Xerox (XRX) investor relations material

Business overview and transformation

• Operates three core businesses: print/managed print services, IT solutions, and digital services, serving 200,000 clients and 90% of the Fortune 500.

• Achieved top five market share in all major print categories after acquiring Lexmark, with 65% of revenue from recurring sources.

• IT solutions segment is the fastest-growing, with Q1 billings up 21% and a strong cross-sell opportunity into the existing client base.

• Digital services, including AI-powered workflow and content management, are early-stage but rapidly expanding, supported by a new leadership team.

Recent performance and operational improvements

• 2025 performance was impacted by government shutdowns, higher product and tariff costs, and delayed synergies from the Lexmark acquisition.

• Transitioning production to Lexmark’s facility in Mexico to improve unit economics and serviceability.

• Supreme Court tariff rulings and synergy realization expected to drive margin expansion and gross profit tailwinds in 2026.

• Q1 2026 revenue of $1.85 billion and operating income of $72 million both exceeded analyst expectations, with improved margins and strong liquidity.

• Repurchased $101 million of 2028 senior notes for $45 million, capturing $56 million in discount.

Financial outlook and capital strategy

• Reaffirmed 2026 guidance: revenue above $7.5 billion, adjusted operating income of $450–$500 million, and free cash flow of ~$250 million.

• Expects to generate over $400 million in free cash flow in the remaining three quarters of 2026, with leverage reduction as a key focus.

• Net debt to EBITDA projected to fall from 6x to 4.5x by year-end through operating performance and synergy savings.

• Launched a warrant exchange program enabling debt retirement at face value using discounted bonds, potentially reducing debt by $600+ million.

• $450 million TPG Angelo Gordon joint venture provides liquidity for transformation and further debt repurchases.