Xerox Holdings Corp.

The company's significant cash balances support the rating for now. While Xerox's good liquidity position allows it some operational flexibility to make investments and limit refinancing risk, we anticipate revenue and EBITDA expansion from 2020 levels will be modest over the next 12 months. We do not anticipate a recovery in 2021. As a result, cash flow generation will be well below past levels of $1 billion or more. We expect annual free operating cash flow (FOCF) of about $450 million-$500 million in 2021 before dividends of $200 million-$220 million. The company's shareholder return target of at least 50% of free cash flow will limit retained cash flow. The stable outlook reflects our expectations that while Xerox will continue to

...We expect digital transformation and hybrid work from home trends will accelerate print industry declines. Xerox has experienced persistent revenue declines highlighting the structural drop in printer markets and challenges inherent in pivoting a large-scale business with high exposure to mature markets. While revenues in 2021 will be flattish because of some resumption of office activity, we believe it will be temporary. The timing to revenue stability and growth are uncertain considering the significant base of enterprise printer business and digital transformation and IT modernization trends underway. While the company is investing in product innovation and IT service offerings targeted at small and midsize businesses (SMB), revenue contributions from growth areas are minimal today given these are recent initiatives and will take longer to realize....

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