Xerox Holdings(XRX) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $1.6 billion, a decrease of 10$0.29, down $0.15 year-over-year, primarily due to higher taxes and interest expenses [6][28]. - Free cash flow increased to$115 million, up $27 million compared to Q2 of the previous year [6][33]. - Adjusted operating margin was 5.4$356 million, down approximately 15% year-over-year, but showed improvement compared to a 26% decline in Q1 [29]. - Post-sales revenue was $1.2 billion, declining about 8$300 million improvement in adjusted operating income above 2023 levels by the end of 2026, with confidence in this target growing due to progress in cost reduction initiatives [8][39]. - The focus is on expanding digital and IT service penetration, leveraging existing print client relationships to drive growth in these areas [12][14]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged a short period of disruption during the implementation of the redesigned operating model but noted improvements in operating processes and financial results since then [5][6]. - Despite lowering full-year guidance, management remains confident in the long-term outlook and the ability to deliver on the three-year adjusted operating income improvement target [7][42]. Other Important Information - The company is in advanced talks to expand its forward flow agreement outside the U.S., which is expected to enhance free cash flow [16]. - The payment of a $1 per share dividend remains a key priority, with expectations for the yield to return to normalized levels as the reinvention strategy is executed [17]. Q&A Session Summary Question: Impact of reinvention initiatives on guidance - Management clarified that the guidance reduction is related to the timing of reinvention initiatives and not a change in overall strategy [45][46]. Question: Revenue guidance and timing - Management explained that the revenue decline in Q2 was influenced by backlog and non-strategic revenue, but they expect growth in the second half due to improved order velocity [52][53]. Question: Growth in digital and IT services - Management indicated that they see significant growth opportunities in digital and IT services, particularly in the mid-market, and are working on breaking out these segments in future disclosures [60][64].