Steve Bandrowczak: Yes. So, let me – and I stated it I think in previous calls. With the changing interest rate environment, it was no longer palatable for us to leverage our balance sheet in the leasing business. And we changed the strategy mid to late last year, and we were no longer going to use Xerox balance sheet for this business and we were going to look for other sources of capital to help us with that business. However, it was extremely important that it is a big component of driving our value in the field that we have the ability to be able to do leasing and bundle pricing in the field with leasing. And so we turn to HPS and PEAC, and we are being – and using them strategically so that we don’t leverage our balance sheet.
You are absolutely right, 2 years ago, we were trying to target growing that business, and potentially, it would have been an operation that potentially would have been up for sale. We have reversed that. It is now going back to an internal captive business and we are not expanding beyond just supporting our business. Xavier?
Xavier Heiss: Yes. No. You said it, Steve, there on the – Maya, the other focus that we have there is to make it an offer that support our business rather than looking at it as a pure separated business here. As Steve mentioned it as well, our balance sheet, the current interest rate environment make us – more than 2 years ago, making this decision here. And at the end of the day, if I look at the current free cash flow being generated and maybe you spotted when we – I commented what will be the benefit of this transaction. Until 2027, we are expecting the finance receivables balance to decrease up to $1 billion. And if you look at the current situation, 2.6 going down there. This will be, over time, free cash flow being generated supporting and driving the case for also the Reinvention that we are building at this time.
So, at the end of the day, the good decision was made 2 years ago. This decision is helping us currently from a balance sheet point of view, and we have kept this ability to be captive and develop our business without hurting it.
Maya Neuman: Got it. Thank you. So, maybe just if we take a step back, printing is a secularly declining market. And while I realize that you are leaning into IT and digital service to try and offset some of those pressures, this business is still overwhelmingly print-focused. But there is a huge TAM in Asia that’s untapped for Xerox with no licensing reductions in place now. So, why not go after the Asia market? And what are kind of the barriers to entry there?
Steve Bandrowczak: And I think there is a couple of different things. First of all, I have stated a couple of times, I think we can grow in our existing accounts with our existing TAM today both in the EMEA region and here in the Americas region. And so we have got a tremendous amount of opportunity to grow and just execute on what we already have today. If you take a look at our share, there is a significant share growth opportunity even inside of print. And I believe our services differentiation and our product differentiation, if we execute, we can actually grow TAM. To go expand into Asia, into other markets, you have to go build the supply chain, you have got to go build the go-to-market, and you have got to go build a logistics infrastructure in and around spare parts.
It’s a significant capital outlay to go expand in those margins. Even if you go with partner-led strategy, you still have significant cash and capital outlay. We believe that the focus that we have on the capital that we already have, we could expand and grow operating margin, as we have shared with you, significantly faster if we do it in the Americas and EMEA and not expand into that region.
Maya Neuman: Got it. Thank you.
Operator: Thank you. [Operator Instructions] And our next question comes from the line of Samik Chatterjee from JPMorgan. You question please.
Samik Chatterjee: Hi. Good morning and thanks for taking my questions. I guess if I can start on Project Reinvention. Can you just help us understand, when you are thinking about the $300 million of improvement there, how should we think about impact on profitability of a sale or essentially benefit to cost of goods sold or gross profit relative to how much of this is an improvement on OpEx? And any thoughts around how long these changes on the go-to-market take for you and how sort of the timing of this $300 million should we be expecting in terms of the linearity of the improvement through the next couple or 3 years? Thank you and I have a follow-up.
Xavier Heiss: Yes. Thanks Samik and thanks for asking a question on Reinvention because this is really a strategic movement for the company, and we are pleased to unveil more on this strategy here. So, from a profit point of view, as we mentioned it, we are expecting roughly to double the operating margin that we have on profitability until 2026. So, it will be like 3 years journey that will continue beyond 2026. But we wanted to plant a seed and give you numbers so you can, I would say, model and look at the trajectory of the profitability here. We are expecting the vast majority of the benefit to be in OpEx. Some of it will be in cost of goods sold, but it will be mainly in OpEx because this is where we will rewire entirely the company and look at not only like the key function or some of the function like go-to-market.
You have heard about geo simplification. At the end of the day, what does geo simplification is, again, back to this concept of balanced execution on very disciplined way of looking at 0.5 year [ph] is where should we be present. It does not mean leaving geographies there, but what is the best go-to-market model we should have in all the countries that we are representing here. So, OpEx will be a key driver there. And obviously, we are expecting, combined with the benefit of FITTLE, free cash flow to go up significantly. As we mentioned it as well, we are expecting this initiative to be self-funded. So, we are not expecting to leverage furthermore the company here. As you know it, we have just completed the transaction with Carl Icahn. We are always opportunistic when we are looking at accretive and value-accretive acquisition.
But at the same time, we have a journey on the trajectory, which is modeled now that will create this profit improvement on the $300 million operating profit that we mentioned here.
Samik Chatterjee: Got it. And for my follow-up, you did mention the weakness you are seeing in the transaction business, and I think particularly in EMEA is what you are calling out. I just wanted to understand the nature of what you are hearing from your customers. Is it really budget consideration and pushing some of those sales out to next year, or are they rethinking sort of their installed base or something else on a more structural basis on the devices or printer front, any insights there, please. Thank you.
Steve Bandrowczak: Yes, let me start. And so if you think about the headwinds that we are seeing, macro headwinds around inflation, around interest rates, around labor, and so what we hear from our clients and aligns really well with our strategy, and that is we have got to drive their success through our solutions and products and services. And that’s why I talk about we could expand in existing clients today, and that’s why we are seeing our renewal rate higher. So, things like Robotics-as-a-Service, things like digital workflow in terms of driving productivity inside a very specific verticals. So, where we are aligning what we are hearing from our clients, number one, is they are looking for help to be able to offset some of these macro trends and drive more productivity, helping them with the challenges around labor, helping them with the challenges around higher cost of capital, things like as a service and subscription model.
