Xerox Holdings Corp at Morgan Stanley Technology, Media & Telecom Conference Transcript

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

Question: Eric Woodring - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>Perfect. So maybe I think it would be most helpful to start, Steve. Just look back on the last 24 months, a lot has changed both from the business from a strategy perspective since you took the helm as CEO. What's kind of most important that has changed under your leadership?

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. Okay. That's super helpful. I want to -- you went through a lot there, so I just want to maybe double-click on reinvention because it's kind of key to the story here. Maybe the question is like the key pillars there. I think you went through them, but if we could just like into a little bit more detail. And what is the end goal of reinvention? Where do we get at the end of reinvention?

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. All right. Perfect. So maybe let's start at the top and take a step back and talk about the print market. You talked about low single-digit declines. We've seen kind of behavioral changes, use of digital tools, environmental concerns, return to offices maybe here, but question mark. Can you just maybe help answer that question of what are you seeing from your customers when it comes to the print market? And how do you offset from your own business to take share? How do you offset those kind of headwinds at the market level?

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. And then let's go to the other side of things where I hear from you over multiple quarters now excitement, which is digital and IT services. So the way I guess I kind of think about it is you have a ton of relationships already. You're using IT savvy as maybe the ballast to build out this strategy. It's relatively small today. The goal is to get to 20%. Maybe just help us understand what services are you selling? Is this a reseller business? Is this a VAR business? Is this a distribution -- where does services fall in terms of value add for you guys?

Question: Eric Woodring - Morgan Stanley - Analyst : And what are you hearing from your customers when it comes to that? When you hear the response from them, what is something that gives you the confidence that, hey, what we've already launched can become that much bigger? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 3:45PM, XRX.OQ - Xerox Holdings Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. Great. Two more questions and then Mirlanda we'll bring you into the conversation. Both of them are on print. So first one, you alluded to the Lexmark acquisition. I would love to just get your perspective. You've been partners for some time. Two questions. What are the key benefits that this deal provides Xerox? And then how do we think about kind of the long term or maybe not the long term, but the impact on your financials and the print trajectory with Lexmark in the business?

Question: Eric Woodring - Morgan Stanley - Analyst : Cool. That's exciting. It's really exciting. And as a follow-up to that one more on print is just Steve, I feel like I hear from you more so than many others involved in the industry. This focus on like innovation and differentiation in print. You've obviously mentioned security is a big factor there. What can drive -- and push back on me if this is an incorrect question, but what can drive faster refresh cycles or faster or stronger upgrade rates than we have seen in recent years?

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. Helpful. And Mirlanda, maybe I'll wrap you into this before we move on to another topic is just if we take everything that we just talked about, pre Lexmark acquisition, what does this mean for 2025? Can you just talk about kind of market growth or market performance, share gains, pricing, kind of one-off headwinds and tailwinds, how do we land at how you're thinking about 2025 from a financial model perspective?

Question: Eric Woodring - Morgan Stanley - Analyst : Right. And all -- everything that you just said is inclusive within that -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 3:45PM, XRX.OQ - Xerox Holdings Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. Perfect. And Steve and Mirlanda, maybe if you could just quickly touch on financial services? Again, you mentioned it's gone through a bit of a strategy shift. Where do we stand with this business today? Kind of what's the key message on XFS today?

Question: Eric Woodring - Morgan Stanley - Analyst : Right. Okay. Let's go back to one of the key pillars of -- we've talked about kind of the demand side. Let's talk about the cost side because it's almost more exciting. If you go back to kind of pre-COVID Xerox, you were at double-digit operating margins. That is the goal to return back to double-digit operating margins. My question is twofold. What are the kind of heaviest levers you need to pull to get there? And can you do that with a flat to declining revenue base or do you have to grow to get to double-digit operating margins?

Question: Eric Woodring - Morgan Stanley - Analyst : Right. Okay. And I'm kind of doing this in reverse order. As I think about the income statement, so I just ask you about operating margins. Now I'm going to ask you about gross margins, and I think about it in reverse, but there has been pressure there. What -- how much of reinvention can address kind of that level of the cost side of things? And really what I'm trying to get is making sure that investors don't think this is just ripping out costs. It's much more intricate than that. But maybe help us understand how that affects kind of the gross margin side of the process?

Question: Eric Woodring - Morgan Stanley - Analyst : Okay. Let's turn to kind of free cash flow, capital allocation before we end. So obviously, FITTLE plays a role in cash flow. So for this year, you've guided to $350 million to $400 million of free cash flow. Can you just walk us through the kind of underlying drivers of maybe core free cash flow generation versus kind of the forward funding agreement? And then how that kind of changes over the years, at least as you have insight into?

Question: Eric Woodring - Morgan Stanley - Analyst : Right. Okay. Maybe let's end on capital allocation. Maybe love to ask each of you, Steve, just starting from kind of like the strategic side of things, how do you think about the priorities because they have shifted over the years? And then Mirlanda, maybe put some numbers behind that.

Question: Eric Woodring - Morgan Stanley - Analyst : Perfect. We are just out of time. So Steve, Mirlanda, thank you very much for joining us, and good luck.