Michael Cadiz

Michael Cadiz inquired about the progress of cross-selling initiatives, specifically targeting milestones and penetration rates for 2026 within Xerox's 200,000-plus client base. He also asked if the sales motions for IT services differ when selling to a Lexmark print client versus a legacy Xerox client.

Answer

Steven Bandrowczak (CEO) explained that the go-to-market strategy leverages existing relationships with mid-market clients, where the same buyer often purchases both print and IT solutions. He cited the Cyber Shield offering as an example of unique value for SMBs, enabled by these existing client relationships. He also highlighted expansion opportunities seen at the National Retail Federation show, where Lexmark's retail expertise combined with Xerox's IT solutions and production capabilities allows for broader bundled offerings. Chuck Butler (CFO) added that these efforts are translating into improved bottom-line performance and cash flow, indicating good momentum.

Michael Cadiz from Citigroup inquired about the progress of cross-selling initiatives, targeting milestones and penetration rates for the 200,000+ client base, and whether sales motions for IT services differ between Lexmark print clients and legacy Xerox clients.

Answer

Steven Bandrowczak, Chief Executive Officer, explained that the go-to-market strategy leverages existing relationships with mid-market clients, where the same buyer often purchases both print and IT solutions. He highlighted the ability to offer a broader portfolio, including new solutions like Cyber Shield, to these trusted partners. Mr. Bandrowczak also noted expansion in retail, bundling Lexmark's in-store expertise with Xerox's IT solutions and production capabilities. Chuck Butler, Chief Financial Officer, added that these initiatives are focused on improving the company's financial profile, with Q4 performance meeting or exceeding expectations for bottom-line and cash flow generation, indicating good momentum for 2026.

Michael Cadiz from Citigroup asked about Cricut's capital allocation strategy, specifically questioning if the special dividends issued in recent years should be considered a recurring event for investors.

Answer

CFO Kimball Shill clarified that recent special dividends were largely funded by excess cash generated from right-sizing inventory post-COVID, a process that is now complete. He reiterated Cricut's capital allocation framework, prioritizing organic growth investments and strategic M&A first. Excess capital is returned to shareholders via stock repurchases, a recurring semi-annual dividend, and periodic special dividends when cash generation exceeds normal expectations.

Michael Cadiz from Citigroup asked for the key drivers behind management's confidence in reaching a sales inflection point this year. He also questioned the source of the stronger-than-expected profitability in the quarter and how investors should view it going forward.

Answer

CFO Kimball Shill noted that while tariff uncertainty poses a risk to the inflection point, positive signs include improving machine sales (both sell-in and sell-out units were up), continued platform growth, and the expansion of the value line of materials with over 100 new SKUs. Regarding profitability, he explained that operating margins were helped by about four percentage points from onetime items. These included higher product gross margins from new launches, the monetization of $5 million in previously reserved inventory, a duty drawback, and the reversal of a bad debt reserve related to the JOANN bankruptcy.

Speaking for Assia Merchant, Michael Cadiz of Citigroup Inc. asked about the nature of customer conversations regarding Keystone (OpEx vs. CapEx) amid macro uncertainty. He also requested color on product momentum following recent validations like the NVIDIA SuperPOD certification.

Answer

CEO George Kurian highlighted strong momentum for Keystone, with TCV sales up 54% year-over-year to $224 million in FY25, indicating no unusual shifts in customer spending preferences. He also confirmed that the new product portfolio is performing ahead of internal plans, with the company seeing SuperPOD wins shortly after receiving the certification, signaling continued strength.

Speaking for Assia Merchant, Michael Cadiz of Citigroup asked about the nature of customer conversations regarding the Keystone storage-as-a-service offering (OpEx vs. CapEx) amid macro uncertainty. He also inquired about product momentum following recent validations like the NVIDIA SuperPOD certification.

Answer

CEO George Kurian highlighted strong Keystone momentum, with TCV sales up 54% year-over-year to $224 million in fiscal 2025, indicating it is a preferred model for a growing number of use cases. He also confirmed that the new product portfolio is performing ahead of plan, with the company securing SuperPOD wins shortly after the certification was announced.

Speaking for Assia Merchant, Michael Cadiz of Citigroup Inc. asked about the nature of customer conversations regarding Keystone, specifically on OpEx versus CapEx spending in an uncertain macro environment. He also inquired about product momentum following the recent NVIDIA SuperPOD validation.

Answer

CEO George Kurian reported strong momentum for Keystone, with TCV sales up 54% year-over-year in fiscal 2025, noting that customers are increasingly choosing it for a growing number of use cases without any unusual shift in behavior. He also stated that the new product portfolio, including systems validated for NVIDIA SuperPOD, is performing ahead of internal plans, with some SuperPOD wins already secured since the certification.

Representing Assia Merchant, Michael Cadiz of Citigroup requested clarification on the outlook for subscription margins, considering the potential absorption of higher tariff costs.

Answer

CFO Kevan Krysler stated that he does not foresee a significant impact on subscription gross margins. He attributed this resilience to the operational efficiency of the Evergreen One service and the agility of Pure's manufacturing and supply chain, which allow the company to manage and absorb potential tariff costs effectively.