Xerox Holdings Corp at UBS Global Technology and AI Conference Transcript

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

Question: David Vogt - UBS - Analyst : Maybe we could start with Q3 what's going on in the market. Obviously, there's a lot of cross currents, company specific, macro. Maybe we could start what you saw in Q3 and where we sit today and how the company is positioning itself going forward post the quarter?

Question: David Vogt - UBS - Analyst : So against the backdrop of the Reinvention program and what just happened in Q3, where do we sit today in that three-year journey? In terms of the asset portfolio, you mentioned the acquisition that you did this year, where do we sit today, I guess, in terms of how the portfolio sits within Xerox and what needs to get done on the margin hit the milestones that you laid out for the Reinvention strategy over the multi-year period.

Question: David Vogt - UBS - Analyst : Can I maybe go back to your internal customer list in the mid-market versus what they bring to the table? How much overlap is there today? I know it's a very large number of customers. But when you look at the potential overlap and the ability to double that wallet share, how should investors think about the low-hanging fruit? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 5:15PM, XRX.OQ - Xerox Holdings Corp at UBS Global Technology and AI Conference

Question: David Vogt - UBS - Analyst : (multiple speakers) I know it's going to be tough. But from a sales force productivity perspective, how do we think about that ramp? Because these are very different offerings and they're used to selling. So is this a 12-month productivity ramp timeline to think about? And so as we sit here a year from now as we're going into '26 that relationship should be in a much stronger position than where we sit today. Obviously, that you just did.

Question: David Vogt - UBS - Analyst : (multiple speakers) you work with the channel partner to get them up (multiple speakers)--

Question: David Vogt - UBS - Analyst : So against that construct of retraining your internal salespeople, rehiring, however, you want to phrase it, educating and training the partner community the channel. When you think about the planting or supporting a secularly declining print business, what -- and you mentioned the low-single digit -- the high-single digit CAGR earlier. Ultimately, what is the revenue model look like as this becomes more successful? Like if we sit here and say, wow, we've nailed this 12 months from now. What is the top-line framework look like for Xerox under this new paradigm? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 5:15PM, XRX.OQ - Xerox Holdings Corp at UBS Global Technology and AI Conference

Question: David Vogt - UBS - Analyst : Got it. So then does that begs the question? So you're at 15% roughly obviously cash flow and capital allocation and your balance sheet are very important considerations today. Does that mean that you need to invest more organically to take that 15% number higher to 2025 or is that an organic strategy or a combination of the two? Like how do we think about getting you over that hump to offset that low-single digit decline in print so that the mix supports obviously (technical difficulty)--

Question: David Vogt - UBS - Analyst : And forgive me for not knowing this. When you think about the tip of the spear in terms of services perspective, when you said you mentioned that why I'm asking you pulled and you queried your partners, what are they looking for right out of the gate from there? Like what is like missing in their stack that they don't currently have where they want to replace with a trusted partner like Xerox?

Question: David Vogt - UBS - Analyst : Security.

Question: David Vogt - UBS - Analyst : That plays into, Xerox is obviously the (multiple speakers) data security, right (multiple speakers)--

Question: David Vogt - UBS - Analyst : Is it fair to say so that the segmentation of the market allows you to attack this mid-market [laborious] of businesses because if you're a large security vendor, you're not coming downstream. It's a local relationship built up over decades, if not longer. And so that gives you the opportunity to be their preferred partner of choice in that (multiple speakers)--

Question: David Vogt - UBS - Analyst : Is that kind of the (multiple speakers)--

Question: David Vogt - UBS - Analyst : Got it. So maybe for Xavier, as we move down the strategy, we're inflecting hopefully positively on revenue growth margin should expand. I know cost has been a big focus from your seat. If you can walk us through where do you think operating margins can get to? I know there had been some maybe backing away, maybe that's not the right phrase of some of the cost-cutting initiatives given the revenue headwinds, but as we go through '25 into '26, how should we think about this journey from a strategic perspective and what it means for the overall profitability?

Question: David Vogt - UBS - Analyst : How much of the margin improvement in addition to Reinvention is tied to the new strategy from bundling or adding capabilities or driving wallet share from IT services? Could you have gotten to the margin targets over a multi-year period without this or is that critical to stem the revenue declines to actually grow top line and drive margin?

Question: David Vogt - UBS - Analyst : Need both.

Question: David Vogt - UBS - Analyst : Leverage in a second. But so you mentioned for each incremental revenue dollar under the strategy comes in at a higher margin. Have you shared with your investors how that works? So we're taking margins from mid-single digits to double digits through revenue growth through the incremental addition of the IT services acquisition. So by definition that on a lower cost base, that would imply that these new revenue streams have much better margin. Is that the right (multiple speakers)--

Question: David Vogt - UBS - Analyst : So the way to phrase it, these are value-added IT services, not -- run of the mill block and tackle low-margin offering.

Question: David Vogt - UBS - Analyst : That's what I wanted to double check. So okay, so we'll come back to cash flow in a second. So we just did a deal. Obviously, you want to get more mix shift towards faster growing IT services, touched on it briefly earlier. If we don't do any future M&A over the next three years, I would imagine your targets for under Reinvention and this mix are achievable, right? We you don't need to do anything or inorganically hit those numbers. Is that --

Question: David Vogt - UBS - Analyst : -- organically, you don't need inorganic (multiple speakers)-- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 5:15PM, XRX.OQ - Xerox Holdings Corp at UBS Global Technology and AI Conference

Question: David Vogt - UBS - Analyst : Got it because I know, we talked to people on the capital structure side, on the debt side that are focused on where your cash flow is going, refinancing, et cetera.

Question: David Vogt - UBS - Analyst : Okay. Got it. We didn't -- we touched on it on the side here. I want to get your perspective tariffs, economic conditions. I know you're dealing with a lot of company-specific and industry-specific issues. You have any thoughts on how maybe Trump 1.0 versus Trump 2.0 plays out. Supply chains are very tricky. We were talking about this earlier, very ingrained in Southeast Asia. How should we think about it? And I know it's very early days. How are you thinking about it in relation to your strategy?

Question: David Vogt - UBS - Analyst : To all of your products that are manufactured assembled in Asia is the bill of lading effectively in the US. So it comes through a US port or you ship -- not locally but to other regions out of that market?

Question: David Vogt - UBS - Analyst : Like what percentage of--

Question: David Vogt - UBS - Analyst : We got some misunderstanding for a lot of companies like it's only US centric good.

Question: David Vogt - UBS - Analyst : Effectively that are going to be subject, well hopefully how do we (multiple speakers)--

Question: David Vogt - UBS - Analyst : So a little bit of (multiple speakers)--

Question: David Vogt - UBS - Analyst : So maybe it's taking on federal government changes. So we've heard from a ton of companies over the last couple of months that federal spending has been somewhat challenging in IT. It's also caused, I think some consternation and maybe spending in other verticals. How do you think about 2025? I know you're working through your own strategic plan. But if there is a unified game plan from Congress and the President and all houses pro-business move things forward. Have you thought about what that might mean? Your business does the mid-market -- let's start with the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 5:15PM, XRX.OQ - Xerox Holdings Corp at UBS Global Technology and AI Conference mid-market. Does the mid-market exhibit more confidence quickly? Like how is that reaction? How's that feedback loop and how would that maybe affect your business?

Question: David Vogt - UBS - Analyst : I mean, if let's say tax cuts are extended, how quickly do they react in terms of exhibiting confidence in the health of their end-markets and (multiple speakers)--

Question: David Vogt - UBS - Analyst : Anything that we didn't cover that, came up in meetings. I want to give you an opportunity to maybe educate, inform investors post Q3.

Question: David Vogt - UBS - Analyst : Got it. So my final question for you is if we're sitting here a year from now, what do you expect the message to be? Obviously, it's going to be bumpy. It's not going to be linear will be another year into Reinvention where does the capital structure sit? How do we think about what we're planning for the next (multiple speakers)--?

Question: David Vogt - UBS - Analyst : All right. So I think with that, I think we're out of time. Steve, Xavier, thank you for your time. Thank you for everyone for joining and thanks again for coming.