Xerox Holdings Corporation (XRX) Earnings Call Transcript & Summary

Welcome to those in the room and to those on the webcast. My name is [ Omar Ahmed ] and I run the International Sales Desk here at Citi. I hope to make it interactive. We have some questions to get the conversation going. And then if anybody has questions, feel free to throw up your hand and we'll make time at the end.

Maybe I'll kick off with something which you can expand, Steve. You've been in the seat, I think, give or take 1 year, a little bit more than 1 year. Can you talk about what has been the most significant challenges you've experienced and perhaps some of the strategic changes you've implemented over those 12 months of thereabouts?

Yes. I think when I took over the business, probably one is the toughest, lowest points in kind of the history of Xerox. If you think about coming off of the COVID environment and the top line revenue loss that we lost, you think about the supply chain challenge we had, Ukraine-Russia impacted our business. And then last June, the tragic loss of our CEO and our beloved friend, John Visentin. And so, when I took it over, I really was trying to focus on 2 things -- 2 really important things. First of all, it was really how do we simplify our business and how do we focus on client centricity and client success. And I'll talk about that in a second, what does client success mean. And so we had an incredible go-to-market. We had incredible brand, incredible trust in our existing clients, and I wanted to be able to expand products and services in the existing account base that we already have. And we're starting to see very significant success in that space. The last 2 -- you can see our revenue flat in a declining industry, which means we're growing products and services on top of what we're already doing inside of existing clients. More importantly, though, when we focus on client success, we become more relevant, right? So everybody is talking about what's happening in the print industry and our competitors and they're shrinking and they're not growing. Well, we are growing, and we have the ability to do that because we focused on client success and we're providing services and software on top of our core multifunctional device and our managed print services. So really focused on that client success. By the way, I believe we can grow our share -- our existing share -- wallet share inside of the existing accounts, which will offset any headwinds that we're seeing on the traditional business that we have. The second thing was around simplifying our business. And so, if you remember, 2 years ago, we had a strategy of we call it sum-of-the-parts. So we were doing a 3D business. We were looking at things like Mojave, which was around HVAC equipment. We were looking at something called Novity, which was IoT data inside of manufacturing. And I thought we had gotten too distracted in focusing on too many areas, and I really wanted to simplify our business and get back to our core. So what did we do over the last year. First, we had Palo Alto Research Center, which we were investing in technologies that were 5, 7, 10 years down the road, but not really adjacent to everything that we were doing, and I really wanted to focus the management's attention on our key clients and our core business and growing our business. So what did we do, we donated PARC to SRI, and we made that announcement. Second thing that we did was we were looking and growing our FITTLE business, which is our leasing business. 2 years ago, the thought was could we grow our leasing business, grow the valuation of that and have an asset that's growing. Well, unfortunately, interest rates have changed. And if you think about the ability for us to leverage our balance sheet and the cost of capital and then leasing, well, the spread between what we can get capital for and our leasing, what we can lease, that was shrinking over time. The second piece of that was we were going to grow non-Xerox business, meaning that we were going to fund other manufacturers. We were going to fund other areas inside of our client accounts and we were going to grow those originations. Well, the reality was we were starting to use Xerox cash and it was a use of cash because we were growing that business. It was good, but the reality was that it was a use of Xerox cash. And so we went into we call forward funding agreement in January. That dramatically shifted how we looked at using our cash and freeing up our balance sheet and actually generating free cash flow for this year. And then I would say the last thing is we used to have a project called Project Own It. Project Own It, we generated roughly $1.9 billion of profit of cost out of our business over a relatively short period of time. But that implemented an environment that drove continuous improvement, but more importantly, it drove an implementation of software and technology to make us better every day. So a simple example is 3 years ago, we had one of our devices that would have failed and you would have called into a helpdesk and you would have logged a ticket. I then would have dispatched somebody, they would have got there. Maybe they got the right part, maybe they have the right skills to fix it. What does that look like today? Well, we use augmented virtual reality and artificial intelligence that our millions of devices that are connected around the world, they have a fault. That fault goes into a data lake. I now use artificial intelligence to pull that fault out, send it up to my call center in St. John's. My call center with artificial intelligence knows the top 3 ways of fixing that problem based on the historical way in which we've solved that. We then can send a link to our customers and open an augmented virtual reality session, and we can fix it real time online, 40% remote solve rate on that particular experience. That differentiates myself from all the other players in the industry around service that differentiates me around how I can get my inventory, meaning my spare parts, how I utilize my spare pause. But more importantly, I now can recruit my service people. I don't recruit them as a service technician. I recruit them as a digital native, and I tell them we're going to use augmented reality, virtual reality, AI, machine learning. I'm now a tech forward company. So that's the transition we've made over the last year.

A few things I would love to unpack there. You talked about the fact that the kind of client centricity, the client focus was one of the reasons or maybe the main reason why demand for your services held up better than other types of IT endpoint solutions. Can you maybe delve into that a little bit more deeply? What were some of the practical steps? Was it the sales force being smarter about the way they're selling into those clients? And then taking a step further, how would you expect that kind of trend to look going forward? Is it likely to kind of move back in line with peers? Or would you continue to expect the divergence?

Yes. So we get asked the question around the Japan players and recent announcements with our competitors relative to print and what's happening there. And so, if you think of a multifunctional device and you just think of it as a box, you can replace player A with player B. That's not what where we're playing today, right? Our multifunctional device has a chip, has a screen and an operating system around it. So what can I do with that? I want to give you a real-world example. When you think about today in a university or in some sort of education [indiscernible], middle school, graduate school, wherever it may be. They don't have enough administrators today. They don't have enough people to service the students that they have. So what can we do? Well, we can help them drive being client-focused, client outcomes, we can help them drive productivity. Simple example, if I am a Dallas school district, I have students to speak multiple languages. Well, I need administration staff that speak multiple languages. What can my multifunctional device do? It can translate from English to Spanish, Spanish to English, physical paper to a voice file, voice file to a paper. So I do language translation in and around my devices. I can also mock papers. So I can scan a paper. I can take it in a digital format. I can grade it for you. I can tell you whether the paper has been plagiarized. I can scan an invoice and put it into my back-end AP process, and I can generate that invoice and that payable process. What does that mean? That means I am now driving productivity inside of my client account using the ecosystem in and around my multifunctional device. Why can I do that? 2 reasons. Number one, I'm there every day. I have a sales force and have a service force. My multifunctional device is behind the firewall. Why is that important? Because I'm already embedded in your security. I'm already embedded into your IT stack, your IT security. I also know because I have done this for you and I have secured your print, I understand origin, destination, where print is coming from, where it's going to. And I can secure it. If I can secure it, I know and I understand all your personnel. Now once I have that, I can use other solutions on digital workflow that allows me to become more relevant, right? So when I talk about client centricity, it's really around helping my clients deal with the economic headwinds, whether it's inflation, labor challenges or capital challenges, and I become a lot more sticky. Why is that important? Because I'm very hard to replace and I grow services on top of my core business. So when you look at my revenue expansion over the last couple of quarters, if you look at my profitability expansion over the last couple of quarters, it's because of my client centricity focus and the simplification of our business.

You mentioned a couple of things that I want to come back to. But you brought up Japanese players. And I think on HBQ's recent call, there was some comments about price competition coming from some of the Japanese players. I guess from what you said, some of the kind of differentiated service providing -- help immunize or insulate yourselves from some of that, but maybe you could just comment on what you're seeing in the market?

To be clear, we're not seeing any price pressure from the Japanese players, right, because we are all around value. We're not about selling a box, right? So where they come in and they want to lower the cost of a box or lower the cost of supplies, everything I described to you, you have to completely rip out and you'd have to add value-added services. You have to take different bespoke solutions and put it inside that ecosystem, much more difficult to rip out. By the way, if you think about any enterprise -- so I talk about SMB for a second, let's talk about the enterprise. What happened in the enterprise. So if I'm a large Citibank and what happens to your employees, they're working from home. Your CIO, your CFO, what are they seeing? They're seeing devices at home that are not secure, that are vulnerable. They're also seeing devices at home that now you're expensing cartridges that you went down to Costco, you went down to Staples to get. Now all of a sudden, your CIO and your CFO realizing your print costs are going through the roof. What can Xerox do? We can help manage that environment, we can help secure it, and we can help drive your cost down. So the inflationary costs and all the things that you're seeing inside of the enterprise today is a sweet spot for us because we can actually drive more value around security, we can drive more value around how do we lower your cost.

Interesting. So that was the -- you mentioned one of the points I wanted to come back to. Obviously been lots of debate in the market around the long-term trajectory of print demand, COVID, work from home, work from an office. What's your current thinking on that? And how would you push back on some of the bears out there that think we're in some sort of terminal decline?

Well, we have made and driven productivity in the work environment for years. The actual -- and this is a strange thing for me to say, but COVID was the best thing that ever happened for us. Yes, we lost significant top line, but we've created products and solutions and services that drive productivity in this hybrid workforce and distributed workplace. So what does that look like? What I mean, I talk about the enterprise, how we can provide value in the MPS space. But think about churches today, think about catholic churches, think about synagogues, think about mosques, all of a sudden, the service, some are inside of the facility, inside of a church, inside of a mosque, some are still remote watching it from the living room. Well, how do you -- the things that we did for the catholic church or for a mosque or whatever it is for the day of that service? How have you driven donations? Well, now we can do it electronically. So this physical to digital, digital to physical, Xerox plays extremely well. And we have the campaign that says We Make Work, Work. It doesn't matter where you are anymore. It doesn't matter that you're in the digital or the physical. Xerox has products and solutions and services that it's not going to matter what the work environment is, we're going to drive productivity, right? So we don't measure it based on how many pages get printed in office. We look at how do we drive value in your workforce.

I guess, putting all that together at kind of the top line level, how should we think about normalized revenue growth going forward?

Xavier, you want to take revenue growth and thoughts on it?

Yes. So I will just reinforce the point that Steve mentioned here. You often look at us by saying, okay, this is like grandmother Xerox, and the print is dead. This is not true. It's something we would like to confirm, print is not dead. Print is not still zero. And what -- if you are looking for evidence point, just look at our P&L, and in the P&L, you look at the revenue lines, both on an equipment and the post sales or services where we do higher margin here. I mean, for the last 3 years, this bottom line had been stable and have seen as well, specifically on management services, we have seen growth. The second point to add on the revenue trajectory, we are not just looking at what is happening on print without reacting to other revenue stream. And everything that Steve described here around digital and IT services, we are now in a position where this revenue stream are becoming material enough in order for us to see a trajectory over time where this revenue could offset potentially a print decline. But so far, last 3 years, post COVID, we have seen stability in the print trajectory there. And lastly, just to conclude and to connect it to our guidance that we have provided to the street this year. Our initial guidance at the beginning of the year was like flat to low single-digit decline. In quarter 2, we up the guidance pricing. We believe we are closer to a flat position, and we do everything, obviously, to grow this well.

You talked about the digital and IT services. Maybe if you could unpack those a little bit in terms of how large an opportunity is it? How should we think about the drivers of growth between the 2 parts of that? And I guess, to some extent, for perhaps people who might be on the line, who are not as familiar with the story, how are you defining the perimeter of digital services?

Yes. So let me take the opportunity in terms of market share, where I think we know that -- Xavier comment on the actual revenue and how you think about that going forward. So if you think about today the SMB business and you think about inflation, labor and capital challenges, they have enterprise challenges without enterprise solution. Simple example, ransomware doesn't care whether it's a Citibank or a Xerox or a mosque or a school or a law firm. It doesn't care. And yet, I've got to protect my assets if I'm a mosque or I'm a church or I am a school, university or I'm a law firm. I have to protect it. I need the same protection that a Citibank and a Xerox has. What we have done is we've taken everything we've done internal to Xerox and we've extended it to SMB customers as a service. So think about subscription for security. You think about RPA. We've driven now internally 7 million transactions per month with UiPath. What does that do? That reduces my cost of transactions. I don't have to have people doing things like going and notifying customers of certain things where products are delivered. I can use RPA to help with my invoice process. I can use RPA in my HR process. I can do the same thing from my SMB customers. The problem is they don't have technicians. They don't understand how to implement UiPath. They don't understand how to dissect the process. They can buy it from me as a service, and I can drive their productivity on a subscription basis. Pay me a dollar, get $5 savings, right? And that's how the model is working. We talk about client centricity. So in terms of our opportunity, we can significantly expand our business. I think we can greatly expand our business inside of existing accounts that we already have with existing capabilities that we already use inside of Xerox. What does that look like from a sales team, right? I want the sales team to be able to sell value to my client. So they go into a law firm or they go into a school or they go in university, very simple use cases. I can improve your productivity by x percentage, using solutions, and I can sell it to you on a subscription model, trying to make it as simple and as easy as we can. Xavier, how we break down the revenue, how do you think about the growth?

Yes. So to make it very simple, so print is still the core part of the business. But if you try to assess, we have not disclosed publicly the size of what is in IT services and digital services. But this is one of the most frequent asked questions that we are facing from investors. I want to give you a proxy here, we are approaching what I would call a materiality threshold. So over a time, while we are building these offerings, we'll be closer and closer to disclose more information on the relevant KPIs that are supporting this business.

Maybe switching gear a little bit to -- further down the P&L, thinking about the cost line. You've done a huge amount of work already on the cost line, particularly with Project Own It. I guess, how do you think about the cost base moving forward? You've made some strategic decisions to move to a more flexible cost base. How does that play into it? And then one of your opening comments was supply chains and the challenges posed by that during COVID. Has that situation eased and what you've done around that to help kind of reduce some of the COGS?

Yes. So a couple of things. Obviously, I was the architect and implementer of Own It over the last couple of years. And one of the things fundamentally, it wasn't just a onetime cost takeout. It was building a culture of continuous improvement and continuously embedding and utilization of software, the service description that I just described for you, right? Think about 3 years ago, I would have to roll and dispatch every time there was an error and a problem of multifunctional devices. I now use augmented reality, virtual reality and machine learning to diagnose, understand and try to do as much remote solve as I can. Second, I try to stop a second or repeat call. Very important, right? If I get a technician that goes out and they don't fix it because they don't have the right partner, they don't have the right skills, and they got to roll it again, I now have a productivity problem, right? So I will continue to advance -- my supply chain continue to advance my service team and capabilities using software, using capabilities that we've embedded inside the company. More importantly, though, we're embedding, I talked about RPA 7 million transactions. Every one of my EC staff, my direct reports has RPA strategies. Xavier has embedded in what he does RPA strategy. By the way, he now has AI strategy embedded inside of what he does, right? How do we use AI to get better predictability on our revenue, better predictability on our forecast, how do we use AI to get better predictability around our inventory and inventory utilization. So we have lots of opportunity to continue to expand our implementation of software and solutions to drive productivity. Last thing we talk about simplification. I started the segment of we really wanted to simplify our business. And when we talk about simplification, there's a lot of different ways you can simplify. You can simplify how you run your business, the number of P&Ls, the number of ways in which you look at your business. You can simplify in terms of the number of products and offerings and services. So we're going to continue to simplify our business that allows us to drive more productivity and drive more profit going forward. Last thing that's really important, when we talk about Project Own It and we talk about the cost side of it, think about what we're trying to do in terms of driving more revenue in existing accounts. That gives me a flat SG&A, more revenue, more profitability, right? So when we think about profit expansion, yes, there's the cost side of it. Yes, there's the efficiency side of it, but I also want to leverage and drive more into existing accounts, focusing on client success and providing more solutions that are services and software based on top of a fixed SG&A. That's another way that I drive more productivity.

And the supply chain?

Yes, supply chain is pretty much back to normal. You really think about it, right? We stopped talking about backlog at the end of Q2. It's back to a normal supply chain that we would have seen pre the pandemic and pre to supply chain issues.

Maybe we just think about kind of profitability going forward. You've talked about some of the drivers from both top line and the cost side. How should we think about it what we put out there? Can you bridge us how would you kind of...?

Yes. So let's talk about the future of the company and some of the areas we're thinking about. We get all excited about AI and ChatGPT. Both of those fundamentally need data. AI needs to have the ability to understand where data is coming from, who the origin is, where it's going to. The receiver needs to make sure that it doesn't get impacted in transit, meaning that what it goes between a sender and a receiver, that data doesn't get manipulated or changed. Xerox has been doing that for years. We just have to be doing it on print. We just happen to be doing it on word files, PDF documents. So we know exactly where it's coming from. We know exactly where it's going to because of our security infrastructure. We know the security around that data who can see it, who can look at it. By the way, when Xavier sent something to me and somebody tries to print it, that it's not inside of my security system, everything gets redacted, right? So we can redact based on who is printing, based on who's seeing that data. So what can we do? We're going to play in the AI space, we'll pay in that ChatGPT space wherever it looks like. So that's the first thing that's really important in terms of the vision going forward. Second, we're playing in this physical to digital world, and we're going to play and have much more greater services in and around IT services and in and around digital services. What does digital services look like. Today, if you think about marketing, and we print large marketing campaigns that could be in a retail store. So if you go into a retail store, you'll see at the in-cap 20% discount, here's the aisle for whatever it is, food. Here's the aisle for pantry stuff, here is the aisle for appliances, but we print all that today, okay? Now think about I can now take that and I can put it in a mobile app and I can put it in a web app. So I not only have the physical world of marketing, I have the digital world of marketing, and now can add AI in top of it. And I can say I marketed this particular thing to you, Mr. Customer one, was it successful or was it not? By the way, when you're in the store and you're buying whatever I'm marketing, whatever that discount is, here's the 5 other things that may go with that product, right? Nobody thinks about Xerox in that what we call CES space, customer engagement space. We have the ability to now play in the marketing side and driving revenue for our large clients and for our SMB clients. So this physical to digital world, we will continue to develop more products and services, the world of AI and where AI is going, we'll continue to provide that. And then more importantly, we're going to provide value to our SMB clients that don't have enterprise capabilities that need things like artificial intelligence, that need RPA, that need security solutions, we'll provide it in a subscription-based services. That's the vision of where we're going.

Next up, I just wanted to move on to cash and funding. You entered into the forward funding arrangement, which you referenced previously. Could you just expand upon that? What the mechanics, how does it work? How does that mechanism work, what you're able to fund, change the growth strategy…

Xavier, you want to take them to the...?

Yes, so I'm sure you all know we -- this business is based on the financing, both the equipment and the solution we are providing to our client. So Xerox historically has had a captive financing business. And this business has been developed over time in order to allow SMB and enterprise to access or to buy our solution on the subscription model. So it's like bundling the component. Think about equipment, services, solution plus financing being combined together. In December last year, we entered into an agreement with a company called HPS. And this agreement is called a 4-world flow agreement. I don't really know how to simplify it, it's like a syndication agreement. What does that mean simply is that every origination that Xerox is generated is funded by HPS. When I say every, currently, we are -- when we report this in the quarter 1 and quarter 2, around 40% to 50% of the origination, this is mainly the U.S. business. Over a time, we want to expand it to Canada, to U.K. and certain European countries. So there will be -- the benefit of this transaction here is quite simple. It's rather than leveraging the Xerox balance sheet. On the cost of fund that the company has currently, we are using the balance sheet of HPS, which is in the financing business at a much larger balance sheet there. And it allows us over time to reduce what we call the finance receivable, so assets that we have on the balance sheet and by doing this to generate free cash flow. So you saw the number. We have given a guidance of $600 million -- at least $600 million of free cash flow being generated for this year. Some of it is coming from this positive impact of the forward agreement being funded by HPS. It will last. So some people ask us is it a one-off transaction you signed? No. The transaction will last until we have the runoff of this finance receivable over time. Last point that we are often asked, is it 100% of what you are generating? The answer is not 100%. There are some receivables that Xerox will keep and some receivable that HPS more for technical reason will not process there. But the vast majority of this will go into this agreement. Very positive news, free cash flow-wise point of view, a key contributor on the free cash flow generation this year, but also in the next 2 to 3 years.

That's such a nice segue. So $600 million of free cash this year, I think 50% of your capital policy is 50% return to shareholders. I guess, how would you plan to return to shareholders? And then for the other 50%, what are the priorities in terms of use of the excess cash?

Yes. So it's quite important. So the first thing is we are committed to our dividend. So we have a $1 dividend share, which is around [ $160 million ], [ $180 million ] type of dividend that we have there. The second element is from a utilization of capital there, we are -- opportunity. We are looking at the opportunities either by investing into the business, supporting the strategy. And if there are potentially M&A acquisition or M&A opportunity that could supplement here, this is also something that we can consider it.

I just want to pause in case if there's any questions from the room. I have some other questions. We can run up then. I think you mentioned this right at the beginning, there's been some degree of industry consolidation Toshiba Tec and Ricoh. Is this the first deal of more to come?

Look, I did the IBM PC spinout and I was part of the team that built Lenovo. At the time, 15 laptop players, and we saw the consolidation. The same dynamics are happening in our industry, right, where you've got a secular declining business. You've got cost -- tremendous cost pressure. And the reality is there are just too many players in the market that we're in today. So I do believe there will be consolidation. We happen to be dealing with an industry of Japan players that are slow to consolidate. It takes a little bit of time. But I think even you saw what happened with Toshiba, right? They are consolidating, although it's not a full consolidation like we would think about. They've consolidated piece of their strategy, and we'll see more of that going forward. But do I think there will be consolidation? Absolutely. One of the things that's important to us is we have a strong balance sheet. We have a strong position. So when those opportunities come arise, we are the acquirer, and we have the ability to be able to help consolidate the industry.

We mentioned -- or you mentioned AI several times already. I think probably a conversation at this tech conference would miss the question. How should we think about that being integrated into your systems? You mentioned a number of use cases, the kind of grading of papers, the translation -- I was noticing some of that when you were talking at the call center. I guess it might be a tough question without putting numbers around it, which you might not be able to do. But like how big a contributor could it be to the business going forward? This might be in 2 or 5 or 10 years, but...?

Yes, let's break it into 3 areas, right? First of all, internal consumption and how we think about the utilization of AI and AI stand-alone without understanding process and RPA and et cetera and the entire environment is useless, right? For us, AI with RPA, AI with everything we're doing around our process understanding is extremely important. So we talked about what we're using in terms of AI to help in outfield service, diagnosing and improving and driving more productivity in my field services team. Doing the same thing in my finance team. Think about AI in and around HR. I get a resume in. I take a look at that resume, how does it fit against my back-end open jobs. And so we will continue to build AI and RPA capabilities in and around in my environment. I get -- you think about the number of inbound ways in which I can get information to my call center. I can get a text. I can get an e-mail. I can get a voice file. There's a variety of ways which I can do. I can use AI to diagnose, understand what that particular voice request is. If it's simple of, hey, I'm customer XYZ with my product, when does it come in, a combination of AI, RPA and all the things that I do with unified communications, I can respond to that. So internally, we'll continue to use AI and we'll continue to drive productivity internally. What that does is that gives me a feel for use cases that we will then look at and turn it externally, all right? So when we talk about how we use AI and HR, everybody has the same challenge that we have. Too many resumes, too many inbound requests in terms of people trying to fill jobs. I don't have enough talent management resources to be able to screen, look at all of those. I can use RPA and AI to help whittle down what is the best resumes that fit against my back-end jobs, right, and against my back-end open position. So as we build those use cases, as we validate that, we can then say to our SMB customers, we can then say to our large customers and say, this is how we use it. We now can provide that same type of thing as a service. So that's the first thing we're going to think about. Second thing is, AI needs data. And you think about the federal government and you think about the state government, think about any large enterprise, where is data. Data is physically on paper. Data is on word documents, data is in PDF documents. By the way, data is on voice files, data is on video files, right? Who better than Xerox to orchestrate all that, secure it, understand where it could be serviced up based on the security profiles in your company and then how do you put AI on top of it. So we're never going to compete with the Google or Microsoft and have a large language multiple -- large language system around how do you deal with things like ChatGPT, et cetera. But we'll be able to play very specifically what we call it the SI for AI, right, orchestrating the data, utilizing the tools. By the way, every single environment will be different. Some people have a Microsoft environment. Some people have a Google environment. AI will play differently in all those environments. And we have a role to play in that orchestration of data. We have a role to play in that security. But more importantly, I think we have a role to play in demonstrating how you can use AI in a safe, secure way and make sure it doesn't get out of -- what makes everybody nervous as it runs amok inside your organization, we can help provide that to our clients going forward.

Now I think it was at the Investor Day last year that you put forward for some of the parts. Story is the thesis -- I think feels like a lot has changed since then. I guess, how would you characterize the investment thesis going forward? So we heard your vision for the business, but how would you say the investment thesis is? And then what are some of the misperceptions you think some investors have about the business outside of print then?

Yes. Look, I think 2 years ago, we really tried to leverage assets that we have in a VC like way, right? And at the time, you could think about what's happening with VCs, what was having valuations with start-ups. And so we were thinking that we could start these businesses up, get external capital, we can grow them and grow value. A lot has happened over the last year, okay, in the VC fund. A lot has happened with cash, right, in terms of capital, in terms of interest rates, et cetera. And so when I took over the role, I took a position of that was distracting the management team. It was a use of cash that was really precious cash that we were having as that was dwindling down because of funding of other things that we needed to do. I wanted to fund things that are more adjacent, near and dear to the strategy. And so we've taken and we've spun out a variety of different of our ventures. It's still up and open, but we're not investing in anymore. We still have minority ownership in it. We're seeing outside capital raised in some of those businesses. But the reality is we're not burning cash and trying to grow those assets anymore. So we've kind of done a [ $180 million ] on those assets. But more importantly, we've taken the value that we had out of those, meaning the cash and the burn, and now we're focusing on how do we grow near adjacencies and really starting to grow our existing business and our existing client accounts with GDS, with IT services. And you're seeing the results of that. You saw the first half year-over-year significant expansion on margins. You saw quarter-over-quarter significant expansion in our margins. You're seeing now expansion in terms of our renewal rate and our renewal revenue in existing clients. So our client focus and simplifying our business, I think, is significantly paying off, and you're seeing that in the results.

Final element to that part was what do you think the most common misperceptions or misconceptions from investors are about the business?

That we're a print company. I think everybody wants to measure us based on the number of pages they get printed. They want to measure us against what HP reported or some Japan print company reported. And the reality is we play in the physical to digital space. We are a solutions-led software-enabled company. We have a large print. And so for us, it's print, yes, Managed Print Services, yes, and all digital services in and around the workplace, right? We're not trying to get out of our adjacencies where we already play. Everything we do is focused on the workplace. Everything is focused on physical to digital of processes that we already know, and we're trying to extend things that we already have internally to our clients that needed to drive productivity inside of a very tough environment, whether it's around inflation, whether it's around labor, whether it's around cost of capital. So we try to get very focused on client centricity and client success, and we think it's paying off very significantly. It was the first time in a long time where our renewals -- so we have our managed print services business, usually 3 to 5-year contracts, typically, the renewal rate, meaning how many get renewed, it was over 90%. But more importantly, the revenue renewal was over 100%. What does that mean? That means that I'm renewing at a higher rate in existing accounts because I'm providing products and services that are more value-add. I see that as 2 things. One, I can grow an existing account. But more importantly, it's a firewall against anybody swapping me out as a box because those extra services become stickiness and become my way in which I can expand inside of existing accounts.

Thank you for that. Well, I think we're coming up pretty much 45 seconds before the alarm is going to go up. Unless there are any questions in the room. I'd like to say thank you to you both. Thank you -- your time. Best of luck with the ongoing transformation of the business. It has been great speaking to you both.

We're excited about it.

Thank you.

Thank you.

Thank you.