Welcome to the Xerox Holdings Corporation Fourth Quarter 2021 Earnings Release Conference Call. After the presentation, there will be a question-and-answer session. To ask a question at that time, please press star one at any time during this call. You can withdraw your question by pressing the pound key. At this time, I would now like to turn the meeting over to Mr. David Beckel, Vice President and Head of Investor Relations.
Good morning, everyone. I'm David Beckel, Vice President and Head of Investor Relations at Xerox Holdings Corporation. Welcome to the Xerox Holdings Corporation Fourth Quarter 2021 Earnings Release Conference Call, hosted by John Visentin, Vice Chairman and Chief Executive Officer. He is joined by Xavier Heiss, 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 express permission of Xerox. During this call, Xerox executives will refer to slides that are available on the web at www.xerox.com/investor, and will make comments that contain forward-looking statements which, by their nature, address matters that are in the future and 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. Visentin. Mr. Visentin, you may begin.
Good morning, and thank you for joining our Q4 2021 earnings call. I hope everyone is safe and healthy. Summarizing results for the year, revenue of $7.04 billion grew slightly year-over-year in actual currency, but was down 1.4% in constant currency. Adjusted EPS of $1.51 was $0.10 higher year over year. Full year GAAP earnings of -$2.50 reflects an after-tax non-cash goodwill impairment charge of $750 million or $4.08 per share, which is largely a reflection of the impact the COVID-19 pandemic has had on our print business. We generated free cash flow of $561 million, $87 million greater than the prior year.
Adjusted operating margin of 5.3% was lower year-over-year by 130 basis points, due primarily to supply chain-related disruption and incremental investments in our new businesses. Our assumption entering the year was that in-office work would normalize following 2020 winter's wave of COVID-19 infections and the global rollout of effective vaccines. However, the Delta and Omicron variants of COVID-19 delayed companies' plans to return workers to the office, causing a reduction in expected post-sale revenue and profits. In the second half of the year, we experienced an unprecedented level of supply chain disruption, with conditions deteriorating throughout the final two quarters of the year. These disruptions resulted in revenue falling below expectations we laid out at the beginning of the year, with most of the shortfall comprised of high-margin mid-range devices and post-sale revenue.
Supply chain disruptions also drove an increase to our backlog of equipment and IT hardware to nearly $350 million, which is approximately 2.5x higher than at the end of 2020. I am proud of the progress our team made this year, advancing initiatives that will set Xerox up for long-term growth in revenue and profits. We continue to streamline and optimize our operations and exceeded our target Project Own It savings of $375 million in 2021. We invested in and grew areas of our print and services business that will lay the foundation for long-term stabilization and growth. Areas such as IT services, digital document services, and hybrid workplace solutions.
We stood up three new businesses, CareAR, XFS, and Innovation, and developed a blueprint for monetizing investments in innovation, as evidenced by the formation of our Eloque, joint venture and the outside investment in CareAR we received from ServiceNow, valuing CareAR at $700 million on a post-money basis. We generated more than $500 million of free cash flow while investing significant amounts to expand our capabilities and grow our new business. Despite continued uncertainty, there are many reasons to be optimistic as we head into 2022. Demand for our equipment remains strong, as evidenced by our backlog, which stands at close to $350 million as of year-end. That is 31% higher than the prior quarter and is primarily comprised of high-margin office equipment.
This suggests to us that companies are continuing to invest in printing equipment in anticipation of a return of the workers to the office. We expect nearly all of this backlog to be installed, given previous quarters' timely clearing rates and limited risk of cancellation. We do expect to carry an elevated backlog at least through the first half of the year. As the backlog clears, our equipment revenue mix will improve, driving gross margin higher. We continue to believe that a broader return of workers to the office in 2022 is a matter of when, not if. For Xerox, the correlation between return to work trends, page volumes, and post-sale revenues remains strong, which suggests employees print when they return to the office and clients continue to value printing services.
Our breadth of product offerings, suite of digital document workflow solutions, and externally recognized securities capabilities position us well to address evolving workplace needs going forward. We stood up three businesses in 2021: XFS, Software, now CareAR, and Innovation. Each is executing its own strategy for growth. At our Investor Day on February 23, we will share more detail about each business's strategy and their respective pathways to monetization. We will also provide sufficient detail about these businesses to allow analysts and investors to value each component separately. We are expecting revenue to grow in 2022 to at least $7.1 billion in actual currency. Underlying that expectation is an improvement in return to office trends in the second half of the year, which will drive improvements in high margin post-sale revenue.
We expect supply chain constraints to ease in the back half of the year, resulting in a gradual reduction of our backlog thereafter. We do not expect to fully deplete the backlog by the end of the year. The rate of revenue growth and margin improvement we achieve in 2022 will depend on duration of supply chain disruptions and the rate at which workers return to the office. We also expect to generate at least $400 million of free cash flow. Our free cash flow guidance reflects the absence of non-recurring Fuji royalty payments we received in 2021, and cash investments in our recently stood up businesses of approximately $200 million, which is close to a 50% increase relative to 2021 levels.
Our ability to deliver growth in light of secular challenges we face is a testament to the strategic initiatives that drive our business, optimize operations, drive revenue, invest in and monetize innovation, and focus on cash flow. We first introduced Project Own It in 2018 with the mission of simplifying operations and instilling a culture of continuous improvement across the organization. We exceeded our growth saving target of $375 million for Project Own It in 2021, bringing total savings since inception to around $1.8 billion. We expect to generate another $300 million of growth savings in 2022. These savings have allowed Xerox to invest in innovation and strategic growth priorities, despite the difficult operating conditions we faced over the past two years.
The program has also driven greater operating efficiencies throughout the organization, improving revenue flow through and return on assets. We see evidence of Project Own It's ability to drive continuous process improvement throughout the organization. For example, we exited the year with 500 bots in production, executing over 5 million internal transactions per quarter, which represents 200% growth year-over-year. These bots answer sales requests, manage parts and services, and expedite case management and billing for our newly integrated partner, Lexmark. These same bots are now operationalized commercially, providing a differentiated offering for our IT services clients. We continue to see favorable results from our efforts to harness growth opportunities in our print and services business. One of the primary reasons we grew revenue in actual currency in 2021 is our ability to consistently grow market share.
As per the most recent report from IDC, we gained two points of revenue market share in Q3. This marks the fifth consecutive quarter of market share gains with particularly strong gains in office centric products. Market share gains are an important part of our strategy for stabilizing and growing our print and services business. We believe these gains are sustainable because they are the product of Xerox's comprehensive and differentiated offering and direct sales presence. We build a comprehensive suite of hardware, software, and services, all with award-winning security features and with a focus on adding value to our clients' printing and document management processes. Our clients recognize this value. In October, Xerox became the only provider of managed print services in distributed workplaces to receive Gartner's Customer First badge, which is earned through the accolades of positive customer feedback and ratings.
We are also seeing our collection of app-based workflow solutions gain traction with clients, particularly those that are accommodating hybrid workforces. This year, we extended the document workflow solutions available through our ConnectKey multifunction printer interface to all devices, including PCs and smartphones, through our Workflow Central offering. In 2021, new hardware business attributable to our applications side, 35% increase. Regarding global document services, we had another strong quarter of signings for our capture and content services, which helps clients digitally extract, categorize, and automate workflows. Signings increased 36% in Q4, and 48% for the year. Growth was strong across renewals and new business in Q4, including a $ multimillion-dollar deal to support a leading financial institution's digitization strategy as it consolidates its physical footprint. In IT services, we saw strong double-digit growth in managed IT services for both the quarter and the year.
Managed IT services do not include equipment sales, but rather are comprised of, among other things, technology product support, professional engineering, and commercial robotic process automation. We have signed 16 RPA deals since our launch last year, including our first $1 million+ deal with Veritext Legal Solutions. We will expand our IT services offerings in 2022 to include managed security and cybersecurity, and a range of digital solutions, including product and information management, master data management, and e-commerce and custom web development. In the past year, we stood up three new businesses, XFS, our financial services business, software, now called CareAR, and PARC Innovation. I am pleased with the progress we have made to date. These businesses are expected to contribute strongly to future growth and to shareholder value creation.
In 2021, we transitioned our separate software business into an end-to-end augmented reality service experience management platform called CareAR. CareAR was officially formed in Q3 in conjunction with an investment by ServiceNow, valuing our software business at $700 million. CareAR is quickly progressing along its product roadmap. This past quarter, we launched CareAR Instruct, which provides AI and AR-driven self-solve equipment service solutions. This complements CareAR's flagship remote solve offering, CareAR Assist. Investments in CareAR's capabilities and go-to-market partnerships drove 45 new logo signings in 2021, giving us confidence CareAR will generate revenue of at least $70 million in 2022. At PARC, we continue to progress on our path to commercializing novel and disruptive technologies in each of our primary innovation pillars, Internet of Things, clean tech, and 3D printing.
At Eloque, in the first half of 2022, we will triple the number of bridges in Australia that have installed our sensors. We are in talks with select European countries to deploy our bridge monitoring solutions. In the U.S., we are in discussions with multiple states to start deploying pilots in 2022. In clean tech, we successfully completed testing the alpha prototype of our energy-efficient air conditioning technology, and we are developing a beta prototype based on requirements from a leading air conditioning manufacturer. We also partnered with a global auto manufacturer to test new methods of developing higher energy density batteries. In 3D, we grew our pipeline of potential ElemX customers in the heavy manufacturing, aerospace and defense, and automotive industries.
In 2021, XFS expanded its offerings beyond Xerox equipment and embarked on a strategy that emphasizes portfolio growth through new dealers, new types of equipment at existing dealers, and new product vendor relationships. The pandemic and supply chain disruptions drove volumes of Xerox equipment financings lower in 2021, but XFS grew originations 14% year over year, due primarily to greater penetration at XBS, and added 136 new independent dealers. We look forward to sharing more details about specific customers and use cases for each of our new businesses at Investor Day. Since 2018, on average, we have returned more than 100% of annual free cash flow to shareholders.
During the fourth quarter, we generated $182 million of free cash flow, bringing the total for the year to $561 million, ahead of our 2021 guidance of $500 million. For the full year 2021, we returned close to $1.1 billion of cash to shareholders through stock buyback and dividends, nearly double our free cash flow generation, all while continuing to invest in innovation and other strategic growth opportunities and without increasing total debt. Our guidance calls for a continuation of strong free cash flow generation and capital returns in 2022. We expect to generate at least $400 million of free cash flow in 2022 and remain committed to returning at least 50% of free cash flow back to the shareholders. We will balance cash flow returns with investments in growth and value creative M&A opportunities.
Before I hand it over to Xavier, I would like to emphasize a few points. 2021 was a challenging year for Xerox, and I commend our team for its ability to navigate the evolving uncertainty associated with the pandemic and the operational volatility caused by the supply chain disruptions. Uncertainty persists as we move into 2022, but we have learned how to successfully manage our business through it and evolve our capabilities to meet the needs of our clients, no matter what type of workplace model they choose. We have the right team and the right strategy in place to stabilize and grow our print services business and drive growth across each of our newly stood up businesses. I will now hand it over to Xavier to cover our financial results.
Thank you, John, and good morning, everyone. As John mentioned, continued disruption to global supply chain from new COVID-19 variants negatively affected our financial result in Q4. Revenue increased sequentially from Q3, but extensive high-margin product shortages, shipping delays from the Omicron variant caused Q4 revenue to come in slightly below our expectation. Despite this setback in Q4, demand for our product and services remains strong, as evidenced by our increased backlog of roughly $350 million, which is close to 2.5x the size of last year fourth quarter backlog. Further, our hybrid workplace and digital solutions are driving new business wins. Page volumes were higher in Q4 of this year than any quarter since the beginning of the pandemic. These favorable trends underpin our confidence to invest nearly $400 million in our stock this quarter while maintaining investment in strategic growth priorities.
On this trends drive our expectation for revenue growth in 2022. Turning to profitability, as with Q3, higher supply chain costs, a less profitable mix of equipment and lower margins on post-sales revenue drove our profitability lower year-over-year. Gross margin declined 330 basis points in the fourth quarter. 240 basis points of this decline is attributable to supply chain costs and capacity restrictions, including higher freight and shipping costs and constrained availability of higher margin A3 devices. Ninety basis points of the decline relate to investment to support future growth and lower royalty revenue from FUJIFILM Business Innovation. We continue to expect supply chain disruption to pressure gross margin through at least the first half of 2022. Adjusted operating margin of 4.8% decreased 470 basis points year-over-year, reflecting lower gross profit.
As explained before, lower government subsidies, net of Project Own It savings on costs associated with standing up new businesses. These headwinds were partially offset by lower selling costs, bad debt expenses, and compensation. SAG expense of $423 million decreased $17 million year-over-year. This decrease was primarily driven by savings from Project Own It, lower bad debt expense, which included a $12 million finance receivable reserve reduction, lower incentives and variable compensation accruals, and lower sales and marketing expenses. Savings were partially offset by investments in new businesses of $14 million, higher legal expenses, and lower government subsidies. RD&E was $75 million in the quarter, or 4.2% of revenue, which was an increase of 30 basis points as a percent of revenue year-over-year. Despite a difficult operating environment, we continued to invest in new businesses this quarter, particularly 3D, clean tech, and IoT.
Other expenses net was $26 million lower year-over-year, primarily driven by losses on the early extinguishment of debt in the prior year on higher non-service retirement-related gains. Fourth quarter adjusted tax rate was -8.8% compared to 29.8% last year, driven by benefit from the remeasurement of uncertain tax position in 2021 as well as the geographical mix of earnings. Adjusted EPS of $0.34 in the fourth quarter was $0.24 lower than in the prior year. A year-over-year reduction in adjusted pre-tax income was offset by lower taxes on a reduced share count. GAAP EPS of -$3.97 was $4.33 lower year-over-year due to a goodwill impairment charge, partially offset by a decrease in adjusted items on a lower tax rate.
Our GAAP earnings for Q4 include an after-tax non-cash goodwill impairment charge of $750 million or $4.38 per share. This charge largely reflects the impact of economic disruption caused by the COVID-19 pandemic has had on Xerox's print business. Some of this impact is expected to be mitigated by growth of our digital services and offerings targeted for hybrid work business models. Additionally, the company is currently pursuing a strategy to develop and expand certain growth businesses such as financing, software, and innovation to offset and eventually exceed lower cash flow from the print business. Turning to revenue, supply chain disruption and the spread of the Omicron variant in December resulted in equipment and post-sales revenue coming in slightly below expectation. However, the underlying fundamentals of our business remain strong.
Equipment orders once again outpaced supplies, resulting in a cumulative backlog this quarter of equipment and IT hardware of nearly $350 million, a 31% increase over Q3 on nearly 2.5x prior year levels. For context, our backlog is now approaching a full quarter worth of equipment on hardware sales. The quality of our backlog remain high, and we expect nearly all excess backlog to be realized as revenue as supply chain condition normalize. Post sales trend also continue to correlate well with return to work trend. Equipment sales of $384 million in Q4 decreased 24.7% year-over-year or 23.9% in constant currency.
The fourth quarter is usually the strongest quarter of the year for equipment sales, but supply chain disruptions limited our ability to satisfy seasonal increase in demand, resulting in a mild sequential decline in equipment sales relative to Q3 levels. At the product level, supply chain constraint most negatively affected installation of our mid-range product for both color and black and white on our entry color devices, causing a negative mix effect on equipment revenue and margin. Post-sales revenue of $1.4 billion decreased 1.9% year-over-year or 1.4% in constant currency. More than the entirety of the decrease reflect year-over-year headwinds from Fuji royalty, lower XBS financing commissions on a large IT services deal in the prior year quarter.
Despite the Omicron variant slowing page volume in December, in the fourth quarter, we recorded the highest level of page volume and revenue associated with the post-sales component that are most closely tied with printing volumes, including services, outsourcing, paper, and supplies since the beginning of the pandemic. Recent page volume momentum and the continued correlation between page volume and post-sales revenue are encouraging indicators about the future trajectory of post-sales revenue as workers return to offices, even in a hybrid model. In services, pandemic-related closures caused several large new business signings to fall into 2022, but renewal rates remain high, and full-year renewal rates were two points higher than the prior year. We generated free cash flow of $182 million in Q4, down from $221 million in the prior year.
Lower cash earnings, which included significant investment in our new businesses, were offset by working capital benefit on lower finance receivable origination due to lower equipment sales. We generated $198 million of operating cash flow in the quarter, compared to $235 million in the prior year, as lower profit were partially offset by working capital improvements. Working capital was a source of cash this quarter of $193 million, which was $70 million better than the prior year. This reflect year-over-year improvement in accounts payable and accounts receivable. Investing activity were a use of cash of $31 million, comprised primarily of $15 million used to acquire businesses and assets and CapEx of $16 million. CapEx primarily support our strategic growth program and investment in IT infrastructure. Financing activity consumed $517 million of cash.
Receivable financing activity was limited to securitization runoff of around $75 million during the fourth quarter. We also utilized $388 million of our $500 million buyback authorization, the balance of which will be used opportunistically going forward. When combined with the $49 million we paid in dividend, we return a total of $437 million of cash to shareholders this quarter, or close to 250% of Q4 free cash flow. For the year, we returned a total of $1.1 billion of cash to shareholder, almost double what we generated in free cash flow. I will share our 2022 capital allocation plan when I discuss guidance for the year. Next, looking at profitability.
At the start of the year, we announced a targeted $375 million of gross savings from Project Own It in 2021, and I'm pleased to say that we exceeded that target. As planned, we utilized a significant portion of these savings to invest in the people, technology, and infrastructure required to stand up three new businesses, as well as ongoing investment in innovation across each of our new businesses on our portfolio of print and services offerings. Despite these net savings, operating profit was negatively affected during the second half of the year by supply chain disruption and delays in the return of workers to the office. We estimate the effect of supply chain-related disruption alone, including higher shipping and logistics costs and unfavorable equipment revenue mix, accounts for nearly all the year-over-year decline in operating margin in the second half of the year.
As communicated earlier, we expect supply chain disruption to weigh on growth and operating margin through at least the first half of the year. Targeted Project Own It savings for 2022 are $300 million. These savings will help offset supply chain headwinds, but as with prior year, our targeted savings will also be used to reinvest in our business. Turning to Xerox Financial Services, total finance assets declined by less than 1% quarter-over-quarter, due primarily to portfolio runoff and equipment availability constraint, which reduced equipment sales on associated new lease origination. Total XFS originations declined roughly 8% year-over-year, but indirect origination, which includes XBS on leases directed at multi-brand reseller, grew 9% year-over-year, due primarily to increased penetration at XBS, and we're 9% above Q3 level.
More and more, XFS portfolio growth will be driven by financial offering targeting a broad array of office equipment, new dealer growth, and non-Xerox vendor partnerships. Regarding capital structure, we ended the year with a net core cash position of around $600 million, which is below Q3 level due to the nearly $400 million of stock we repurchased during the quarter. $2.9 billion of the $4.2 billion of our outstanding debt is allocated to and supports the XFS lease portfolio. The remaining debt of around $1.3 billion is attributable to the core business. Debt primarily consists of senior unsecured bonds and finance asset securitization.
We have a balanced bond maturity ladder with $300 million maturing in 2022. Year to date, we have returned close to $1.1 billion of cash back to shareholder, which contributed to the $700 million year-over-year decrease in net core cash since the end of 2020. Finally, I will address guidance for 2022. Starting with revenue, we expect revenue to grow to $7.1 billion in actual currency. Supply chain conditions and the ongoing pandemic continue to embed a level of uncertainty in our outlook. However, we felt comfortable providing an outlook for revenue growth in 2022 due to the strength in demand for our product, favorable print volumes and post-sales trends, and momentum we are seeing in our growth businesses such as software, innovation, and digital and IT services.
In terms of timing, we expect revenue growth in 2022 to be back half weighted, as supply chain conditions are likely to remain challenged through the first half of the year. Post-sales revenue growth is expected to track a return of workers to the office, which we assume will take place in the second half of the year. We will not be providing profitability guidance at this time, but I would like to offer some consideration. Similar to revenue, we expect profitability to be back half weighted in 2022. We expect gross margin to be negatively affected by supply chain disruption through at least the first half of the year. We began implementing price increases for equipment, supplies, and services in 2021, which will partially offset elevated shipping and logistics costs.
Further, as supply chain conditions ease and paid volume improves, we expect gross margin to benefit from equipment and revenue mix. Finally, Fuji royalties and financing commissions will be less of a headwind in the back half of 2022. I will also give some context for 2022 SAG expenses. We expect some of the $300 million of additional savings from Project Own It will benefit SAG in 2022. However, there are some offsets to be aware of. 2021 SAG expense benefited from government subsidies and bad debt reversal totaling $65 million, which we do not expect to recur in 2022. We also expect to invest more in our people. Let's say, we do expect operating margin to improve in 2022. Finally, free cash flow.
At this point in the year, we feel confident providing an outlook for free cash flow of at least $400 million in 2022, which, as a reminder, reflects the absence of non-recurring Fuji royalty payment we received in 2021. Cash flow generation is and will remain a primary focus at Xerox. It is important to point out that despite the challenging environment, we are not slowing investment in businesses with high growth potential. In fact, included in our guidance of at least $400 million of free cash flow is a roughly 50% increase in cash investment across each of our new businesses, investment that will total around $200 million in 2022. We believe it is important for investors to understand the magnitude of our commitment as we stand these businesses up.
We look forward to sharing more details about these businesses, including the specific growth opportunity made available through this investment at our Investor Day. I will now hand it over to John.
Thank you, Xavier. Operator, will you open the line for questions?
Certainly. Ladies and gentlemen, once again, if you have a question at this time, please press star then one. Our first question comes from the line of Ananda Baruah from Loop Capital. Your question please.
Hey. Yeah, good morning, guys. Happy New Year. Thanks for all the detail and for taking the question. Just a couple, if I could. First on the revenue growth, how are you guys thinking about, you know, based on what you see right now, you know, kind of the normalized revenue growth of the business, you know, given when you net out, you know, the current backlog, we're not yet back to office, and what you've seen since 2020, you know, given that you're actually, you know, looking for revenue growth this year, you know, off of, you know, sort of big drop down in 2020, but then pretty stable 2020 and 2021. Would love to get your thoughts there. I have a quick follow-up.
Yeah, Ananda, good morning. Revenue, you should look at that with two angles. One is equipment and as you have seen it, I mean, we suffered in quarter four from I would say supply chain disruption, mainly driven by the lack of chips there. You saw as well that our backlog equipment backlog, which is a strong backlog, has increased 31% over quarter three, but also year-over-year, a very significant increase there. We expect this backlog, you know, to resolve or to clear during the second half of the year with the visibility we have on supply chain. We are used to have around $100-$250 million of backlog of equipment.
We expect, I will call that half of this backlog, you know, to be resolved, the remaining backlog to be resolved in the second half, so H2. Post sales is everything related to back to the office and, you know, employee using our solution and using our equipment there. Good news, and we mentioned this and we commented here, is that in Q4, since the beginning of the pandemic, we have had the highest print volume on our equipment. It was very strong in October, November. Then, as we already quoted.
Strictly related to the variant on the pandemic there. There is a strong correlation with the presence in the office on the ability of a user to use our solution. December was a little bit softer, but we feel encouraged with Omicron now being more behind us on the recovery we start seeing in quarter one coming from different countries, not only in the U.S., but also in Europe.
Do you think, you know, sort of the new business notwithstanding, do you guys think once you get through the backlog, you know, the revenue decline profile of the core business resumes back to being similar to prior, you know, the pandemic, or do you think it could look different?
Yeah. Ananda, good morning. I would say when you think of the revenue backlog in our print business, what we've done also is invested in the IT services business, which wraps a lot of solutions and digital services around the product. We've seen a lot of good growth come from both those businesses. Our strategy moving forward is, one, win market share, which we have in the last few quarters, and continue to win market share in the spaces where we're strong. Then two, continue to wrap our services around security services, IT services, MPS services around our product base so that we could have sustainable growth going forward.
That's really helpful. I'll leave it there. I know there's a lot of questions. Thanks, guys.
Thanks, Ananda.
Thanks, John.
Thank you. Our next question comes from the line of Shannon Cross from Cross Research. Your question please.
Yes. Thank you very much for taking my question. I'm curious. I realize you're not giving EPS guidance, but as we look to early in 2022, how should we think about operating margin trajectory? I know, Xavier, you talked about it being up for the full year, I believe, on a year-over-year basis, but clearly there's gonna be pressure early on. Maybe if you can just give us some more color on how you're thinking about linearity during the year, that would be helpful.
Yes. Shannon, good morning. What we expect from an operating margin is an improvement. As you know, the operating margin is highly driven by the revenue mix. What we face during 2021, 2020 as well there, is less of a mix of post-sales revenue. As we just commented here, we expect, you know, this post-sales revenue to increase, improve next year with, you know, hybrid environment and back to the office environment we just described. At the same time, the backlogs that we have currently from an equipment point of view impact mainly the A3 equipment. As you know, the A3 equipment attract a higher margin.
If I'm assuming that, you know, back to office will improve during the second half of the year, plus some of the backlog could be resolved also during the second half of the year, I'm expecting a sequential improvement in quarter three, quarter four of margin here. We provided, you know, during the script or during my explanation, you know, some guidance around also the investment that we are making. We are still sustaining this investment and also increasing the investment in order to support the growth revenue businesses that we are building up currently.
Okay, thank you. Maybe John, could you talk a bit about, I think it's the $200 million that you're investing in your growth businesses. Can you maybe give some more clarity into where those dollars are going and then what sort of milestones we should be watching, you know, within CareAR, 3D print, the sensor business and in HVAC? I'm not sure exactly, you know, where you're focused most of your investment dollars. Thank you.
On Analyst Day, we'll detail that out for you in February, Shannon. Suffice to say that we're doing investments both in R&D and go-to-market and partnerships and standing up these businesses so that they can fly on their own. They don't have just a reliability on us. XFS is an example where in the past they relied on Xerox and Xerox products alone. Now we've asked, and they started becoming a global payment solution business where they're looking for OEM and third-party partners. That takes investment. We'll detail all of that per unit so that you could have the right metrics to do the valuation at Analyst Day.
Okay. Just my final question, I think there was an 8-K recently talking about some retention program for change of control. Can you just give us some ideas to what drove that and maybe more specifics on the program? Thank you.
Yeah. We're just trying to align with some of our key employees that have been instrumental in standing up these businesses. We're just trying to align compensation for them, which basically says if, you know, at a type of exit, they would be also compensated. There has to be some type of monetization.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Erik Woodring from Morgan Stanley. Your question please.
Hi, this is Sabrina Hao on for Erik Woodring. Thanks for taking the question. I guess first, we're wondering how should we think about the pace of buybacks in 2022, given that dividend should account for nearly 50% of free cash flow in the year, and so why not buy back more?
Good morning. Buyback profile. As you know it, we have a $500 million authorization of buyback. As we mentioned it, we spent in 2021 $388 million. We are left with $112 million. As we already communicated, we are using this buyback opportunistically to position the share price where it should be.
Okay, perfect. Just a follow-up. For the $300 million of gross savings in 2022 from Project Own It, how should we think about those being concentrated?
Oh, you know, back to Project Own It. Project Own It is much broader than the, I would say, cost-cutting type of program there. This is a program which is more systematic, which allow us, and you have seen this during the pandemic and even in 2021, you know, us being able to adjust our cost base on ensuring that, whatever quarter we face, we were able to be EPS on the free cash flow positive. This is the spirit and the mindset we have. We don't take the year as granted here. You know, we are expecting some recovery to happen during the second half of the year, but, you know, you never know on the, we have to keep this flexibility.
Project Own It, the $300 million will be distributed across the main cost line of the P&L. It's mainly geared toward cost of goods sold with some impact on the SAG as well there. We will detail during the Investor Day, you know, the specific area. But just to illustrate, you know, example of what we have, we have currently from internal use much more robotic automation that we never had. That means we have currently more than 500 robots, you know, running millions of transactions in replacing, I would say, manual activity in providing better outcome for customer here. We'll provide more detail, more insight during Investor Day on the Project Own It, on how we drive it and manage it.
Great. Thank you.
Thank you. Our next question comes from the line of Samik Chatterjee from JPMorgan. Your question please.
Great. Thank you. John, you mentioned, as you're planning for 2022, the return to work is more a matter of when and not if, but I guess there's also consensus that an increasing number of professionals will work in a hybrid setup, even as people come back to work. Just wanted to understand how you're thinking about aligning both the equipment business as well as the managed print business to increasing number of people working in a hybrid setup, and sort of growing the business with the consumers in a hybrid setup as well. I have a follow-up.
Yes. If you think of our digital solutions, you know, we are positioned well in a hybrid environment where print will be done both at the office and at home. As importantly, workflow solutions for assuring where the information is going from one place to the other, keeping it secure and ensuring that it's being printed properly at the right places becomes important. Our solutions, like our cloud-based print solution, our security solution, helps a lot in a hybrid environment. What we also found, Samik, is that as clients return back to the office, even in a hybrid environment, where it's three days a week or four days a week or two days a week, a lot of the printing is done still in the office.
We see it with a few things, not just on market share that we've gained, but we've also seen it with the backlog that's been increasing while we're in an Omicron crisis where a lot of the offices are still closed. We're seeing clients getting set up for the future, and that gives us confidence. Now, we've modeled that we said they'll come back to the office and more than likely in the second half, but you know, we're following the guidelines like everybody else, CDC guidelines and all, and just you know, watch it. That's how we look at it.
Okay. Just a quick follow-up. I think looking at seasonality, 1Q on average tends to be about down low teens versus 4Q in terms of revenue, if I look at the past few years. Just wanted to see if you can help us think about how to think about the setup for 2022, given that you have a backlog, but you're also talking about constraints and sort of the delayed return to work in the first half of it itself. Just maybe help us think about how maybe this typical seasonality-
Well, yeah.
Different seasonality there.
I think you've heard us say this, Samik, that in the first quarter, we're not seeing much of a supply chain improvement, albeit a little bit in the first quarter. We're modeling that supply chain should start stabilizing in the second half of the year. Again, back to work and with Omicron and all that, we're modeling a second half of the year, you know, return to the office gradually over the next few quarters.
Thank you.
Thank you. Our next question comes from the line of Jim Suva from Citigroup. Your question please.
Thank you. In your prepared comments, you mentioned incremental investment of $200 million. You mentioned that on the Investor Day you'd give some more details, but I wasn't sure. Is that $200 million for Xerox core or for PARC or kind of a combination? Was it kind of always planned, or was it just kind of newly communicated to us? 'Cause I'm trying to figure out, is it you're getting closer to go to market with more initiatives in Xerox PARC, or is it expandable, adjustable market? I'm just kinda curious for additional commentary if possible.
Yes. Hi, Jim. Good morning. Just to clarify, the $200 million are not incremental. What we've commented here is that we will have $200 million of investment to support the investments that we are making in these new businesses. These new businesses is what we call innovation, XFS, and software businesses. That's the three businesses that we're currently supporting since the beginning of the year. What we mentioned is that the reason $200 million is roughly $70 million above what we were doing last year, so in 2021, which is roughly 50% of the increase. As you can sense it, this is more insight that we're providing on these businesses.
You can have a view of the investment that we're making and also see, you know, how we use, you know, some of the cash generated by the print business to invest in the future of the company from a revenue point of view. This is, you know, continuous, improvement with an increase in acceleration and just show as well the maturity of some investment on our intent, you know, to, drive the revenue growth and monetize this investment there.
Okay. Thank you. It's greatly appreciated and I look forward to hearing more from you next month.
Thank you, Jim.
Thank you, Jim.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to John Visentin for any further remarks.
Thank you, operator. As you heard today, we are confident in our ability to deliver at least $7.1 billion of revenue in actual currency and $400 million of free cash flow in 2022, despite the continued uncertainty. That confidence stems from the strength of our team and a strategy we believe in. We look forward to sharing our three-year outlook and plans for driving long-term growth and results and shareholder value at our Investor Day. We hope to see you all there. Be safe and be well.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.