus workplace an actions as future. signed in expands allowing by It clients evolving improves and Solution, trusted focus Elem enable the our rigorous client and addressable and on responsive service we build we with positive predictability Research Last that for the financial positive business delivery market the Our solutions as and core Center the and to of solutions partners, services. our Fidel affiliate of business. businesses. on XD IT We on ensuring

which We and of drive client our large equipment digital challenged hardware. account industry also in to success stability client of like above the markets print even such revenue Net we Promoter intended presence an in than evidencing reduced Xerox IT XXXX, sales In as certain contract services compete, of focus reduction Score share and achieved our the we nonstrategic on sell renewal enhanced in our levels results, centricity proving profitability, certain can print in more with lower delivered Print. traditional renewals, secularly paper that new spend. in We and offset markets rates revenue across improved. grew XXX% ability types

reinvention Moving and profitability million base and pricing scale in profile and growth operational capacity this from to month for double-digit reduction cost returning and to firmly operating levels from the improving margin stem In us by on restructuring tactical by profitability. requires low reduction efforts, adjusted profitability. by in a of path $XXX of scope of our XXXX, improved discipline revenue These ongoing nonstrategic margin strong profit deliver than basis structural put announced and build. XXXX, efficiencies while XXX to Improvements our areas. a more with Xerox we to year-over-year. the and actions Transformation profits early contemplated by which reinvestment adjusted the profit points

policy debt excess Xerox share the per free more $XXX rewarded team that achieved million Finally, total cash shareholder when are and by and our our while shareholder important debt reduced combined to used approximately while our XX%. pay on with It by our cash balance balance share sheet our flow is was dividend, while count lower than million $X of XXXX, returns. $XXX Board reinvention. to reducing return we our accompanying In on its management investors

of our build in year achievements will on X reinvention. as We these XXXX our priorities evolved

adoption new details our are and IT the expand wins in a XXXX the print, strategic short, revenue In new greater unit-led client-centric And products which priority our businesses. business of mentality leveraged will the with business this service significant market and capabilities including our a Bruno, Our partner pursue workplace. bedrock drive client-centric to businesses alignment revenue and provide of buyers and penetration service existing rather model a improve expected of model, renew. business today's diversification. unit us as reach a COO, market hybrid partner-led more on over establishment John digital closely partner a services is share the core relationships new with and rates of time. ecosystem, is our service and opportunities from we core digital be of geographic end and and by reach businesses, IT more client operating and President on of These with new changes. the strengthening Earlier our businesses. and we of economic month, repositioning contracts Xerox our to the continued to changes partner prospective operating of further mindset incremental resulting opportunities will announced rates global focus first with higher and strengthen will than reorganization Stronger aligning form equipment a led our both the sharpens of distribution. operating capture a to ancillary clients, These core expected position print, to revenue our along

in place XXXX above priority in on is improvements XXXX XXXX. to is in through Our efficiencies improvements levels put expected drive We associated the XXXX. structural quarter are of expected second Which reorganization. operating last million the and of adjusted implementation profits to that improvements deliver higher $XXX build successful announced again net cost with meaningfully our income reinvention and

We earlier of that in expect in X/X large cost the part month. this reorganization to associated achieve organizational XXXX more improvement announcement due savings with to than

service GBS, Our XXXX. which John global catalyze these organization newly will or describe, will savings in expected further business organizational formed

improve comprehensive AI works Beyond internal which into it business of cost with improvement for technologies offerings, this do an satisfaction associated to making key advanced footprint like restructuring to the embed as further those processes, announced augment product machine This we engine optimization a our within to Xerox. recently also more continuous program. began expected savings XXXX, the we expect of client and and are learning GBS with and and be to easier geographic group year,

capital Finally, allocation.

to As towards leverage. Excess reward cash be directly to path be to capital. I our invested of management expected and rates mentioned, to shareholders used over tactically X as more Directors flow invest and share on expected these reinvention. free In organization and to to now John in Board is the our recent high us map. dividend provide announcement Xerox goals. on used the our is expected to acquisitions pay the projects hand per road cash reduce $X of I'll priorities believe or Bruno is flow with important our execute of long-term XXXX, free reinvention reinvention puts we our it Each returns achieving details on call

John Bruno

reinvention by balanced to and to opportunity client a remain coverage but and of needs today's its with of reinvention validated they is to Steve, clients. business We to meeting clients. the our and model are Critical services in an opportunities a IT IT secularly the client part and I market, and we to improve be their to Xerox with these operationalizing our build must we're good There strategy you, relevant capable market market more offerings. underutilized business multiyear adjacent appreciate through Thank and core, more around evolve. clients. business easier services penetration our that more today, adjacent and our market predominantly digital addressing fully foundation markets Print, of is And address planning. existing a environment of and to in understand as market reinvention to this secondary about win and the the needs and to you be market, by for primary do the Xerox provide At dynamics stable, morning, of like evolving for opportunities improve as legacy referring is mid-market, everyone. in journey. I'm purpose opportunities speak our to to new core opportunity fit competitive, research service These within challenged clients to enhancements our digital the available require today context a our our where is assertion

transform and complexity future. part Pattern into that has was my important As we efficient to have our modernize Xerox, a for time. me and what lack been like workplace I've different address simpler, aimed similar at resistance such, this change. companies, which business most very need clients' are first In challenges heritage. is our of time little and now have over operationally place, large with business. Xerox strong a the experienced to In other its addressing organization year, our reinvention hybrid more tells of the built of to I or we transformation efforts recognition successfully desire designing

people any work to that's the embrace place and they're Our and asking tenacity to are direct and change, is discipline. to a for great and it. as And be requires eager reinvent company complex

leaders XXXX reductions organizational the a and ONC goes shared from operating and few simplification, focus profit more XXX support print, and building changes with Xerox. differentiation capabilities an on formation for the name by our rights in go-to-market to merges narrowed our of will formed Earlier Business and It leverage a structural our are reduce all success we and total as generate year GBS of geographies entities, legal generate continuous agile. costs redesign lack external more to digital management, innovation, As services distribution In revenue be to model profit initiatives. model. businesses and overhead of operations to required to organizational XX require this these defined Steve operating ERPs, sales improved month our year Project team sustainable leading more on customer information processes, a initially in from offerings year delivery a leveraging by offering spanning set Progress income operating return experiences. is XXXX. with examples. have competitive business and profit. target key XXXX, well where regional teams made invoice or geographic service key Services, new These flatten a we narrow efforts concurrent expected responsible IT effect above but enable than see systems gross focus toward drive organizational 'XX an to to improvement. are structure be We The embed product earlier they by drive capital. enterprise journey. our layers marks centrally noted, XXXX streamlines improve expected moved payroll reach than executing to at operating selectively X GBS We and business and from empower of associated a global achieve system in to actions improve announced Global of efficiencies and summary, teams removed of will the with our was will designed, beyond decision efforts. team of a invested our touchless foundational and Xerox. a streams of fewer previous and XXXX enabler coordinating management technologies and for million is revenue internal from this office The this complexity. will one will we platforms. In business to to just foundational we currently to levels We and rates reductions costs negative sufficient strategic enabler productivity and program second our as align comprised long-term new improvements optimize on and offerings a up of This efficiency regions, X-year well to end-to-end competing work priorities involves the The the groups organization, as GBS, GBS internal as $XXX development and potential sales one offering our place gains operating month, cost to that of we profitability strategic organization geography that driven and improvement We unit. operating our collapses unit-led in outweigh currently announced in profits.

reinvention led The model journey GBS. simplification the throughout by initiatives with first savings operating continuous

from offering is a profit I to direct investments in solutions and as geographies with I'll business more partner-led and net results second to savings simplification operations tactical favorable product efficient improved partnerships revenue hand grow and shareholder of mix digital The profile generated geographic a portfolio. will into finally, with beyond. costs and over financial associated XXXX, to certain they're updated lower XXXX And going in being simplified more efforts, our forward journey and to continue our services provide replacement the and with our returns. the now keeping look through delivers along IT you and reinvention call Xavier. more

Xavier Heiss

Thank you, John, and good morning, everyone.

improve steps As and in our XXXX were Steve mentioned, taken on important to simplify profit balance sheet Xerox profile. business

of For strong more and structure reflecting despite cash the year, successful modest delivered a implementation earnings we in and flow share revenue, operating free per growth a cost rigorous the decline discipline. flexible in

are reinvention. intentional the the and declined improvement backlog efficiencies our revenue. mainly further reduction equipment Revenue of certain further expected profit structural by margin second year to reorganization year in reduction profit nonstrategic prior growth by Additional affected year-over-year enabled a was of to significant full our QX, in revenue, due quarter. drive of XXXX, In

factor, this increased single have low would Excluding year-over-year. revenue digit

declined This sales and by The than offset to operating XX.X% per other were than to profitability. due to basis operating pricing by and points benefit expense. EUR million the business redetermination due of reduction increase mainly Turning net cost actions, nonfinancing and benefit quarter year-over-year gross the due the margin year, XX expense, offset points structural in product unrecognized to of Adjusted on XX.X% higher tax effort. lower noncore of lower basis and structural XXX of of largely fourth was higher by margin $XX includes assets higher restructuring lower profit in and X.X% lower change of compensation the workforce cost simplification rate announced Adjusted asset the or interest due shares. $X.XX prior the expenses partially Gross EPS revenue per income loss FG deferred the $X.XX prior royalties, associated year-over-year net, lower expenses, on benefit prior to was year. charge year. with offset an termination tax Adjusted compared was of to $X.XX declined activity, million freight the to higher partially reductions. and partially lower over XXX by strategic last lower of the pricing costs lower recently associated benefit of was share. the decrease position. the Adjusted tax driven GAAP $X.XX other after-tax with allowances share $X.XX quarter certain year valuation

backlog more XX.X% Equipment $XXX in The Let declined revenue. mix, year-over-year favorable activity or year in year actual mid by QX cash me Declines on with and increased prior prior of constant prior Starting revenue year now in declined. and XX.X% while less sales prior in were currency. flow million year effect review detail. in in color to declined year-over-year on of drove reductions, currency. backlog. momentum product Post Underlying reduction decline. current XX% currency affected year-over-year, primarily installation on entry of revenue more while as offerings equipment demand of order gaining macroeconomic conditions declines equipment, $X.X constant to backlog entry in sales of due stable which backlog equipment installations for than point high-end X.X% constraint, reflect stabilize. outpaced to in backlog and our is reflect Total X.X% activity actual year reduction mid year-over-year remains reduction the billion revenue currency

declined region and over termination as actual plan in on of royalty modestly. only device Fuji to effect we on absence lower-margin both the the to constant exit Excluding placement, continue revenue endpoint revenue, the currency. Russia, paper of reduce decline the well time post IT of the of nonstrategic which and sales Geographically, park as

and for will item of revenue associated help quarters nonstrategic signipance I businesses. in provide clarify commentary the additional full trajectory trends our Span year, the our underlying revenue on to recent with core the Given

year the of QX, in decline by lower to this in paper printed XXX simplify on page revenue stable our When and basis For business growth points of around businesses revenue. full digital prior the revenue single the this effect XXX effect to decline decline of low points equipment total contributed Lower core XXX year-over-year the are demand IT contributed around on IT around actions the digit our devices in points on contributed and services combined partially basis reflecting removed, nonstrategic endpoint basis reduction backlog offset taken sales in royalty strategic quarter, decline. volumes. grew and from

For this to the for points the decline declined in item X%. in a same contributed XXX the basis Therefore, year, the have year year-over-year aggregate core business than around little less revenue. would revenue

activities of a working financing Let's noncore flow of a and reflecting compared reduction of Financing Finance now prior cash in cash proceeds cash lower million $XXX of Free $XX sales lower source use of a totaling to QX $XXX $XXX $XXX mainly of expected. a our by $XXX of review in compared were cash partially million the as flow of on a in in cash cash by in The HPS of improvement $XXX driven CapEx. year, assets, capital million a to were secured of the receivables reduction assets with from of dividend associated the cash year a to higher million this $XX forward $X in net quarter, million $XX around offset million, $XX use million in benefit million program improvements source and consumed flow. Operating of by debt a $XXX of million. million includes year-over-year resulting was a year-over-year. prior driven quarter cash were capital. of of compared by cash increase Investing payment in organization mainly QX, of which with a lower flow QX million source cash due activity in this the Working cash million was inventory. XXXX. was source $XXX million to business in

the During term loan proceeds the loan we repaid a quarter, from credit with a facility. of bridge insurance

FITTLE its declined solutions. product volume balance of in Captive X%. origination reflecting the FITTLE year-over-year, XX% actual segments. change focus reflecting around FITTLE currency, financing on up FITTLE towards in to sequentially only return funding existing HPS to captive receivable finance X% origination. were runoff of receivable origination Turning finance strategy declined

sales reflecting XX% Other on lower driven by $X commissions. slightly receivable As highlighted, revenue previously Print to profit Other income segment QX finance and in lower decline in revenue, lower balance sales finance lower was to Print higher revenue, bad the year-over-year, assets. pricing nonstrategic was XXXX. prior in fees decline reduction in and normalize by FITTLE QX versus segment effect profit mainly margin prior debt down the FITTLE cost FITTLE million the actions. in year billion other associated a due mentioned $X backlog expect XXX we of resulting our of up and and declined to year-over-year and finance structural to and efficiencies declines commission offset finance receivable revenue year-over-year profit million, with in intercompany and fell prior year-over-year, expenses in items X.X% balance, reduction Segment to receivable my by the $X point due due for partially closer by equipment offset post basis year from partially comments. quarter, lower

capital to term concept borrowing few Total attributable structure. of $X.X Turning over remaining the cash, debt and cash, $X.X of of We with finance ended cash a unsecured on business. balanced $XX remaining the to loan. years. our equivalents asset restricted next non-leasing the debt around QX a secured billion of We million our support with outstanding maintained maturity around bonds, asset billion senior ladder $XXX million of new finance bond debt the

guidance. I will Finally, address

decline to decline effect is headwind the specifically, expected performance year attributable of in constant of revenue, of points sales the the contribute X% in points XXX guidance with on Included X% the XXXX year-over-year to core For all reduction decline businesses, to nonstrategic currency backlog to basis with certain a the XXXX. to unrelated print in in associated lower this XXX expect services deemphasis are prior of which basis and in More revenue, around reduction we revenue, of are certain of nonstrategic the of backlog another including businesses. our paper. of

this and business macroeconomic expected is and digital roughly the growth services in condition. of neutral core be demand IT Excluding item, revenue cumulative year-over-year, stable flat effect reflecting to print

future As strategic involving respective simplification update decided, product action are geographic the of on effect actions or guidance will these accordingly. we

reduction expected In in cadence, previously revenue a affect revenue terms sequential is the revenue improvement quarterly of between expected year. of QX backlog trajectory decline effect expected headwinds at the are that the year-over-year and XXXX particularly QX third second to the noted, growth year. rate most significantly in of year-over-year throughout and with to the quarter QX of

on driven simplification will and by structural be profit expect the throughout XXXX The expected to the margin increase the of at reinventions reduction factor XXXX margin of X. on at including XXXX $XXX in in realization enabled year-over-year, Operating will income in through level XXXX. of above points be the announced adjusted profit X/X cost timing from in improvement basis profit least by seasonal in QX an operating X.X%, improvement decision XXX effect We reorganization, actions, lowest structural to margin more than of be reductions workforce of January operating due resulting least XXXX. expected the million mainly our

improvement associated in revenue $XXX outweighed once significant slight Improvement on Free benefit be will is profit predicated from lower far nonstrategic revenue. flow profit debt with reorganization We operations underlying solid growth and acquisition. guidance cash demand in dividend finance in ability of as at achieve onetime cash line cash with XXXX XXXX. higher in to QX expected the our offset an in with of the in clear, increase are at balance. to operating and expected level throughout by $X are improvement services, year. margin plan not To receivable that is expected will momentum associated opportunity in on QX Free is meaningful be for on with again signing reinvest the improvement million expecting restructuring flow payment, reduction the in operating cash our to to outstanding enter according a on and expected from taxes operating our least expected more from to a savings and be to reduction savings be strategically Xerox. share clear flow XXXX business obligation enable rate footing, contribution. stable structure we cash profit. free our another investment, in to and of Excess orders opportunistically In deployed pay to We product including simplified return flow summary, sight year our pension

We will now line open the for Q&A.

Operator

Thirdly, for of one line moment Ananda And the comes Loop question our from first first our from question. Baruah Capital.

Ananda Baruah

I those quantified the do sort of fully I revenue think kind a to good be revenue have a quarter -- impacted last well. the what's point off deck well. reported I that in I you how of for as expect in apples-to-apples. year? couple, about And as pointed off I if of be headwinds quick... The When on to and way And you guess could. through the as Can they sort roll time guys out pointed out to the the you at guess think what to we move them rolled call,

Xavier Heiss

Okay. Ananda, if are one, different main there, the at Xavier as here. speaking phasing so next we the have headwinds Yes, that But mentioned you nature look here. you of the by the would they normal XX by year, nature. impact around that to basis have is I business the our They say, X% X%. are, core we points said minus we forecast not minus And do here there. it,

compare the is out of expect the basis XXX backlog, the we the XXXX. XXX X end The The end points backlog. at quarter impact. first basis The to of backlog one of end backlog is of point the

the quarter year have should backlog. the because So compare of in normal quarter still X and be impact XXXX, we X last pressing

for point basis at QX. there, during the the we is example, They IT item XXX there stay to mentioned end phase royalty, paper of end related out full that the sales, item, have will we other there, the but endpoint. The will year, year the that item we within some year an items are

backlog So important The are largest of the -- less X. nature. but one in they backlog is is the and quarter and

Ananda Baruah

sanity That's just up, getting what sort then be to it something you profit of million up Is maybe forecasting that, $XX Is or super year-over-year. looks do, nicely to math million op helpful. $XXX you're like assessment? an that I'm use. on It like check but a this like accurate here. is looks like And the like that to accurate? depending And easy revenue

Xavier Heiss

And Yes. higher. even

last it year operating After was is the margin this X.X%. X.X%. year, So

have So progression X.X%. for forecasting at in that are year, least we we quite guiding done profit. And a nice next operating

is XXX here operating this been than more In we're million basis in adjusted points are income, absolute operating which $XXX margin. more about million $XXX this we of also value, income year, operating than on after doing as progress speaking So has that well.

are momentum revenue. the not -- operating I we driven the other of that point entirely delivering is flag nice dependency improvement a by that margin want and is to building So or this operating profit

is we improvement being we that one we understand there. at given actions guidance, revenue our operating that which you beginning restructuring the But have started the January, the a the profit, now. a one-off supporting already actions of of this large are that are the impact play, actions that have of have announced in margin We lot action operating

Ananda Baruah

super that's And helpful.

that the company's are things that income, XXXX for one. remind versus driven let dovetail completely is revenue you goal that incremental it have me last $XXX for that the me. into control? of us of that's how Can And then you Just one the much million under op

Steven Bandrowczak

the reinvention the as changes and strengthening the has of cost which we drives did, combination drives goes very one announced out launch very the of when strategic and the structural On, simplification make the a business end-to-end the of our core that you we of strategic an we flexibility to goes revenue and things very, up, have and adjust our down. sure revenue remember,

business. doing about to of margins talked simplification. So GBS drive X in will there One, drive our and and pieces drive we're it. We reinvention improvements overall our what

Second, geographies strategic take we're in going to our products. actions and our

so revenue on of of make that independent revenue. adjust we on can operating million what the adjust decisions to So we up whole profit and happened down whatever $XXX nonstrategic based

Ananda Baruah

it. got I

would so so accurate? to $XXX And the incremental million? addition in that any Steve, driven revenue be Is

Steven Bandrowczak

should. It Yes.

We very our we profitability. should default, by right. our you're profitability. increased higher has revenue higher increase strategically that targeting revenue, And We are absolutely

Operator

our for question And moment line from next One question. Chatterjee the of next comes our Samik you. Thank from JPMorgan.

Samik Chatterjee

if start How that I flat context can out on keep and guiding nonstrategic the from guess certain the guide we x I you're a to for backlog in with your what businesses. do a XXXX, demand is revenue the clarification market. in in of have which to exit I or in of you're here for referring I into you've about in And are you a XQ outlook? European when baking mild macro softening follow-up. your sort XXXX How thinking seen XQ, impact the

Steven Bandrowczak

Yes.

strong. that turn we grow a take start QX, took at backlog Let signings in and for strong services and and extremely me it Xavier that then over looks that, We and numbers. saw a business at to our look

areas also strengthening today. in the our We that see we core in play business

increase orders, at over signing XXX% our of we're core backlog combination our signings, And Xavier services piece in our in the and a business. mentioned now on revenue other our that in renewal was service. So in contracts

as growth us go and Xavier? stability gives foundation good those forward. for So we

Xavier Heiss

add Steve, I as well. will

a the bit specifically conditions of quarter So quarter bit both were We little Fan interest a on easing around see that specifically here. observing, X. we there's the of the the smoother Europe rate sides macro X, little in

But bit So trend the on it we industry important is telling the This flat mentioned normalized to [indiscernible], confidence is that indicator page revenue the put here, what have When when X%. office a sustained. you return also as is Samik, volume you here. side. this minus is is of we paper also us thing, gives numbers at be revenue at little to here of seeing this the look the can look we us on that revenue, on

Samik Chatterjee

Yes.Got it. Got it.

improvement million of second of cash HPS some sort in then to and $XXX or XXXX. so And Okay. cash. the accrue continue my for $XXX transaction There's on have operating one, income million you you flow, an did

cash us a for I there what's the XXXX, a And in bit piece And the -- there? is mean? as bit with help hope the why higher maybe So more flow particularly, well? guidance restructuring in

Xavier Heiss

a Yes, good Samik, that's question.

stage improvement the to free flow, at is improvement least So the we the of year. this cash cash $XXX directly flow, of million the which income. related in said at The operating operating

U.S. are tax an from due restructuring adjusted We cash a million. XX%, flow has additional provision, point additional free mentioned being for as we profitability you we we in from or to we cash XX% income are the operating contribution our it, then pensions have expecting to also an still as year, have what But the view there. conversion cash rate $XXX that income operating around provision have do which and a is of range, to well to used this of in impact there. produce restructuring

you on it is will around us of net how gives Over this, this when XXX. trend provide visibility time, going. this number quarter-by-quarter So of we all more

Operator

question. Morgan our And for line moment question One Stanley. next of from the from comes next Erik our Woodring

Erik Woodring

few contracts, renewal Steve, a helpful customers. large -- color understand rates believe frame know have you'd don't of us the customers fairly well. I of same then how the customers. think for metric you Can percentage help as rest cohorts, SMB on you smaller have it to services the tail a just about those I for I we represent? what maybe maybe long start, how if those customers. of large just And

the set? And enterprise think customer follow-up, importance about renewal of please. then So how for the SMB a have of look cohort? rates large And kind do I versus that how do I

Steven Bandrowczak

Erik. Appreciate Thanks, Yes. it.

So roughly about overall it's X/X our revenue. of

IT core services and of opportunity digital so there the contracts. we're services on embed to seeing And top our what really is

a We've as we're challenges of client renewals the we have. is to and drive what So we been help start biggest up we do clients centricity. seeing our them big they how help come that And on some focus year-over-year. do means solve how see productivity,

SMB, use and to about whether our successful we to increase more challenges offset if significant it's on profitability, look applies been the it's to same bring continue we've pressure, capital, SMB When Same whether has SMB around around opportunity. rates think due profitability products us labor it's it's whether help our around overall whether offset. We So whether up. they're enterprise and of at you with it's costs, even thing of pressure whether on pressure businesses, capital, of in renewal pressure increase see probably in to an headwinds, to right? costs, that's it's labor on them why we it's to looking our solutions that, in that help

We help talked we that we of law quarter solutions some these So we cetera. of the on some et of on, focusing bring last how solutions. universities, about inside continually help we're do do inside really vertical care, firms, how health

execute and grow accounts have, just And for seeing of evidence to signings. on so we core inside been already that we of I've made accounts sees renewal solutions now And continue that at our very everybody already that of that we're and we those a better new and with we the client services opportunity the it, times great rates, us term stated of the as bring existing is with successful. need and top our is in we we've products expand look products have, couple and core services have to that to We with beyond a statement business.

Erik Woodring

think if Super. help kind X.X% Xavier, in to of to to low. how at it understand revenue, but revenue significant the X, gross quite because reduction as we're would a percentage depending OpEx just imply January that is margin all as we operating margins, fairly announced you OpEx And looking percentage turn on you, in of understand a OpEx, of gross that Okay. RIF on about maybe I margins I relative target. of you helpful, can asked Very maybe at us trajectory I maybe land better Steve. the XXXX

I how really how be you might of next want that to reinvesting understand dynamics us understand And if end? or through some this all to those you please? So think XXXX, collectively, just other on that just the and year for better so could much of help year

Xavier Heiss

Eric, you've the Yes. here. picture so got big

I driven are you as what know well, just pricing that of already expansion we or slight expecting OpEx mentioned lot actions a will gross that with paper. this a enable margin. it, offsetting stream all And by or margin this we expansion mentioned profitability. or We of also, to been this say, reduction supported is place, expansion are action So have have some some also we revenue. year. would that And a are exiting as with we revenue to, have we But this endpoint margin by next of the in gross type is measure put is an margin. have we year I of the reducing area mentioned improvement. we profitability some And clearly And IT with have margin. able you higher other this low it solution lower year.

that here, restructuring year-over-year. margin margin had with here. If done, adjusted than you with the a and by you the donation points and on the improvement will operating is ppark will earn the year-over-year, look specifically at -- to driver of operating we main have that have XXX basis trajectory, related it amount SAG it's When park reduced RD&E more the we we be at look this the this significant improvement --

actioning based on the last that already actions that on So have actions taken either end the year the and of or XXX we benefit flow-through. year where on basis back last points see announced are we were will

So dependency is the on revenue us the the point on trajectory, executing is key point the my cost key here message less it -- the behind actions. that

Steven Bandrowczak

the other Eric, add like we the I'd question. thing to get always because

big that You did actions the doing and reinvention.

with of to of simplify of ways we're cetera. industry SG&A, that's we all work look end-to-end at Those drive coverage, sales structure. the business, we it's opportunity et the which systems variations to we business. where you beginning at of around in of that our really what can in And the do whether benchmark this so at and cost when confident. lot company, number to year, we we this processes got finance, where against did we as IT, do looked different against number the have, And in that still have, a whether look the We've it's

that to put and a we've from standpoint we really execute, of through pure in to it lot execute against next is us. a for GBS months. at But still of benchmark that's GBS XX there's other we'll us. obviously, of place. focused. the room look we've where got when lot ahead And just we XX a So And really opportunity industries, got companies

those Our it on in expanding Global process independent and do We processes, see we business how simplification at our Chat we're of that drive of to robotics really end-to-end we the Business decline. simplify cost each one each RPA, think technology. and that or We the the slight we're line of see Services looking a processes significant grow staying in as at future, focused the opportunity how those margins and and do of AI. then and how is automation GPT, using do we looking every automate revenue one flat about those a

company this in efficient. very and cost very, we're we've So execute we more can that room drive, our a optimistic lot basis we can lot of to and got make a

Erik Woodring

you Xavier obviously, really didn't about hear question, and allocation, Super. Maybe beginning we last capital color the quick Thank on was for and that that. one buybacks.

right I of not those done priorities that sure about buybacks thinking And then kind we should being understood make in be me. that's any and for to want just it XXXX? I so And

Xavier Heiss

You are correct.

Operator

hand This the question-and-answer session Steve back for of does program I'd to Bandrowczak further any like remarks. conclude program. the to today's

Steven Bandrowczak

our conference listening call earnings you Thank to for morning. this

reinvention. on firmly path our are We of

businesses, reinvention this free allocate shareholder way Our XXXX in reorganizations core a the of to returns. to through strengthen costs generate more reduce our we year expect flow optimizes second our $XXX in is of further total focus that than structural million cash in and

a $XXX targeted 'XX levels sight X-year improvement goal at of ensuring great profit we exceed operating you line above day. million laser-focused Thank and on and income to by XXXX least our the are clear of have for in of have 'XX, adjusted improvements We profit listening, XXXX.

Operator

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

disconnect. You may day. now Good

Xerox (XRX) 25 Jan 242023 Q4 Earnings call transcript