Xerox Releases Fourth-Quarter and Full-Year Results

Q4 Revenue and Margins improve YoY; Company Guides to Improved Profitability in 2023

Financial Summary

Q4 2022

• Revenue of $1.94 billion, up 9.2 percent year-over-year or up 13.9 percent in constant currency.
• GAAP earnings per share (EPS) of $0.74, up $4.71 year-over-year. Prior year Q4 GAAP EPS includes an after-tax non-cash goodwill impairment charge of $4.38 per share.
• Adjusted EPS of $0.89, up $0.55 year-over-year.
• Adjusted operating margin of 9.2 percent, up 440 basis points year-over-year.
• Operating cash flow of $186 million, down $12 million year-over-year.
• Free cash flow of $168 million, down $14 million year-over-year.

FY 2022

• Revenue of $7.11 billion, up 1.0 percent year-over-year, or up 4.8 percent in constant currency.
• GAAP loss per share of $2.15, up $0.41 year-over-year. Both the current year and prior year include after-tax non-cash goodwill impairment charges of $2.54 and $4.08 per share, respectively.
• Adjusted EPS of $1.12, down $0.39 year-over-year.
• Adjusted operating margin of 3.9 percent, down 140 basis points year-over-year.
• Operating cash flow of $159 million, down $470 million year-over-year.
• Free cash flow of $143 million, excluding a one-time product supply termination charge, down $418 million year-over-year.

NORWALK, Conn.–(BUSINESS WIRE)–Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2022 fourth-quarter and full-year results and guidance for 2023.

“Resilient demand and improvements in supply chain conditions drove solid Q4 growth in revenue and profits,” said Steve Bandrowczak, chief executive officer at Xerox. “Our employees and partners worked hard to deliver the highest level of revenue since the start of the pandemic, and I am proud of the focus and dedication which led to these results. As macroeconomic uncertainty extends through this year, we will continue working alongside our clients to develop and deploy essential workplace solutions and services, positioning Xerox for long-term growth in profitability.”

^{_____________________}

Beginning in the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments – Print and Other, and Financing (FITTLE).

^___________

2023 Guidance

• Revenue growth: flat to down low-single-digits in constant currency
• Adjusted Operating Margin: at least 4.7%
• Free cash flow: at least $500 million

Free cash flow guidance includes the net benefit of a receivable funding agreement recently signed with an affiliate of HPS Investment Partners. This agreement covers sales of primarily U.S. direct lease receivables.

Non-GAAP Measures

This release refers to the following non-GAAP financial measures:

• Adjusted EPS, which excludes the Goodwill impairment charge as well as Restructuring and related costs, net, Amortization of intangible assets, non-service retirement-related costs, and other discrete adjustments from GAAP EPS, as applicable.
• Adjusted operating income and margin, which exclude the EPS adjustments noted above as well as the remainder of Other expenses, net from pre-tax income (loss) and margin.
• Constant currency (CC) revenue change, which excludes the effects of currency translation.
• Free cash flow, which is operating cash flow less capital expenditures.

Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures.

Forward Looking Statements

This release and other written or oral statements made from time to time by management contain “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “should”, “targeting”, “projecting”, “driving” and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include but are not limited to: the effects of pandemics, such as the COVID-19 pandemic, on our and our customers’ businesses and the duration and extent to which this will impact our future results of operations and overall financial performance; our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; reliance on third parties, including subcontractors, for manufacturing of products and provision of services and the shared service arrangements entered into by us as part of Project Own It; our ability to attract and retain key personnel; the severity and persistence of global supply chain disruptions and inflation; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyberattacks or other intentional acts or that cyberattacks could result in a shutdown of our systems; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring and transformation actions; our ability to manage changes in the printing environment like the decline in the volume of printed pages and extension of equipment placements; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; interest rates, cost of borrowing and access to credit markets; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; and any impacts resulting from the restructuring of our relationship with Fujifilm Holdings Corporation. Additional risks that may affect Xerox’s operations and other factors are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of Xerox Holdings Corporation’s and Xerox Corporation’s combined 2021 Annual Report on Form 10-K and combined Quarterly Reports on Form 10-Q, as well as in Xerox Holdings Corporation’s and Xerox Corporation’s Current Reports on Form 8-K filed with the Securities and Exchange Commission.

These forward-looking statements speak only as of the date of this release or as of the date to which they refer, and Xerox assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

Note: To receive RSS news feeds, visit https://www.news.xerox.com. For open commentary, industry perspectives and views, visit http://www.linkedin.com/company/xerox, http://twitter.com/xerox, http://www.facebook.com/XeroxCorp, https://www.instagram.com/xerox/, http://www.youtube.com/XeroxCorp.

Xerox^®® is a trademark of Xerox in the United States and/or other countries.

___________________________

Fourth Quarter 2022 Overview

2022 was a challenging year as revenue and profitability was impacted by an uncertain and unpredictable macroeconomic environment, which included increasing inflation and higher interest rates, supply chain challenges, currency disruption and a war in Ukraine. Despite these challenges, fourth quarter 2022 revenue grew in actual and constant currency¹ for the first time since the second quarter of 2021, due to strong demand for our products and services and improved product supply and mix.

Equipment sales revenue of $554 million in fourth quarter 2022 increased 44.3% in actual currency and 49.0% in constant currency¹ as compared to the prior year. Equipment sales revenue growth was driven by better availability of product across all categories and regions, particularly for higher margin A3 devices in the Americas region. The sequential growth in equipment sales revenue mirrored the decline in equipment backlog², revealing strong order activity amid an uncertain macroeconomic backdrop. Equipment sales revenue outpaced installations this quarter due to favorable product mix and the benefits of recent pricing actions. Installation growth was strongest for mid-range products and color A4 multifunction machines. Post-sale revenue declined 0.4% in actual currency and increased 4.2% in constant currency¹. Growth in constant currency¹ this quarter was driven by IT Services, which includes the acquisition of Powerland, and growth in supplies and paper. Contractual print services³ revenue growth accelerated modestly this quarter in constant currency, aided by recent pricing actions and the acquisition of Go Inspire.

Pre-tax income and adjusted¹ operating income were both higher year-over-year, primarily due to increased equipment sales revenue, improved product and geography mix and lower logistics costs, partially offset by higher bad debt expense. We expect profitability to improve further in 2023 as we realize the benefits of price and cost actions taken in 2022, further improvements in product availability, lower logistics costs and additional operating efficiencies.

Total Revenue is expected to be flat to down low-single-digits in constant currency¹ in 2023. In 2023 we expect adjusted¹ operating income margin to be at least 4.7%, an 80 basis point increase over 2022 levels and we expect to generate at least $500 million of free cash flow¹, which reflects the benefits of our Financing (FITTLE) segment’s receivable funding agreement.

Reportable Segment Change

During the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments – Print and Other, and Financing (FITTLE) to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company’s key growth strategies. As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company’s current reportable segments.

__________________

Contacts

Media Contact:
Justin Capella, Xerox, +1-203-258-6535, Justin.Capella@xerox.com

Investor Contact:
David Beckel, Xerox, +1-203-849-2318, David.Beckel@xerox.com

Read full story here