Good morning, everyone. Asiya Merchant here, Citi Research. It's day three of Citi's 2026 Global TMT Conference. I'm very pleased to have Xerox's management here with me. Louie Pastor, the CEO, and Chuck Butler here, the CFO. This is an interactive session. I do have some prepared commentary. If you have any questions, I would just request that please raise your hand, we'll bring the mic to you. Louie, let me just start off, maybe I'll turn it to you. I do have some prepared comments here. Just want to understand about the revenues, right? I think that's been a key focus for a lot of investors. You're talking about revenue stabilization here. That has been a key priority for a lot of investors, and I know it's for you as well. When investors monitor sort of the demand environment out there, we're looking at enterprise budgets getting tightened here or maybe spreading thin across server, storage, networking. When you think about print hardware and the fact that you're guiding to revenue stabilization, help us understand why that's the case. Yeah, happy to. Maybe let's start by taking a little bit of a step back and looking at our business on the whole. Roughly speaking, I think I guided to, what, $7.6 billion this year of revenue. Let's just use really round numbers. Call it $7.5 billion. It's basically $1 billion of IT solutions and digital services, roughly $1 billion of production print, and then $5.5 billion of what you would think of as almost like traditional office print. Okay? I use the term office there, but I don't love the term office because our hardware is in a multitude of environments. Yeah. It's not just offices, but it's actually retail locations, distribution warehouses, manufacturing facilities, but call it the workplace. That's predominantly what you think of as the low-end and mid-range machines, A4 and A3. That is, I think when people look at our business and the industry, that's probably the area of facing the most secular headwinds, and it's also the biggest part of our business. Okay? I think when you talk about revenue trends and competition for budgets in the IT space, again, that is probably the area of largest concern, not just because it's the biggest part of our business, but because it's probably the area, again, with the most sort of secular headwinds. How do we think about stabilizing that part of our business and also, frankly, getting it to growth? How do we do that? This is where we talk about this gainshare and mix shift strategy, and this is where the gainshare component of it is so important because the only way to grow in a market that's secularly challenged is to take share from others. How do we actually take that share? Why will we be able to take that share? This is where the Lexmark acquisition is so critical because it's not just about scale. That was a very strategic acquisition, and we acquired a set of capabilities that enable us to differentiate in the one area of this market and of this industry that can actually move the needle. What do I mean by that? By acquiring Lexmark, what we acquired was the full end-to-end control of our technology stack. From early design, development, manufacturing, delivery, installation, service of our hardware, our print hardware for the office space end to end. There's only one other player in the industry that has that. What it enables us to do is differentiate on the service experience. Everybody in this industry, because there's been virtually no consolidation, it's highly commoditized, everybody's competing on price. Okay? All you can compete on are reliability and price. Price is something we will never alone be able to compete on and to win on because we're not Japanese, we're American, and we need to operate with 10% operating margins, not 2%-3% operating margins. Right. Okay? The reason, though, that now we can take these set of capabilities, this end-to-end control, and compete differently is because if you think about it, the laws of physics, okay, prevent you from taking the cost of the equipment to zero. Okay. The laws of physics prevent you from taking the cost of the supplies to zero. These are physical products in a physical world. You have to make them, you have to send them places, right? The laws of physics do not prevent you from bringing the cost of service to zero. The thing is, everybody in this industry sucks at service because it's hard. You have to build up these very expensive fleets of technicians and engineers who go out in the world and show up at a customer location and fix the machine when it breaks down. Okay? These machines can operate a whole lot more like your dishwasher or your washer/dryer. Which is to say, yes, you have to put detergent in and you have to clean the lint filter, but otherwise, you are going to buy it, and for 7- 10 years, it is going to run, and it is going to work, and when it does not anymore, you are going to replace it. Now, in our case, you are going to replace it before it actually breaks down rather than when it breaks down to avoid that. How do we actually make it so that these machines do that? One is we buy the very electrical and mechanical engineering of our products, the design and development. We actually make products that come off the manufacturing line far more reliably and that perform far more reliably than anybody else in the industry. Okay? On top of that, because of the sensors that we build into the technology, and the fact that they are all connected, we have more data about how they perform than anybody else in the industry, because we have more sensors, and we have a more robust fleet management capability. Now what we can do with AI is build algorithms. We used to have to do this with people, with data scientists who needed to learn the industry and study the inputs that were coming back. Now you can do it with AI. What we can do with this data that comes off the machines, and now digitally intervene to proactively and predictively maintain the machines out in the world, means we do not have to maintain this service fleet, and the customers have a better experience. Now you have a better customer experience, so that is the reliability component. We can actually use this to fundamentally change the economics of the model, and to compete much more effectively on price, which is ultimately, in this highly commoditized space, what the economic buyers are making decisions on more than anything else. Service actually is very, very important. The experience of end users is very, very important, especially at the high end with your largest customers who have global deployments of our technology across many countries, and do huge volumes. It is better on both ends. That, for us, when we look at our portfolio end to end in that way, and we think about revenue trends moving forward, this is why we're so confident in our ability not just to stabilize this biggest part of our business, but actually grow it. Because this will enable us to take share from others, because it's the most differentiated value proposition in the industry, while competing most effectively on price. The reason why others in the industry won't do it is because they've built up. So one, they don't own their technology end to end. There's only one other player that does, and that player that does sells so much through third parties, other OEMs and partners, and they've built their business on top of those other people having to buy parts and supplies and carry all these replacement items. It's actually not in their immediate near-term economic interest to do it. It requires a change in their model. This part of their business exists solely to generate cash for investment in other parts of the business. They're not interested in creating near-term profitable headwinds for long-term profitable growth. Not here. Mm-hmm. Okay. All right, so that's sort of where you're most focused on. I think it is the biggest. Look, it is the biggest part of our business, and ultimately, gaining share there while expanding our margins is the nearest term path to getting to a more sustainable leverage profile, which ultimately is the nearest term path for significant equity accretion and value creation for our shareholders. Right. You did talk a little bit about pipeline, right? That you were seeing some momentum. Is all these initiatives that you talked about focused on services reflecting that in your pricing, in your go-to market? Is that what underpins the confidence that you are talking about, that print pipeline momentum looks like it is improving? Is that what is. Okay. Is that what is driving? 100%. It is like this value proposition, this vision for this part of the industry is part of what is fueling the increase in our pipeline. What we are seeing in our pipeline as well is we sort of differentiate between existing customer engagements and renewals versus competitive takeout, knockout. What we are seeing is this value proposition, it resonates in both, but it is allowing us to grow our pipeline and mature the pipeline for competitive knockout, and we are starting to see conversion there as well. Those types of engagements, you get a verbal on a win. We just got one more recently, as in earlier this week. It is a $5 million a year global managed print services engagement. Going from verbal to signing to actually installing equipment, verbal this quarter, it will sign next quarter. The rollout and the transition will be into next year. It takes time for that all to convert through to revenue. Okay. Given that even the print market, there's various segments, right? There's the A3 market that's going through some declines. You have production print. I don't know if these wins and the market share gains that you're talking about, is it across all those, or are you focused on maybe certain ranges within the print market? It's a great question. I would say predominantly what I was just talking about was A4 and A3. Okay. At the low end. I would say there's definitely a mix shift as well, sort of from the mid-range to the low end. We see it especially with partners going through the channel. There's a lot of reasons for that. But everything I was just describing was not really about production. In production, our strategy is a little bit different- Okay. ...because the economic buyer is different, the market dynamics are different. There is actually secular growth. There, it is much more about having the broadest end-to-end portfolio- Okay. ...and offerings, and helping our clients, who they are predominantly commercial printers, actually grow their business. Okay. Expanding into new segments and verticals. There was a great example of this actually more recently in the announcement we made about our new partnership with Xeikon, where our technology is actually embedded in their machines, and then we are going to be going to market together with them as well. Packaging and labels is, I think, a $1.8 billion market that is going to grow 15% a year for the next seven years. So there is those areas of secular growth, and being positioned to capture them the best where we do not really need to be vertically integrated because the economic buyer is not just buying on price, they are buying an end-to-end solution. That you need to be able to not just bring them the technology, but deliver and provide the software that makes it run most effectively and efficiently with as little labor as possible, but as a high volume as possible. You need to have the distribution capabilities to ensure they have supplies and parts, because these machines are running constantly, and you have to have the ability to service it. That is where the end-to-end value proposition is very powerful. Back on the ones where you are gaining share on the entry side. There's a little bit of a mix shift like sort of happening from the mid-range, maybe even the high-end towards more of the entry products. Market share gains, but then what about the margin profile across the mix shift? It's another great question. Because the mid-range, historically, you had very profitable equipment sales and post-sale. Yeah. In the A4 space, that's not the dynamic. In some cases you may sell at a loss the equipment, but I think largely think of it as kind of flat. Like you basically sell the equipment at very little to, if any, margin. But the post-sale streams are 70%-80% gross margin as opposed to something that was more balanced in the mid-range. As this mix shift takes place from the mid to the A4, so from A3 to A4- Yeah. ...there is a headwind on equipment margin because we're going to be placing more machines that come with effectively no margin, but over time actually the overall margin profile of these engagements with customers is actually higher. Okay. The lifetime value. Okay. Yeah. Right. There is a lot of concerns also on the aftermarket post-sales. Like how do you kind of make sure that you maintain your margins here in post-sale? I am going to let Chuck speak. Margin. to that one because Lex had refined this model quite well. Yeah. Post-sales is the lifeblood- Right. ...of any imaging company, right? We want to get printers in the field, in the install base, and we want to keep them printing for a long time, because that's what drives the highly profitable annuities on the back end. Louie mentioned the difference in the margin profile between an A3 and an A4. A4 especially is indexed toward that post-sale margin. You're in the 70%+ range. So it's important that we keep that, especially when you're placing your hardware at neutral to maybe even slightly negative in some places. You have to make sure you keep the post-sale annuities coming at the high margins. The way Lexmark did it and what Xerox acquired with that acquisition, was they had really good security chips that they put inside their printers that allow only authentic supplies to work inside these printers for the first five, six, seven, eight years of a printer's life until an alternative comes in and cracks the security chip, and then they bring an alternative for the market. We don't see that for a long time. Lexmark never has. They've had best in class in terms of the security chip that they put in place. Okay. Once that happens, it is time to refresh your printer anyway, then we put a new printer out there with a new- Chip. ...with a new chip inside it. Okay. All right. Talking about Lexmark, I know you guys have had some savings that you have identified as part of the synergies as you are bringing them in. Just help us understand, the targets for those synergies have increased. I think in the more recent one you talked about $350 million in synergies. What is underpinning that? Why is this higher target? Why are you laying out a higher target? What are you seeing that is better than what you thought initially? Yeah. You want me to start or? Well, let me unpack maybe integration a little bit. We closed on the Lexmark acquisition July 1st of last year. The first six months post-acquisition, which is actually the second half of last year, was very much about core operational integration. Let's go get every dollar of duplicative cost out of this combined organization, right? That was the first six months, and by the end of last year, even within those first six months, we exited the year we had done, I think the number was $146 million of run rate cost out just from the first six months. Of that $300 million that we had originally said. Great. Second six months, the first six months of this year, very much about unifying the go to market. By the way, a lot of costs come out there too because what we had for the first six months was you can't share customer information ahead of an integration. Ahead of a closing, you can't do that much mapping of your account coverage and things like that. That's where the second six month period was let's take what was a legacy Lexmark sales force selling legacy Lexmark offerings to legacy Lexmark accounts, right? Same thing we had on the Xerox side. We'll put them together and have a unified sales force with one coverage model. Right? Selling one portfolio. That's great. A lot of costs come out there too because you don't need as many sellers when you do that. That was good. Now the second half of this year, which is kind of the third six month period, is very much about transitioning product. Going from the OEM sourced kind of A3 product to our own internally developed technology, I talked about the strategic importance of that because of the end-to-end value proposition. A lot of costs come out as you do that because you are capturing margin on margin and you have the gross margin expansion. Okay. It is not sourced product. At each of these different periods, you have significant costs coming out, and in each case, as you are doing the work, you identify new opportunities. You set a target based on what you know at a moment in time, and for us, there is some conservatism there, and then as we go through it, we identify new and greater opportunities. As we think about next year, that is sort of the genesis of how we got to a greater number for this year. As we think about next year, we will obviously get the full flow through of every action that we have taken this year, right? On top of that, we still have opportunities with respect to systems and culture and even those will generate more savings as we go forward. I would say our confidence, not just on hitting the number that we have now sort of taken up, but even what the benefits and impacts will be as we go forward continues to go up. The only thing I will add to it is, I do not think we are surprised that there is more synergies there. That was the genesis of the question was, what is changed in our thinking? Right. I remember going through the process. I started out as Lexmark CFO, and then after the acquisition, became the CFO of the combined company. I remember going through that, and I was talking to Greg, and I said, "I think the synergies are $400 million plus." Greg said, "That is a huge number. There is no way." I said, "That is kind of what I see here." I do not think we are surprised. I think sometimes you have to start exercising the motion, making sure you understand all the processes and how they align, and then it is starting to come back to what we had originally thought anyway. You go out with originally, this is what we have clear line of sight to right now, and that is what we led with. Now we are starting to see the other opportunities unfold. There are some investments though alongside as well, right? Because you do have these cost savings, but then you are investing, whether it is, I think you talked a little bit about bringing manufacturing to Mexico. Just walk us through when you talk about what impacts your income line or net income line or operating income line, EBIT line, how are you thinking about those savings relative to then investments, so the net impact to the operating income line? Yeah. So all the manufacturing that we are moving, Lexmark already maintained a footprint in those places. Right. Yeah. There is not huge incremental investment in it. The only incremental investment that comes is with whatever tooling and just a little bit of incremental manufacturing capacity that you need to build in those locations. Okay. There's not a huge cost to moving that product from an outsourced to an insourced product, and we receive all the benefits from not paying margin on margin, being USMCA compliant, coming in through Mexico. Right. Saving on the tariffs, and just the cost of the structure of the A3, the mid-range box that we now source internally, is $3-$10 less than what it would be if we continued to go to our external provider. Okay. All right. That's fair. Maybe a little bit on IT solutions. It's a smaller part of your business, obviously, not impacted by Lexmark necessarily, but just talk to us about that. What are you seeing in that market? Again, coming back to my original question, there's a lot of pressure on company CIOs, and IT budgets are getting stretched thin because server prices have gone up, storage prices have gone up, PC prices have gone up. How you're thinking about where IT solutions revenue growth targets could look like relative to, let's say, when you acquired it. Well, I would say a few things. One is we have every bit as much conviction about the long-term opportunity with that business today as we did when we made the acquisition. We acquired ITsavvy in November of 2024. The idea there, I will differentiate it from the Lexmark acquisition where the idea was, hey, best of breed kind of approach, where, it is more like a merger of equals and there is capabilities that we are acquiring, and there is capabilities that we have that are even stronger together. At the time, we had a roughly, call it, $300 million or so IT solutions business, but it was not a single business. We had pockets of businesses. We had some offerings in the Netherlands, the U.K., Canada, the U.S. all that had been sort of acquired over time, each run with their own sort of processes and systems and leadership, and they offered different things, and all were subscale. So the genesis and thesis behind acquiring ITsavvy was to buy a scaling and scalable platform, and I use that word sort of in the broadest sense, meaning it is people. It is offerings, it is capabilities, it is processes, it is systems, all of those things that are built to acquire and absorb because it was a private equity roll-up built through acquisition itself, but that actually was fully integrated. To then acquire that, retain it, invest in it, and actually take these disparate businesses that we had and integrate them into and onto that platform. Right. It's like a reverse integration. Right. Okay. Right? And having done that, and look, that created great cost savings, but also headwinds actually from a sales perspective because a lot of the sellers in those legacy businesses churned. Right. Of course. Right? They had less control. They got to work through different systems and processes, and some of that, frankly, was healthy and good. We onboarded new sellers, and now we're starting to see the ramp of those sellers. I talked a little bit about that on the Q2 earnings call, and we're starting to see the ramp of that and the investments that we've been making to build out our capabilities. Our biggest opportunity with that business is, I would say a few things. One is just penetrating the existing 200,000- Yeah. ...customer base of Xerox as a whole, and we are targeting where we have the right relationship with the right economic buyer within the customer, right? Because if your relationship is with procurement versus sometimes it's with real estate, sometimes it's with the CIO, that's the relationship that we want. Yeah. Right? And that's where we're relevant to them. Then being able to offer them a set of capabilities that actually help them with the challenges that you're describing. One of the things that resonates very powerfully with those economic buyers is actually when we talk about the work that we do internally to leverage this business to get greater outcomes for our own technology spend. We are a multinational, 22,000 employees, $7.5 billion a year in revenue, plus with a huge cost base ourselves, a lot of which goes on technology. When we start to talk about how we have actually standardized our own operations and sort of drink our own champagne, it is very powerful, and we can give specific use cases of where we have been able to deliver better outcomes. Building that sort of relationship with the client, that we are your trusted partner, we have these set of capabilities, they are enterprise-grade, is very powerful. Okay. Mm-hmm. Right. I like the reference to champagne, so All right. Maybe just as we dig into that, you did talk about selling the synergies, or selling, sorry, selling the whole portfolio solutions across your entire customers. Where are we on that journey now? I see you have obviously integrated these offerings into IT solutions, but are you starting to see that 200,000 customer base that you have for Xerox core now getting onboarded with these IT? Are we starting that momentum? Have you started to see that come through yet? Yeah. We are. I would say we admittedly and consciously did not push as hard forward on the whole cross-sell/upsell motion while we were doing all of these account coverage shifts and unifying the go to market. When I talk about unifying the go to market, it was unifying the print go to market. IT solutions has a separate set of sellers. Yeah. The idea here is to not do what we have seen others in this industry do as they have tried to pivot, is to try to get printer sellers selling IT solutions. Oh, no. Yeah. It doesn't work. But the print sellers have the account relationship. Right. It is more of an account manager model, and then the specialists on the IT solution side who can come in. A lot of it is about building the right pipeline, focusing on the right customers and clients, where we have the relationship with the economic buyer, we have offerings that map to what they need, and then putting in place the incentives needed to drive the right behavior. To ensure that print sellers not just know who to call on the IT side to bring them in, but are incentivized to actually grow that account. All those incentives are now in place, so we are starting to see even more traction because of that. I think we said in Q2 we had, I think it was like $134 million of opportunity sourced just from the print side alone for IT solutions. We expect that number to i n the pipeline o ver time. Yeah. It's in the pipeline. Okay. Yeah. All right. Then just talking about within that IT solutions, obviously AI is a big topic, right? To the extent that are these IT solutions sellers, are they on the devices side, like AI PCs? How does AI kind of flow into that, and what are you seeing in terms of enterprise adoption for these customers as it relates to AI? So I would say for our IT solutions business, now remember, this business is, call it 75% hardware resale, 25% services. Okay? AI is a tailwind on equipment sales. Right. On hardware sales, servers, more investment needs to AI-enabled devices right, for the device lifecycle management piece of the business. On services, AI presents a great opportunity not just for revenue growth, but also for margin expansion. There, we introduced a new AI-driven IaaS platform, so IT- as- a-S ervice, that allows the services clients on the IT side to have one pane of glass that they go in to see all of the services that they consume from and through our organization, and to be able to toggle their usage and their consumption up and down. Their licensing and new services, and all of that is AI-enabled and driven. Other services, again, like our Network- as- a-S ervice offering, is completely AI-enabled. Meaning, so many other people consume and utilize Network- as- a-S ervice through other third parties that we compete against that is entirely really labor-driven. It's offshore models. It's somewhat antiquated in that way, and this is more AI native. It's not just that it's more profitable for us than it is for them, but actually, we can compete on price and with a better and higher quality offering. We are positioning the portfolio on the IT solution side to benefit from AI. I think to your point, there's headwinds there, too. With the budgets being stretched thin for your typical CIO, there's definitely challenges on the hardware side that also just make the business sort of inherently more lumpy. Because prices are moving so fast, and you can quote a deal at $10 million for hardware, and then a week later you have to quote it again and now it's $12 million. Right? It literally changes what's going to get- Sales. Yeah. ...what's going to get purchased and when. Yeah. That part of the market is very fluid. But on the whole, I would say AI is a tailwind for the business. Okay. All right. Just let me first make sure, any questions in the audience? Sorry, were you raised. Okay. Let me talk about free cash flow. That's always very right in Chuck's courtyard here. Free cash flow guidance, how should investors think about that? I know you guys have talked a little bit about, obviously, your guide for fiscal 2026, but then there is some tariff recovery that benefited your free cash flows because you did, I guess, get receivables that you sold for the tariff. But beyond just this one-off stuff, as you guys are expanding, you have margins, tailwinds here, revenue stabilizing and growing. How should we think about free cash flows ahead into fiscal 2027? Yeah. I think the way I think of it is you do get some tailwinds this year for sure. While tariffs, we did get the refund, we also are paying a significant amount of tariffs still to this day. Tariffs isn't really a tailwind in terms of the actual benefit to the free cash flow and operating income probably balances out. But it's a fair statement we got the refund. We also have the back book sales and the forward flow agreements, and those will get less throughout time. But if I take those out and think about what is my core free cash flow, we said we had $335 million this year, in forward flow benefits, we got $80 million from the tariff. If you take those out and you just look at normalized cash flow and then take that into next year, that improves. That improves next year based on expanding the margins through the synergy savings that we've talked about, and paying less interest expense. So you're going to have better operating income, less interest expense, which will expand margins, therefore drive to a more stronger operating cash flow, isolating for those one-time tailwinds that we got this year. Okay, and the biggest drivers there, is it just top line margins, working capital? It's margins. If you think about the top line of the business, now again, we'll give more guidance of this as we do the Q4 earnings announcement, but we're looking to stabilize revenue. We operate in a space that declines. The largest part of our business does decline in the low single digits. There are pockets growing. We'll continue to expand in those pockets where we can. And then we anticipate growth out of that other kind of billion dollars of IT solutions and digital services in that- Right. ...10%- 15% range. Year-to-year, you are not going to see a bunch of top-line movements, might even see some slight compression. We haven't put it together yet. Okay. Your margins will expand significantly. Okay. Debt reduction, how do you guys think about the leverage and the path towards leverage debt- Yeah. ...reduction there? Yeah. Louie and I have made the stated goal. We have three objectives, right? We're going to stabilize the top line, we're going to expand margins, and we're going to delever this company as quickly as possible. After we signed the JV deal we were at 7x gross leverage and 6x net. At the end of Q2, we were down to 6x and 5x, and by the end of the year, we'll be down to 5x and 4x. So you're down two full turns within one year after you sign the JV. Our stated midterm goal is to be down in that three range. Your progress toward that then will be more opportunistic retirements of debts where it makes sense, plus expanded margins and EBITDA growth. Okay. All right. Then once you kind of reach your leverage targets, where does your capital allocation priorities lie? What a problem I can't wait to have. We'll invest back in the business where it makes sense to, but- Okay. ...right now we are going to stay ultra-focused on stabilizing the top line, expanding margins, and delevering this company as quickly as possible. Well, we are up on time, so I just wanted to thank Louie and Chuck here. Thank you very much. Thank you. There is a lot of wood to chop here at Xerox, so good luck with all of that. A lot of opportunity as well. Yes. Appreciate it. Thank you very much. Thank you very much