Good afternoon. I'm Samik Chatterjee, and I cover hardware and networking companies at JPMorgan. For the next fireside chat, we have the pleasure of hosting the Xerox management team. With me, Steven Bandrowczak, who's the CEO; John Bruno, who will join us shortly, who's the president and CEO; and Xavier, who's the Chief Financial Officer. Thank you all for taking the time to attend the conference, and thank you to the audience as well. Steve, John, I guess what we are asking most of our companies to start with is a bit more of a forward-looking view into the next 12 months. Given the end markets that you serve, if you have were to outline where, how those end markets would look 12 months from today, how would you sort of answer that question?
Either you can sort of go by it by geography or customer cohorts that you classify your customers internally, like, whichever way you want to, handle that. But just want to get a better view of how you're thinking the next 12 months pan out from an end market perspective.
I think if you break it down into our clients in very specific segments. So our largest population in terms of driving revenue and profitability is in the mid-market space, and what we're seeing is, in the mid-market space, significant challenges and headwinds around inflation, labor, and cost of capital. For us, it's all about how do we help them with those headwinds that they're seeing? So very specifically in digital and IT services, helping our clients drive productivity, and we think it's a great opportunity for us to actually grow our business in those segments over the next 12 months. So for us, it's how do we do more digital services, how do we do more IT services, as we are solving an end client challenge around the headwinds that they're seeing.
It also gives us a great opportunity to be a lot more strategic in these clients. So if you think about hospitals today, or you think about law firms today, or education, they are all being challenged with: How do I deal with artificial intelligence? How do I drive more productivity with less people? How do I deal with cost of capital going up? And so what we've been building is products and services as a service, so they don't have to invest capital, they don't have to have labor, they don't have to have people, and taking advantage of things like AI and robotic process automation. Because we're already in there, because they already trust us, we are solving that problem and actually expanding on top of the services we have. So we're excited about IT and digital services.
Our core business in print, we see pretty much flat to slightly down, but even there, we've got a great opportunity to take share and grow our business through taking share. In an industry that's declining, you have an opportunity to take share if you bring more value-added services. So Xavi and I have been talking about at the end of each quarter now, our overall revenue renewal rate has been renewed up over 100%. Why is that happening? Not because our renewal is the same value for less. What we're seeing is we're actually adding products and services on top of existing contracts as we renew, and that's good news for us. That means we're new digital signings, new IT service signings, and that's what we're most optimistic about.
So for us, over the next 12 quarters, it's the next 12 months, it's all about: How do we help our clients' success, help them with their headwinds, and then grow our business that way?
Okay, great. So we'll definitely maybe get into some of the AI drivers for your products and services, but maybe before we get to that, help us think about, and we are asking all of our companies to sort of share what they are doing on this front as well, is how are you adopting AI internally? How does that help you improve your own productivity before you improve customers' productivity?
Yeah, we're looking in three areas. So first of all, internally, if you think about today in specifically service delivery and technicians, we have a tremendous amount of people that are in the field that are servicing equipment. We have an aging workforce. We have a workforce that it's hard to recruit for. So we created technology, we call it AI for SD, AI for service delivery, where we're using AI to help instruct the field on what are the likely ways of solving a particular fault or a particular problem. The other thing we're doing is we're actually taking those faults in the field, sending them to a central location up in St. John's, where we have a client center. When that fault comes in, we automatically take that particular fault, run artificial intelligence against it, understand the likely three ways of fixing that fault.
We then send a text to a client, where they open it up, and we have an augmented virtual reality session where they can self-solve as an end customer that particular problem. We're getting 50% resolution rate on those calls. So think about it for a second. Instead of me having to go and dispatch technicians, 50% of those calls are both client self-serve and 95%+ satisfaction rate. So that's an example where we're using AI. We're using AI in our supply-demand process. We're using it inside of predicting when boards are gonna fail or when we're gonna see fails on products.
Mm.
We're using it inside of our processes on supply chain, trying to predict when things and products won't get to an end client. So internally, we're using AI significantly. We're also using it from a ChatGPT standpoint, thinking about: How do you respond to inbound channels? How do you respond to inbound text, voice files? How do you respond to emails? We now can use that technology to respond automatically based on a client's segment, in terms of they sent us a note saying, "Hey, where is my particular supply?" Pretty easy to respond, check the order, send it. But if they said, "Hey, we've been waiting four weeks, and my supply is not here," you know the sentiment of that email requires it to go automatically to an agent. They want a live voice. So we're using AI internally. Also, now putting it actually inside of our products, right?
To help predict what's going on with our products, utilization, product failure, et cetera, and then really now helping our clients externally on how can they use it inside of their businesses to drive produ ctivity.
So sticking to productivity, but more specific to Project Reinvention that you've talked about, which is much bigger than just sort of looking at it as a cost-cutting exercise. When you think about sort of tangible improvements we should be looking forward to from that project, how would you outline that as we go through the next three years, you do this transformation through Project Reinvention? Outside of just the financial sort of impact on the numbers, how should we think of the broader sort of changes in the company on account?
Yeah, so think of the reinvention of what we're trying to drive is really a 12-quarter program, right? On really doing three fundamental things. First of all, simplifying our business significantly in everything we do. You know, over the years, you build a tremendous amount of infrastructure and repetitive things across geographies, across locations. Simplifying it, we created something called Global Business Services, where we're putting all of our processes, all of our systems under one team, and then now creating end-to-end simplification of our business. But more importantly, when you simplify, you take the complexity out, but you can also add technology to actually speed up that simplification, speed up that end process. So you think about adding RPA or AI on top of a process. Second is geo-simplification, right?
We're looking at where do we go direct, where do we go with our partners, indirect or a hybrid. That allows us to do a couple of things. One, as we move more towards a partner-led, geography, go-to-market motion, that allows us to reduce heavy infrastructure, whether it's network infrastructure, finance infrastructure, whatever it may be in a country. Then we think about product simplification, right? Where we have a significant amount of product complexity, again, reducing the product complexity, reducing the number of products that we have, simplifying and driving velocity. What should we be seeing? One, more productivity and more cost efficiency. Two, you should see from a client experience, easy to do business with and within. Our employees will see it, be able to do their job easier.
Then from a partner standpoint, clearly, we're building and making sure that we enable partners to do and have interactions with Xerox much more easier than they've had. Velocity from a client standpoint, velocity from a partner standpoint, and certainly easy to do business with and within.
Got it. Got it. So there's... When you laid out Project Reinvention, I think some of the investor pushback to this was that Xerox has, in the past, taken similar cost actions. Particularly, I think this was in more reference to the headcount reduction that you had around that time. And yet, the secular declines in revenue have limited the progress on margins, and what would be really different this time around? Any, any thoughts on that, how this-
Yeah, John, you want to take it?
- compares to previous actions?
Yes, we're going to get into the elevator logistics business at Xerox and try and schedule a... My sincere apologies, everybody. I was literally stuck upstairs for, like, 15 minutes, trying to get an elevator to come downstairs.
Right. Right.
So I apologize for joining in progress, but it's a great question. You know, and I'll pick up where Steve left off. So, I'm John Bruno. I'm President and Chief Operating Officer of the company. I've spent the large amount of my time on the structural redesign of the business from top to bottom, go-to-market, who the economic buyer is, how do they buy from us, and all of those types of things. So to your point, relative to headcount reductions and margin, and how are we looking at this, the structural redesign or the dismantling of the business that was built around a structure for a fit for purpose for previous years, is what we've attacked and what we're, in total, bringing forward and readdressing inside the company, with regard to the reinvention.
So, it goes to, you know, in our print business, especially in the SMB space, a lot of them are looking for ancillary and incremental services that we currently provide beyond print, like IT services. We're making investments in that space. We've done a significant amount of structural simplification around spans, layers, decision-making processes, how things get done inside the company. Those were the types of investments we made, you know, in and across those areas. I just wanted to kind of pick up where Steve left off, 'cause that's been it, where Project Own It in... Previously, the company took a lot of cost out, but it didn't change the structure of the business. It didn't change the way we routed to market.
It didn't look at a global partner program or simplifying for consistency across countries and geographies, or align where we should be partner first or we should be direct led. This has been all the work that we're doing here. This is much different. Now, with that in place, you can now do a lot of things behind the scenes, middle office, back office-type systems, integration, that would always be restricted, or you'd have a lot of objections from the business, 'cause they have a very consistent way of doing things for a long period of time, so you can't disrupt. But you can disrupt it if you redesign it from an organizational design perspective, top-down, bottoms-up, but aligned around what the economic buyer, who that is, how they want to purchase from you, what routes to market.
So this is very different in that regard because it has been a completely organizational-driven change to the business, not a cost-cutting exercise.
If you remember, Project Own It was, we were gonna drive cost out to create cash to consolidate the industry, right? We think about the HP consolidation. That consolidation was gonna be our redesign of the business through the integration. Well, that didn't happen, so now we have to do it differently.
Mm-hmm.
Post-COVID, post the supply chain challenges and all the things we had, we now put the same type of process in place, but we've got to do it internally, and we've got to redesign ourselves as opposed to consolidation.
Okay. So you talked about... You referred to this, which is the geographic reorganization, where you go partner first versus direct... maybe just walk us through the decision-making process there. How do you work out which sort of geographies make sense to go partner first, which geographies make sense to go direct? What are the challenges you're facing as you go, going through that exercise? Just walk us through that please.
Sure. So I'm sure everyone will wanna lean in a little bit on this one. But it goes back to the point that I was making earlier around who's the economic buyer? How do they purchase from us today? How do they wanna buy from us going forward? And so you can think about where we have the greatest concentration, you know, the Canada, U.S., France, you know, the U.K., et cetera. These countries, we have a very comprehensive set of solutions that our clients buy across the spectrum of what we sell: print, managed print service, IT services, digital services. And then where the penetration is less, but we have partners that can actually fulfill some of those solutions with either things that they develop organically, that's another tier. So you can kind of think about it, direct full service Xerox.
Then you can think partner-assisted, where they're taking more of the lead with some of the ancillary services, and we're part of the overall solution. And then completely partner-led, where we're more transfer pricing of products and equipment into what it is that they're delivering to the end customer. We may or may not still provide service and support, depending upon penetration. So it really comes down to the capabilities within the geography of our partner ecosystem. But, you know, when I walked in, Steve was talking a lot about the mix shift, 'cause the mix shift is not only geographies, which we serve direct, you know, partner-assisted or they partner-led. And then, what are the offerings? How do we simplify those inside that space? And then the mix shift of how much print, how much IT service, digital service.
That combination of those three elements allows us to dictate which are the right partners, which are the right geographies, which are the right countries for that model. So it's purely based on adoption and ability to execute, speed, and things that the clients are looking for, so it's very much a client-back-into-Xerox approach.
The other thing on the geo-simplification is we are actually getting smaller to go faster, right? If you think about rolling out digital and IT services across 60 countries versus 10 or eight or whatever that may be, you can go a lot faster and have a lot more velocity. And so where we think we have a unique advantage on the go-to-market in our mid-market space, and the relationships that we have, and the right to play in that space, we can't do that in 60 countries, right? Some of our other partners may have a better relationship in that space, and therefore, the geography mix makes a lot more sense. But, you know, it really is consciously so we can go faster in building those other services.
Okay. Yeah. I wanna go back to core print, which you mentioned. You said flat to slightly down, but generally on your earnings calls, you've talked about flat underlying trends for the core business, while the revenue decline is more coming from the one-off comms that you had from last year, includes backlogs, some of the paper. Just walk us through what's driving the confidence in those flat underlying trends. We haven't seen those historically sort of play out for the last few years. So now that you look at it, why should investors feel confident that there's a flat underlying trend below the numbers?
Let me take it from a market standpoint, and then maybe Xavi dig into the numbers a little bit. I think you think about the physical to digital world and digital to physical, and what we're seeing is, even though we're seeing digitalization, digitalization is happening in the contents of document flow. So you think about patient administration, patient discharge. Think about what happens in a CVS today, where you go, and you have an online app, but you also go, and you've got a physical interaction. And so what we're seeing is a significant physical to digital, digital to physical. For example, I was in Germany with a partner over the weekend or last week, and they're now taking artificial intelligence. You can send in a picture, you can send in the top three things that your child likes to do, and out comes a...
Literally a book, which is a superhero of your child in all different things. So they're creating new print examples. You think about what's happening inside of hospitals today and the way in which you admit a patient. How paper-intensive is that? You think about what's happening in insurance claims. How paper-intensive is that? Think about what's happening with shipments in Amazon on time. Everything you get has a label, and it's printed. My point is, we're seeing different physical types of print, different types of prints, but we're also looking at this ecosystem of digital to physical, physical to digital. And the more we can provide value-added services in that, the more we protect our core, the more we can take share from our competitors, but more importantly, we become more relevant in that space.
I think when you think about print, you think about 8.5 in by 11 in, and you're just thinking of a traditional piece of paper. The reality is there's significant shifts and significant physical to digital where we're playing.
You know, just double-clicking as well on print. There is a misperception around print. I'm sure if I'm asking you, you know, what is a print revenue trajectory, you could have, I call that nightmare scenario, by saying no one is printing anymore. This is not what we observe. This is not as well what, IDC, which is, you know, tracking from a news point of view, is forecasting. The CAGR expected on the overall print market is minus 1% for the next three years. So print is not dead, but print, this is not entirely Xerox. So we are shifting, and we have currently around 90% of our revenue, which is print, 10% IT digital services.
Over time, this percentage will change, and the overall reinvention strategy is focused on driving this revenue shift there, but also ensuring that we can invest in this new opportunity of IT and digital services, so we can offset the secular slow revenue decline there. Another thing, if you look at our number, since COVID, if you exclude what I call one-off type of revenue items, Russia, okay? We have had to exit Russia like a lot of companies there. Paper, we were in the paper business. We said, "Is it critical for us? Not really." We exit. IT endpoint, low entry, low-margin devices, not critical for us. So when you exclude these items, and you look during the last four years, what was Xerox's revenue trajectory? Flattish...
On what we are forecasting for this year is a -3% -5%. This is guidance. If you exclude from that basis point of one-off items, including the one I mentioned to this year, we will be in a slight growth to slow decline there. So don't look at print only being like a secular decline, we can't do anything. Print is still a juicy business, generate a lot of cash, and help us investing on creating the future business stream of the company.
Great. I still want to ask you, as much as you talked about core business being flat, you have this target of double-digit margins by 2026. If for the hypothetical scenario that your revenue trends track below expectation in 2024, below the flat that you're thinking of 2025, 2026 in terms of underlying trends, what are the levers you can pull to still get to that double-digit margin? How realistic is that margin target, even if revenue is-
Yeah
... coming in a bit lower than you're thinking?
So just to provide context, the guidance we have given for this year is, an operating, net operating margin of... adjusted operating margin of, 7.5%. This come after two years ago, 3.9%; last year, 5.8, 7.5. On the, our destination, 2026 destination that we have communicated is, is 10%, so double digit 2026. So you can see this trajectory of margin improvement that the company is building there. The first part of the journey, as John and Steve explained this, is around, you know, simplifying the way we operate, but also returning and being able to fund the journey of, shifting, revenue shifting, to IT and digital services. But while we are doing this here, we are improving margin mainly by reducing and simplifying our cost base here.
Proof point, I don't know if you know that, at the beginning of the year, we have announced, third of January, a 15% headcount reduction restructuring program in the company. This is at play. This is executing currently. We've also announced the organization of the company around GBS, Global Business Services. The company was not structured this way, only as Steve and John explained it, was more an ability, you know, to improve the profitability by protecting the structure of each of go-to-market. Here we are changing and organized by end-to-end processes on a GBS point of view.
The third, and certainly one of the largest restructuring or new ways of organizing there, we have left a country geographic footprint model, where in the past, for the last 50 years, everything was centered into a geography on being present and focused on selling the solution country by country. We are shifting into a business unit model. On the two business unit model that the company has currently, very simple: print, IT, and digital services. The gentleman on my left is in charge of this end-to-end. He does not have to negotiate with anyone. He does not have to interact with each of the geography leader that could have a different opinion on what makes sense in their country. We implement it, we simplify, we gain velocity of implementing it across the organization.
So I'm providing all this level because all this level will be pulled during the next three years. We have started the journey. The most significant impact this year is a restructuring program that we have implemented, and the organization shift into business unit there. More to come on this one. One thing I just want to ensure that all our investors understand here, this is a 12-quarter journey. This is not a quarter-by-quarter journey. There will be bumps in the journey. We know that. It's not easy. This is rewiring the entire company, and this is a strategic shift in the way we look at our market and our trajectory, revenue trajectory here. So we know that some quarter will be higher and lower there, but we look at the trajectory from a thee-year point of view.
On our confidence level, that we will achieve the 300 net profitability improvement versus what we were doing in 2023, is quite high by executing this program and having this monocle focus on delivering the savings.
Yeah, got it. I'll bring you back to the more of a near-term question, which is the shortfall in revenue that you had in Q1 2024. You talked about the disruption in the business because of the operational redesign. Just give us an update on that. How do you think about where you are in terms of regaining productivity back to the same level since those changes?
Yeah, I think, look, January and February, we stalled the organization, if you think about it, and we made a very conscious decision. We were gonna be very transparent about what we were gonna do. And first of January, we said we're gonna take a 15% reduction in the organization. You then have 20-plus thousand employees who are sitting there waiting: "What's my job? What am I doing? Where do I go? What's my commissions? What's my profit?" Right? And then at the end of February, we made those changes. So we stalled. No question, we stalled and disrupted the business in January and February. As we said on the earnings call in March, we saw a significant year-over-year increase in order velocity. That gave us confidence that the sales engine was going, that our clients were booking again with us.
We saw a very similar type of pattern and comfort level as we started to exit Q1 and now into Q2. So the momentum of getting back to business, order velocity increasing year-over-year, and we're just seeing people just getting back to business, getting back to what we're doing. We're seeing the engagement level with our clients, the number of calls that we're doing, all the things that you would look for to see if, is the engine running again? We're starting to see... We saw it certainly at the end of Q1 and at the start of Q2. So I've got confidence that we now get people settled in. We had over 6,000 different jobs that got realigned. So think about, we made an announcement. You don't have a manager, now you're waiting for: Who do I report to? What are my goals?
What am I working on? And so we really realigned our entire organization, and it did a couple of things for us. You know, the organization structure we put in place was designed to go for speed of decision-making. I think about a battleship. You're trying to turn it, it's really hard. We've created many speedboats, right? We've just said, "Okay, under John's leadership, end-to-end, you have all of our print business, and you have all of our digital services and IT services business. You wanna change pricing, you wanna change contracts, you wanna change how we think about commissions, it's all under one individual," literally, right? So he doesn't have to debate and have conversations with the product team, have conversations with the geography team. It's all in the organization. And then in GBS, it's like, "Okay, John, what can you afford?"...
In terms of the service, whether it's around finance services or supply chain services. And so the two of them make the business decisions necessary to accelerate the changes in the business. That is working very well, and that's what gives me confidence that the sales engine is going. I'm now seeing the operations up and running, and now it's a matter of, can we discipline and continue to execute going forward?
Okay, great. When you think about the rest of the changes in this 12-quarter journey, what gives you that confidence that none of these will be disruptive to the organization again? And even if, in particular, if you're saying none of these changes that you're going to make over the next 12 quarters are as big-
Yeah
... I mean, in the aggregate, do they, is there a risk they add up and disrupt the organization?
I wanna take a step back, because a very fundamental shift that we made in September is we bought out one of our largest shareholders, reconstituted the board, and you will see our new board gets elected in tomorrow. And if you take a look at the board that we have, the, John Roese, who's the CTO of Dell, Ed McLaughlin, who's the CTO of Mastercard, the people that we've brought in understand the journey that we're on-
Mm
... and have the skills and have been through that journey, right? So I've got a board that supports the management team-
Mm
... that we're going to be able to execute what we're gonna do. Inside the programs that we have, we know that there's enough capacity in terms of the things that we can do, that allows us to get to the end of this journey and do the mix shift and get the costs out. So when we talk about $300 million of net operating income profit, right, it's in the context of broader things that we're trying to do to free up cash so that we can invest it back in the business. I mention the board because it's supportive, and it's important that they're patient with us. Tami Erwin, who was at Verizon, has done this big time at Verizon, multiple transformation-
Mm
... multiple changes from a product to a solution and services company, right? We now have a board that's gonna support us and take us through that journey. So no question that as we did our outside study about what the art of the possible is, there's more than enough opportunity. Now, I have the board to help us, and then the leadership that we've brought in between John, myself, and the team, we've had the experience of transforming companies multiple times before. So I'm confident we're gonna get there. As Xavier said, this isn't a straight path. You're gonna see bumpy and lumpy, but at the end of the day, it's straight up, and we're gonna deliver what we said we're gonna deliver.
Okay. Let me get into a couple of questions on the more sort of the P&L and the balance sheet side. Capital allocation priorities, just sort of help us think through what how you're thinking about things, given that I think there's been a big focus in sort of taking the leverage down. But how should we think about normalized cash flow? What's the priority going forward?
First, cash allocation priorities are very simple: debt, reducing the debt of the company here. I will go back on the leveraging ratio we are willing to target there. The second point is we have a dividend, still a $1 dividend, which is still, I would say, a decent yield, you know, versus the share price of the company here. The last point, which is a very significant change, Steve, and you need to the change of shareholder, where the shareholder before, major shareholder, who was requiring at least 50% of the cash being returned to shareholder, this policy does not exist anymore. It's one of the first things that we have suspended since he left there.
So at the end of the day, the rest of the cash will be invested in the growth and, executing the revenue shifts that, we were mentioning before. You know, the secular decline, offsetting it of, the secular decline of print with IT and digital services, new revenues there. Regarding, debt leverage, we are targeting 3x. And, at the end of the day, if you look at, as well what we have done from a free cash flow point of view, and there is a deleveraging of the company in the past years, more than $1.5 billion has been reduced from a debt point of view from, two years ago, a little bit more than two years ago.
Regarding our ability to generate free cash flow, just would like to remind everyone there, we have a captive business, a captive business, which is a leasing financing company. In the past, we were using Xerox balance sheet. You know, from this year, we find very smart and elegant mechanism to deleverage the company on not using the debt in order to finance it with a mechanism called a forward flow. This forward flow mechanically will generate $400 million of free cash flow per year in the next. It started last year and in the next three years, $400 million of free cash flow. If you look at our guidance, free cash flow guidance of this year, $600 million, a vast element is contributed by this.
Over time, it will be offset by the natural operational cash flow being generated by the core business.
Okay, good. Well, how do you think about sort of eventual leverage target that you're trying to get to? Sorry if you mentioned that already, but-
Three times.
Three times.
Three times.
Three times.
Okay, got it. Maybe going back to sort of, before Project Reinvention, one of the big strategy pillars was to focus on the SMB market. As you think about how the business looks after the transformation through Project Reinvention, how do you think about still sort of going after the SMB customer base and the opportunities there? And is it now more of a SMB in the North America versus SMB, a bit more of sort of globally?
I think it's a secret sauce that we have in terms of go-to-market capabilities. When we talk about going at SMB, it's not just because they're a customer base, it's because we have sales team touching them every day. We've got service team touching them every day. We've got a relationship that we've built. What people don't realize, if you think about our multifunctional devices inside of environment, it's behind the firewall. Why is that important? Because we are integrated into your security. We know your security. We protect your data. We know and understand how we integrate into your IT processes. We know and understand how do we redact certain data... how do we make sure the data is protected, whether it's being encrypted from origin to destination, make sure it's not changed in motion? Guess what you need with artificial intelligence?
You need somebody who understands the data, somebody who understands security, somebody who understands processes, and somebody who can bring value on top of that. So our SMB relationship, not just in the U.S., but in Canada and other geography areas, are going to be as important as ever. I've said it multiple times now, I think we can double our business in wallet share inside of existing clients with IT and digital services. Why do I say that confidently? Because the buyer who buys our products in the SMB space is the same buyer who will buy IT services, AI services, RPA services. Different than a JPMorgan, where the CIO is gonna buy from one group, and then you've got somebody who runs real estate and office who will buy a printer. They're two different buyers, two different individuals.
So my relationship, and I mean important relationship, 10, 15, 20 years with an economic buyer in the SMB space, trusts us. They know we're gonna be around for a while. They know we're gonna be there in the long term. They know we're gonna protect their data. And so I get asked, "Well, who's the competition?" It's usually the local IT services who's in a local geography. It's not the TD or the Ingrams of the world. It's not the big SIs of the world. They can't touch those clients. We have a unique value proposition where we can not only touch the client, but we have a tremendous amount of trust with our brand.
Got it. Got it. I'll end with a question, which is when you... I know you have targets for margins, but maybe thinking a bit more longer term through this transformation. Five years from today, how does the business look in terms of mix of hardware, services? Where do you want to take it in terms of what's the optimal mix for the company?
Yeah, I think first of all, print is not dead, it's obvious there. But more importantly, you think about your cell phone without a network connection, it's a brick, it's useless. AI without data is useless. We are going to play in this world of AI for many, many years on our core business. It just happens to be paper, scanned documents, whatever it is, things we've been doing for a long, long time. So over the next five years, we will grow our IT services business, we will grow our digital services business. We are going to play in the AI space. We will continue to help our clients unlock value inside of data. When I talk about data, it's not just paper, it's not just scanned. It will be data in motion. It will be video data, voice data.
We understand how to correlate that, we understand how to secure it, we understand how to find the value in it, and so over the next three to five years, you will see us growing IT services and digital services as our core business is flat to slightly down. But even in the core business, I talk about this physical to digital, digital to physical. That ecosystem will be a world in which we will continue to grow products and services, because documents have intelligence in it, meaning that every document, it has data and it has information that's intelligent. We can unlock that, and we can grow our business over the next three to five years. So look for IT services, digital services to grow. Look for us to become more and more relevant in the AI space as it relates to data.
Look, we're not gonna do large LLMs. We're not gonna write and go compete with the big Googles of the world. That's not what we're talking about. But those companies need the SMB market to have their data in a format such that you can put algorithms on top of it, you can put their technology on top of it. That's where we're gonna play going forward.
Got it. I'll wrap it up there, but thank you for coming to the conference, and thank you to the audience as well. Thank you.