Thank you for standing by, and welcome to Xerox Holdings Corporation’s third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during this session, you’ll need to press star-one-one on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star-one-one again. As a reminder, today’s program is being recorded. Now I’d like to introduce your host for today’s program, Mr. David Beckel, Vice President of Investor Relations. Please go ahead, sir.

Good morning everyone. I’m David Beckel, Vice President and Head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation third quarter 2024 earnings release conference call, hosted by Steve Bandrowczak, Chief Executive Officer. He’s joined by John Bruno, President and Chief Operating Officer, and Xavier Heiss, Executive Vice President and Chief Financial Officer. At the request of Xerox Holdings Corporation, today’s conference call is being recorded. Other recordings and/or rebroadcasting of this call are prohibited without the express permission of Xerox. During this call, Xerox executives will refer to slides that are available on the web at www.xerox.com/investor and will make comments that contain forward-looking statements, which by their nature address matters that are in the future and uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I’d like to turn the meeting over to Mr. Bandrowczak.

Good morning and thank you for joining our Q3 2024 earnings call. The benefits of reinvention are driving improved financial results, albeit at a slower pace than expected. Positive proof points from the quarter include a second consecutive period of moderating revenue declines, year-over-year improvements in adjusted operating income and income margin, and more than 100% free cash flow conversion from adjusted operating income; further, the pending acquisition of ITsavvy is expected to improve our mix of revenue from complementary value-add businesses with higher underlying rates of revenue growth. Summarizing results for the quarter, revenue of $1.5 billion decreased 7.5% in actual currency and 7.3% in constant currency. Excluding the impact of year-over-year fluctuations in backlog and reductions in non-strategic revenue associated with the reinvention, core business revenue declined low single digits and at a pace consistent with the prior quarter. Adjusted EPS was $0.25, $0.21 lower year-over-year due primarily to the one-time sale of non-core business assets in the prior year quarter. Free cash flow was $107 million, $5 million lower year-over-year, and adjusted operating margin of 5.2% was higher year-over-year by 110 basis points, reflecting the benefits of organizational simplification. The reinvention of Xerox is difficult but necessary. Reinvention is a multi-year journey to sustainably streamline operations while positioning the company to benefit from favorable long-term trends within print, digital and IT services. Progress has been steady and confirmatory of our original thesis, but the financial proof points of this strategy’s success are not unfolding in a linear fashion. This quarter, print equipment sales fell below expectations due to delays in the global launch of two new products and lower than expected improvement in sales force productivity. Tactical challenges associated with the timing of Hurricane Helene and increasing competitive activity in certain markets also contributed to the shortfall. We have analyzed the factors that contributed to the product launch delays and are confident those factors will be resolved as we recalibrate global product launch plans, and despite lower productivity improvements than expected in Q3, we are confident ongoing sales efficiency and effectiveness programs will drive productivity sustainably higher in 2025 and beyond. Shortfalls in equipment sales masked the breadth of reinvention progress made to date, much of which is expected to reveal itself in our annuity revenue streams and a sustainably lower cost base over time. In quarter three, we made progress along each of our strategic priorities in furtherance of our long term reinvention goals. Starting with a stronger core, a key tenet of reinvention is closer alignment between our organization and the economic buyers of our products and services. We realized early in our reinvention that a refined sales coverage model and investment in client perception and sales force productivity were required to more efficiently and effectively serve clients’ needs in a rapidly evolving print and workplace services landscape. The realignment of our sales organization has not been as smooth as we would like, but we are seeing encouraging signs that a leaner, more focused sales team can deliver improved client outcomes and more efficiently than in the past. While sales productivity fell short of our expectation in Q3, it has improved year to date through a greater end market focus and a reduction in administrative burden. We expect the cumulative effect of productivity actions taken to date, future scale efficiencies including additional capacity in our dedicated virtual sales center, and other initiatives designed to foster incremental client interactions will drive sales productivity higher than Q3 levels in Q4 and into 2025. Net promoter score, a key barometer of client perception, has improved 11 points this year in the Americas through increased client engagement and integrated sales and marketing. The increase reflects improved client satisfaction and brand consideration, which we expect will drive an increase in purchase intent from clients that understand and appreciate our position in the market as a leading provider of print, digital and IT workflow efficiency solutions. We see evidence of the strength of our value proposition with clients most prominently in our services metrics. In the last 12 months, our revenue retention rate for large client renewals remained above 100%, meaning on average clients are buying more print and digital solutions from us when renewing long term service contracts. Our portfolio of digital and managed IT services continues to resonate strongly with clients. In Q3, digital services new business signings were up double digits with renewal rates above plan and digital and managed IT services revenue also grew double digits, reflecting sustained signings growth in the current and prior periods, and the pending acquisition of ITsavvy is expected to drive growth as we leverage an improved expanded portfolio of IT services to grow penetration with existing clients. Moving to cost improvements, operating expense decreased more than $50 million year-over-year in Q3 and $125 million year-to-date, reflecting the benefits of strategic actions taken in the prior year, current year reductions in headcount associated with the structural reorganization of our business, and ongoing operating efficiencies driven by our global business service organization. Certain reinvention actions taken this year have resulted in a reduction of revenue, for example the transition from direct to indirect distribution in certain markets, as is the case with geographic simplification, or measures taken to simplify our offerings, as was the case with our decision to exit the manufacturing of certain production equipment. Our intent with these actions is to reduce the level of operating expense that previously supported those activities by a greater amount than the associated reductions in gross profit. While still early, we are beginning to see the thesis play out in our financial results. At a total company level, adjusted operating income improved this quarter despite a reduction in revenue. We expect this trend to continue in quarter four. In future years, we expect our pipeline of more than $400 million of gross cost savings that have either been actioned but not yet realized in results, or have been identified for future implementation to support operating income growth. Finally, balanced capital allocation - this quarter we generated more than $100 million of free cash flow, including the benefits of reduction in finance receivables, marking the fourth consecutive quarter of more than 100% free cash flow conversion from adjusted operating income. We continue to make progress sourcing financing receivable funding agreements outside the U.S., including a recently signed agreement to sell future finance receivable originations in Canada to De Lage Landen Financial Services Canada Inc. Balance sheet health improved again this quarter as we reduced our debt balance quarter-over-quarter. The pending acquisition of ITsavvy will be funded in part with debt but is expected to be leverage-neutral in a little more than a year and deliver a return on capital well in excess of our weighted average cost of capital. I will now hand the call over to John Bruno.

As Steve noted, this quarter equipment sales fell short of expectations for two main reasons. We had higher expectations of global product launches that were impacted by poor product transition planning and execution. Through our post mortem, we’re taking deliberate steps to optimize price and marketing programs by specific go-to-market areas to ensure improved demand to supply chain readiness that will complement market-specific launches. We also had higher expectations of our sales productivity initiatives in Q3, given the improvement we realized in Q2 after the Q1 organizational changes. We were essentially flat quarter-on-quarter on an activity basis, and that was not sufficient to offset the reduction in sales headcount. We have analyzed these points of friction from lead generation, quote to order, and order to install. We’ve aligned process improvement teams and we are course-directing these areas of under-performance. We are seeing a positive impact of that work, albeit more slowly than originally forecasted. While productivity stalled in Q3, we do expect these operational and process improvements to drive sales productivity higher in Q4 and into 2025. We make no excuses for our under-performance in equipment sales, and these operational misses overshadowed broader strategic improvements elsewhere. On balance, I’d like to highlight other strategic areas of reinvention where we are seeing the forecasted results of our efforts. Starting with geographic simplification, this quarter we transitioned two additional countries, Hungary and Bulgaria, from a direct to an indirect distribution model. We also signed an agreement to sell our paper business in EMEA to a leading global paper supplier, Antalis. These transactions and others expected in quarter four allow us to provide partners in EMEA with the products and services clients demand most and with greater operating efficiency. Moving to offering simplification, with the recent launches of our A4300 series and refreshes of our A3 AltaLink and PrimeLink products, we are streamlining our offerings in the office and light production categories. For example, the updated 300 series printers share a common engine with our 400 series, reducing spare parts SKUs by 20%. Software enhancements included with the updated AltaLink products eliminate the need for physical installation kits and simplify the installation process, and our new PrimeLink machines offer a wider range of engine speeds, features and capabilities, improving competitiveness and marketability. The consolidated configurations and enhanced capabilities of these respective products make them more competitive and improve order and inventory management as well as marketing efficiency. Additionally, we continue to refine our production print equipment portfolio. We’ve engaged with leading print engine manufacturers to broaden our production print ecosystem and this quarter, we announced our planned collaboration with Tactical Software to integrate their digital embellishment technology for our clients. We anticipate revealing more partnerships within the production print segment within the coming year as we invest in a platform featuring services-led and software-enabled products. For example, our pipeline includes cloud hosted versions of FreeFlow Core to include an AI framework for workflow automation, application expansions into adjacencies like packaging and labels, as well as SaaS-based offerings. Finally, operating model simplification - our global business service organization, or GBS is performing as intended and finding ways to leverage a simpler operating model to drive long term enterprise-wide efficiencies. A key driver for long term reinvention savings will be the optimization of our technology and support infrastructure. Last quarter, we signed agreements with multiple technology partners to transform our operations with technology-led process improvements. Building on that announcement, this quarter GBS restructured an agreement with a key business process outsourcing partner, creating a mutually beneficial incentive structure to save costs through operating efficiencies. This new service structure is expected to yield a double-digit improvement in contracted rates and will serve as a blueprint for driving sustainable organizational savings. Collectively, these savings are expected to drive more than $700 million of cumulative gross reinvention savings over the next few years, putting us on a path to achieve double-digit adjusted operating income margins over the course of our reinvention. We will continue to exercise balanced execution in the implementation of these initiatives to minimize operational disruption. Finally, revenue mix - beyond cost reduction, an equally important tenet of our reinvention is an improved revenue mix that enables better client outcomes. To that end, two weeks ago we announced the acquisition of ITsavvy. The acquisition of ITsavvy expands our portfolio of IT service offerings and our addressable market coverage. With ITsavvy, we acquired an accomplished management team with a demonstrated ability to deliver positive results through its suite of life cycle deployment and managed services across IT infrastructure pillars of cloud hosting, network and security, collaboration, and the hybrid workplace. We expect to leverage this platform and improved scale to drive increased penetration of IT services across a client base that increasingly look to Xerox to provide these types of solutions. The acquisition will be funded with cash on hand and a combination of seller notes. We expect to quickly realize more than $15 million of cost synergies as we consolidate IT service operations and adopt ITsavvy’s operating platform. Along with revenue synergies from expanded client penetration, we expect an enhanced IT services offering. This will improve client satisfaction and stability in our core print business as clients are able to realize more value from a services partner that can be a one-stop shop for their most critical print and IT infrastructure needs. The acquisition is expected to be immediately accretive to earnings per share and free cash flow, and we look forward to welcoming the ITsavvy team to Xerox at the end of this year. I’ll now hand the call over to Xavier.

Thank you John, and good morning everyone. In Q3, total revenue declined 7.5% in actual currency or 7.3% in constant currency on a year-over-year basis. As Steve described, equipment revenue this quarter fell short of expectations; however, the trajectory of process revenue improved as expected, reflecting growth in digital or managed IT services. Turning to profitability, gross margin was flat year-over-year as higher freight costs and unfavorable equipment mix on lower print volumes were offset by the beneficial impact of reinvention savings on favorable currency effect. Adjusted operating margin of 5.2% was 10 basis points higher year-over-year due principally to reinvention-related cost reductions on lower incentive compensation expense, partially offset by the effect of lower revenue on gross profit. Total operating expenses in Q3 declined $53 million year-over-year, or more than 10%, reflecting headcount and other non-labor expense reductions associated with recent reinvention actions. Adjusted other expenses net were $55 million higher year-over-year due to an increase in non-finance interest expense, reflecting higher interest rates on a lower portion of debt allocated to our financing business. The increase also reflects a gain on the sale of non-core business assets recorded in the prior year. Adjusted tax rate was 27.7% compared to 7.2% in the same quarter last year. The increase in rate reflects non-recurring tax benefits associated with uncertain tax positions on the establishment of valuation allowance against the current year deferred tax asset. Adjusted EPS of $0.25 was $0.21 lower than the prior year as the benefit of higher adjusted operating income on a lower share count was more than offset by higher non-financing interest expense and a higher tax rate on the prior year gain on sale of non-core business assets. GAAP loss per share of $9.71 included an after-tax non-cash goodwill impairment charge of approximately $1 billion, or $8.16 per share on a charge to tax expense related to the establishment of a valuation allowance of $161 million or $1.29. Regarding the goodwill impairment, it was determined following a sustained period in which our market value fell below book value that the fair value of our print and other segment had fallen below carrying value. The valuation allowance was established against deferred tax assets that are not expected to be realized in certain international jurisdictions. Let me now review revenue and cash flow in more detail. Starting with revenue, Q3 equipment sales of $339 million declined around 12% in actual and constant currency. The effect of backlog fluctuations in the current and prior year on reinvention actions accounted for around 400 basis points of the decline. The remainder of the decline mainly reflects the delayed global launch of two new products, lower than expected improvement in sales force productivity, delays in the timing of installations associated with Hurricane Helene, and unfavorable mix on the large production equipment sales in the prior year. Total equipment activity increased 17% year-over-year, due largely to entry level equipment. Entry revenue declined despite higher installations due to an increase in the mix of low end black-and-white multifunction printers. Midrange installations were slightly lower year-over-year but revenue declined faster than installations due to unfavorable A3 product family mix. High end revenue decline reflects the ongoing evolution of our production print portfolio on offering rationalization actions taken this year. Process revenue of $1.2 billion declined mainly 6% in actual and constant currency, a roughly 200 basis point sequential improvement. Excluding the reduction of non-strategic lower margin paper on IT endpoint device placement and the effect of other reinvention actions, post sales revenue declined 2% in actual currency, reflecting lower activity partially offset by double-digit growth in digital or managed IT services revenue, as well as higher services pricing. Consistent with past quarters, I will provide additional commentary and clarify underlying trends in our core businesses which exclude the effect of backlog fluctuations on reinvention actions. For Q3, lower sales of non-strategic paper, IT endpoint device on declining finance revenue reflecting the change in our finance receivable strategy, contributed around 200 basis points to the decline. Other strategic actions taken to simplify our business and improve profitability, including geographic and offering simplification, contributed around 200 basis points to the decline. Finally, the effect of equipment backlog fluctuations in the current and prior year quarters contributed less than 100 basis points to the year-over-year decline in total revenue. When these impacts are removed, total revenue declined low single digits in actual currency, consistent with the prior quarter. Let’s now review cash flow. Free cash flow was $107 million, lower by $5 million year-over-year. Operating cash flow was $115 million, $8 million lower than the prior year quarter due to lower contribution from working capital on higher pension payments partially offset by higher adjusted operating income on cash from finance receivables. Investing activities were a use of cash of $7 million compared to a source of cash of $25 million in the prior year, largely reflecting a prior year sale of non-core business assets. Financing activity consumed $74 million this quarter, reflecting $42 million of net debt repayments and dividends of $36 million. Turning to segments, in Q3 XFS revenue was down around 10% year-over-year due to lower finance income on order fee revenue associated with a decline in our finance receivable balance, partially offset by higher commissions from the sales of finance receivable assets, in line with our forward flow strategy. XFS finance receivable balance declined roughly 3% sequentially or 23% year-over-year in actual currency, mainly due to XFS’ changing strategy to return its focus to captive-only financing solutions. Q3 XFS segment profit increased by $9 million as a reduction in bad debt expense on lower operating expenses more than offset reductions in gross profit associated with lower revenue. Print and other revenue fell roughly 7% on segment profit increase of around 5%, for the reasons previously mentioned. Focusing on capital structure, we ended Q3 with $590 million of cash, cash equivalents, and restricted cash. Around $2 billion of the remaining $3.3 billion of outstanding debt supports our finance assets, with the remaining debt of $1.3 billion attributable to the non-financing business. I’ll now provide an update on reinvention savings. For 2024, we expect to realize close to $200 million of incremental gross cost savings. Since the prior quarter, we have operationalized an additional $20 million of savings, much of which will be realized in 2025. We maintain a pipeline of more than $400 million of gross cost savings that are expected to be realized by 2026, with around $125 million related to actions already implemented or expected to be implemented in the near term. Finally, I will address guidance for the remainder of the year and comment on expectations for 2025. All 2024 commentary excludes the effect of the pending acquisition of ITsavvy. For revenue, we now expect a decline of around 10% in constant currency versus a decline of 5% to 6% in constant currency previously. Around 75 basis points of the decrease in guidance is attributable to incremental effects associated with intentional reductions in non-strategic revenue. The remainder of the decline reflects the delayed launch of two new products and lower than expected sales force productivity improvement. Full year revenue guidance now includes around 625 basis points of effect from non-recurring headwinds associated with backlog fluctuations in the prior year on current years, a reduction in non-strategic revenue and other reinvention actions. For the year, the roughly 4% of expected year-over-year decline in core business revenue indicates a mid-single digit decline in normalized equipment sales and a low to mid-single digit decline in normalized post-sales revenue. We expect a return to revenue growth in 2025, supported by the inclusion of revenue associated with the pending acquisition of ITsavvy, new product launches, improved sales productivity, and growth in digital and IT services. The inorganic revenue benefits from ITsavvy are expected to more than offset reductions in revenue associated with ongoing reinvention actions as the impact of strategic reductions in revenue are expected to be lower in 2025 than they were in 2024. For full year adjusted operating income margin, we now expect a margin of around 5% versus our prior outlook of at least 6.5%, reflecting the effect of gross profit decline associated with the reduction in our equipment revenue outlook and, to a lesser extent, the delays in the implementation of certain cost reduction initiatives to 2025. Due to lower than expected revenue in 2024, we no longer expect to grow adjusted operating income $300 million above 2023 levels by 2026; however, we continue to expect growth in adjusted operating income and a return to double-digit adjusted operating income margin over the course of our reinvention. In 2025, we expect growth in adjusted operating income and margin, supported by a return to revenue growth and the benefit of additional gross cost savings associated with cost reduction actions implemented in 2024, or expected to be implemented in 2025. Finally, full year free cash flow guidance was reduced from at least $550 million to a range of $450 million to $500 million, reflecting the previously noted reduction in adjusted operating income guidance. In summary, 2024 has presented unexpected challenges; however, in Q3 we grew adjusted operating income and margin year-over-year despite a reduction in revenue, a trend we expect to continue as we implement further reinvention actions aimed at simplifying our organization and driving closer alignment to the economic bias of our products and services. We’ll now open the line for Q&A.

Certainly. Our first question today comes from the line of Ananda Baruah from Loop Capital. Your question, please.

Good morning, and thank you for taking my question. I have two inquiries regarding the product. First, could you clarify the reasons behind the product delay and share any insights you gained to prevent similar issues in the future? Additionally, regarding sales productivity, what specific factors surprised you and contributed to the decline in productivity? I have a quick follow-up as well. Thank you.

Hey Ananda, this is Steve. Thank you for the questions. I’ll turn it to John in a minute for some specifics, but I just want to remind you, look - the reinvention is a multi-year journey, and inside that multi-year journey, the ultimate strategy is to get to sustainable revenue growth and get to double-digit operating income. As part of that, we’ve made some progress in each of the areas, if you think about what we’re trying to do in our revenue mix, ITsavvy gives us a great platform. We’re seeing IT services growth over the next couple of years. We also saw the good impact of operating expense reduction quarter-over-quarter and year-over-year. My point is that inside of reinvention, we have multiple work streams, some of which will exceed, some of which will be set back, but we will ultimately get to our end goal. Specifically to the product and to revenue in terms of productivity, we made very large organizational changes at the end of Q1, very specifically realigned almost 6,500 new jobs in terms of realignment, and we had a very large reduction in our workforce, which is basically the premise of what caused the reduction. We saw quarter-over-quarter productivity improvement from Q1 to Q2, and from Q2 to Q3. John, other color you want to give?

Let me start with the product transition issue first. It’s primarily a forecasting challenge. When we examine the inventory of older products, the timing of new product releases, and the forecasting of that mix, there are many complexities involved in the demand and supply dynamics. We initially expected to see older products sell out more quickly, but as the timing of the new product releases adjusted, we had decisions to make. We definitely don’t want to accumulate excessive working capital and inventory; our goal is to sell through and manage these transitions effectively. This is something we usually handle well, but this time, we struggled partly because we didn’t accurately assess the timing of each factor, leaving us little time at the end of the quarter to implement necessary changes. At the beginning of the quarter, we were optimistic about the ramp-up in sales over the last six weeks, which didn’t materialize as we had hoped. This largely ties back to managing the transition between demand and supply signals. Regarding sales force productivity, we measured this from a quarter-over-quarter sales headcount perspective and found a significant decrease in the number of sellers year-on-year. We’ve since stabilized this with new territory assignments, re-mapping, and account coverage. These factors also relate to forecasting, timing, and understanding our clients. We initially had an overly optimistic outlook for equipment sales revenue at the start of the quarter, but as we progressed, we adjusted our expectations, which is ultimately a positive sign. However, operating so close to our targets means that even minor discrepancies can significantly impact our results. My confidence stems from our performance; while Q1 was underwhelming, we saw improved productivity in Q2. I had anticipated continued growth in Q3, but results were essentially flat compared to Q2. We then analyzed what led to this stagnation. While we didn’t decline, it reassures me that we’ve stabilized the situation, and now it’s about enhancing our sales activities, demand generation, and improving forecasting accuracy to ensure we move forward.

Ananda, I also would like to share my thoughts.

Yes, please.

Yes, we’re all jumping on this one.

I want to emphasize that our revenue consists of ESA, which accounts for about 25% of the total, while 75% comes from post sales. Throughout this year, the trajectory of ESA revenue growth has improved quarter-over-quarter, despite the challenges mentioned by John and Steve in Q3. This represents an improvement compared to what we experienced in Q1 and Q2. Additionally, we’re also pleased to see that the post sales revenue stream is improving quarter-over-quarter, even with the ongoing reinvention activities. The key takeaway is that our reinvention efforts are actively in motion, particularly in the services area. It's important to note that equipment revenue can be cyclical, and we have seen an example of that in certain quarters.

That’s all super useful context, and I really appreciate it. Just a quick follow-up that and then I’ll cede the floor, any sense of sort of macro or the general market demand backdrop was a bit softer, and if that was also a contributor, John, to the flattening Q-over-Q and efficiency progression, sales efficiency progression?

Yes, there was very little impact. I would describe it as minimal. Most of it was just related to execution challenges.

I’d love to blame the macro. It was about the same.

Got it. Thanks guys.

Thank you, and our next question comes from the line of Erik Woodring from Morgan Stanley. Your question, please?

Thank you for taking my questions this morning. I have two. To start, Steve, you are making significant changes, including exiting businesses, altering your delivery model in various regions, reducing headcount, launching new products, and acquiring new businesses, all while facing demand challenges in your end markets. That's a lot to manage, and I commend you for these actions. However, regarding your comments about expectations for 2025, you're anticipating revenue growth, operating income growth, and margin expansion. I’m curious why you believe this is the appropriate expectation to set, especially considering the challenges you've encountered this year, which could persist as you undergo this transformation. Given all these changes, what gives you the confidence that you can return to growth and margin expansion next year? I also have a follow-up question.

Thank you for your question. I want to highlight a few points. Our management team has consistently demonstrated our capabilities throughout our careers. We have a strong ability to recognize patterns, allowing us to foresee future outcomes based on the strategies we've implemented. While some aspects may not be visible internally, we have insights into our program execution and the developments we're pursuing. In terms of our reinvention, it's quite similar to the initiative where we had multiple work streams, with several expected to exceed goals and a few that may fall short. However, we expect to achieve favorable overall results. The strategic actions we're taking, such as our approach to free cash flow and the initiatives tied to PARC, are aimed at establishing long-term revenue growth and attaining our desired operating income. As we assess each work stream, we observe a notable reduction in expenses and costs. Additionally, we’re actively working behind the scenes on our acquisition of ITsavvy. We're making significant changes to our sales coverage, which is helping us build new customer pipelines. I believe our efforts are effective. Progress isn't always linear, and it's challenging to take a three-year program and evaluate it based on a single quarter. Nonetheless, I see promising long-term returns in the next few years from what we are doing. Our history and the recognition of patterns from our past experiences assure me that we are on the right path.

Thank you, Steve. As a quick follow-up, you mentioned that your adjusted EBITDA margins are close to 9%. I understand that regarding ITsavvy, the EBITDA margins are around 7%. You indicated that this asset is expected to be accretive immediately. Can you clarify how you arrived at that accretion, specifically in terms of revenue synergies? I know you mentioned some cost synergies, but it would be helpful to understand the overall assumptions supporting the idea that this will be accretive. Thank you.

Yes Erik, I will provide some information about ITsavvy, including the size of the acquisition, the revenue, and the opportunities it presents. As noted in the press release and during the earnings call, the company has approximately $440 million to $450 million in revenue over the last twelve months and around $30 million in EBITDA. We anticipate achieving about $15 million in synergies, which, when combined with their EBITDA, suggests an EBITDA margin exceeding 9%. This will make the acquisition accretive compared to our current figures. Additionally, from a free cash flow perspective, they will be beneficial to us, and EPS will also improve accordingly. I want to emphasize that while the business model has a lower gross margin, it also has reduced operating expenses, making EBITDA the key metric to focus on. Overall, this will lead to an immediate enhancement in our financials starting as soon as the transaction is finalized, which we expect to occur shortly.

And Xavier, I just want to clarify one last point regarding how we incorporate ITsavvy into the model. I assume it will be included in the services, maintenance, and rentals line, as we think about our model. I want to ensure we are incorporating that correctly. Thanks.

Yes, we will continue to distribute it as we do today, which includes a hardware element that will appear as a separate cost of revenue. Someone on the team can assist you with how we will handle the pro forma, but it will be quite similar to our existing approach. As you are also aware, next year we plan to implement segment reporting, which is vital because ITsavvy serves as evidence that our reinvention strategy is effective. With ITsavvy, IT and digital services will make up 15% of the total company, representing a 5% increase from the current 10%. We aim for 20% of our revenues to come from non-print-related sources during the reinvention program, and this is a significant initial step towards that goal.

Awesome, thank you so much.

Thank you, and as a reminder, ladies and gentlemen, if you do have a question at this time, please press star-one-one on your telephone. Once again, ladies and gentlemen, that’s star-one-one to ask a question. As it appears that we don’t have any further questions in the queue at this time, I’d like to hand the program back to Steve Bandrowczak for any further remarks.

Thank you. Recapping today’s call, equipment sales fell short of our expectations this quarter and for the year, but we are confident we have identified and addressed the factors that contributed to these shortfalls. We expect an improved equipment revenue trajectory and the pending acquisition of ITsavvy to drive a return to revenue growth in 2025. This quarter reminds us no single performance indicator or quarterly results defines our reinvention. Consistent progress in operating efficiencies, client perception, services signings and expected sales force productivity gains gives us confidence we are on the path to enabling long term profitable growth through reinvention. Thank you very much for attending this call.

Thank you ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.