Welcome to the Xerox Holdings Corporation's Second Quarter 2024 Earnings Release Conference Call. After the presentation there will be a question-and-answer session. [Operator Instructions]. At this time, I would like to turn the program over to Dave -- to Mr. David Beckel, Vice President and Head 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 second 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 recording and/or rebroadcasting of this call are prohibited without the expressed 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 are 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 Q2 2024 earnings call. Sequential improvements in adjusted operating income margin, cash flow, and revenue validate the comprehensive and strategic organizational changes implemented in Q1. Reinvention is a multi-year strategy to simplify operations and repositions Xerox towards market opportunities in print, digital, and IT services with the highest rates of underlying growth. With transformational changes of this magnitude, progress may not always unfold in a linear fashion. We experienced a short period of disruption in the first quarter during implementation of the redesigned operating model, but continued to execute reinvention according to plan. Notable improvements in operating processes and financial results since the reorganization further our confidence in this strategy's ability to deliver a targeted $300 million improvement in adjusted operating income above 2023 levels by the end of 2026. Summarizing results for the quarter, revenue of $1.6 billion decreased 10% in actual and constant currency. Excluding the impact of year-over-year fluctuations in backlog and reduction in non-strategic revenue associated with the reinvention, core business revenue declined only modestly. Adjusted EPS was $0.29, $0.15 lower year-over-year, primarily reflecting higher taxes and interest. Free cash flow was $115 million, an increase of $27 million compared to Q2 of last year. And adjusted operating margin of 5.4% was lower year-over-year by 70 basis points due to lower revenue offset by operating cost reductions. With the disruption in Q1 firmly behind us, the benefits of streamlined organizations with improved operating focus are materializing in the financial results. Q2 revenue was largely in line with expectations marking an improvement in trajectory from Q1. Adjusted operating income margin improved more than 300 basis points on a sequential basis and free cash flow grew sequentially and year-over-year. Momentum in equipment orders and pipeline, new product launches, and improved sales processes are expected to drive stronger revenue growth in the second half of the year than originally expected. Despite an improved outlook in the back half of the year, we lowered full-year revenue, adjusted operating income, and free cash flow guidance. The reduction in full-year guidance primarily reflects the impact of incremental reinvention actions, including geographic and offering simplification. The savings of which are now expected to be realized predominantly in 2025. Other impacts to margin, including higher freight and product costs, are also expected to be mitigated over time. Accordingly, the reduction in 2024 guidance has no bearing on our confidence in the three-year $300 million adjusted operating income improvement target. In fact, our confidence in the three-year outlook has grown over the past quarter due to progress in the identification and estimation of reinvention cost reduction initiatives, now totaling more than $700 million between 2023 and 2026, and the quality and rigor behind the management infrastructure recently put in place to execute those initiatives. John and Xavier will discuss the timing and consistency of future operating cost reductions in more detail. I'll now turn to our strategic priorities which continue to guide our decision framework as we execute the reinvention. Starting with a stronger core, the change to the business unit led operating model in Q1 and related changes to the sales organization were designed to catalyze [ph] market share growth by bringing sales and operations in closer alignment with the economic buyer of Xerox offering while improving sales efficiencies. We are seeing early evidence of the success of both fronts, now that our sales team has settled into the new operating model. The sales, marketing, and pricing teams are working more collaboratively to design offerings and marketing strategies specific to client segments and routes to market. Sales efficiency has improved through enhanced intelligence, better planning tools, and optimized sales coverage models. And work continues to reduce administrative burden giving the sales team what time to focus on the highest quality opportunities and target new accounts. These improvements are bearing out across top line key performance indicators. Equipment auto momentum continued Q2 with orders and pipeline both higher year-over-year. Supplies revenue also grew in the second quarter and the first half of the year. Services KPIs are similarly strong. Revenue renewal rates for large accounts remained above 100% in Q2 and for the last 12 months and across both print and digital services new business signings are higher year-to-date with renewal rates ahead of internal targets. The benefit improved sales operations will be augmented in the second half with a refreshed A3 product lineup, our largest and most successful product category. The lineup features what we believe is the world's first AI assisted multi-functional printers. The devices come with adaptive learning modules which save clients time by suggesting new and optimized workflows using AI-based algorithms to analyze device use patterns and user preferences. Also included are pre-loaded AI applications that enable users to summarize, convert handwritten notes, and automatically auto-redact any scanned documents. More importantly, these AI-enabled devices serves as a platform for a broader range of AI-assisted workflows including intelligent document processing currently deployed by Xerox as a digital service. The updated platform combined with cloud-hosted AI applications and integration opens the door for innovative new use cases. The change to the business unit operating model has also brought increased focus on expanding digital and IT service penetration across our client base. Stronger alignment between product development, solutioning, and sales teams is driving differentiated digital workflow solutions for traditional print clients who are increasingly looking to partners like Xerox to improve their most critical document workflow processes. Our strategy of expanding total addressable market with every print client is progressing accordingly. In Q2, we signed a deal with an existing print client in the European telecom space to provide an end-to-end customer acquisition solution for the client's new home broadband service. With the help of a strategic partner, we sourced unique customer data and applied proprietary intelligence to identify an optimum set of customer targets. We designed and executed an omnichannel marketing campaign across both digital and print media and using the response data from the campaign to recalibrate the targeting strategy, improving marketing effectiveness for the client over time. This solution demonstrates our ability to integrate print with advanced digital capabilities to provide incremental value to our clients. Increasingly we are utilizing artificial intelligence to optimize our digital solutions. This past quarter we signed a deal with an existing print client in the insurance industry to provide a digital workflow solution leveraging AI and machine learning which assists in the prevention of money laundering and financing of terrorism. This unique solution automates processes involved in the screening and detecting of fraud and other non-compliant activities greatly reducing the need for manual processes and client risk. The ability to sell advanced digital solutions such as intelligent document processing by leveraging print customer relationships is a key competitive advantage as we expand our digital services business. The new business signing for digital services are up double-digits year-to-date and we expect increased demand for solutions utilizing AI to provide a tailwind to growth for our digital services businesses in 2025. Moving to cost improvements. In Q2 operating expense decreased nearly 50 million year-over-year reflecting the benefits of the strategic actions taken in the prior year, the use of AI to optimize internal processes and the planned reduction in headcount associated with the structural reorganization. With headcount reduction largely behind us I'll focus this quarter turn to identifying future cost reduction initiatives and developing the systems and processes required to ensure the successful delivery of those initiatives. Our global business service organization or GBS is a key to the delivery of future savings as it enables continuous operating efficiencies through shared capabilities and platforms. Louie Pastor, our Chief Administration Officer, leads the GBS organization. He is also our Chief Transformation Officer putting control of both the design and implementation of the end-to-end structural changes in the hands of one leader. I am pleased with the progress his team has made to identify more than 700 million of gross cost savings through reinvention from 2023 to 2026. Finally, balanced capital allocation. This quarter we delivered year-over-year growth in free cash flow despite lower operating income and lower sales of finance receivables. We are in advanced talks to expand our forward flow agreement outside the U.S. which will enhance the company's free cash flow profile by reducing capital required to fund future lease originations in other regions. Balance sheet health and liquidity improved this quarter through the reduction of 300 million of debt and expansion of the ABL facility by 125 million. We expect free cash flow in future periods to be sufficient to both fund value accretive growth in digital and IT services and reduce debt. Through reinvention we intend to reduce leverage below three times EBITDA by the end of 2026. The payment of our $1 per share dividend remains a key priority. Our dividend yield is well above that of our peers but we fully expect our yield to return to more normalized levels as we execute our reinvention. I will now hand the call over to John to provide an update on specific reinvention initiatives. John G. Bruno: Thank you Steve. As Steve noted we made progress this quarter in design planning and implementation of structural changes expected to drive reductions in operating costs to meet our three-year 300 million adjusted operating income growth target. I'll spend time on today's call discussing the mechanics and assumptions underlining the target and key progress made in Q2. Sequentially higher operating income requires a leaner, less complex organization, fit for purpose to the market opportunities available to us. The structural reduction in organizational complexity through reinvention will be driven by three primary levers, geographic, offering, and continuous operating model simplification. These savings unlock require structural reduction in operating costs which when combined with a more favorable mix of revenue towards markets with higher underlying growth rates will drive cash flow sufficient to fund growth while reducing leverage. I'll start with an update on geographic simplification. We are currently executing a shift in how we distribute product in certain markets from a direct to an indirect model. This shift in distribution strategy does two things. One, it allows greater focus on providing print and digital service capabilities for channel partners who are best positioned to serve our clients within their region; and two, allocates more time and resources on being the leader in the markets in which we maintain direct operations. This quarter, we transitioned our operations in Ecuador and Peru from a direct to an indirect model, following a similar move in Chile and Argentina in the prior quarter. We continue to evaluate the optimal mix of direct versus indirect distribution by country, across our operations in Western and Eastern Europe, and will provide updates as transition decisions are made. Offering simplification will narrow and optimize our offerings over time to those with the greatest levels of competitive differentiation and profitability. Last quarter, we announced our decision to exit the manufacturing of certain production print equipment. We did this to refine our focus to the submarkets within production that are growing fastest and put more resources behind the development of a services led software enabled production print ecosystem, leveraging our free flow and XMPie software as examples. This quarter, we consolidated our remaining manufacturing operations globally and are ahead of plan in the sale of discontinued products. We continue to explore further rationalizations of our offerings to drive closer alignment with the needs of our clients and channel partners. One such example is the optimization of our A4 product for specific markets within the distribution channel where we have the most opportunity to gain share. As we discussed last quarter, operating model simplification will leverage the global business services organization to drive long-term enterprise-wide efficiencies and technology-enabled productivity gains. During the second quarter, the GBS organization began implementing 60 new initiatives to accelerate savings across key business functions, including reports to report, order to cash, global spend management, and the people operations. These efforts will help streamline and standardize global internal processes making it easier to do business with and within Xerox. Also in the second quarter, we entered into agreements with technology partners to transform our operations with enterprise-wide technology-led process improvements. And over the next few years, we plan to greatly reduce the technological debt associated with our legacy infrastructure by implementing a technology stack that mirrors the standardization of our global business processes. These agreements allow us to reduce the IP costs and improve business insights while providing greater flexibility and expanding our offerings and solutions. Another win this quarter was the redesign of our transportation network. Our teams negotiated key transportation contracts to derive economies of scale savings through the optimization of our transportation costs across our carrier network, reducing supply chain costs in future periods. These unlocks are critical enablers of broad-based organizational efficiencies and the operating savings that accompany those efficiencies. And to date, the reinvention office has identified over 300 savings initiatives resulting in more than 700 million in gross cost savings through 2026 across seven primary cost categories. In the second quarter, the reinvention office implemented a new management operating system, including comprehensive change management and accountability structures to ensure the successful realization of these initiatives and the continuous identification of further initiatives. With reinvention momentum and progress made thus far we are confident in our ability to deliver 300 million of incremental adjusted operating income by the end of 2026. Even after accounting for the shift in certain markets from direct to indirect distribution, a narrow production equipment focus, and potential erosion in our core print business and ongoing reinvestments in our growth businesses. When we enter 2027, we expect Xerox to be a transformed business with double-digit operating margins and more than 20% of revenue coming from higher growth, digital, and IT services businesses, as we reinvest growing levels of free cash flow and our discipline in our organic and inorganic investment opportunities. I'll now hand the call over to Xavier.

Thank you, John, and good morning, everyone. As Steve mentioned, the benefit associated with this year's organizational redesign are materializing in financial results. In Q2, adjusted operating income margin, adjusted operating profit, free cash flow on revenue-old-improved-sequentially, while free cash flow-improved year-over-year, despite the lower contribution from finance foreseeable activity. Total revenue declined 10% in actual and constant currency. Excluding the effect of backlog fluctuation, reduction in non-strategic revenue on order-reinvention action, total revenues this quarter declined 3% in constant currency to more than 200 basis point improvement from Q1. Core revenue in the first half of 2024 was below our expectations, mainly due to the first quarter performance. However, continued momentum in equipment orders on pipeline supported by the improvements in sales operations Steve noted earlier, new product launches on continued strength in signings activity gives us increased confidence both core and reported revenue will grow in the second half of the year. Turning to profitability. Similar to Q1, we incurred inventory charge associated with the exit of certain production print manufacturing operations. All profitability commentary to follow exclude this impact. Gross margin declined 50 basis points year-over-year due to lower volume on higher freight costs, partially countered by favorable currency effects on revenue mix. Adjusted operating margin of 5.4% declined 70 basis point year-over-year due mainly to lower gross profit, partially offset by the benefit of structural cost reductions. Total operating expense in Q2 declined 47 million year-over-year or close to 10%, reflecting headcount reduction action taken in Q1, no labor reduction in overhead on the flow through of cost reduction implemented in the prior year. Adjusted other expenses net were 13 million higher year-over-year due to an increase in non-financial interest expense associated with our recent debt refinancing activities. While our debt balance is not significantly higher year-over-year, non-financial interest expense increased due to higher interest rates on the lower portion of debt being allocated to our financing business, reflecting lower finance receivable balances year-over-year. Adjusted tax rate of 25.5% compared to a 20% tax rate in the prior year period. This increase in tax rate is a result of settling certain non-U.S. tax audit. Adjusted EPs of $0.29 in the second quarter was $0.15 lower than the prior year, driven by lower adjusted operating income, higher interest expense on a higher tax rate, partially helped by a lower share count. GAAP EPS of $0.11 was $0.52 higher year-over-year, as the prior year quarter included a $92 million net after tax charge associated with the donation of PARC of $0.58 per share. Let me now review revenue on cash flow in more detail. Starting with revenue, on the natural and constant currency basis Q2 equipment sales of 356 million declined around 15% year-over-year, compared to a roughly 26% decline in Q1. The effect of backlog fluctuation in the current and prior year on reinvention action, including geo simplification, accounted for most of the decline. Excluding this effect, equipment sales declined modestly, an improvement relative to Q1 which was negatively affected by the sales reorganization. After a brief period of disruption in Q1, we are seeing consistent improvement in equipment order velocity on pipeline, reflecting the intended benefit of closer alignment between our sales on offering teams and the economic buyer of our product. Each year, backlog compares continuous momentum in order on a refreshed A3 product lineup featuring a range of AI enabled capabilities give us confidence equipment revenue will return to growth in the second half of the year. Equipment revenue decline outpaced decline in installation activity in Q2 due to unfavorable product mix. Decline in installation activity mainly reflects the prior period reduction in backlog on the slight increase in current quarter backlog. Order activity outpaced installations again in this quarter, providing a tailwind to equipment revenue for Q3. Post sales revenue of 1.2 billion declined approximately 8% in actual on constant currency. Excluding the reduction in non-strategic lower margin paper on IT endpoint device placement on order re-invention actions, including geo simplification core sales revenue declined modestly. Consistent with past quarter I will provide additional commentary to help clarify underlying trends in our core businesses, which excludes the effect of backlog fluctuation on reduction in non-strategic revenue, including reinvention actions. For Q2, the effect of equipment backlog fluctuation in the current and prior year quarters contributed around 300 basis points to the year-over-year decline in total revenue. Additionally, lower sales of non-strategic paper IT endpoint device on decline in finance revenue, reflecting the change in our finance receivable strategy, contributed more than 200 basis points to the decline. Finally, other strategic actions to simplify our business on improved profitability, including geographic simplification, contributed around 150 basis point to the decline. When these impacts are removed, revenue declined low single digit, primarily reflecting decline in printed page volume, partially balanced by growth in digital on managed IT services as well as growth in supplies. For the second half of the year, we expect revenue growth on both reported basis and when adjusted for reinvention actions. Let's now review cash flow. Free cash flow was 115 million in Q2, higher by 27 million year-over-year. Operating cash flow was 123 million in Q2, 28 million higher than the prior year quarter. The increase was mainly driven by working capital benefit, partially counterbalanced by lower adjusted operating profit, lower cash from finance receivables, higher restructuring payment associated with reinvention on higher pension contribution. Finance assets were a source of cash of 161 million reflecting the benefit of our HPS Forward Flow program on lower origination year-over-year. This compared to a source of cash of 210 million in the prior year quarter, which included a large one time sales of finance receivable. Working capital was a use of cash of 133 million, a 115 million year-over-year improvement, driven mainly by the timing of accounts payable. Investing activity were a use of cash of 2 million, largely consistent with the prior year quarter. Financing activities consumed 336 million, reflecting the 217 million pay down of the remaining 2024 unsecured senior notes, along with the 82 billion of secured debt payment on dividend of 34 million. Turning to segment. Xerox Financial Services or XFS origination volume declined 41% year-over-year, reflecting XFS change in strategy to return its focus towards captive only financing solution. XFS finance receivable balance declined 9% sequentially in actual currency due to the runoff on sales of U.S. XFS origination on existing finance receivable on HPS funding of XFS origination. As previously highlighted, we expect our finance receivable balance to continue to decline on normalized closer to 1 billion by 2027, benefiting free cash flow in future period. In Q2, XFS revenue was down 12% year-over-year due to lower finance income on order fees associated with the decline in XFS finance receivable balance, partially offset by higher commissions from the sales of finance receivable asset. Q2 XFS segment profit was 4 million higher year-over-year, mainly due to lower bad debt expense, reflecting lower origination on a lower finance receivable balance. Print and Other revenue fell 10% year-over-year in Q2, due to lower equipment on post sales revenue for the reasons previously mentioned. Print and Other segment profit declined 25 million versus the prior year quarter, driven by lower revenue, partially offset by structural cost efficiencies. Turning to capital structure. We ended Q2 with 551 million of cash, cash equivalents on restricted cash. Around 2 billion of the remaining 3.3 billion of our outstanding debt support our finance asset, with the remaining debt of around 1.3 billion attributable to the non-financing business. Total debt consists of senior unsecured bond, financed receivables secured borrowing, term loan on a convertible note. During the second quarter, we retained the remaining 217 million of 2024 senior note. As a result, we have only 67 million of secured debt come in due in the balance of the year. Before addressing guidance, I want to provide additional details behind the more than 700 million of gross cost savings I notified to date through reinvention. In the past year we have implemented or are close to implementing initiatives that are expected to result in more than 425 million of run rate gross cost savings for 2026. We have notified around 275 million of additional savings opportunity to date including overwrite [ph] savings associated with geographic on offering simplification that will be implemented in 2025 and 2026 bringing total realized on estimated gross savings to more than 700 million through 2026. And our work continues to identify additional savings opportunity. We expect to realize close to 200 million of gross cost savings in 2024 on already line of sight to nearly 100 million of savings in 2025 from project [indiscernible] currently implemented or those that will be implemented shortly. We expect to realize additional savings in 2025 from initiatives not yet implemented and will update Investor each quarter as we move projects through the stages of reimplementation. As John noted progressing the identification of structural cost reduction to date, give us confidence in our ability to grow adjusted operating income at least 300 million above 2023 levels by the end of 2026. To put the separated operating income improvement in context, assuming our adjusted operating income target is rich as planned, in 2026, we expect EPS of more than $3 per share, adjusted EBITDA done north of 900 million on cumulative free cash flow from 2024 to 2026 of more than 1.5 billion. Finally, I will address full year 2024 guidance. For revenue we now expect a decline of 5% to 6% in constant currency versus a decline of 3% to 5% previously. The entirety of the reduction in revenue guidance is attributable to intentional reduction in non-strategic revenue. Including incremental geographic simplification action, the decision to exit the manufacturing of certain production print equipment on lower than expected revenue from financing income on low margin IT hardware endpoint devices. Full year revenue guidance now include 550 basis points of effect from non-recurring headwinds associated with backlog reduction in the prior year, reduction in non-strategic revenue on order reinvention actions, including geographic on offering simplification. Excluding the cumulative effect of this item, expectation for core business revenue in 2024 is unchanged at roughly flat year-over-year. We expect revenue in the second half of the year to increase on both the core on reported basis, which reflect improvement in our print business and continued growth in digital on manage IT services. For adjusted operating income margin, we now expected margin of at least 6.5% versus our prior outlook of at least 7.5%. This reduction mainly reflects the effect of lower revenue guidance, including geographic on offering simplification action, as well as higher than expected freight on product cost. Over the course of reinvention, reduction in non-strategic revenue, such as zoos [ph] associated with geographic and offering simplification, are expected to improve total profitability on margin. However, so reduction in overhead costs associated with many geographic simplification action is expected to be implemented in 2024 will not be realized until 2025, delaying the net savings benefit associated with this action to 2025. As Steven just noted, despite the reduction to 2024 guidance, confidence in our three year adjusted operating income improvement objective has increased in recent months, leveraging a strong managerial infrastructure to support the identification on delivery of cost reduction initiative currently contemplated. We now expect free cash flow of at least 550 million versus prior guidance of at least 600 million. So reduction in free cash flow is in line with the after tax reduction in adjusted operating income expectation. As a reminder, free cash flow guidance is inclusive of around 100 million of expected restructuring payment on 50 million of incremental year-over-year pension payment. In summary recent change to our operating model growth sequential improvement in results this quarter and we expect your new product launch on growing demand for our equipment on service to support our return to top line growth in the second half of the year. So reduction in full year guidance mainly reflects the timing of incremental reinvention action taken in 2024 with the benefit of this action now expected in 2025. We remain confident in our ability to grow adjusted operating income by at least 300 million over 2023 level by the end of 2026, a view supported by observable momentum in our business, and the team on management operating system capable of delivering a successful reinvention of Xerox. We now open the line for Q&A.

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

Yeah, thanks guys. Thanks for taking the question. A couple if I could. And Xavier just picking up right where you stopped. A moment ago, you talked about the reinvention initiatives being the catalyst for the guidance lower. Is it intra quarter, you guys moved around some of the timing of the initiatives and that's what's causing the impact or is it you're just learning more in the last 90 days about the impact of the initiatives, but the timing of the initiatives are relatively the same? And then I have a quick follow up, thanks.

Yeah, so thanks Ananda there. So yeah, we are executing the strategy as we've planned there. Ananda as you mentioned it, we go into the strategy and we assess each of the initiative individually here. As you know it we have not changed the guidance that we have for the entire program. So we stick with the three year guidance that we have there. Regarding the specific guidance for this year, if you look at the revenue guidance change it is entirely related to the way in which an action, specifically offering on view simplification here. If you exclude these the core business is behaving as we are expecting. Ananda, as we mentioned it, it is like modest decline, even like fatty situation when you look at certain lineups of revenue. From a profit point of view, operating margin point of view it is simply the timing of the action. I can give you an example, when you do or view a simplification action here, you have the impact from a revenue immediately, but you move from an indirect to direct model and then comes the action of taking the cost out of the cost base in the country that are impacted, but also in our corporate overhead. It is just a timing point, the overall program is executed as what we're expecting, although we are sticking to the three year guidance.

Hey Ananda, this is Steve. Just a real quick reminder, one of the things that we talked about is we had to make very large structural changes going back to early 2023. So we think about what we did with PARC, what we did with XRCC, our federal change implementing an operating model in the beginning of the year, what we did with production and manufacturing, now what we're doing in GL. It is a basket of activities that drives that end $300 million incremental operating improvement justice. And so what I want you to think about is this is not a linear, meaning that not every action drives a quarterly return, but the bucket drives what we want to do and we've got enough in that bucket that makes us confident that we're going to be able to deliver the end results. There are things that are out of our control, we talk about geo simplification, what happens with approval in a country, what happens with labor, what happens with the things that you need to do to get regulatory approval for the deal. So these are not straight where you can set up a plan, you know exactly what's going to happen in the quarter. However, with that bucket, we can feel confident that we are going deliver over the next three years, the exact financial results that we're talking about.

That's super helpful. You know, guys, I'll just leave it there given the time, and we can get it on the call back. I appreciate it.

Thank you. And our next question comes from the line of Samik Chatterjee from J.P. Morgan. Your question please.

Hi, thank you for taking my question. So if I can start off with following up on the question that Ananda had, but partly on sort of timing here. I heard you say that the 2Q revenues were largely in line if I heard you correct. So my question is, when we think about this incremental load guide for the full year, the 1.5% roughly sort of change is it primarily in the second half in terms of rebasing the second half, is that impact going to be more in the second half than the first half or rather, second half versus 2Q, how should we think about timing?

Timing wise, so just to go back to Q2, and give a little bit more detail on that, the impact in quarter two here. So if you look at our total revenue decline was 10%, including all the impacts that we mentioned. Now, to give more clarity on what we mentioned in our script there is 300 basis points of this impact come from backlog. So if you remember, year-over-year backlog last year was very strong, because we were crushing backlog. If you think about the second half, we will not have this impact anymore and this is the reason why we are thinking about [indiscernible]. The second point was related to 200 basis points. So 300 on backlog, 200 additional basis points related to what to call the end of non-strategic revenue paper endpoint devices on the sum related to the Forward Flow agreement, which has generated less interest income there. And lastly on the top 50 basis point was related to geos simplification and offering simplification. So you take all of this. So 10% from new decline, but at the same time 650 are rationally explained or driven by this section here. When you look into the second half now, you won't have the backlog flush anymore. We will still apply our decision on non-strategic revenue and the geo simplification impact will still continue. But when you look at these and this is the reason why we commented there, the backlog flush on the ability for us to drive the equipment revenues [ph] give us the confidence that will drive revenue growth during the second half of the year.

Thank you. I mean, I guess I'll just sort of rephrase that in the sense what I'm trying to get to, is did Q2 have an incremental impact in revenues coming in below consensus on account of the changes that you decided to do in between intra quarter and is that -- is more of -- or is more of the impact really more in the second half from these incremental changes? And secondly, maybe just for my follow on like, it seems like you're waiting for the bills to be finalized before you incrementally account for them in the revenue guide, full year revenue guide. So how do we get confidence that there's no more sort of some of these deals in the pipeline in terms of which geographies you want to exit subsequently in the year? Thank you.

Yeah, so I will answer the first question. So on the consensus, I don't think the consensus was taking into account some of the action. Because as we said it, every time we will have action ready to geo offering simplification, we will invest investor on [indiscernible] this is what we're doing here with 150 basis point here. Now, we're getting to second point on the second path there, we are executing as we plan the strategy here. I won't say the vast majority, but with some of the action already at play as we describe it here and if there are additional output or major or significant action, during the second half we will inform investor during our earnings calls. John G. Bruno: I do think, it's John, I do think it's a fair point. And I think that to just kind of add something to that it is about not only the mix, the mix of the types of geographies that we're looking to exit, the timing and the pacing, the sequencing, but also the mix of the revenue types and the deals that we looked at. And some of the lower profitable deals in some of the areas and low hardware, we're just being very disciplined with regard to balanced execution across both geographic mix shift and products and offerings. And because we're at the halfway point of the year, it's not as if that there's things in the back end part of the year that we're very concerned about to answer your question directly. It's actually the opposite. It gives us -- it gave us all the information in our learnings through Q1 and Q2, gave us a good guide of what's in the pipeline and how we pace and sequence them. So that’s definitely is a timing and a mix issue.

Thank you. Thanks for taking the questions. John G. Bruno: You are welcome.

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

Hi, this is Maya on for Erik. So I think just to start, if we think about let's say roughly a $6 billion revenue base, and with services being less than 10% today, that means it's maybe around 500 million to 600 million in annual revenue roughly. Do you think about that mix can more than double by 2026 but what's your assumption about your total revenue base at that point, meaning, are you telling us services revenue is going to double in two years or how should we be thinking about that, any color will help? John G. Bruno: I think it's a combination of both. So yes, you do have to think about the broad based services, big asset services as a growth business for us. We really see an opportunity, a very good one in the middle market across our IT services business, because our brand is very well recognized. Those environments are dealing with lots of issues on technological upgrades. We're in there having conversations with customers. And we think that that IP service is part of our business and has very good growth in the SMB space. We're seeing similar items in digital services, but they're not as mature. And that is absolutely offset by the declines that we've shared with you over the same period of time on print. So we want to make sure that we get the print mix, right, both in production, in the enterprise, and on the low end. So it does -- it will -- you will see a mix shift within our print portfolio, between our low end A4 or A3 and our production at the same time, you'll see an increase of our IT services and digital services. And that's the whole point of ensuring that the geographies we position these offers in and the offers themselves, and how we grow them is how we're getting to this mix shift changes over time. And the savings that we're driving through them gives us the ability to invest in them. So yes, that's why it's kind of -- it's complex by its very nature and it's a multi-year program, over a period of time, as both Steve and Xavier pointed out to. But yes, you are thinking about it correctly with regard to growing the services business and offsetting the declines in print.

Yeah, I might add, I want to also just to highlight there. So when we do the compare, when you look at Q1 or Q2 revenue, and you say, okay, this is like a double digit revenue declines. So is it like those are future trend. We should not forget that last year, we had significant backlog flush there and we know that starting Q3 and Q4, we will be no more apples to apples compare and that obviously is why we are saying for the second half, our view is that we'll be on a growth mode on both this adjusted revenue taking into account all the different strategic actions that we are doing. But also if you look at the different line of revenue that we are driving here, the outcome will be positive. So we should not forget last year the backlog had an impact in the first half.

Got it. That's helpful to remember. And so I guess when we talk about kind of this business being a significant growth business, the digital and IT services, are you looking at breaking services out, when should we kind of expect that to become a part of your regular disclosures?

Yeah, so this is good question on the -- this is one of the most demanded question from investor here. So our plan so far is at the beginning of next year, we would like to present accompanying result in two segments. So we are working on this one, currently two businesses. One will be print or call print and the other one will be IT or Digital services. I'm not committing to this area, because it required for us to work on the reporting, so we can be compliant with the reporting requirement, but we understand that this is clearly a requirement. So we have a much better understanding of the hydraulics between these two businesses.

Got it. Thank you. And then I just have one last question. We've heard in a few different tracks about some potential product or supply shortages potentially being caused by the reinvention and actions you're taking internally. Do you think this could have an impact on customer spending or purchase intentions or even channel partner behavior? John G. Bruno: We don't -- we've got no issues with supply internal shortages. I don't know where it's coming from. We're fine with inventory, and we are fine with supplies, not an issue.

Alright. Thank you so much. John G. Bruno: You are welcome.

Thank you. And our next question comes from the line of Asiya Merchant from Citigroup. Your question, please.

Great, thank you for the opportunity, good morning. Just a high level, I guess I wanted to dig into the revenues that you guys are thinking about over this next three year period, how you guys are thinking about the operational improvements that you've already discussed, but what's kind of the revenue trajectory post 2024 and to what extent is that beacon whether it's print market decline, your own market share position within that? And if I can double click on the digital and IT services, areas which are -- which you present our growth opportunities, where are you seeing success in those, if you could double click on those in terms of drivers of growth there, whether it's geographical, vertical, I know you talked about the mid-market, so if you could just double click a little bit on that, that would be great? And lastly, the operational investments that you need to do in order to drive growth there, if you could double click on that as well, that would be great? Thank you.

Yeah, great question. Let me start with the strategy, as we've been talking about as part of the whole reinvention. First of all, we believe that the existing TAM inside of existing clients and accounts is a great opportunity for us very specifically, in mid-market and helping a lot of our mid-market clients, being able to absorb new technology, whether it's AI, RPA, intelligent document flow, looking at IP services, and how did they embed it. So we're perfectly positioned as a trusted partner in that ecosystem to be able to bring products and services. And we're seeing that across our offerings. In addition to that, if you think about what's happening today, in the world of AI, in the world of intelligent documents, you take a look at RPA, we are greatly positioned because we are already behind our clients firewall, what does that mean? That means we're embedded in their security, we're embedded in their business processes. And therefore, we can create capabilities and solutions that brings client success and client value. We talked about changing and really focusing on client outcomes about a year and a half ago. And that really means how do we bring more value to our clients through our technology, and not just bring solutions from a product standpoint. So that's where we get services and that's where you saw some of the things that we highlighted in the opening comments around the things that we're doing with our clients. John, you want to go through some specifics? John G. Bruno: Yeah, for sure, Steve. So I'd like you to think about digital services in two ways. For large enterprise clients they look at work streams like invoice processing, invoice accuracy, the types of things that are both ingested via scanning and things that are printed, PDFs and their formats, the from, the to, and all of the handling of all of that. Robotic process automation and all those types of advancements in that space is just helping clients be much more efficient. And that's kind of more of a large play, a larger play in that space. You're seeing in the graphic communications and in the marketing space, Chief Marketing Officers are trying to understand the efficacy of both print and digital ads. That's why you see barcodes embedded on so many index cards or on various different offerings and physical items or watermark. They're trying to understand what the effectiveness is on a printed page, on a digital page, on programs overall, and make better decisions in that space. These types of things are the types of current today's issues, the advancements in AI in some of the areas that both Steve talked to and Xavier talked to earlier. Gen AI is dependent upon good data and good data comes from documents, the repositories of these documents have to be scanned, have to be indexed, have to be redacted. You need to understand chain of custody across these items. So the whole digitization of a document, the origination of the documents, the ability to redact, the ability to secure all these types of digital services and they are combined. It is no -- it is very much a kind of a multi prong approach because there is no one particular area. That's why people say Omni commerce, omnichannel, that's what they mean, it's coming both physical, both digital, but the processes are the same. So we're seeing these types of things emerge in digital services and the IP services around it is managed cloud, just like our Managed Print, manage IT security, and those things. And we believe that that's an SMB opportunity for us more than the large market, because that's where we see the market need. That's where it's very highly fragmented, it's very geographically put in place really like NFL cities, if you will, in the U.S. We have an opportunity to do some consolidation in that area, and extend our services through our brand and through our distribution easily without having to invest a lot more in that space. And so that's how we're balancing those issues.

Okay, and to what extent, you know, what about just the broader print market, I mean, to what extent is your operational income improvements speaking in just challenges in the overall print market? John G. Bruno: Yeah, so in the overall print market, it's pretty simple. If you look at our -- if you look at our positions across the three main categories more broadly, it is a gain share program in a secular challenged markets, right. So that means refactoring our offers in each of those three pillars. So it's a grow our market share position on the low end in the A4 and in our offerings and expanding in that space and creating more opportunities, mostly through are indirect channels. As we look at this mix shift, and you look at our Geo strategies, these are tied together. We want to build more channel ready products, higher velocity and capabilities across our A4 portfolio and if that's a gain share program. We are the leader in A3, that's a whole share and continue to differentiate. That's why you hear all the issues we're talking about in AI and enhancements. And we focus on that. That's a reshaping and continue to be competitive in the leader in that space, because we are the leader. This is why we want to make sure that the places in which we're direct, were surrounding that A3 market of more value added services to continue to enhance and protect print. And then on the production side, those are areas if you break the production market down, there's parts that are growing in that space, you see cut sheet inkjet, we see specialty labels, and really all the productivity that surrounds the presses. All the pre-press, post press items and making the presses run more efficiently because runtime and optimization for a large production clients is critically important. Down machines aren't making money for them, these are complex ecosystems. So you're seeing advancements on our side, we want to gain share in the software and services. That's why it's services led software enabled program there. We have to bring more capabilities to our print clients to help them as the digital divide there, which is very much a laggard. A lot of that stuff are still analog processes. We want to make sure that we're bringing productivity tools, and we're making these print shops or these embedded print customers inside the large enterprises, more practical. So it's different for each of the main three categories. It's gain in the low end, it's hold and surrounded strength in the mid, and it's enter new segments by repositioning our production portfolio to where the market is moving versus where it has been and where we've been in previously.

Thank you.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Steve Bandrowczak for any further remarks.

Recapping today's call, structural changes implemented in Q1 resulted in a short period of disruption but are driving notable improvements in operating efficiencies and sales effectiveness. The sequential improvement in financial results observed in Q2 and improvements in underlying processes designed to enable future cost reductions gives us confidence the reinvention strategy is working and will deliver the targeted 300 million of improvement in adjusted operating income by the end of 2026. I thank you for joining the Q2 earnings call and I wish everybody a great day.

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