Xerox Holdings Corp. Q4 FY2024 earnings call

• 2024 was a year of reinvention with structural changes like business unit-led operating model, sales organization realignment, and Global Business Service Organization formation. Revenue in 2024 was $6.2B, down 9.7% in actual and 9.5% in constant currency. • Achieved $200M of gross reinvention cost savings in 2024, with total company operating expenses down close to 12% excluding ITsavvy and one-time costs. • 2025 priorities include executing next phase of reinvention strategy, realizing benefits of ITsavvy and Lexmark acquisitions, and improving balance sheet health. • Geographic simplification: completed transitions in 11 countries in 2024, slated to complete up to 4 more in Europe in 2025. • Operational simplification: Global Business Services established to drive operating efficiencies, with plans to implement new enterprise-wide technology platform in 2025. • Commercial Optimization and Growth: extend AI-based pricing tools, optimize service delivery costs, and strengthen go-to-market performance. • Acquisition benefits: ITsavvy integration progressing, Lexmark acquisition expected to drive cost synergies and improve financials.

In Q4, XFS revenue was down around 11% year-over-year due to lower finance income and other fee revenue, but segment profit increased by $10M as lower operating expenses more than offset reductions in gross profit. Print and other revenue fell 9%, and segment profit decreased by 2% as gross profit declines associated with the Print and other segment exceeded the reduction in direct and indirect operating expenses allocated to this segment.

• 2025 revenue expected to grow low single digit in constant currency inclusive of full year of ITsavvy revenue, with around 400 basis points headwinds from reinvention actions. • Adjusted operating income margin expected to be at least 5% in 2025. • Full-year free cash flow expected in range of $350M to $400M in 2025, primarily driven by lower finance receivable inflow but offset by improved operating margin and working capital. • Lexmark acquisition expected to be immediately accretive to adjusted EPS and free cash flow, improve adjusted operating income margin, and lower pro forma debt leverage.

Q: Can you describe how ITsavvy operates?

A: ITsavvy is a VAR with strong relationships with large suppliers, adding value-added services around technologies to drive end outcomes for clients in various verticals. They have the ability to wrap technologies together to create solutions for companies, differentiating themselves by providing value-added reselling and services.

Q: About Project Reinvention headwinds in 2025, is the headwind likely to continue into 2026?

A: No, the foundational elements of reinvention like geo simplification and product simplification are behind us; we do not expect the headwind into 2026.

Q: Talk about the future of the forward flow program and its contribution to free cash flow?

A: We expect to sell about $800M of finance receivables over the next two years as part of the four-year forward flow program. We will review the balance and plans going forward, but the program has about $800M of finance receivables planned to go through in '25 and '26.