Xerox Holdings Corp at Citi Global TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : So I'll kick it off, and we can tag team here who wants to take this. But, we've been sitting here asking all our companies about end demand. As we secure at calendar 3Q, how you guys are thinking about end demand right now? And if you dial it back maybe to the start of the year, what has surprised you? And how do you think about the puts and takes to end demand from here on to the end of the year?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : All right. And then maybe if you can -- what gives you the confidence, like whether it is anecdotally or even -- I mean, obviously, you have a pretty strong pipeline or backlog that's giving you confidence that the improvement in growth or improvement in the growth trajectory, both in 3Q and then like you said, positive growth in 4Q. If you could double-click on what's driving that confidence in growth? Are you -- is that any particular geos? Is it particular end markets? That would be helpful (technical difficulty) customer size.

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. Right. Just maybe we've been talking to, obviously, HPQ, we've talked to Dell. They're talking about obviously, different end markets, perhaps and where you guys are on the enterprise demand side. A little bit more caution, I sense just on enterprise demand. Maybe some of it just because IT spending has been shifted to AI, for example. So within that context, can you remind me how you think about demand for print, print services, and then we can also shift into IT and digital services. But what is your long-term outlook perhaps on print demand? And more in the near term, what are those drivers that gives you confidence on that secular trend?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. And just more even on the -- I know I understand that there's this OEM option that you're doing on the higher-end print, any specific seasonality within each of those low, mid, and high end that we should be aware of?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. And AI, I know a lot of people talk about AI, we've been asking all our companies here to talk about how AI impacts their end markets, their core offerings. Maybe if you could talk a little bit about how you think Xerox's offerings play in the world of AI?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Are you guys using AI internally? It's one of the questions we've been asking all our companies --

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : And maybe perhaps you can talk a little bit about what are you seeing in terms of whether it's productivity savings or some -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 7:50PM, XRX.OQ - Xerox Holdings Corp at Citi Global TMT Conference

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : All right.

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. All right. Maybe we can talk a little bit about the Project Reinvention. And I know in the past, you've also done Project Own It. Maybe just talk about what is -- why is Project Reinvention different from Project Own It? And for those in the audience who may not know, maybe you can just give a little bit of introduction.

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay.

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Related to that, I know you guys have -- and related to your reinvention, I think you have some operating income targets that you've shared with the investment community. I know it's over three years or '24,' 25, '26 of $300 million incremental operating income improvements. And so one of the questions I get is, help us understand from the structural cost savings that you've talked about and Project Reinvention. What gives you confidence that, that kind of flows through into the operating income line that what investors will be focused on?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : And then the cadence of that?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. All right. We can switch to digital and IT services maybe as key growth drivers. I know you both talked about that. And just maybe for the purpose of the audience, how do you define digital services? How is that different than IT services and the key drivers of growth for each of these subsegments of the business?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : And can you remind us like what how much of the revenues right now are from each of these two subsegments like digital versus --

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. And how fast have they been growing for you, let's say, over the last, I don't know, 12 months?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. All right. And then obviously, the question I get is, how much investment do you need to double that business? And how does that factor into your operating margin income improvement that --

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 7:50PM, XRX.OQ - Xerox Holdings Corp at Citi Global TMT Conference

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. Little bit about your forward funding agreement. If you can remind investors what's the impact of forward cash flow -- or sorry -- free cash flow. And -- how is that expected to fund your Project Reinvention initiatives?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. You talked a little bit, Steve, about consolidation at some point. I mean, it's an industry that is flattish, let's say, goes through these periods where there's declines, obviously, macro-related otherwise. Generally, investors don't view as more print. People are printing less, and that's why you're adding on value-added services there. Still quite a few players in this space. So what's your view on consolidation? When does the market get there? What's preventing the market from consolidation?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Yeah. Let's see. On your -- let me -- actually, first, let me just ask the audience. Any questions from the audience? Yeah, please raise your hand, so we can bring the mic. If not, I have a few more questions here. Capital allocation. I know you talked about that. You have points of -- given your growth and the free cash flow generation from the sale of receivables here, you will be generating $1.5 billion or expecting to generate $1.5 billion of free cash flow by 2027. Can you talk to us about how you think about capital allocation in light of those funds? And should we expect like significant debt pay down here?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : Okay. If I may, Steve, you've been a CEO at the company since mid-2022, I hope I have my dates right. What are some of the biggest challenges that you've seen in this industry? And just actually you've taken the helmet Xerox, and the strategic changes that maybe you think investors don't necessarily appreciate and that you'd like to highlight?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : All right. Great. Any other parting remarks, maybe what you're most excited about, John?

Question: Asiya Merchant - Citi Investment Research (US) - Analyst : All right. Thank you very much. That about wraps up for today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 7:50PM, XRX.OQ - Xerox Holdings Corp at Citi Global TMT Conference