Good morning, everyone. Thank you for attending Xerox's 2022 Investor Day. I'm David Beckel, Head of Investor Relations at Xerox Holdings Corporation. Now, before we get on to today's content, I remind everyone that this event is being recorded. Other recording or rebroadcasting of this call are expressly prohibited without the permission of Xerox. During the event, 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 uncertain. Actual future financial results may be materially different than those expressed herein. For those watching virtually, I wanna also note that everyone in attendance has complied with the safety protocols that are mandated by the City of New York, Nasdaq Market Site, and Xerox.
All live attendees are vaccinated and were tested for COVID-19 prior to today's presentation. Masking is voluntary, consistent with New York City and Nasdaq guidelines. The prepared portion of today's program is comprised of eight sections, including detailed overviews of print and services, FITTLE, which is formerly known as XFS, CareAR and PARC, and will conclude with a management Q&A session. After the prepared portion, we'll invite our virtual and in-person attendees to experience our innovation showcase. Now it's my pleasure to introduce Xerox's Vice Chairman and CEO, John Visentin, who will open today's event with a strategic outlook.
Thank you, David. Good morning. Good afternoon to everyone. This is fun. We're in person. Two years later, this is actually the first in-person event that we've done here at Xerox in over two years. I know a lot of you are streaming and watching us, and I just wanted to thank you all for attending today. What are you gonna hear today? You know, there's a saying that says, what is now proven was only imagined. 3.5 years ago, when we had this same meeting, we talked about ideas, innovations that we were focused on for the future. What we wanna do was bring these ideas, this imagination to not only proven, but to commercialization. What we're looking for in the commercialization is how does this monetize and how does this help our shareholders?
We wanna disrupt the as is with our new offerings, and hopefully you will see that today, not only in our innovation like PARC, but also in our print and services which you will see that we will be growing over the next three years. The last two years, two and a half years have been hard on all of us. You know, both economically, personally. It's been some of the two and a half years that society went through that none of us could have imagined. I gotta tell you, I'm really proud of this team, my team at Xerox. When this hit us like a train, we saw all our metrics go down. You know, we have a reliance on offices, as all of you know. We saw revenue going down at an incredible rate at the beginning.
What we did is we regrouped ourselves and we focused on what we could control. That was first and foremost the safety of our employees. You know, we had over 50% of our employees out there servicing clients that were and had to remain open during the COVID crisis. We scrambled to assure ourselves that the utmost safety of these employees was there. We also had to focus on the well-being of our employees, and we made sure that they were all employed 'cause that was one less stress that was taken away from them. If you think about it as we turned, we looked at the two years, you know, we delivered positive free cash flow in every quarter, and we were very proud of that. That's because of our maniacal focus, and we never lost sight of our ESG standards.
More importantly or as importantly, in those two and a half years, we continue to invest in our future. That's what you'll be seeing going forward. How did we get through that? How did we go about it? You hear us talk about these strategic priorities every quarter, and these are the four pillars, the four strategies that this whole company is based on. You know, we achieved in optimizing operations, we achieved gross cost savings of $1.8 billion over the years. We're gonna do another $300 million this year. Steve's gonna take you through that soon. What's interesting is as we optimized our business and we got cost savings out of it, we're now taking some of those same offerings that we did for ourselves, and we're offering it to the SMB marketplace.
Our maniacal focus on free cash flow. We're gonna continue to grow free cash flow over the next three years, you will see that. Print and IT services, there's been a lot of development, there's been a lot of investments in it, and we're going to grow that over three years. We stood up three businesses. We stood up FITTLE, CareAR, PARC, and you'll see how we're gonna bring these businesses not only standing up on their own, but also to a monetization. ESG is ingrained in our culture. One thing I'm very proud of is that we are focused on mirroring the markets we serve.
Diversity is in every one of our discussions, and that's what gives us the extra strength, that's what gives us the force to go ahead and move ahead and say, "As we focus on sustainability, it's not just for the environment, for society, it makes us a better company." We're proud of it. We're proud we were announced as one of the 100 most sustainable corporations by the Corporate Knights. It's the inaugural Terra Carta Seal that we got, and we got other awards. We're also proud of having a roadmap to net zero by 2040. We brought that in by 10 years last year. These are things we're gonna continue to focus on. Our EC is also compensated on our ESG metrics to assure that we have continuous improvement in this area.
What are you gonna see in the next few hours? Tracey's gonna take you through Print and Services. What I always find interesting is we call that traditional, we call that core, we call that our business. What Tracey's gonna show you is the investments we made in digital services that complements the workflows of how clients are printing in this environment, and how clients are focused on security, workflow, and information across. She'll take you through all the investments we made and why we believe in this market where we've been gaining market share in the areas we serve over the last years, while we're gonna continue to gain market share and grow this business. Joanne's gonna take you through our IT Services. Our IT Services are growing quite nicely, and we're adding offerings to it.
We're adding security, we're adding robotics, focused on the SMB marketplace. She'll take you through a little bit on what's going on in IT Services, we're in three countries now, and how we're getting good growth from it and take you through it. FITTLE is our new XFS. XFS today was announced as FITTLE. It's got its own management team. Nicole's gonna take you through our leasing business, how we're not just focused on Xerox gear, but we're now a global payment solution focused on other OEM gear and other OEM services. She'll take you through some of the progress that we've gone through it. Where are we in terms of originations, where are we in terms of pipeline, where are we in terms of partnerships that we have out there? Nicole, who is our president, is gonna take you through that.
Steve's gonna come back and talk about CareAR. We're doing one thing with CareAR. We are disrupting the traditional service experience. We've come a long way in the last year with CareAR, both in terms of partnerships, in terms of system integrators that wanna work with us, clients, pilots. You know, we have an evaluation of $700 million on CareAR, our partnership with ServiceNow, and I'm looking to Steve to take you through all of that. Then Naresh will take you through our innovation, our IoT. What's going on in IoT? We already stood up our first business, Eloque, which is FiBridge and the bridges, and what we are doing there with Victorian Government and where are we focused on which other countries and where we're heading with that.
These are disruptive technologies that don't exist, and that's what you're going to see as we go through it. 3D print, clean tech, all of them are at a different stage in terms of the, from incubation to commercialization. We're very proud of where they are. All of these take investments. We've increased investments in these areas by 50%. Again, Naresh will take you through all this. If we look at our three-year outlook, we're looking to do low to mid-single digit growth every year. I think it's the first time we've announced top line growth in this company for three years in a row. Xavier will put it together for you in terms of numbers to say, how do we get there? What are we utilizing to get there?
You know, our expectation is now back to the office at 100% like 2019 levels. We're using very modest expectations of return to the office. Xavier will take you through the metrics of what happens for every percent of offices being open and what does that look like, how does that translate to both EBITDA, and how does that translate both into revenue. Going forward, our cash flow is gonna be growing from the $400+ that we said this year to $450-$500 million while still having major investments going on for our future. Again, Xavier will be taking you through all this. You know, the question becomes, you know, why invest in Xerox. During the toughest times, we delivered positive free cash flow.
We delivered over 50% of our free cash flow every single year and more for shareholder return. Our dividend remains strong. We are focused on future with innovative products that as we look to monetize these products should be very accretive to all of us as shareholders. There's a lot more. Hopefully, you'll see in the next couple of hours what exactly it is and why you should invest in Xerox. Now I'm gonna pass it over to Steve, and he'll take you through Project Own It. Thank you.
I have a wonderful electronic invention I want you to see. See? It looks something like this.
don't want to do things the same old way. We reject the same old way. Therefore, I hope you come with an attitude that change will be a way of life for you. Imagination, creativity, new ideas, new challenges. If you're that sort of person, you'll be very welcome here at Xerox.
Good morning. Project Own It, we launched in 2018. As we talked about at the last investor meeting, we talked about it being a culture, a culture of driving efficiency, a culture of driving operational excellence in everything that we do. Utilization of our assets around supply chain, utilization of our field service, what we do, and how we look at real estate, how we think about procurement, and more importantly, it was driving a culture into every single thing that we do, that Own It would become a part of the fabric of what we do here at Xerox. Really what it's sustained us through some very difficult times, but more importantly, it's allowed us to continue to invest as John talked about.
We're gonna highlight that over the next hour and a half around where we continue to invest and the things that we were passionate about standing behind, and you're gonna see the fruits of that as we go forward. We generated about $1.8 billion. Nobody will question whether Own It is successful or not, but really we're now entering that next phase. What else can we do? Well, one of the things that we're doing, we're looking at technology. We've implemented cloud-based solutions around unified communications, cloud-based solutions around what we do with our sales force and how we manage our sales force, cloud-based solutions around how we manage our field service and our supply team. We also implemented robotics, and so we now have over 5 million transactions per quarter in robotics.
Think about those. Are all transactions that just three years ago we did manually. All those things we have the ability to now add artificial intelligence into our work stream. You're gonna hear Naresh talk about IoT. You're gonna hear me talk about the connected universe that we're in today. How do you deal with all that data? How do you create insight, and how do you action that insight? These are all investments that we are making and we have made. We're gonna do another $300 million of Own It savings in 2022. Part of that will go back to reinvest, continuing the investment engine. Part of it will go back to shareholder return. Part of it will go back to investing in the things that we need to do as a corporation. Nobody will say whether Own It was a success or not.
We got $300 million, but what are we trying to do? Where are we going with it? Well, the idea is that we continue to take and drive operational efficiencies, drive operational savings, drive customer experience, and now we start to move at the speed of software. If you think about now with data in motion, and you think about IoT data, you think about all the data that we have relative to our supply chain, relative to what we're seeing in our connected devices, we're now adding artificial intelligence on top of that. We're now looking at data in motion to now start to make intelligent decisions where we used to do a lot of that manually. We've got insight to our business like we've never had before in the finance area, in the supply chain area, in what we do in field service.
We're taking all the things that we've built over the last three years, and we're now accelerating it, and we've got a lot more opportunity to go. More importantly, we're reinvesting it back into things like artificial intelligence. You're seeing in your personal life, and you'll hear me talk about this when we talk about CareAR, you're now seeing the reality of augmented reality and virtual reality, as well as the adoption and the acceptance of artificial intelligence. How are we using that? We're reinvesting that back into our supply chain. We're also reinvesting into security. You're gonna hear Tracy talk about the security of our products. You're gonna hear about we do relative to security on our infrastructure. We continue to invest in things that allows us to drive innovation, that allows us to drive more productivity and more efficiency.
We also did one other thing. As we started to build these things internally and these capabilities, we now are taking and commercializing it. I talked about the 5 million transaction we do each and every quarter. Well, those robotics, we now have said we've got something that we can bring to the SMB customer. SMB customers don't have the enterprise infrastructure and IT services that we have here in Enterprise. We've taken what we've done in robotics, and we've now start to commercial that, and you're gonna hear that from Joanne when she talks about IT services. You're gonna hear us talk about what we do with IoT data and AI.
A lot of the great work that we've done in Palo Alto, a lot of the great work that we're using internally in terms of IoT and connected devices and the connected enterprise, we're now bringing that to market in other ways, and you're gonna hear Naresh talk about that when we talk about Eloque and we talk about Novity, as well as in the other areas like Fido. We'll also talk about what we do in terms of security. Think about the SMB space over the last 24 months. They are challenged with the same security issues that we all are from an enterprise standpoint, whether it be around ransomware, whether it be around viruses, whether it be around how do you create an infrastructure that allows you to move forward and become modern and have mobile applications, have web applications, have enterprise-ready applications in the SMB space.
They don't have the CIOs and the infrastructure to do that. We're taking what we do internally within Xerox. We're now packaging it, and we're now moving it through our IT services in the SMB space. What Own It has allowed us to do is drive operational efficiencies, reinvest back, and you're gonna hear that theme over and over and over again, how we're investing for the future, how we're launching new businesses, how we're now gonna start to monetize all the hard work that we've done before. That's what Own It is all about, and it's sustainable going forward. Let me introduce my two favorite colleagues, Tracy and Joanne. They're gonna take you through print services, and they'll take you through IT services.
Good morning, everyone. As John said, truly pleased to see you here today. Thank you very much for coming. Thank you for everybody online, too. I'm gonna talk to you about print services. We're very excited to say that we are number one. We're very proud of that. We are number one in market share in both office production and managed print services. We actually managed to grow during the pandemic our market share. In terms of stable cash flows, we see that the market will be flat to slightly up, and we see growth opportunities still for us to grow our share in both print and MPS, as well as penetrate IT services and digital services more.
As the pandemic hopefully ebbs into an endemic and supply chain normalizes, we see our margins will improve. Even though it's obviously been a very difficult time, as John said, we've been investing in areas of growth, both in print and the managed print service, but also a strong focus on IT services, SMB and digital. Our customers are on a digital journey, and they're looking for a high-performing, collaborative and resilient work environment. The great thing about us is we're able to serve both small customers all the way up to very large enterprise, and we do this obviously through our direct workforce, as well as accredited channel partners, which we have thousands of.
We have portfolio breadth that really no one else has, and we're able to right fit that technology, whether it's on the actual equipment side all the way through to services and workflow. A very important thing, of course, today is that we need to be able to, or customers need to be able to print at the point of need. That could be obviously they're in the office, they're mobile, or they could be remote. To be honest, I think there's more and more actually of all three mixing together. The other thing, of course, that we need to do is once you give them access, is what else can we do and help them with? That's where the digitization, collaboration, and automation really comes in. We obviously build our services, our equipment, and our solutions and software with some key elements in mind.
Security, you heard John and Steve talk about. This is really an issue obviously for everyone, whether you're a small business or large business. We take that really seriously. We are a leader in security. We've been pointed out to be that. And of course, as we help customers on their digital journey, the more you put into digitization, actually there's more risk, right, around cyber threat. And that's where we are now invoking zero trust, where we literally don't trust anyone coming onto the network, onto the device, the content. And these are things that are very important and our customers are requiring. Analytics are becoming more important.
Of course, being able to put data and intelligence in our customers' hands is really important for them to be able to be more productive, obviously save costs, but really generate more insights to help them create new offerings. All of this, of course, we can do on premise, but we're moving more and more to the cloud, and that allows us to be agile as well as resilient. Of course, this is where you enable that continuum of whether you're at the office or whether you're at home or you're on the move, you have access to all of your business processes. Lastly, but very importantly, and really with a lot of passion, sustainability is at our core. You know, when my engineers, when we design, we have that right in the forefront.
We're obviously working on things that are three, four, five years out, trying to make sure that we are going to obviously drive to carbon neutral by 2040. We obviously are looking to new capabilities. Like with CareAR, the French would say we're drinking our own champagne, the British would say we're eating our own dog food. We are using CareAR in a big way to help us in terms of driving sustainability, because for every truck we don't roll, we're helping in terms of keeping the carbon footprint lower. It's a big focus for us. Let's move forward. Print technologies. We are number one. We are the leader. We're very proud of that, and there's a reason.
It's because we can cater for all the way from a small desktop up to a press that is as big as this room. With that capability, we have also been focusing though on key areas of growth. If we look at the left side of the page on production, obviously, we need to have great presses, but there are areas that are really growing, and that's where we're focusing a lot of our investment. On embellishment, during the pandemic, embellishment grew by 15%. We're talking about gold, silver, clear even, fluorescence. These are things that really help us drive more revenue and profit, and they really help our customer. The big thing, you can offer the technology, but if they don't know how to use it, we're really not going to get the whole continuum.
We actually help them learn to design, to cost, to market, and to sell these applications, which is something that no one else does. With Xerox, we don't just turn up with the technology. We help you to make the most of it. The other area of investment is cut-sheet inkjet. You know, analog. You've heard of this for a long time. Analog pages are truly starting to move to digital. In 2021 about 7% of the revenue was on digital. It's going to be almost 30% by 2025, and that's why we've been investing in our Baltoro Press. We've been adding more productivities so you can turn jobs quicker.
We've been improving our applications, so now we can do coated media, which was really sort of the unlocking of being able to take those pages off of analog. We see great future for cut-sheet inkjet. Of course, the secret sauce always is in the software in terms of FreeFlow. FreeFlow products help from pre-press all the way through to analytics, and this is about how to obviously get the jobs out quicker, more efficient. If we move over to the workplace, and again, here, we have offerings that can help a small business all the way up to a large enterprise. I'll just point out a couple of things. We're introducing a new kiosk, a small kiosk that you're able to work with a mobile phone. You QR code in.
You're able to pay with Google Pay or Apple Pay, even the old-fashioned credit card. These are gonna fit very nicely into coffee shops and hotels and libraries. On the hardware side, we have great equipment. Well, the secret sauce again is in the software. Of course, a printer or an MFP, multifunction printer, you're able to print, scan, copy and fax. But now with ConnectKey and all of our applications, you could do 100 things with our technology. You know, you're able to translate into over 40 languages. You're able to take text documents, turn them into audio to be able to listen to it on the go, summarize, redact. I mean, it goes on and on. These are all capabilities that we bring to all of our customers, small or large.
I think the big breakthrough for us in the recent months is the introduction of Workflow Central, which gives customers the ability to act and take care of these, take access to some of these applications, but through their mobile phone, through a tablet, through a PC, yeah, and even through an MFP. This truly means that wherever they are, they can do their work. They can be more productive and have access to these applications. I'm just gonna take a drink. Sorry. Market share, we are the number one. You can see that we've been gaining. That really isn't an accident. In the high, you'll see that we're clear leaders, and that's because we have a better together story.
Inkjet and toner together, along with our applications and our software and solutions and our excellence at third-party integration on the finishing, really has us holding firm there. In the mid-range, you can see we've been gaining. Again, the reason for this, we've been really concentrating on platforms. It's very important in the environments for our customers they have a consistency across their portfolio, so that when somebody learns to do a job on one printer and they go to another place, whether it's at home or, you know, a hybrid environment, they're able to do that same process. We've been working on the platforming of our portfolio in mid-range. We've also been working on simplification.
We already were the leader in terms of making sure that we don't have many part numbers and SKUs, but we really did a strong job in terms of taking the complication out, which is what our customers also want. Then, of course, we've been updating ConnectKey. We've been updating our security again. We just released this week a new A3 product that has additional McAfee security for the box. When you come into the low range, it may seem underwhelming, but we choose to play where there's reasonable profit. We play in B2B, we do not play in B2C. Of course, you know, the leader there is heavy into B2C. We did gain two points, and we did it in a very responsible way. We actually have high hopes with the...
We've introduced 10 new products with Workflow Central. We believe we've got a strong future there as well. This, I think, is an interesting page. Google Mobility, everybody's watching us all the time. But Google Mobility really looks at how people are moving and they obviously went through the pandemic. They've been watching many things, you know, such as public transport and what's happening with recreational places, and return to the workplace. Here you can see we've got EMEA and Americas, and you'll see the strong correlation between people coming back into the office. Vaccination obviously plays a part in this too, and the strong correlation that people coming back into the office are printing.
Now, as John said, we don't expect pages to come back to 2019, but this is a strong indication as things move from the pandemic to the endemic, that we will see an increase. Managed Print Services. We invented Managed Print Services, and it was a simple thing way back when, where it was a device, toner and a click. We've been evolving this as our customers needed. Here you can see again comprehensive security. It was very important that we do very well in terms of securing the network, the product, the content, and then ensuring that users are authorized. Analytics has become more and more important. Again, we're putting these tools and capabilities at the fingertips of a customer.
Cloud infrastructure, of course, is, you know, a must in these days, and we again have been recognized for our cloud print infrastructure. We have all the tools that have basically allowed us to take from simple MPS. We've been growing, and we have a word for it here or an expression called land and expand, and that's what we've been doing with our customers. We've been adding capabilities, adding services over the years. Now here you can see the customers are voting with their dollars. We are at over 90% retention rate, which is pretty darn good. You will see that also, the discerning analysts have us as a leader. We feel very confident that we can offer the best services here.
Now on the journey, the digital journey, the customers are looking. We are their trusted advisor to help them now manage not just the print environment, but also to help them along their journey around content, documentation, and marketing services. We've been again growing over the last couple of years in these areas. Capture and content services, there's so much data, there's so much content out there that we help them take the structured and the unstructured, bring it together, extract it, categorize it, and get it ready for the next process. There's so many examples here. I mean, we're doing accounts payable, accounts receivable, we're doing onboarding of people into bank accounts. I think the interesting one is the digital mail room.
When we all went out two years ago, you know, we still need to get access to our mail, both physical and the digital. This is somewhere we really stepped up for our customers. What we found, actually, we could also help them in terms of cash flow. In some cases, we are now taking accounts receivable information and paying directly into the bank, saving them more time. On the right-hand side is about integrated customer communications. Here we have great prowess with our XMPie software. When you communicate to an individual, there is far more chance that they're going to actually open that content, digest it, and do something with it. This is something that again, we've been expanding over the course of the last two years. We're able to help our customers.
We actually are able to take files, print them, and distribute them, whether it's across, you know, obviously print, email or even over SMS. I think what's great here is look at these customers, look at these brands that were willing to be in our investor relations day. These are very important brands to us. There's global brands here, really full gamut. We're making great strides. In summary, print is still exciting. There's a lot of market there, and we're going to keep grabbing. It's due to the breadth of portfolio and our capabilities around apps, solutions, and digitization. We think we can also take share in digital services, great opportunity. We're the trusted advisors, they're looking to us. Then IT services. IT services has got a great performance to date, and I'm going to hand it over to my colleague, Joanne Collins-Smee, who will talk to you more about that. Thank you so much.
Triumph Business Capital is a financial service company. The technology that we have put into all our processes is one of the things that set us apart. We needed to be able to address a wide variety of vendors in a systematic way consistently. Before RPA, some of these transactions were manually driven. Now this is a process that run overnight that we don't touch, and the next morning when we show up, it's already done. A task that was completed by five-seven people two hours a day is now only monitored by one. Those resources are deployed to help other departments. The CX team was responsive and easy to work with. We chose Xerox RPA over other RPAs programs because they provide all-in-one solution beginning to end. They support it, they service it, so it's a turnkey solution that is easy to implement. It's already catching attention from other managers and other departments, and we are already evaluating other ways to use it throughout other areas.
I love that video. I wanted to do it for a longer time, and I was told we only had a minute. But we have several clients that we are using our robotic process automation solution as part of our IT services offering. As Tracy said, we love print, but we now also love many other things. One of them is IT services. When we think of the TAM, the addressable market for IT services, it's almost $700 billion, and it's growing at a 6% CAGR. I service the small, medium business clients in Xerox. Those are my clients. I love them to death. They have been asking for IT services. We started it in part of our business, and now we've expanded it dramatically. As John said, we're investing in this part of the business.
If you're a small and medium business today, you need technology. It's ubiquitous. To be successful, you need technology, but it's hard, it's complex, and it's also fraught with risk. If you think about the bad guys, hitting an SMB is a lot easier than hitting one of the Fortune 100 or Fortune 50 firms. It's difficult to get people to support your technology infrastructure. That's where we come in. That's where Xerox coming in, and we believe that this is a space that we are made for. Why is this the space that Xerox is made for and we're gonna win? Because we have such a deep set of SMB clients that are so loyal to us today.
We have about 200,000 SMB clients, and we have about 2,000 specialist salespeople that are throughout the U.S., Canada, and Europe that are focused on small and medium business. They're in their communities. They sell to them today. It's a great part of our business. Our small and medium business clients love our Xerox product and our services. We're expanding what we're going after. As I said, we started with small pockets of this service around the U.S., and now we're expanding in a big way, and it's really resonating with our clients.
One of the other things is, if you're a small and medium business, you may have one firm that does network, another firm that, you know, is selling you laptops, and oh, by the way, your nephew went to a couple of classes in security, and he's an expert, so he's maybe giving you a little consult, right? It's difficult if you're an SMB. When we look at what we can bring in, it's leveraging what we have, our great brand, our great people, and investing in our capabilities. The clients have told us they're interested in one vendor to actually pull this together for them. Xerox is offering end-to-end IT services for our SMB clients. We're gonna procure the laptops. We're doing this today. We're gonna install, and we're gonna manage. We're doing this for endpoints through servers, through the network environment.
This year, we've started RPA, which really resonates with our clients. If you're a small business, you couldn't imagine getting a team of developers to come in, analyze your business, and figure out where you can put automation in. We are providing that as part of our IT services offering. We're also moving to web development and e-commerce support. It's a great end-to-end offering for our clients, and it's resonating today. We've grown significantly, and we're looking at what we can do going forward. I'm gonna wrap up for Tracy and myself for Print and Services. We are looking at Print and Services, which includes print. Tracy had great description of all our offerings here, as well as our managed service, digital service, and IT services. We are looking at a low single-digit revenue growth.
As I mentioned, IT services and digital services are really resonating with our clients. We are seeing great take-up in this area, and we're investing in capabilities, and additional support in both those areas. We're gonna see about 100 basis points improvement in margin, and that is as we're seeing an end to the pandemic and a resolution of the supply chain problems that we have today. We love print. We also love services, including IT services. Thank you for your time, and I'd like to pass over to Nicole Torraco.
Morning. Hopefully you all saw our press release this morning, announcing the new name for Xerox's Financial Services business, FITTLE. As many of you know, we've been in the captive financing business for decades, and this has created a firm foundation from which to stand up this business, a decision we announced roughly a year ago. Today, I'm here to share our strategic vision on how we'll become a global financing solutions provider of choice for both vendors and dealers. FITTLE will have three offerings. The first, XFS or Xerox Financial Services, will continue to serve the Xerox portfolio and will be the exclusive financing provider for Xerox. This is a roughly $2.2 billion book today. Also, we have a vendor program and multichannel dealers.
This is a little over $1+ billion today and historically has been to service and sell Xerox equipment through the channels. However, since announcing the stand-up of this business roughly a year ago, we have doubled the amount of non-Xerox business we are selling through this channel. Finally, there's a vast opportunity to bring adjacent offerings to our core customer base. We are also addressing these adjacencies. As we grow, we will continue to be a B2B provider. We will contemplate new offerings only where we have a competitive advantage and understanding of our customer needs. How will FITTLE win in the market? Today, we are a roughly $600 million global business with a presence in nearly 30 countries. This makes us one of few truly global equipment leasing providers.
We have a deep level of expertise in a number of industries and a broad range of assets adjacent to our core business, from IT services to software, 3D print, audiovisual, as well as security equipment. Automation, machine learning, artificial intelligence, proprietary models have given us best-in-class credit adjudication and credit approval rates of over 90%, while loss rates are less than 0.5%. We've launched a number of new offerings, as I spoke about IT, 3D print, audiovisual and other office technologies. As we launch each of these, we have robust internal processes. With every new offering, we are only playing in markets that are natural extensions, where we understand our customer needs and the asset class. Finally, we maintain a competitive cost of capital through programmatic securitizations.
I spoke to you earlier about the non-Xerox business we're doing, and here are a number of new partners we've signed in the last several months. They range in industry from 3D to IT services and include vendors where FITTLE is supporting a direct sales force to enable affordability, as well as dealers, where we are selling a range of equipment by providing financing. Some of these partners have used leasing for decades, and we've been able to offer them unique solutions given our understanding of product lifecycle as well as technology dealer needs. In other instances, we are helping these partners for the first time to lead with leasing to enable sales. Each of these logos represents new originations, which translates into revenue growth for us.
We measure our performance on a number of key performance indicators, including return on assets, return on equity, as well as the efficiency of our credit adjudication. We outperform the industry on nearly all metrics. As seen by our return on assets, our profitability vis-à-vis our asset size is extremely robust. AI and machine learning drive high approval rates with net loss rates that are less than 0.5%, highly competitive. There is one area where we have a great amount of opportunity as we stand up this business. This business has been developed from an administrative function to a fully functioning BU. Opportunities such as Own It and similar programs are going to enable further cost saves to drive our profitability.
New processes, systems, and org design are helping to increase our efficiencies as we grow this business. Since standing up our financing business, we have grown originations by 14%. This has reversed several years of declines. This growth has occurred while maintaining high credit standards and playing solely in asset classes that we understand. We will continue to grow our business through non-Xerox vendors and dealer relationships. The trajectory you see here of growth is based on our current set of offerings and does not include the new offerings that we are planning to launch in the future. As we grow, we will also maintain a mid-teens ROE as well as a low single-digit cost of funding. If you take one thing away from this portion of the presentation, it's that FITTLE is an engine for growth with opportunities completely separate from the Xerox captive business.
The dealer equipment leasing market is extremely fragmented, with many small players competing for business and lacking an overall digital experience or white glove service. Vendors are looking for financing partners who understand their go-to-market motion and product life cycles. FITTLE is capitalizing on all of these to differentiate itself. Now I'd like to introduce back to the stage, Steve, who's going to talk to you more about CareAR.
Our consumer world and our enterprise are colliding. We're seeing a rate and pace of change like we've never seen before. Think about over the last 24 months, how much life has changed for us, whether it's around how we look at content, whether we think about the retail experience. We talk about the Amazon experience. You think about how you interact with loved ones. You think about the experience that you expect now in retail, in shopping, in getting your food. What we've seen is a tremendous change in expectations, where the consumer world is now colliding with your enterprise. You're seeing companies like Walmart's and Target's trying to replicate that same type of experience. Same-day delivery, same-day ordering. The one area that we haven't seen significant change is in the service space.
Think about your own personal lives over the last 24 months if you had to call about an appliance that broke at your house or an HVAC that broke in your house or, God forbid, the internet was down and the cable modem was down. Think about that experience. Cable is down in your house and you don't have internet access. What do you do? You dial the 800 number, you call up, and you got the technician, or you got the customer service on the phone and say, "Can we verify who you are first?" "Yes, it's Steve Bandrowczak." "Yes. Can you verify your email address?" "Yes, it's stevebandrowczak@hotmail.com." "Can you verify your phone number?" "Yes. 919 blah, blah." "Can you give me your account number, sir?" "I don't have my account number.
I don't have my billing in front of me." "Okay, let's make it easy for you. Just give me the 15-digit serial number off of your cable modem." So you go in the closet and you go downstairs, you get the flashlight, you read the 15-digit thing, and they say, "Welcome back, and thank you for being a loyal customer. What's your problem?" "The Internet is not working, and my wife wants to divorce me." "Okay, sir. Did you reboot your laptop?" "Yeah, I rebooted my laptop." "Did you power everything off?" "Yes, I powered everything off." "Well, I think you got a problem, sir." "Yes, I think I got a problem." "Well, we're gonna get a technician right out to you immediately. We have this window three days from now. You can go between 8:00 and noon or 1:00 to 6:00.
Which one do you want, sir?" "I'll take the 8-12. But can you narrow that a little bit for me?" "No, sir. That's all we have. We give you an 8-12, but we'll text you when the technician is coming. We'll let you know." You wait three days later and you get this text. "You're our next call. We'll be there within the hour." Two hours later, you finally get the technician who shows up. "What's your problem, sir?" "I told you my Internet is down. It doesn't work." "Okay, sir. We'll go down and we'll take a look at it." We get the technician goes down, comes back up in an hour, says, "Sorry, this is a new type of technology. I am not experienced with that." How many of us have had that experience?
It's the last place in which technology and capabilities have changed it. What we're trying to do and what we're going to do is we're gonna revolutionize the service experience. We're gonna change it. We're gonna lead in the service experience management. Over the next 20 minutes, I'm gonna take you through not things that we're gonna do, things that we have today, things that we can provide to our customers today and the differentiation of the capabilities, and I'm gonna walk you through that same experience once I take you through the product. We're gonna revolutionize the service experience with CareAR. If you take a look at just what's happening in terms of trends in the industry, think about the great resignation. All of us are challenged, and we are here at Xerox with our field service and turnover and the great resignation.
It creates a couple of problems. Number one, you're losing a tremendous amount of knowledge and intellectual property every time field service technician leaves. They're going across the street to Starbucks, they're going across the street to Amazon, they're going across the street for Walmart. They're changing, and we're losing all of that knowledge. Even more importantly, there isn't a good stream of incoming resources that says, "How do we pick up the knowledge and the product in your experience?" We're seeing an inflation in cost because of the people that we need to bring in. We're seeing the great next generation of technology. Augmented reality, virtual reality, and AI are going to be the drivers of GDP over the next five years. You see, when you're at full employment, you can't add labor to it anymore. You've got to add technology.
We're gonna see augmented and virtual reality and AI drive significantly GDP and company growth over the next couple of years. The connected enterprise. You think about IoT data and the connected world in which we're in today, and the accelerators of that. Well, what do you do with that connected data? What do you do with IoT data? How do you change the service experience through that connected data? I'm gonna take you through that. Industry 4.0. If you think about the supply chain, and if nothing else has taught us over the last 24 months, our supply chains are challenged significantly. The way in which product flows, the way in which product is manufactured, we have to think differently. We gotta think differently about availability, we gotta think about differently in terms of uptime.
You're gonna see some great things from the rest a little bit later on. We've gotta think about Industry 4.0 and how do we reinvent ourselves from a manufacturing capability. What do we think about 5G? 5G is extremely important to this whole scenario. Why? Because it allows us to drive significant bandwidth. Now we can drive video content, we can drive more things into the field, into remote places that we've never had before. 5G and the expansion of 5G is a tremendous technology and a wave in which we're gonna ride as we go forward. From a CxO perspective, whether you're a chief delivery officer, whether you're a chief financial officer, one of the things you wanna do is continue to drive self-service.
Think about in our own personal world, in the consumer side, how many things we are doing ourselves, whether it's around data entry, whether it's around ordering, whether it's around following. We are now a consumer world that is allowing ourselves to do more individually. We need to bring this to the enterprise. Why? More self-service. How do you do that? How do you give customers? How do you bring all of that using analytics and AI? Improve operational efficiency. If we've seen nothing else over the last 12 months, and candidly over the last two quarters, the pressure on margins as it relates to inflation of labor, as it relates to the transportation costs, products and individual components increasing. Service organizations have to be more efficient. They've gotta be able to drive more cost down.
How do we think about the next generation of tech workers? There isn't a good funnel of inbound technicians that can pick up these technologies and grow. It takes years of experience to be able to service some of our equipment, certainly on the high-end side. What we can take advantage of digital natives. Think about today, we have to take advantage of digital natives. What does that mean? We've got technicians and people that are extremely comfortable with augmented and virtual reality, extremely comfortable with AI, extremely comfortable with mobility. How do we leverage that and that digital workforce to help solve this problem? Last, John talked about our commitment to ESG, but everybody is really trying to think about how we can reduce our carbon footprint. When you think about CareAR and the bundle, we can fix these problems.
What I'm really excited about, you're gonna go from a $30 billion TAM to an $80 billion TAM. That's $50 billion of growth that we are smack in the middle of that we can help drive in the industry today. We're very excited about where we are and the condition. Where are we? What did we launch? John talked about it. We had a ServiceNow investment and a $700 million valuation. We launched this at the end of December last year. Now where are we at in the movie? Now we got $35 million of ACB, 25% growth in the last quarter in our pipeline. We are seeing significant growth in areas that we didn't even think about just six months ago. We're talking with banks around how do you service ATM machines.
We're talking about the medical industry around how do you service MRI equipment. We're talking to airline industries around how do you service jet engines. These are things that we weren't even thinking about just six short months ago. We're running into industry use cases, and we're running into availability in terms of where we can bring technology and solve some of these problems in areas that we've never seen before. Made some investments. We talk about CareAR and ServiceNow and the partnership. It was more than the investment in CareAR. It was an ecosystem. You think about one of the largest and fastest growing SaaS companies in the world focused on field service management and customer service management, we are embedded. I'll talk about the partnership and how we're driving that.
We are embedded with their sales force, we're embedded with their product team to drive value to mutual customers together. The reason why we can drive value is we add that experience on the last mile. We add and we solve the toughest problem, which is really the customer experience, the field management experience on that last mile. We have a partner ecosystem that is incredible. When I say partner ecosystem, we're talking about working with the Wipro's, the TCS, the HCL's for joint customer accounts and very specifically use cases to how we solve some of the toughest challenges in service management, in field management, and in customer service management. Joint accounts, joint go-to-market, where they bring us into accounts or we bring them into accounts.
By the way, we have a significant integration with ServiceNow, but it could be Salesforce who has a field service management and the customer service management. It could be Oracle, and it could be SAP. We're agnostic to who provides that field service and customer service management. Our partner ecosystem is significantly to the reach and to the depth and breadth in which customers we are engaging with and how we're consolidating. More importantly for us is we started using it internally. We call it Customer One. If you have a chance, go see my other favorite EC member, Mary McHugh. She nudged me a little bit because I had the two previous personal favorites. That's okay. I'll get that fixed. Talk to Mary McHugh about how we're deploying our field service team and how we're using CareAR to solve some of the problems.
What we do is we take that use case, and we can go to a large telco and say, "You've got 20,000 field technicians. What happens if I drive a 10% improvement in your productivity? What happens if I drive 20% of your vehicle miles away and the carbon input and the savings that you can have in terms of carbon input? What happens if I can increase your call center to your clients or to your end customer, that engagement, by over 50%?" We take real-world data, we take the things that we're using and solving ourselves, and now bringing it to other industries and bring it to other companies. Yes, we are a market leader in this space.
Yeah, there are other companies that play in the augmented reality space, and you'll see they do a really good job, like we do in Assist, but they don't bring content and they don't bring insight. That's the differentiation I'm gonna show you in a few seconds. We really have three areas of our portfolio that we're driving. One is Assist, the ability for us to do an augmented and virtual reality session with a customer. If we can't solve it real-time with a customer, we can do that with our field service team. We have Instruct that gives us the ability to take and bring instructions to our customers in the field. Think about today.
If you go to our Home Depot and you buy a barbecue, last thing you do is open up the manual and read how to put that darn thing together. You get on YouTube, and you go find somebody who has installed and put that barbecue together. That's how we want to do things. We don't wanna do it with PDF documents. We don't wanna do it with manuals. We wanna look at native digital technologies that allows us to drive and use the things that we're used to in our consumer life. Insight, tremendous amount of insight, meaning that we've got IoT data, we've got ServiceNow data, we've got data on our products, and we now roll all of that together, and we give our field instructors insight into how they solve the problem.
Just think about, we've got artificial intelligence that looks at what is the problem that we're seeing based on IoT data, and we serve up the five most common ways of solving that problem in digital content. All right? That's how we start to change the experience. Let me give you a real-world example. Let's roll the video, please.
CareAR is making expertise accessible. Let's see how Matt, a field technician equipped with CareAR, works through a new issue on a server. Matt navigates through his service ticket to launch the CareAR app on his smart glasses device. Once open, he scans the asset code and is able to quickly visualize rich contextual data about the device directly in his field of view. The issue is one that Matt is not familiar with, and he needs help, so he connects with Sarah, an expert in network systems. Sarah is not only able to see what Matt sees but is also able to pull up an interactive 3D digital model powered with IoT insights side by side within the same CareAR console.
Matt is able to visually track as Sarah highlights specific parts of the server, all within the CareAR app on his smart glasses device. Sarah can isolate the issue and leverage CareAR's augmented reality annotations tools to provide step-by-step instructions to Matt that he can easily follow along from within his field of view. Upon successful completion, Matt is able to take screenshots that are automatically saved in the completed work order. At CareAR, this is how we plan to reinvent service experience. Making expertise accessible is the future, and the future is happening now.
Take that same experience with that internet outage, where internet outage happens and I send a link to my customer that opens an augmented and virtual reality session. I skip and bypass the whole identification. I skip and bypass the whole what is your problem. I start immediately interacting with my customer in augmented and virtual reality. By the way, that session I can record and I can store, so if a customer self-service doesn't work, then when my field technician gets there, they pick it up right from that moment in time.
If I've got a customer and they've got a field technician who only has 30 days experience, I now have the ability to add insight and instruct where I can help that 30-day experienced technician look like they're a 30-year experienced technician. For some reason, they can't solve it themselves, they do a VR session back to a level 3, level 4 engineer, and we solve that problem. When you talk about service and what we're trying to do, we're really trying to create a platform. It's really the service experience management platform that has all these attributes. The two different differentiations from everything else that's out there is really around instruct and the ability to be able to take content from customer. You think about it, there's a lot of content that's out there. Every customer is in a different space.
They've got video content, train-the-trainer content. They've got product content. How do you pull that all together? Then how do you serve it up in a way in which it is real-time at the time that they need it? You see, I don't want instructional information too early. I don't want it too late. I want it exactly when I need it, at the time that I need it. What that is driving is that it's driving all the way through upfront in terms of now training. This is a new area that we're starting to run into in terms of how do you launch new products? How do you train your field service team?
One of the things that we're trying to do is we're now trying to make this flywheel effect around how do we go from instruct to AI in terms of being able to give an insight all the way back to assist. This is a flywheel that will continue to drive and continue to add more value as we move forward. We're running into more opportunities, and we're seeing now AR ready across the enterprise. I talked to you about service, I told you about customer service, but we're also seeing it in things like product and manufacturing. Think about the manufacturing shop floor and how we keep the shop floor running, Industry 4.0. How do we help in being able to provide that? What do we do in terms of being able to drive and continuously drive improvement? Then how do we handle that knowledge transfer?
You see, every time I record a CareAR session, I now can play that back for future technicians to use that section in the future. We've got this creative repository of knowledge. We got this creative repository of information, so that when you come in off the street and you're a digital native, I give you all that content, I give you all that knowledge. I don't need 30 years experience. What we're seeing is a tremendous amount of excitement around the AR-ready for the entire enterprise. This is a customer example of where they're using it inside the data center, very similar to the video that we showed you. ServiceNow, CareAR, working inside of data centers to how do you solve some of the toughest challenges. Think about COVID, where they didn't want service technicians and vendors inside of data centers.
We now can work with the individuals that are on the ground to solve the problems using CareAR under a ServiceNow umbrella. Extremely exciting what we're starting to see in that space. The last thing I wanna highlight in terms of their product is we now will start to launch products that are CareAR and AR ready. What do I mean by that? Well, if you think about how we used to launch products in the future, we used to do things like train the trainer. We used to send out PDF documents. We used to give our field technician a whole bunch of material, and the experience kinda happened along the way.
What we're doing now, and what you're gonna see on the floor as you walk the floor a little bit later on, is we're now saying, "When we launch a product, it's going to be AR and CareAR ready." Well, what does that look like? Well, it helps you with actual installation. It helps you with the basic fundamentals of break fix immediately right inside the CareAR application. I don't have to train my field anymore. It is available via digital content. It's available via the way in which they wanna learn as a digital native. We will continue to launch product with CareAR and AR ready. Think about today, think about automobiles. Automobiles launch with CareAR and AR ready. Think about how we think about MRI equipment, how we think about medical devices, jet engines.
Anything that has a product launch that needs a field service technician, we can solve and help that training, and we can help solve with that content. We're very excited about the future in terms of AR-ready products. We're gonna drive about $70 million in 2022. What are we doing? What's our route to market? We obviously have a tremendous sales force, direct sales force around our SMB go-to-market, as well as our Europe and our Americas go-to-market. Over 10,000 customers that we're going into. Tremendous pipe in terms of the availability and the TAM that we're going after. We also have the ecosystem of partners that I talked about. You can take a look at any public documents in terms of what the big SIs are doing with ServiceNow and SAP.
We are right there with them in terms of going into accounts together and bringing CareAR as part of that bundle. Then the last one is really around what we do with ServiceNow and the ability to have ServiceNow bring us into accounts and grow inside their ecosystem. When we take a look at what we're doing in terms of a go-to-market and the coverage, we have more coverage today with CareAR than candidly we do with a lot of our other products, and the opportunity is tremendous. Let me finish with this. If you think about today, the growth, 30%-40% growth in a business. You think about today, revenue with 90% retention. We've got 91% going in. We think 90% retention going forward. Gross margins at 70%+.
You think about what we're gonna do in terms of we're gonna spend, keep investing in 2022, break even in 2023. This is what an exciting growth business looks like. We are extremely excited about CareAR. Extremely excited about what we can do to the market, and we're extremely excited about going after $50 billion of TAM. Thank you very much. We're gonna take a break at this point, and roll.
Thank you. Good morning, everyone, and welcome back. When we last met, we said that we were actually gonna drive innovation and new growth companies. I'm really happy to talk to you about actually the three businesses we've actually recently launched. The first one is Elem Additive Solutions, the second one is Eloque, and the third is Novity. What we've also done is actually established what we call a venture studio that can now scale our businesses very rapidly and create even more businesses than what we've accomplished today. Our focus areas are threefold. One is 3D, IoT, and clean tech. Let me walk you through our first business.
Okay.
Additive manufacturing. What's really interesting over the last few years, you've all experienced substantial issues around the globe with regards to both manufacturing and supply chains. Right. There's been major disruption, and a lot of it has to do with the fact that manufacturing has been centralized, and there's a tremendous amount of risk that comes with actually trying to gain access to spare parts products impacting manufacturers and customers. What's interesting about the new technology and where directionally the industry is going, is that the industry is now pivoting towards what I'd say distributed manufacturing, localized manufacturing, and production on demand. Our technology with additive enables just that. Let me walk you through a real-life example of the work we're doing with an entity which is one of the largest entities in the world, which is the U.S. Navy.
This past year, we worked very closely with the U.S. Navy to really understand all their pain points. What's really interesting is the U.S. Navy is distributed all over the world, and it takes them weeks and months to gain access to spare parts and supplies. In addition, if you think about their challenges with transportation costs, warehousing, distribution, huge capital goes into even maintaining inventories around the world. They have all got to be either flown in onto their transport systems or at port of call. They talked to us about a very fundamental issue that they've been exposed to. I'm actually pleased to let you know, after studying their problems this past year, we just signed an agreement with the U.S. Navy, and we are the first company in the world that is in the process of actually deploying a 3D printer onto an aircraft carrier.
Now, you'd ask the question as to why did they pick us? That's an interesting question because if you think about the technology that exists today, which is powder-based systems. Powder-based systems have been around for a while. But the issue with powder-based systems is that the materials are expensive, they're hazardous, they're explosive in nature, and it's extremely hard to transport. If you think about powder-based machines, they require clean room setups or clean room type setups. Again, they require a significant amount of safety and expense around trying to even create one of these environments. All of this was a non-starter for the Navy. The great news is that we are gonna be deploying new technology and to be the first company to deploy this technology.
In terms of what's next, we started thinking about let's talk to the Navy and also our industrial customers to understand in terms of where we go from here. It started becoming clear that what they are really interested and excited about is the possibility of how do we now start creating more digitized parts, technologies in terms of digitizing their old schematics and parts, et cetera, and how do you create the right economic analysis around it? I'm pleased to say that we just launched our second business, which you're gonna hear more about, which is our digital manufacturing software.
That's gonna get launched in the second half of this year with the focus on actually a whole ecosystem of solutions, starting with the ability to be able to map your 2D parts to 3D digital parts and repositories, from which you can now do printability analysis to determine if this part can actually be 3D printed. We've taken it a step further to actually develop the techno-economic analysis to give them the value proposition to determine if it is actually economically viable to actually print this part. We're gonna be launching the software. It's hardware agnostic, so it can run on multiple vendors and platforms. Okay. In addition, I'm also excited to actually announce at the end of this year we're gonna launch the next generation of our materials, which is 6061.
The advancements in 6061 are exciting because it increases the aperture of the industry verticals we're gonna get into at scale, which is the whole automotive industry and the aeronautical industry. This is really an exciting business. We've got it off the ground, and we've got a tremendous amount of launches coming up in the second half of this year. Our goal right now is to double and triple the number of machines this year that we are gonna be launching. Okay. Let's talk about the IoT business. We've got a couple of key businesses that we've launched. The first one is Eloque. Let's step back and think through the problem that Eloque solves. If you think about at a global level today in terms of what we're faced with, we are starting to see crumbling infrastructure, critical infrastructure around buildings, roads, bridges around the world.
Very little data is known about these environments, and when we do find out about it's too late. Earthquakes make these environments very vulnerable. We start to see bridges collapsing, buildings, roads. This is becoming a very big universal problem. What's really interesting is that even in the United States, when you look at the data today, over 42% of our environments, especially bridges, are over 50 years old, and approximately 340,000 of them require maintenance and repair. Now, how do you prioritize these ecosystems and how do you even efficiently apply capital towards it? It's a massive challenge that we're faced with. What's really interesting is that we've deployed a solution and a company which is a joint venture with the government of Victoria in Australia.
It's really exciting because this technology has been deployed on their bridges and some of their roads, and we're starting to understand and learn about the telemetry. It's really exciting in terms of the data we're starting to see. What Eloque does in Australia today is that we've deployed what we call fiber optic sensing technologies coupled with very advanced AI. What it's able to do is actually provide you tremendous telemetry on the health of these bridges. Example, all of the load-bearing structures on a bridge, what the effects of stress and strain is, fissures, fractures, et cetera, temperature, vibration, noise, even climate and environmental conditions.
This is very valuable data because what we are starting to do is give operators and customers an opportunity now to start thinking about how to prioritize the capital spend, including the maintenance of what's required and how do you sequence all this. Okay? This technology now is getting rolled out across Australia, and our goal is to triple the number of bridges. We're gonna be launching this technology in the first half of this year. You dial forward, and what's also exciting is that we're starting to talk to states in the U.S. and select countries in Europe. We're really excited to start scaling this technology because we think we can solve a very real world problem universally. Let me move on to the next, the third business that we launched-
In fact, there are many different types of bridges, suspension bridges, cable bridges, wooden bridges, old masonry bridges, concrete bridges. Our product roadmap is starting with what we call tier one, and we methodically working through the five tiers of bridge types with its own unique artificial intelligence, algorithms, machine-based learning. Every problem has a solution, an Eloque solution for every bridge type. We have the technology. We have the partnerships. The Eloque solution gives bridges a voice. We just need to be able to listen.
Let me talk to you a little bit about the third business we launched, Novity. What's interesting about the problem we're trying to solve here is Novity actually solves a very critical problem around unplanned downtime for process manufacturing operations. This is for very large sectors, oil, energy, gas, mining operations, including pharma. The interesting problem we're trying to solve here is that at a global level, when you look at unplanned operations, it costs us over $50 billion universally to actually solve this problem, especially when all of these process manufacturing industries face unplanned downtime. A specific plant can lose its production capacity anywhere from 5%-10%, which creates a very serious problem that can lead to millions of dollars in losses on production capacity.
The Novity technology that we've launched is a series of sensors, but more importantly, uses very sophisticated, what we call hybrid AI technology, which is a combination of what we call physics-based, what we call simulation models of architectures for various industries. We take the data from these physics-based models, and we actually bridge them with learning-based data from an actual set of sensors from a specific plant. What this lets us do is actually, in a very accelerated way, dynamically in real-time, produce what we call predictions of potential failures of greater than 90% accuracy. We can do these predictions weeks and months in advance, and so we can get ahead of this problem. What's really interesting about this sector is that we're working with one of the largest manufacturers in the world for raw materials in the construction industry.
We've deployed this technology, and what's really interesting that in the first month, we were able to detect a potential issue with their milling operations and actually avoid potentially a real problem there. We're starting to see a lot of data coming out of this operation, which is very encouraging and exciting. We also now launched two other very active engagements right now with a key player in the oil and energy sector, a key player in actually one of the largest players in the industrial sector. We've just started an engagement with a food and beverage producer that is also a bottler. We think that is exciting. This technology is really exciting and our plan right now is just expand and scale this technology.
Moving right along, I'm gonna talk to you. We've talked about the three businesses we've launched, and I'm gonna touch on another technology which is very specifically around what I call the ocean of things. Okay. If you look at our oceans today, okay, what's really interesting is about 70% of our planet is surrounded by oceans, and very little information is known about our oceans. They're unmapped, they're undiscovered, and unmonitored. What we've discovered is that over 80% of these environments we just know nothing about. Working with DARPA, who's our first customer, we've actually deployed a very, what we call technology, which is geospatial floats. What these floats do is actually monitor everything on the surface of the ocean and below the ocean.
They've deployed it in a couple of parts of the world, and what they're currently doing is monitoring all ocean traffic. We're also extending. There are tremendous use cases with this technology, and we're now expanding use cases into things like what we call aquafarming and aquaculture. We're working with a commercial operator right now to start detecting things like viral spreads, algae blooms, and even environmental conditions like detection of oil spills and pollution and plastics in the ocean. What we're gonna do is actually by the end of this year, we're looking towards working with them to deploy a pilot on this technology, which is gonna expand all of the different use cases. There's tremendous opportunity here. This is early stage. We completed this technology.
We've deployed it with DARPA right now, and we're now gonna start advancing the technology for alternate use cases with different other industries. This is another exciting space that we are working on. The last area I wanna touch on is clean tech. If you step back and think about climate change, it's a very, very big problem on our planet right now. The biggest issue here we're faced with is greenhouse gas emissions. What we discovered is that building cooling technology, they contribute to approximately 4% of greenhouse gas emissions. What we have actually developed is a very advanced cooling technology that can actually give us the potential of up to 80% efficiency in cooling. We developed the alpha last year, and what we discovered is that the technology looks very promising.
There are a couple of key benefits with the technology. Besides the fact that we can improve energy efficiency by 80%, we can improve indoor air quality, we can lower consumption, including costs of deploying this technology. What we're doing this year is actually we are working with one of the largest manufacturers of cooling technologies in the world, where now we're developing the beta, which we will complete by the end of this year. This is very exciting technology, and we're looking forward to results of this technology. Moving right along. Let's see here if I can advance these.
You get a lot of energy savings in air conditioning if you can dehumidify the air without cooling the air too much. In traditional air conditioning systems using refrigeration, we have to cool the air too much in order to get all the humidity out. This technology that we're developing allows us to decouple those processes. Here we have a unit that allows us to simulate weather conditions, and then once we simulate that humid, hot air, we can send that air into the air handling unit, where the liquid desiccant contacts the air and removes the humidity so that we can deliver air to the building at a comfortable temperature and humidity.
I've given you some insight into the businesses we've launched and also some of the technologies we're advancing through the pipeline. What we've now established at PARC Innovation is a venture studio. What does the venture studio do? We've created a flywheel effect with the studio, which is we've taken experience and learnings from the three businesses we've launched. We've put capital structures around them. We've developed a leadership team of world-class leaders to run these businesses, and we've aggressively taken them to market. There are some critical benefits with the venture studio concept in terms of the modeling that we've done and put in place. Because, one, it helps us very quickly, rapidly accelerate even more businesses across the pipeline. What we use is a customer-led innovation process. The focus is to test and validate problem-solution fit and product-market fit early in the life cycle. We can put the capital structures early on, and what this also helps us determine very rapidly what businesses we will move along the pipeline and just as quickly what businesses we will shut down.
The second key business benefit that we've derived from this is that we now have vehicles to actually take these businesses to market in the form of spin-outs, joint ventures, and even licensing opportunities with regards to the technology. Xerox, as a company, what we get to enjoy as a minority investor is all of the benefits of the upside. Hopefully this gives you some sense of the platform we put in place to actually incubate businesses at PARC Innovation and rapidly take them to market. Why do we need the platform?
What's really important about the platform is that we have a very rich pipeline of innovation that we are progressing through different stages of maturity. We've talked about Elem and Eloque that we launched, including Novity, and we are now in the process of looking and assessing all of these different businesses across the pipeline. Some of these will get through, and some of them will get rapidly shut down. What's important is to make sure that we are very efficient around the use of capital in terms of how we progress these entities. One critical or key business I'm really excited about is actually co-extrusion battery technology. We've actually developed a technology right now which can create and produce up to 20% density. This is exciting because it's greater than anything that's available in the market today.
We're now working with one of the largest automotive manufacturers in the world to actually test the co-extrusion technology in their production line. What's also interesting is we developed a manufacturing process where you can actually plug this entire process and chemistry into existing production lines without any customized changes necessary. This is early-stage technology that we're gonna be testing and validating with one of our largest automotive manufacturers, and we're gonna hope to learn a lot more about the results, which are looking very encouraging by the end of this year. Hopefully what I've given you is some insight into the incubator that we've built, the companies we've launched, and how we plan to accelerate even more companies through this pipeline. Our mission at PARC Innovation remains unchanged. Our goal is to continuously create breakthrough businesses powered by breakthrough technologies.
But more importantly, our impact, our mission is gonna be impacting what I call business, society, and planet, and that's gonna be the focus. With that, I'm going to actually close on this session, and thank you for your time. I'd like to encourage you to see the innovation showcase, so you have an opportunity to actually look at all of our technologies and also meet with all of the leadership teams that are actually running and scaling up these businesses. I'd like to introduce Xavier Heiss, our CFO at Xerox Corporation. Thank you.
Thanks. Good morning. This is exciting. I'm the CFO. I feel excited about this, but I'm sure you can sense, you know, some of this excitement here. Let me now try to translate, wrap up with financial, the strategic element we share with you this morning. In this section, I will walk through our three-year financial outlook for Xerox Holdings for each of the four businesses we describe. I will also highlight why we believe we are undervalued, and will provide you with a framework for valuing each of Xerox separated business. I will end with a traditional review of our capital allocation policy on why we believe Xerox is a great investment. Let's recap. As a quick outline, what you have heard from the management team, from my colleagues is key messages.
Number one, we expect our print and services business to not only stabilize, but grow. You know, you have seen our strategy to strengthen our leadership position. Number two, we are still investing. We're investing in FITTLE, in CareAR, in PARC to drive growth and create additional shareholder value. Number three, PARC has successfully incubated businesses. You have proof points that we shared with you, and there is more to come, as you have seen it in the pipeline. We'll share for the first time with you the financials for each of these businesses to highlight the value and the growth potential of this asset. Our goal is very simple. We want you to be better qualified or better equipped on how to assess the value of each of these businesses independently. Let's start with the big picture. Xerox Holdings outlook revenue, we describe it.
We are expecting at least $7.1 billion of revenue in 2022 on low- to mid-single-digit annual growth through 2024. This is very different than the outlook given in prior Xerox Investor Day, where the expectation was to stabilize rates of decline. Over time, we expect to offset the natural erosion of the traditional print market with the investment we have made in strategic growth areas. Adjusted operating margin, we are planning to grow 200 basis points above 2022 level by 2024. In print, obviously we expect per-unit efficiencies to drive margin expansion as the market recovers. We will also continue to invest in new businesses, but headwinds will fade as the new business scale.
From a free cash flow point of view, we are planning to grow from more than $400 million in 2022 to $450 million-$500 million through 2024. We expect operating income gain to flow to free cash flow given our capital light model. We are also continuing to make investment in our growth businesses. Let's now double-click on each of the models. Print. Print is a solid business with recurring revenue and strong cash yield. We expect revenue of around $6.3 billion in 2022 or close to 90% of the company total. According to external studies, you saw some of the data point, the traditional print and services market as a whole is expected to be flat to slightly up over the next three years. We believe we can do better than that.
We gain market share. We will continue gaining market share in print and grow as well in IT on digital services. The adjusted operating income margin, 7.5%-8% in 2022, growing 100 basis points by 2024. We are expecting improvement as workers return to the office and supply chain conditions ease, but we assume only a modest page volume increase. It will be as well offset by a higher mix of IT services revenue. IT services is a great business, but this is a business which attracts a lower margin. Finally, from a free cash flow point of view, we expect free cash flow to be in the range of $525 million in 2022, growing in line with revenue.
Free cash flow is very predictable for print and is expected to be stable given the high level of recurring revenue that we have in print from the print and services business and with the increased exposure that we are planning to have with IT on digital services. I would like to share with you and provide more context behind our print and services assumption. This is a question we often ask about, and this slide should summarize the pace of recovery in page volume and supply chain conditions embedded in our financial forecast that we're sharing with you. The expected page volume is planning to improve at the beginning of the second half of 2022 and modestly recover in 2023 and 2024. This may prove conservative.
However, I just would like to give you and provide a rough guide of upside to our forecast. Every 1% of page volume increase represents around $40 million of revenue and creates a 20 basis point increase of operating margin. We are also expecting supply chain condition to ease beginning in the second half of 2022 and normalizing by 2024. In this forecast, we are taking a balanced view, and we are not forecasting a return to pre-pandemic level. Instead, we assume around 80% of the 2019 level. Let's double-click now to FITTLE. FITTLE is a great business. Nicole explained, you know, the strength of the business. I would like to go through the financial. Revenue is expected to grow faster on a standalone basis than our print and services business, because FITTLE will expand beyond the pure Xerox business.
We're also expecting an adjusted operating income margin with a slight improvement with the net interest spread on securitization, offset by the new business costs there. We expect free cash flow to remain flat through 2024, as we are growing this business. We are growing origination to support net balance asset balance growth. I'd just like to share with you in my life, the most frequent question I'm asked as a CFO. "Xavier, why do you have $4.2 billion of debt when you have $2 billion of cash?" This is a question that I'm receiving and I'm having very frequently. Just would like to give you the simple reason. $2.9 billion of that debt support FITTLE financing business. You should look at this not like a debt.
This is like working capital or cost of goods sold. This is good to have debt if you are a financing company. If you exclude this debt from our capital structure, Xerox goes from a net debt position of $2.3 billion to a net cash position of $600 million. This will become clearer in our financials when we begin segmenting FITTLE results in quarter one this year. We will also take this opportunity to change FITTLE's definition of free cash flow by reclassifying changes in finance receivables from operating to investing cash, as any leasing company is doing it. Let's move now to CareAR. As Steve explained it, CareAR is our SaaS-based software platform. This is an exciting business because the growth expected in this business is around 30%-40% through 2024.
The focus that we have here is on expanding our penetration in a growing, large TAM. Therefore, we do not expect significant level of profit or free cash flow through 2024. Another question I'm asked, and we are asked often is, where do we get this $700 million valuation for CareAR? As a reminder, this is the implied valuation that we get when we receive the investment of ServiceNow in CareAR. But just to put this valuation in context, if you compare CareAR's expected EBITDA margin plus revenue growth, some of you call that the Rule of 40 metrics. If you compare this to other publicly traded software companies, CareAR $700 million valuation falls below the average for the group. We believe this is currently appropriate, this company are more appropriate.
However, we expect the implied valuation of CareAR to grow over time as its revenue will grow and the business matures, we're going for higher multiple. Finally, PARC. PARC is the incubation engine of high growth and disruptive businesses. Revenue, we are not highlighting PARC revenue forecast on this slide, given the uncertain nature of the timing of specific deals. The primary metric of relevance is near term investment in new businesses. We define it as RD&E plus commercialization and startup costs associated with launch businesses. You just saw some of the great technology in PARC's pipeline, so you understand why we plan to invest $125 million-$150 million in this and other new businesses. The businesses we are launching target substantial markets and can command healthy revenue multiples in the market.
For example, 3D print, IoT business typically trade between 2-5 and sometimes 7 times revenue. I will call it the expected slide. When you add all of this together and you take all of the pieces together, what does that mean? You can now see how we arrive at revenue, operating income, margin, and free cash flow estimate from Xerox Holdings. I repeat some of the information, but this is low to mid single-digit revenue growth is expected to drive high teens growth in operating income as new business scales. We also expect $400 million of free cash flow in 2022 to grow to $450 million-$500 million in 2023 and 2024. On our print and services business to continue and contribute more than $525 million of free cash flow.
This page provides a summary of data points to assist you with the modeling of our separated business. If you need additional detail, of course, and to support your model, I encourage you to reach out to David Beckel on the IR team. Another question I'm often asked is why are you investing? How much are you investing? What is your number you are investing? If you remember during our quarter four earnings, we started sharing, you know, how much we are investing in the new business there. So you saw the PARC number in total. In 2022, we are investing $200 million in new businesses. This amount is comprised of PARC, but also FITTLE and CareAR. It funds mainly the research on the commercialization of future businesses.
We call this out because we do not believe we are getting adequate credit for this investment in our valuation. For example, if we would stop simply investing in this business, our free cash flow would be approximately $200 million a year, amounting to around $600 million in 2022. Based on our current market cap of around $3.5 billion, that implied a free cash flow yield of 17%. On top of that, if we were to exclude net core cash from our market cap, that would equate to a free cash flow yield of 21%, a significant number. Let's now go through the sum of the parts. On all the elements we shared with you, we provided insight throughout the day into the hydraulics that drive how these businesses run our primary business financial outlook.
We present here a range of values based primarily on public valuation, comparison of historical transaction value that can be applied to each of these businesses on the relevant financial metrics. Even at the low end of this indicative range, the implied value of our stock is more than 50% higher than where it currently trades, and that does not include any upside from PARC. PARC is not included in this number, and there is no pipeline of opportunity of PARC included in this number. Our goal is to prove that the value of our PARC is between the medium and the high range over time as we execute on our strategy for growth and monetize these businesses. Another point I want to share with you, I want to highlight that our executive compensation is aligned with investor on the metrics.
These metrics will be the most impactful in driving valuation on share value over time. It is worth noting we are actively incentivizing the businesses who are growing internally with compensation plan tied to growth in enterprise value on liquidation event. Liquidation event are an important means of unlocking the value embedded in our businesses today. Whether through spin-off, sales or partial sales, we are always looking at the way we can best maximize shareholder value. Before wrapping up, let me address capital allocation. Our capital allocation priority going forward remains the same, with at least 50% of free cash flow being returned to shareholder. In 2021, we returned nearly two times of our free cash flow to shareholder, mostly in the form of buyback, while paying down debt and investing in future growth.
We plan to continue paying our $1 dividend and will pursue value accretive M&A. We will also be targeting an investment-grade rating over time. Finally, why invest in Xerox? Throughout the day, we have made our case for making an investment in Xerox. Our print and services business is expected to produce stable, predictable free cash flow for many years. New businesses will comprise as much as 25% of our revenue by 2024 and are targeting large ongoing market. Our cash will be used to invest in business with superior growth perspective on valuation upside, consider strategic option, manage debt, and continue paying our dividend. This is an exciting time for Xerox, as I mentioned it when I started my presentation. We are now ready to answer your question, and I'm asking my colleague of the executive committee to join me on stage for this session.
While we get people set up, for those watching virtually, I just wanna remind you that you too can ask questions. I have a live feed here of those questions, and we'll be answering those as well as those in the room. Give us a minute here to set up. Okay. We're good. Mic's good. Is the mic not on?
No.
No, it's not.
Why did you say mic's good? All right.
Oh, dear.
Worst case, I can repeat the question.
If you like, Ananda, you can come on stage with us.
Cool. How's that? Here we go. Cool. Thanks for all the great detail today, and thanks for doing this in person as well. It's a cool experience. You picked a good day also, with the weather. I guess my question is on the potential for revenue growth long term, you know, post the three-year outlook. It's easy to look on this three-year outlook slide when you look at the weighted average, you know, of the revenue streams, why the sort of the 2023, 2024 outlook is low to mid-single digits just based on the weighting. What's the potential over time to have the business be more like just kinda like a mid-single digit grower? You know, so you remove the low and just to be a mid. You know, any additional context, you know, like that would be useful as well. Thanks.
Xavier, you wanna take it?
Yeah. Yep. I will take it, Ananda Baruah. First of all, you saw, you know, the mix of revenue changing. You saw, you know, two big, I would say, driver of the growth, CareAR and innovation. Okay? FITTLE will grow over time, but FITTLE is starting on a solid basis as of now. You know that in this business you are like in a tanker. I mean, you need to have a lot of origination in order to drive it. What is the potential to move there when CareAR, when innovation will drive and will achieve, over-achieve some of the ratios that we have here? We want. I will be straight here. We want CareAR to be a $1 billion business. That's the vision, you know.
When you say it is a vision here, you look at the foundation. We start with 70. You just do the math, 40 + 40. You already come to a business which is close to 200 or more. This business over time is the business that will expand and grow. There is a potential. You saw the size of the market. All the market we are targeting have at least a double digit term growth which is planned there. This is the reason why we feel we start, you know, with this journey. If you also get one point we share today, roughly 25% of the revenue in 2024 will not be print, what I call print only. Print means, I say it's a device per the click. Okay? There will be services that will be then the other engines that we describe. It starts from today, 15. This is also this mix of revenue that will drive your revenue growth.
That's super helpful.
Yeah.
Just to quick follow up. How do you think about the long-term growth potential of FITTLE? It's low- to mid-single now. Do you see it as a low- to mid-single, or has it evolved?
Yeah.
into stronger growth?
Yeah. Clearly so. You saw. I will tell you, one year ago, you would have not seen some of the logos that were on this chart. Okay? When Lexmark signing with us, when Office Depot is signing with us, when other Blue Tech company are currently calling us and willing to develop this business there. Yes, there is clearly an opportunity here to grow. Don't forget, this is an important thing to have in mind, the financing business is a business which is based on interest, on fees that you get on a portfolio. The first thing you have to do is to grow this portfolio, to grow origination. This is a little bit the point when I say I'm always asked, "Okay, why are you consuming free cash flows, Xavier?" You need, it's like drilling oil.
You need to drill oil in order to get the oil and then get the profit coming here. This is what, Nicole and the team are currently, you know, developing. Again, this concept of new business not being any more an administrative process is very different.
Yeah. The only thing I would add to what Xavier said is we stood up these businesses so that they can really stand on their own and be a substantial difference, not just in revenue and in growth, but as a company on its own. FITTLE knows it has to go after origination, knows it'll require cash flow to go deliver the profit. You know, you talked about CareAR, where we're at stages now where we're in a lot of pilots, and that's what gives us confidence with the CareARs. Steve alluded to it, but we have a lot of clients that are in pilot mode. These new breakthrough technologies all start with pilots.
The bridges are expanding in Victoria, but imagine now another country and in a couple of states that say, "We're gonna start piloting this." Hence, that's the 2024 and on, and that's where we're seeing that this becomes a bigger part of it. I don't wanna lose sight of print. Because I still think print will always be a player for us here. I do believe wrapping digital services and IT services around it will continue the growth of print, but I think that's where the market's going to, where it's not just a product, but it's really the whole workflow through it. That's what gives us excitement on growth in the future.
Cool. Thanks.
Let's take another question from the audience. We have Shannon down here in front. You wanna keep your hand raised?
No.
Thank you.
Hi, Shannon Cross, Cross Research. John, clearly you're setting up separate businesses and they're running on their own and, you know, reading the tea leaves, assuming you don't get credit for them as a consolidated business, I would assume you'd look for ways to monetize them, especially with some of the compensation changes you've made. What are the gating factors to doing that? What do you wanna see from CareAR? What do you wanna see from the ex-- sorry, FITTLE and some of the other businesses before you would look to separate them? Because clearly, you know, like FITTLE, for instance, is, it has a higher operating margin than the core business, so that would be margin dilutive, albeit, you know, could be-
Yeah.
Invaluable for shareholders. What should we be looking for? I have a follow-up. Thank you.
Yeah. What I would say, and we could have others chime in on this, is we're looking for each business to grow. Grow in their industry and grow with the metrics that matter in their industry. FITTLE is a great example where originations is key, the profitability is key, and their revenue is key. Cash flow could be negative in a year given how much originations you get, and we're looking for them to grow. We're not planning the exit today. We don't plan an exit. An exit happens after the businesses have stabilized, grew, and frankly, the exit could be in many ways. It could be a joint venture, it could be a partnership, it could be a buyout sale. What makes sense for Xerox Group as we're looking at it?
Eloque is a great example where we said, "If we combine with Victoria and we create Eloque, and we move forward with them, we can move a lot faster than moving alone." That's why we did what we did. CareAR with ServiceNow, having them put in an investment was really phase one in saying, "How could we move faster?" As we think of monetizing, there's a couple of questions. Yes, is it profitable for our shareholders? Does it make sense? In some cases also, can we go even faster than we're going today? That becomes really key for us.
Steve, in terms of CareAR, given the opportunity and, you know, with the valuation that you're putting forward for that business, it would seem like revenue should be growing faster, frankly, especially if you-
You and I agree with each other finally. Are you listening to that, Steve?
I appreciate that.
Are you listening to that, Steve?
No, but I mean, like if you look at the valuation, you know, I mean, Snow was obviously has a higher valuation. A lot of those too have been cut in half in the last few months, so, you know, I think we have to be cognizant of that. I'm, you know. There are so many people who are looking at augmented reality and virtual reality, and yet there are so many barriers. I mean, Google has been doing it for a while. Apple is obviously looking at something. I mean, even Pitney Bowes talked about it a few years ago. I guess my question is: what do you think is gonna actually, you know, take $70 million-$300 million, where it becomes a company that maybe we can actually start to, you know, give inherent value within your stock?
Yeah, that's why we went after a specific use case and service experience. This wasn't about augmented reality or virtual reality. We see that in the gaming world. We see that with Microsoft, with the HoloLens. We see that with Google Glass. This is really an experience that takes augmented and virtual reality along with content. Content is so critical and so differentiating along with insight. When I go and we sit down with the largest customers in the world, we're not bringing them a glass, we're not bringing them HoloLens, we're bringing them solutions that says, "How do you go and change the customer experience?" Oh yeah, by the way, we're doing it with our own customers and with our own field service technicians, right? We're very focused on the service experience, and you can see what IDC has written about us.
You can see what's happening in that space. The differentiation is content and insight and really solving a specific issue around the service experience. We're not trying to get into the gaming world. We're not trying to touch those other areas that have been struggling for a long time. In fact, we got the Google Glass of the world, we got the NOVOS of the world, we got ServiceNow of the world coming to us and saying, "Okay, how do we take this excitement around augmented and virtual reality and how can we create that use case?" It's really about the use case. Everything that I defined when I talked about that experience, and I give it a totally different use case, it resonates very, very quickly. That's what we're starting to get excited about, is that use cases.
More importantly, we're now starting to see those POCs, we're seeing these proof of concepts, and we're now starting to see the outcomes of that, right? We'll see industry verticals, right? You think about large telcos now having to deal with 5G towers, and I can use drones to go and think about how I service these towers. We're changing the service industry. We're changing and revolutionize how you think about service. This isn't about augmented and virtual reality. I get what you're saying. It has nothing to do with it. It's all about the service experience and driving and owning that moving forward, Shannon. You're right. It, we think there's a big opportunity. We're being a little conservative about the adoption of how that'll look, but it's a great opportunity for us.
Just a clarification.
Yeah.
Of the $70 million of revenue, how much of that is, like, an intercompany revenue?
[crosstalk]
This is Xerox. It has nothing to do with intercompany revenue.
No Xerox products or services running through that.
This is all CareAR and a complete augmented set of services stack.
Next question. Take, Jim. Yep. Right up here.
Hey, Jim.
Thank you so much. Can you hear me?
Yeah.
When you talked about the slide, it was number 54, what's next with the strong pipeline of what's coming through PARC, and you kind of put out Eloque and Elem. Just curious, I noticed like CareAR wasn't on there and a few others wasn't. Was that because they've already come out the pipeline, and this is just a small representation? And then I guess the more interesting question is, of the ones that are in the pipeline, which ones do you see in the next, call it 6, 12, 18 months that are most optimistic and that you're most excited about that are getting close to coming to fruition?
Let me take that question. I'll let Steve talk about CareAR and the whole software business that's launched as a whole.
Let me just answer that one really simply. CareAR is launched. It's a standalone business. We're gonna talk about it separately versus what's going on in PARC. It wasn't omitted. It really was like just the same way we speak about FITTLE. While we're using technologies like AI that will bring forward into CareAR to help us with solutions, but it's really its own business now, and you'll be hearing about it on its own standalone business. It's simple.
I think the next set of businesses that I think is very promising is frankly all the expanded use cases in the energy sector, especially with battery technology. That's one area of focus that we think we have tremendous amount of IP. We are excited about that space, and that's gonna be interesting as we evaluate the space even further. The other aspects of what I'd say clean technology, okay, in that space, we think hydrogen pyrolysis is very interesting because if you can actually take methane and separate out carbon and pure hydrogen, you can start now very aggressively going after alternate fuels, okay? To our battery technology, which is much more focused on EV. I think hydrogen is an interesting space.
I think the geospatial sensing space, when we talked about aquafarming, what we've discovered is that technology has uses, not just expanded across oceans, for a multitude of use cases, but even on land. What we are looking at is actually a lot of environmental conditions on land that can be monitored is actually gonna be very interesting for us using the geospatial sensing technology as well. I'd say some of these key areas we think have expanded what we call use cases. We're starting with an initial thesis, but we think there's tremendous opportunity across all of these use cases. Just these three areas of focus, we think has tremendous expanded adjacencies to every one of them.
Because if you look at just the extent of what we're doing for bridges right now, you can expand it into roads and buildings, okay, very quickly as an adjacency and globally. It's a very, very big market. If you look at 3D, whole range of opportunity in technologies of aluminum alloys, a whole range that can touch so many different industry verticals in an expanded way. We think the current set of focus areas have very, very large adjacencies and expanded use cases, but energy and batteries is where we're focused.
The way I would simplify it is the ones we showed you that are in incubation are the ones we believe can be there in 12-18 months, but they have to get through the hurdles. They have to get through the hurdles of where are we with the prototype, you know, is there someone out there that sees the same value we do? That's the science. Right now we're at science and how do we move it forward. That's what we did with things like IoT and FiBridge, where we brought it to a point that says, now we have a product that is available for pilot, and we're gonna team up with Victorian Government to have the expertise that they bring forward.
I encourage you all to, whether you're on stream or not, to listen to the innovation after this because they'll take you through it in detail, how combining together makes us stronger and faster. Yes, what you're seeing right now in incubation is where we think the next bets are, but it could change. It could change if we can't get the science to where it needs to be. Thank you, Jim.
Next question down here. Erik.
Thank you. Hey, good morning, everyone. Thank you for the time and detail today. I guess maybe, you know, I'll just throw it out to the group here, but I believe you can gain access to the Asian markets in a little bit more than a year from now, but, you know, that wasn't necessarily called out in the three-year plan. Just curious, one, do you account for that in your forecast? Two, if you do, what would be the potential offset theoretically? I have a follow-up.
Yeah. I'll start it off. What I would say is that in our three-year plan, we're not looking a lot at the Asia markets, but we've always said that M&A is a play that we'll continue to look at and is something if it follows the criteria of what we're looking for, we're not afraid to do an M&A that would help us with not only the Asia markets but you could see some of the offerings that, like in Eloque that we have today, that there's no reason why we wouldn't be in the Asia markets having those discussions today. It's not a big number in our plan.
Correct.
That's how I would look at it.
Thank you. You know, maybe just help us get smarter on CareAR. You know, $70 million of revenue to a $30 billion market. Who are the market leaders? Why is CareAR positioned to compete in that market? Thanks.
I think, as I stated a little bit earlier, there are a lot of players that are in the assist space. You're seeing a bunch of them. You saw that on a chart where they really help with assist, with augmented reality, virtual reality. That area, what's differentiating us from the pack is really bringing Instruct and Insight. When you think about Insight, we took all the great AI technology out of PARC, and we've now brought that as part of the CareAR portfolio. We've taken the heritage of what we've been able to do with documents, with workflow, with the ability to be able to take content and serve it up. We took DocuShare and XMPie, two assets that we had, put that together.
Nobody out there today has the ability to provide content, insight, as well as the whole instruct period. That bundle is what we're seeing as differentiation. We went into a lot of customers, and specifically telecom customers, where they've been using AR capabilities for a long time and haven't made the progress. It's like, what's the difference between that and FaceTime? Well, the difference is you don't have instruct and you don't have insight. When we go into customers now, we say, "You've got all this IoT data, you got all these ServiceNow tickets, you got all this tremendous data. Oh yeah, by the way, you've got all this content, whether it's PDF content, video content, your instruct content." We now put that all together in a single platform, and we create a service experience. That is what the differentiation is for us.
We've taken assets that we've had, and we've built a service platform and really focused on the service experience. Nobody else in the industry has it today at all, and that's where we're gonna continue to drive. We did a couple of acquisitions you may have seen, really to continue to accelerate that whole content experience. We went into a very large pharmaceutical where they had a point of sale solution. The biggest problem with the retail store was that thing was breaking down all the time, and they couldn't keep the people in the stores up to speed on how to change the money, how to change the paper. We said, "Hmm, with our CareAR solution, you don't have to worry about the turnover because we'll use the digital native CareAR solution.
Day one, when I'm on the job, I'll use CareAR to go solve that problem." Think about that. Point-of-sale in a large pharmacy. Now I can do that in other companies like, oh, say Lowe's, say Home Depot, Walmart, anybody who's got a point-of-sale solution. What we're doing is we're running into these use cases and very rapidly expanding into other areas and other capabilities.
The other way.
The difference is all around Instruct and Insight.
Yeah. The way I'd categorize is what we're doing is what ERP happened years ago when people were selling accounts payable or GL/AP/AR and somebody was selling some managed inventory, and then someone at Baan showed up or someone at SAP and said, "I'm putting it all together for you with technology." That's what we're doing, and that's what excites the, you know, the Verizon's and others that we're working with and say, "Okay, this is different. You're making this a lot easier for us, and you're end-to-end, and you're combining your technology, your AI in this. It's worth pilots." That's why we get excited is we're getting pilots in all these different use cases.
While it is a $30 billion-$80 billion, we're focused on saying, "Get the pilots in, get the proof points, get the industry, and then let's watch it go.
Okay.
Sorry, go ahead.
No, I'm just gonna ask one clarification question on FITTLE, and that was, you know, XFS was, call it $200 million and change of revenue. FITTLE is $650. Can you just bridge the gap on-
Yeah, it's very simple. What you have, the $200 million is mainly what we call interest income.
Mm-hmm.
You know that the leasing business, financing business is not only interest income.
Okay.
There's plenty of fees coming on top of this. Plus also you have operating leases that are taken into account for us on the other hand. That's the difference, the bridge between what you will see as the $200 and the $650 that we have today.
Awesome. Thank you very much, guys.
Before we get to more from the audience, we're getting a lot online here. Try to aggregate these the best I can. I think this is for Xavier.
For those of you we don't get to online or all that, we will either send you answers.
Yeah
or we'll call you, whichever one is more.
Absolutely
meant to you, so.
One for Xavier here around paid volumes. Why are we only expecting paid volumes to get to 80%? What type of upside, you know, could that mean for our business if we were to exceed that?
That's a great question. You know, you all know that this is a frequently asked question, I would say, to the print business, company here. Number one, our business, 75% of the print business is mainly made out of recurring business. Volume is one of the key component. When you look at this business here, only 25% is transactional. Around 75% of this is committed, contracted for four, five years or more. This is one of the reason we want to flag again that print business, number one, is not dead. You saw the market. Number two, predictable, stable, generate free cash flow. Point number one. Number two, the print volume assumption are clearly correlated to, you know, will a worker be back to the office?
I want to demystify a little bit some of the data we are hearing. Number one, you saw the chart, Tracy showed it, strong correlation between vaccination rate in country, people returning to the office, so Google Mobility Index on page volume. Number two, if someone is going to the office only three day, and in some cases two days a week, do they print more or less than before? We will give you our statistical data. We see that the print volume are roughly the same as if they would be five days in the office. I will give you also not the anecdotal data, but the testimony of customer telling us, "Hey, this is what we observe." This is interesting to see, Mary McHugh will confirm this here.
Currently, with you know, COVID-19, the pandemic moving to endemic, we are receiving more and more calls from customers saying, "Hey, I want you, Xerox, to be ready when my employee will be back to the office." This is happening. We are seeing, you know, trend. I share with you know, every quarter the trend of what we see in paid volume. Last data point, just to reiterate. 1% of page volume increase versus, let's call that, I won't call it the conservative, but the assumption that we have in the numbers that we share, which is around 80% of 2019. 1% of paid volume increase equal to roughly $40 million revenue.
On this $40 million revenue, because it is high margin, which translates to a 20 bps margin expansion. When you look at our trend here, what we plan with the recovery during the second half of this year, then a slight improvement in 2023 and 2024. You could also consider that there are potential upside based on the behavior we are observing currently.
Great.
Just to simplify, we picked 80%. Some will tell us it's conservative, some will tell us it's aggressive, but us as an organization, when we looked at it, we said, "Let's go with 80% over the three years, and wouldn't we all like to be surprised and make it 95%?" We know what the numbers are for every percent that goes up. But again, we're managing what we could control. We just lived two years of offices shutting down and expecting offices to open up two months later. We're all home for 30 days. Remember that trick that we all got there? We're all home for 30 days, guys. We're two years later, and you know, there's things going on. So for us to say to you, "Hey, we're gonna model 95% or a hundred percent back in two years," I hope so.
We'd rather model something that we believe if it happens, worst case, you know, we know what we could hit as numbers going forward. 'Cause we look at that modeling that also helps us saying, how much can we invest? How much cash can we put back in innovation? How much cash can we put back in CareAR and in other areas that we want to invest in? To us, we're pulling the whole string, and we're saying, let's go with a model that we know cannot disrupt everything else that we're trying to do. That's how we did that.
Great. I think we'll do a couple more questions. One other one from online, touching on print. Maybe, Tracey or Joanne, if you wanna chime in on this one. Gets to the heart of the breadth of our offerings that we presented as part of the competitive advantage. The question here is really around, you know, how much of a competitive advantage is that in the marketplace relative to some of our peers, and what type of upside could we see from additional cross-sell?
Look, we've got some formidable competitors out there, and they've all got strong elements in certain places. I think as I covered, I do believe that we have the greatest in terms of end-to-end solutions. It's not just about the technology, and it's not just about managed print service, but it's around how we help the customers in terms of that digital journey. There are certain elements that we excel at, right? Security, absolutely a leader. Gotta have that. This extension of being able to have 100 applications to help you with workflow, nobody else has that. Workflow Central, please take the time to just go and have a look how easy it is. I think it could help many of you in your very busy day-to-day lives. The competition doesn't have that.
We're always trying to keep ahead, listening to the customers, observing their problems, and we provide a full end-to-end solution. I think that's where we differentiate, and we are keeping ahead.
Can I add to that? Our competitors, the traditional print OEMs, don't have what we have related to our IT services. That expansion of we love the Xerox product, we love the Xerox service, and what else can you do for me, we are seeing that really resonate with our clients, where we're taking basically the rest of their technology needs. We use great OEM partners for that, like Lenovo and Dell and Cisco. We're seeing the expansion from our traditional print clients into our IT services business.
Excellent. We're gonna do one more question. You had your hand raised.
I just have two questions, one around IT services. Konica has been on IT services thoroughly covered for 10 years. They're still losing money in it, right? You have Ricoh that went out and bought Best Buy. They're losing money in it. Why do you folks think that you can do it differently when there's so many MSPs out there that are proven?
Let's just talk about what I know we're doing and why we're so confident. We started slowly. We're just focused on SMB, okay? That's the sweet spot for IT services for us. We started slowly. There were a couple of our teams around the country that were doing this, and it was, we realized, a great business. When I went around, when our executive team went around, it was a tremendous synergy in terms of an SMB client and what we could bring to bear. We started slowly, and we're using our XBS team to actually grow that business. Lots of training and capabilities, again, across that whole team. We acquired two firms. We're incredibly disciplined, our M&A team, about what we acquire.
You know, I would come with 100 options, and it would get winnowed down to no to all of them. We recently acquired two great firms, C2 in Vermont, that is high services, and Powerland up in Canada.
Yeah.
No. We are going slow, but we know where we're going, and it's resonating with our clients.
Having run an IT services business, you can get in real trouble real quick when you try to do everything for everybody. One thing we put in place immediately when we decided that we were gonna expand what we had is we put something called an SDCOE, a Solution Design Center of Excellence, which means we're not gonna be selling IT services for the sake of just getting revenue. What we've always had a mantra in services is that you don't celebrate the signing, you celebrate the install, and we're profitable already today. What Joanne's saying, when we're looking at companies, we're looking at add-ons and all that, you know, it doesn't matter the size of the add-on. It what matters is how does it fit into our solution design centers? Can we deliver what we say we can, and can we replicate it over and over and over?
Great. Just one other follow-up. So, how are you guys marketing yourselves? Because part of what I see is what's the company identity, right? I love that you're getting into new things. I used to work at Xerox, it's great, right? The reality of it is, how do you get that message out? CareAR, FITTLE, CareAR, FITTLE.
Yeah.
all of the other places, right? 3D, right? I'm working with your 3D people.
Yeah.
Down in North Carolina. The reality of it is, I think it's great, but I don't think anyone knows about it.
Yeah.
I don't mean that as a disrespect. I'm just saying.
No, I get it.
I think Xerox has always what Xerox is.
Yeah. I don't think we wanna ever apologize for who we are as Xerox, 'cause Xerox has been innovating for 50 years. We've come up with some inventions that just revolutionized the world. What we didn't do is monetize it. When we say, "Hey, we're working. Look, FITTLE..." I'll put FITTLE aside 'cause that's more understandable. When we're talking about getting into CareAR or some of the PARC innovations that we will commercialize ourselves, it's really up to us to earn the right. The way to earn the right is not just advertising and marketing, and let me tell you how great we are. What we've always said is that, you know, we will start with disrupting the industry, getting the proof points. 'Cause everybody, the first question we get, or at least I get is, "Okay, you're in this augmented reality. What proof points do you have?" Well, ServiceNow is a proof point.
Having clients like Verizon and others, very large clients saying, "We're gonna pilot." Those are all proof points. Over time, what you see is you're going to see more marketing and marketing directed to CareAR. What at least we direct the teams to is direct it with proof points, with case studies, because at the end of the day, that's what clients care about. You saw IDC, you saw other charts there where we get ranked, whether it's CareAR, all that. CIOs read that. We know that. That's important to us to get in it. You know, are we going to do a commercial on the Super Bowl? Probably not. No disrespect to the Super Bowl, but probably not.
Because at the end of the day, the question we ask ourselves is how does it move the ball forward for our clients and for us? Yes, you know, I've been in here three and a half years, and the first thing I said when I walked in here, Xerox has the best-kept secret. You know, everybody knows we Xerox things, but it's the best-kept secret. It's incredible the amount of innovation. It's on us, it's on us as a management team to make sure that we bring it from imagination to proven all the way to commercialization. That's what we're showing you today, three years later saying, "Here's where we are at the dance.
Great. Well, on that note, we will conclude Q&A. Thank you for our presenters and all the great questions from the audience. Well, in a few minutes, we'll begin our innovation showcase, which is a great setup for everyone, virtual and in person. For those that are here in person, we invite you to follow us through the cafe and around the corner to our innovation booths over here. For those that are online, please follow the prompts on your screen to join virtually. Thank you very much.