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Xerox (XRX) Q2 Earnings call transcript Jul 25, 2024

AInvestThursday, Jul 25, 2024 9:11 pm ET
1min read

Xerox Holdings Corporation's Q2 2024 earnings call, led by CEO Steven Bandrowczak, highlighted the company's progress in implementing strategic changes to streamline operations and reposition its business towards market opportunities in print, digital, and IT services. Despite a 10% decrease in revenue compared to the same quarter last year, the company reported notable improvements in adjusted operating income margin, cash flow, and revenue, indicating the benefits of these organizational changes.

A Focus on Strategic Priorities

Xerox's strategic priorities are centered around improving core business performance and expanding its addressable market through digital and IT services. The company's shift towards a business unit-led operating model and sales organization has brought sales and operations in closer alignment, leading to improved sales efficiency and a stronger focus on market share growth. This is evident in the increase in equipment order momentum, new product launches, and a refreshed A3 product lineup featuring AI-assisted multifunctional printers.

Cost Improvements and Future Outlook

Xerox's cost improvement initiatives, including geographic and offering simplification, have led to a reduction in operating costs and a more favorable mix of revenue towards markets with higher underlying growth rates. These changes, along with the implementation of a technology stack to mirror the standardization of global business processes, are expected to drive cash flow sufficient to fund growth while reducing leverage below 3x EBITDA by the end of 2026.

Navigating Challenges and Confidence in the Future

The earnings call also addressed challenges faced in the first quarter during the implementation of the redesigned operating model. However, the company remains confident in its strategy's ability to deliver a targeted $300 million improvement in adjusted operating income above 2023 levels by the end of 2026. This confidence is strengthened by the identification and estimation of reinvention cost reduction initiatives, totaling over $700 million between 2023 and 2026, and the quality and rigor behind the management infrastructure recently put in place to execute these initiatives.

Investor Questions and Insights

During the Q&A session, key analysts raised questions about the revenue guidance for the full year, the impact of reinvention actions on revenue, and the company's plans for digital and IT services. Xerox executives provided insights into the timing and execution of these initiatives, emphasizing the importance of balancing geographic and product mix shifts while maintaining a disciplined approach to investments.

A Path Forward

In conclusion, Xerox Holdings Corporation's Q2 2024 earnings call underscores the company's strategic focus on operational efficiencies, market expansion, and cost improvements. With a clear path forward towards growth and reinvention, Xerox is poised to navigate the challenges of the evolving business landscape and capitalize on opportunities in the print, digital, and IT services markets.

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