Achieved adjusted operating margin and free cash flow guidance
in 2023; Guiding to another year of meaningful growth in adjusted
operating income
Financial Summary
Q4 2023
- Revenue of $1.77 billion, down 9.1 percent year-over-year or
down 10.6 percent in constant currency.
- GAAP net loss of $(58) million, or $(0.50) per share, down $179
million or $1.24 per share, year-over-year, respectively. This
quarter includes an after-tax Restructuring and related costs, net
charge of $78 million, or $0.62 per share, related to the recently
announced workforce reduction.
- Adjusted net income of $56 million, or $0.43 per share, down
$90 million or $0.46 per share, year-over-year, respectively.
- Adjusted operating margin of 5.4 percent, down 380 basis points
year-over-year.
- Operating cash flow of $389 million, up $203 million
year-over-year.
- Free cash flow of $379 million, up $211 million
year-over-year.
FY 2023
- Revenue of $6.89 billion, down 3.1 percent year-over-year, or
down 3.3 percent in constant currency.
- GAAP net income of $1 million, or $(0.09) per share, up $323
million or $2.06 per share, year-over-year, respectively. 2023
includes a Q4 after-tax Restructuring and related costs, net charge
of $78 million, or $0.62 per share, related to the recently
announced workforce reduction. 2022 includes an after-tax non-cash
goodwill impairment charge of $395 million, or $2.54 per
share.
- Adjusted net income of $287 million, or $1.82 per share, up $98
million or $0.70 per share, year-over-year, respectively.
- Adjusted operating margin of 5.6 percent, up 170 basis points
year-over-year.
- Operating cash flow of $686 million, up $527 million
year-over-year.
- Free cash flow of $649 million, up $547 million
year-over-year.
Xerox Holdings Corporation (NASDAQ: XRX) today announced its
2023 fourth-quarter and full-year results and guidance for
2024.
“Last year, steps we took to structurally simplify our business
impacted revenue but led to 170 basis points of adjusted operating
margin expansion and laid the foundation for successful execution
of our Reinvention,” said Steve Bandrowczak, chief executive
officer at Xerox. “As we enter 2024, we are focused on stabilizing
and strengthening our core Print business, driving enterprise-wide
efficiency and productivity gains through our new Global Business
Services organization, and further capturing opportunities in
Digital and IT Services. We expect balanced execution on these
priorities, supported by our new operating model, will yield
significant progress towards our three-year adjusted operating
income improvement target of $300 million above 2023 levels."
Fourth-Quarter Key Financial
Results
(in millions,
except per share data)
Q4 2023
Q4 2022
B/(W)
YOY
% Change
B/(W) YOY
Revenue
$1,765
$1,941
$(176)
(9.1)% AC
(10.6)% CC(1)
Gross Margin
33.5%
34.8%
(130) bps
RD&E %
3.2%
3.6%
40 bps
SAG %
24.9%
22.1%
(280) bps
Pre-Tax (Loss) Income (2)
$(88)
$145
$(233)
NM
Pre-Tax (Loss) Income Margin
(2)
(5.0)%
7.5%
NM
Operating Income - Adjusted (1)
$96
$178
$(82)
(46.1)%
Operating Income Margin - Adjusted (1)
5.4%
9.2%
(380) bps
GAAP Diluted (Loss) Earnings per
Share
$(0.50)
$0.74
$(1.24)
NM
Diluted Earnings Per Share - Adjusted
(1)
$0.43
$0.89
$(0.46)
(51.7)%
Full-Year Key Financial
Results
(in millions,
except per share data)
FY 2023
FY 2022
B/(W)
YOY
% Change
B/(W) YOY
Revenue
$6,886
$7,107
$(221)
(3.1)% AC
(3.3)% CC(1)
Gross Margin
33.6%
32.6%
100 bps
RD&E %
3.3%
4.3%
100 bps
SAG %
24.6%
24.8%
20 bps
Pre-Tax (Loss)(2)
$(28)
$(325)
$297
NM
Pre-Tax (Loss) Margin(2)
(0.4)%
(4.6)%
420 bps
Operating Income - Adjusted (1)
$389
$275
$114
41.5%
Operating Income Margin - Adjusted (1)
5.6%
3.9%
170 bps
GAAP Diluted (Loss) per
Share(2)
$(0.09)
$(2.15)
$2.06
NM
Diluted Earnings Per Share - Adjusted
(1)
$1.82
$1.12
$0.70
62.5%
_____________ (1)
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.
(2)
Fourth quarter and full-year 2023 pre-tax (loss) and margin
includes a fourth quarter Restructuring and related costs, net
charge of $104 million ($78 million after-tax), or $0.62 per share,
related to the recently announced workforce reduction. Full-year
2023 also includes the PARC donation charge of $132 million, or
$0.58 per share. Full-year 2022 pre-tax (loss) and margin includes
a Goodwill impairment charge of $412 million ($395 million
after-tax), or $2.54 per share.
Fourth-Quarter Segment
Results
(in
millions)
Q4 2023
Q4 2022
B/(W)
YOY
% Change
B/(W) YOY
Revenue
Print and Other
$1,686
$1,862
$(176)
(9.5)%
Financing (FITTLE)
100
101
(1)
(1.0)%
Intersegment Elimination (1)
(21)
(22)
1
(4.5)%
Total Revenue
$1,765
$1,941
$(176)
(9.1)%
Profit
Print and Other
$89
$177
$(88)
(49.7)%
Financing (FITTLE)
7
1
6
NM
Total Profit
$96
$178
$(82)
(46.1)%
Full-Year Segment
Results
(in
millions)
FY 2023
FY 2022
B/(W)
YOY
% Change
B/(W) YOY
Revenue
Print and Other
$6,571
$6,804
$(233)
(3.4)%
Financing (FITTLE)
401
393
8
2.0%
Intersegment Elimination (1)
(86)
(90)
4
(4.4)%
Total Revenue
$6,886
$7,107
$(221)
(3.1)%
Profit
Print and Other
$360
$258
$102
39.5%
Financing (FITTLE)
29
17
12
70.6%
Total Profit
$389
$275
$114
41.5%
_____________
(1)
Reflects revenue, primarily commissions and other payments, made
by the FITTLE segment to the Print and Other segment for the lease
of Xerox equipment placements.
2024 Guidance
- Revenue: decline of 3% to 5% in constant currency
- Adjusted operating margin: at least 7.5%
- Free cash flow: at least $600 million
The company expects stable Print demand, growth in Digital and
IT Services and neutral macroeconomic conditions. The guided
year-over-year decline in revenue is attributable to the following:
around 200 basis points of headwind from prior-year backlog
reduction and around 200 basis points from the deemphasis of
certain non-strategic revenue, including lower sales of paper.
Margin guidance implies adjusted operating income margin
improvement of more than 190 basis points, and adjusted operating
income improvement of more than $100 million, year-over-year.
The company reiterates its three-year target of $300 million of
incremental adjusted operating income above 2023 levels and a
return to double-digit adjusted operating income margin by
2026.
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 (loss) income 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: Global macroeconomic conditions, including
inflation, slower growth or recession, delays or disruptions in the
global supply chain, higher interest rates, and wars and other
conflicts, including the current conflict between Russia and
Ukraine; our ability to succeed in a competitive environment,
including by developing new products and service offerings and
preserving our existing products and market share as well as
repositioning our business in the face of customer preference,
technological, and other change, such as evolving return-to-office
and hybrid working trends; failure of our customers, vendors, and
logistics partners to perform their contractual obligations to us;
our ability to attract, train, and retain key personnel; execution
risks around our Reinvention; the risk of breaches of our security
systems due to cyber, malware, or other intentional attacks that
could expose us to liability, litigation, regulatory action or
damage our reputation; our ability to obtain adequate pricing for
our products and services and to maintain and improve our cost
structure; 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; risks related to our indebtedness; 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; laws, regulations,
international agreements and other initiatives to limit greenhouse
gas emissions or relating to climate change, as well as the
physical effects of climate change; and other factors as set forth
from time to time in the Company’s Securities and Exchange
Commission filings, including the Company’s Annual Report on Form
10-K for the year ended December 31, 2022. The Company intends
these forward-looking statements to speak only as of the date of
this release and does not undertake to update or revise them as
more information becomes available, 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.
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
(LOSS) INCOME (UNAUDITED)
Three Months Ended
December 31,
Year Ended
December 31,
(in millions, except per-share data)
2023
2022
2023
2022
Revenues
Sales
$
721
$
851
$
2,720
$
2,800
Services, maintenance and rentals
1,000
1,039
3,975
4,100
Financing
44
51
191
207
Total Revenues
1,765
1,941
6,886
7,107
Costs and Expenses
Cost of sales
466
572
1,778
2,002
Cost of services, maintenance and
rentals
677
664
2,664
2,679
Cost of financing
30
30
130
108
Research, development and engineering
expenses
56
69
229
304
Selling, administrative and general
expenses
440
428
1,696
1,760
Goodwill impairment
—
—
—
412
Restructuring and related costs, net
132
24
167
65
Amortization of intangible assets
10
11
43
42
PARC donation
—
—
132
—
Other expenses, net
42
(2)
75
60
Total Costs and Expenses
1,853
1,796
6,914
7,432
(Loss) Income before Income
Taxes(1)
(88)
145
(28)
(325)
Income tax (benefit) expense
(30)
24
(29)
(3)
Net (Loss) Income
(58)
121
1
(322)
Less: Preferred stock dividends, net
(3)
(3)
(14)
(14)
Net (Loss) Income attributable to
Common Shareholders
$
(61)
$
118
$
(13)
$
(336)
Basic (Loss) Earnings per Share
$
(0.50)
$
0.76
$
(0.09)
$
(2.15)
Diluted (Loss) Earnings per
Share
$
(0.50)
$
0.74
$
(0.09)
$
(2.15)
___________________________
(1)
Referred to as “Pre-tax (loss) income” throughout the remainder
of this document.
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
Three Months Ended
December 31,
Year Ended
December 31,
(in millions)
2023
2022
2023
2022
Net (Loss) Income
$
(58)
$
121
$
1
$
(322)
Other Comprehensive Income (Loss),
Net
Translation adjustments, net
172
260
191
(376)
Unrealized gains (losses), net
1
17
1
(2)
Changes in defined benefit plans, net
(345)
(267)
(331)
(171)
Other Comprehensive (Loss) Income,
Net
(172)
10
(139)
(549)
Comprehensive (Loss) Income,
Net
$
(230)
$
131
$
(138)
$
(871)
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except share data in
thousands)
December 31, 2023
December 31, 2022
Assets
Cash and cash equivalents
$
519
$
1,045
Accounts receivable (net of allowance of
$64 and $52, respectively)
850
857
Billed portion of finance receivables (net
of allowance of $4 and $4, respectively)
71
93
Finance receivables, net
842
1,061
Inventories
661
797
Other current assets
234
254
Total current assets
3,177
4,107
Finance receivables due after one year
(net of allowance of $88 and $113, respectively)
1,597
1,948
Equipment on operating leases, net
265
235
Land, buildings and equipment, net
266
320
Intangible assets, net
177
208
Goodwill, net
2,747
2,820
Deferred tax assets
760
582
Other long-term assets
1,034
1,323
Total Assets
$
10,023
$
11,543
Liabilities and Equity
Short-term debt and current portion of
long-term debt
$
567
$
860
Accounts payable
1,044
1,331
Accrued compensation and benefits
costs
306
258
Accrued expenses and other current
liabilities
877
881
Total current liabilities
2,794
3,330
Long-term debt
2,710
2,866
Pension and other benefit liabilities
1,216
1,175
Post-retirement medical benefits
171
184
Other long-term liabilities
360
411
Total Liabilities
7,251
7,966
Noncontrolling Interests
10
10
Convertible Preferred Stock
214
214
Common stock
123
156
Additional paid-in capital
1,114
1,588
Retained earnings
4,977
5,136
Accumulated other comprehensive loss
(3,676)
(3,537)
Xerox Holdings shareholders’ equity
2,538
3,343
Noncontrolling interests
10
10
Total Equity
2,548
3,353
Total Liabilities and Equity
$
10,023
$
11,543
Shares of Common Stock Issued and
Outstanding
123,144
155,781
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
Three Months Ended
December 31,
Year Ended
December 31,
(in millions)
2023
2022
2023
2022
Cash Flows from Operating
Activities
Net (Loss) Income
$
(58)
$
121
$
1
$
(322)
Adjustments required to reconcile Net
(loss) income to cash flows provided by operating
activities
Depreciation and amortization
62
65
251
270
Provisions
17
17
54
65
Net gain on sales of businesses and
assets
(2)
(39)
(39)
(56)
PARC donation
—
—
132
—
Stock-based compensation
14
12
54
75
Goodwill impairment
—
—
—
412
Restructuring and asset impairment
charges
121
18
146
62
Payments for restructurings
(4)
(14)
(27)
(52)
Non-service retirement-related costs
5
6
19
(12)
Contributions to retirement plans
(27)
(18)
(102)
(124)
Decrease (increase) in accounts receivable
and billed portion of finance receivables
42
—
(5)
(48)
Decrease (increase) in inventories
73
(7)
123
(143)
Increase in equipment on operating
leases
(32)
(38)
(141)
(112)
Decrease (increase) in finance
receivables
124
(131)
614
(141)
Decrease (increase) in other current and
long-term assets
24
(9)
16
27
Increase (decrease) in accounts
payable
—
80
(290)
278
Increase in accrued compensation
32
5
48
34
Increase (decrease) in other current and
long-term liabilities
45
82
(114)
9
Net change in income tax assets and
liabilities
(56)
27
(80)
(54)
Net change in derivative assets and
liabilities
(3)
(12)
13
(22)
Other operating, net
12
21
13
13
Net cash provided by operating
activities
389
186
686
159
Cash Flows from Investing
Activities
Cost of additions to land, buildings,
equipment and software
(10)
(18)
(37)
(57)
Proceeds from sales of businesses and
assets
3
38
43
87
Acquisitions, net of cash acquired
—
—
(7)
(93)
Other investing, net
(1)
(3)
(4)
(15)
Net cash (used in) provided by investing
activities
(8)
17
(5)
(78)
Cash Flows from Financing
Activities
Net payments on debt
(347)
(24)
(478)
(529)
Dividends
(34)
(43)
(165)
(174)
Payments to acquire treasury stock,
including fees
—
—
(544)
(113)
Other financing, net
(2)
—
(15)
(6)
Net cash used in financing activities
(383)
(67)
(1,202)
(822)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
2
2
(1)
(29)
Increase (decrease) in cash, cash
equivalents and restricted cash
—
138
(522)
(770)
Cash, cash equivalents and restricted cash
at beginning of period
617
1,001
1,139
1,909
Cash, Cash Equivalents and Restricted
Cash at End of Period
$
617
$
1,139
$
617
$
1,139
Fourth Quarter 2023 Overview
2023 was a pivotal year for Xerox and marked the first full year
of our Reinvention, a multi-year strategy to reposition our
business for long-term, sustainable growth. We took structural and
foundational actions to improve our core business and simplify
operations, resulting in greater operational focus and a clear path
for more transformative Reinvention actions this year and beyond.
For the full year, the Company delivered growth in earnings and
operating cash flows despite a modest decline in revenue,
reflecting the successful implementation of a more flexible cost
structure and rigorous operating discipline. Additional structural
efficiencies enabled by our Reorganization are expected to drive
further profit improvement in 2024.
Equipment sales of $458 million in the fourth quarter 2023
declined 17.3% in actual currency, or 18.3% in constant currency1,
as compared to the fourth quarter 2022. The prior year effect of
backlog2 reduction drove more than a 25-percentage point
year-over-year decline. Total equipment revenue outpaced equipment
installation activity, due to favorable product mix. Installations
of High-End color equipment, which were less affected by prior year
backlog2 reductions, increased as compared to fourth quarter 2022,
while Entry and Mid offerings declined. Declines in entry primarily
reflect prior year reductions to backlog2 and current year
constraints. Post-sale revenue of $1.3 billion declined 5.8% in
actual currency, or 7.5% in constant currency1, as compared to
fourth quarter 2022. The decline was primarily due to lower sales
of non-strategic and lower margin paper and IT endpoint device
placements, which we plan to reduce over time, as well as the exit
of Russia, the termination of the Fuji Royalty and the absence of
PARC revenue. Combined, these items contributed 500 basis points to
the year over year decline in post-sale revenue.
The pre-tax (loss) of $(88) million for the fourth quarter 2023
decreased by $233 million as compared to pre-tax income of $145
million in the fourth quarter 2022, primarily due to lower revenue
and gross profit as well as higher Restructuring and related costs,
net and Other expenses, net. Adjusted1 operating income decreased
$82 million as compared to fourth quarter 2022 due to lower
equipment and post sale revenue. Benefits from structural
simplification efforts and pricing were partially offset by higher
compensation expense and a lack of Fuji royalty income.
We expect a total Revenue decline of 3% to 5% in constant
currency in 2024, which includes effects of prior year backlog2
reductions and the exit or deemphasis of non-strategic businesses –
all of which is unrelated to the performance of our core print and
services businesses. Core business revenue is expected to be
roughly flat year-over-year, reflecting stable Print demand, growth
in Digital and IT Services and neutral macroeconomic
conditions.
We expect 2024 pre-tax income and adjusted1 operating income
margins to improve in 2024 to approximately 5.1% and at least 7.5%,
respectively. The increase in profit margins will primarily be
driven by structural simplification actions enabled by our
reorganization, including the effects of the workforce reduction
decisions announced in January 2024.
Free cash flow1 is expected to be at least $600 million in 2024
(includes $50 million for capital expenditures). Free cash flow1 is
expected to benefit from a reduction in our finance receivables
balance. Improvements in cash flow from underlying operations are
expected to be offset by restructuring payments, higher cash taxes
and an increase in pension contributions.
___________
(1)
Refer to the "Non-GAAP Financial Measures" section for an
explanation of the non-GAAP financial measure.
(2)
Order backlog is measured as the value of unfulfilled sales
orders, shipped and non-shipped, received from our customers
waiting to be installed, including orders with future installation
dates. It includes printing devices as well as IT hardware
associated with our IT service offerings.
Financial Review
Revenues
Three Months Ended
December 31,
% of Total Revenue
(in millions)
2023
2022
%
Change
CC %
Change
2023
2022
Equipment sales
$
458
$
554
(17.3)%
(18.3)%
26%
29%
Post sale revenue
1,307
1,387
(5.8)%
(7.5)%
74%
71%
Total Revenue
$
1,765
$
1,941
(9.1)%
(10.6)%
100%
100%
Reconciliation to Condensed
Consolidated Statements of (Loss) Income:
Sales
$
721
$
851
(15.3)%
(16.7)%
Less: Supplies, paper and other sales
(263)
(297)
(11.4)%
(13.6)%
Equipment Sales
$
458
$
554
(17.3)%
(18.3)%
Services, maintenance and rentals
$
1,000
$
1,039
(3.8)%
(5.4)%
Add: Supplies, paper and other sales
263
297
(11.4)%
(13.6)%
Add: Financing
44
51
(13.7)%
(15.2)%
Post Sale Revenue
$
1,307
$
1,387
(5.8)%
(7.5)%
Segments
Print and Other
$
1,686
$
1,862
(9.5)%
95%
96%
FITTLE
100
101
(1.0)%
6%
5%
Intersegment elimination (1)
(21)
(22)
(4.5)%
(1)%
(1)%
Total Revenue(2)
$
1,765
$
1,941
(9.1)%
100%
100%
Go-to-Market
Operations
Americas
$
1,153
$
1,277
(9.7)%
(10.1)%
65%
66%
EMEA
589
619
(4.8)%
(9.0)%
34%
32%
Other
23
45
(48.9)%
(48.9)%
1%
2%
Total Revenue(2)
$
1,765
$
1,941
(9.1)%
(10.6)%
100%
100%
______________
CC - See "Constant Currency" in the
Non-GAAP Financial Measures section for a description of constant
currency.
(1)
Reflects revenue, primarily commissions
and other payments made by the FITTLE segment, to the Print and
Other segment for the lease of Xerox equipment placements.
(2)
Refer to Appendix II, Reportable Segments
and Geographic Sales Channels, for definitions.
Costs, Expenses and Other
Income
Summary of Key Financial Ratios
The following is a summary of key
financial ratios used to assess our performance:
Three Months Ended
December 31,
(in millions)
2023
2022
B/(W)
Gross Profit
$
592
$
675
$
(83)
RD&E
56
69
13
SAG
440
428
(12)
Equipment Gross Margin
32.4%
31.6%
0.8
pts.
Post sale Gross Margin
34.0%
36.1%
(2.1)
pts.
Total Gross Margin
33.5%
34.8%
(1.3)
pts.
RD&E as a % of Revenue
3.2%
3.6%
0.4
pts.
SAG as a % of Revenue
24.9%
22.1%
(2.8)
pts.
Pre-tax (Loss) Income
$
(88)
$
145
$
(233)
Pre-tax (Loss) Income Margin
(5.0)%
7.5%
(12.5)
pts.
Adjusted(1) Operating Income
$
96
$
178
$
(82)
Adjusted(1) Operating Income Margin
5.4%
9.2%
(3.8)
pts.
_____________
(1)
Refer to the "Non-GAAP Financial Measures"
section for an explanation of the non-GAAP financial measure.
Other Expenses, Net
Three Months Ended December
31,
(in millions)
2023
2022
Non-financing interest expense
$
28
$
18
Interest income
(4)
(3)
Non-service retirement-related costs
5
6
Gains on sales of businesses and
assets
(2)
(39)
Currency losses, net
6
11
Loss on early extinguishment of debt
7
—
All other expenses, net
2
5
Other expenses, net
$
42
$
(2)
Segment Review
Three Months Ended December
31,
(in millions)
External
Revenue
Intersegment
Revenue(1)
Total
Segment
Revenue
% of Total
Revenue
Segment
Profit
Segment
Margin(2)
2023
Print and Other
$
1,665
$
21
$
1,686
94%
$
89
5.3%
FITTLE
100
—
100
6%
7
7.0%
Total
$
1,765
$
21
$
1,786
100%
$
96
5.4%
2022
Print and Other
$
1,840
$
22
$
1,862
95%
$
177
9.6%
FITTLE
101
—
101
5%
1
1.0%
Total
$
1,941
$
22
$
1,963
100%
$
178
9.2%
_____________
(1)
Reflects revenue, primarily commissions and other payments, made
by the FITTLE segment to the Print and Other segment for the lease
of Xerox equipment placements.
(2)
Segment margin based on external revenue only.
Print and Other
Print and Other includes the design, development and sale of
document management systems, solutions and services as well as
associated technology offerings including IT and software products
and services.
Revenue
Three Months Ended
December 31,
(in millions)
2023
2022
%
Change
Equipment sales
$
454
$
548
(17.2)%
Post sale revenue
1,211
1,292
(6.3)%
Intersegment revenue (1)
21
22
(4.5)%
Total Print and Other Revenue
$
1,686
$
1,862
(9.5)%
_____________
(1)
Reflects revenue, primarily commissions
and other payments, made by the FITTLE segment to the Print and
Other segment for the lease of Xerox equipment placements.
Detail by product group is shown below.
Three Months Ended
December 31,
% of Equipment Sales
(in millions)
2023
2022
%
Change
CC %
Change
2023
2022
Entry
$
56
$
79
(29.1)%
(30.8)%
12%
14%
Mid-range
302
369
(18.2)%
(18.8)%
66%
67%
High-end
94
100
(6.0)%
(7.1)%
21%
18%
Other
6
6
—%
—%
1%
1%
Equipment Sales (1),(2)
$
458
$
554
(17.3)%
(18.3)%
100%
100%
_____________ CC - See "Constant Currency" in the Non-GAAP
Financial Measures section for a description of constant currency.
(1)
Refer to Appendix II, Reportable Segments
and Geographic Sales Channels, for definitions.
(2) Includes equipment sales related to the FITTLE segment of $4
million and $6 million for the fourth quarter 2023 and 2022,
respectively.
FITTLE
FITTLE represents a global financing solutions business,
primarily enabling the sale of our equipment and services.
Revenue
Three Months Ended
December 31,
(in millions)
2023
2022
%
Change
Equipment sales
$
4
$
6
(33.3)%
Financing
44
51
(13.7)%
Other Post sale revenue (1)
52
44
18.2%
Total FITTLE Revenue
$
100
$
101
(1.0)%
_____________
(1)
Other Post sale revenue includes lease renewal and fee income as
well as gains, commissions and servicing revenue associated with
sold finance receivables.
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: Global macroeconomic conditions, including
inflation, slower growth or recession, delays or disruptions in the
global supply chain, higher interest rates, and wars and other
conflicts, including the current conflict between Russia and
Ukraine; our ability to succeed in a competitive environment,
including by developing new products and service offerings and
preserving our existing products and market share as well as
repositioning our business in the face of customer preference,
technological, and other change, such as evolving return-to-office
and hybrid working trends; failure of our customers, vendors, and
logistics partners to perform their contractual obligations to us;
our ability to attract, train, and retain key personnel; execution
risks around our Reinvention; the risk of breaches of our security
systems due to cyber, malware, or other intentional attacks that
could expose us to liability, litigation, regulatory action or
damage our reputation; our ability to obtain adequate pricing for
our products and services and to maintain and improve our cost
structure; 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; risks related to our indebtedness; 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; laws, regulations,
international agreements and other initiatives to limit greenhouse
gas emissions or relating to climate change, as well as the
physical effects of climate change; and other factors as set forth
from time to time in the Company’s Securities and Exchange
Commission filings, including the Company’s Annual Report on Form
10-K for the year ended December 31, 2022. The Company intends
these forward-looking statements to speak only as of the date of
this release and does not undertake to update or revise them as
more information becomes available, except as required by law.
Non-GAAP Financial Measures
We have reported our financial results in accordance with
generally accepted accounting principles (GAAP). In addition, we
have discussed our financial results using the non-GAAP measures
described below. We believe these non-GAAP measures allow investors
to better understand the trends in our business and to better
understand and compare our results. Management regularly uses our
supplemental non-GAAP financial measures internally to understand,
manage and evaluate our business and make operating decisions.
These non-GAAP measures are among the primary factors management
uses in planning for and forecasting future periods. Compensation
of our executives is based in part on the performance of our
business based on these non-GAAP measures. Accordingly, we believe
it is necessary to adjust several reported amounts, determined in
accordance with GAAP, to exclude the effects of certain items as
well as their related income tax effects.
However, these non-GAAP financial measures should be viewed in
addition to, and not as a substitute for, the Company’s reported
results prepared in accordance with GAAP. Our non-GAAP financial
measures are not meant to be considered in isolation or as a
substitute for comparable GAAP measures and should be read only in
conjunction with our Condensed Consolidated Financial Statements
prepared in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP are set forth below, as well as in the fourth
quarter 2023 presentation slides available at
www.xerox.com/investor.
Adjusted Earnings Measures
- Adjusted Net Income and Earnings per share (EPS)
- Adjusted Effective Tax Rate
The above measures were adjusted for the following items:
Restructuring and related costs,
net: Restructuring and related costs, net include
restructuring and asset impairment charges as well as costs
associated with our transformation programs beyond those normally
included in restructuring and asset impairment charges.
Restructuring consists of costs primarily related to severance and
benefits paid to employees pursuant to formal restructuring and
workforce reduction plans. Asset impairment includes costs incurred
for those assets sold, abandoned or made obsolete as a result of
our restructuring actions, exiting from a business or other
strategic business changes. Additional costs for our transformation
programs are primarily related to the implementation of strategic
actions and initiatives and include third-party professional
service costs as well as one-time incremental costs. All of these
costs can vary significantly in terms of amount and frequency based
on the nature of the actions as well as the changing needs of the
business. Accordingly, due to that significant variability, we will
exclude these charges since we do not believe they provide
meaningful insight into our current or past operating performance
nor do we believe they are reflective of our expected future
operating expenses as such charges are expected to yield future
benefits and savings with respect to our operational
performance.
Amortization of intangible assets:
The amortization of intangible assets is driven by our acquisition
activity which can vary in size, nature and timing as compared to
other companies within our industry and from period to period. The
use of intangible assets contributed to our revenues earned during
the periods presented and will contribute to our future period
revenues as well. Amortization of intangible assets will recur in
future periods.
Non-service retirement-related
costs: Our defined benefit pension and retiree health costs
include several elements impacted by changes in plan assets and
obligations that are primarily driven by changes in the debt and
equity markets as well as those that are predominantly legacy in
nature and related to employees who are no longer providing current
service to the Company (e.g. retirees and ex-employees). These
elements include (i) interest cost, (ii) expected return on plan
assets, (iii) amortization of prior plan amendments, (iv) amortized
actuarial gains/losses and (v) the impacts of any plan
settlements/curtailments. Accordingly, we consider these elements
of our periodic retirement plan costs to be outside the operational
performance of the business or legacy costs and not necessarily
indicative of current or future cash flow requirements. This
approach is consistent with the classification of these costs as
non-operating in Other expenses, net. Adjusted earnings will
continue to include the service cost elements of our retirement
costs, which is related to current employee service as well as the
cost of our defined contribution plans.
Discrete, unusual or infrequent
items: We exclude these item(s), when applicable, given
their discrete, unusual or infrequent nature and their impact on
the comparability of our results for the period to prior periods
and future expected trends:
- Goodwill impairment
- PARC donation
- Contract termination costs - product supply
- Accelerated share vesting - stock compensation expense
associated with the accelerated vesting of all outstanding equity
awards, according to the terms of the award agreement, in
connection with the passing of Xerox Holdings Corporation's former
CEO.
- Loss on early extinguishment of debt
- Tax Indemnification - Conduent
Adjusted Operating Income and Margin
We calculate and utilize adjusted operating income and margin
measures by adjusting our reported pre-tax (loss) income and margin
amounts. In addition to the costs and expenses noted as adjustments
for our adjusted earnings measures, adjusted operating income and
margin also exclude the remaining amounts included in Other
expenses, net, which are primarily non-financing interest expense
and certain other non-operating costs and expenses. We exclude
these amounts in order to evaluate our current and past operating
performance and to better understand the expected future trends in
our business.
Constant Currency (CC)
To better understand trends in our business, we believe that it
is helpful to adjust revenue to exclude the impact of changes in
the translation of foreign currencies into U.S. dollars. We refer
to this adjusted revenue as “constant currency.” This impact is
calculated by translating current period activity in local currency
using the comparable prior year period's currency translation rate.
This impact is calculated for all countries where the functional
currency is not the U.S. dollar. Management believes the constant
currency measure provides investors an additional perspective on
revenue trends. Currency impact can be determined as the difference
between actual growth rates and constant currency growth rates.
Free Cash Flow
To better understand trends in our business, we believe that it
is helpful to adjust operating cash flows by subtracting amounts
related to capital expenditures. Management believes this measure
gives investors an additional perspective on cash flow from
operating activities in excess of amounts required for
reinvestment. It provides a measure of our ability to fund
acquisitions, dividends and share repurchase.
Adjusted Net Income and EPS reconciliation
Three Months Ended December
31,
Year Ended December 31,
2023
2022
2023
2022
(in millions, except per share
amounts)
Net (Loss) Income
Diluted EPS
Net Income
Diluted EPS
Net Income
Diluted EPS
Net (Loss) Income
Diluted EPS
Reported(1)
$
(58
)
$
(0.50
)
$
121
$
0.74
$
1
$
(0.09
)
$
(322
)
$
(2.15
)
Adjustments:
Goodwill impairment
—
—
—
412
Restructuring and related costs, net
132
24
167
65
Amortization of intangible assets
10
11
43
42
PARC donation
—
—
132
—
Non-service retirement-related costs
5
6
19
(12
)
Tax Indemnification - Conduent
—
—
(7
)
—
Loss on early extinguishment of debt
7
1
10
5
Contract termination costs - product
supply
—
—
—
33
Accelerated share vesting
—
—
—
21
Income tax on PARC donation(2)
—
—
(40
)
—
Income tax on adjustments(2)
(40
)
(17
)
(38
)
(55
)
Adjusted
$
56
$
0.43
$
146
$
0.89
$
287
$
1.82
$
189
$
1.12
Dividends on preferred stock used in
adjusted EPS calculation(3)
$
3
$
—
$
14
$
14
Weighted average shares for adjusted
EPS(3)
125
165
151
157
Fully diluted shares at end of
period(4)
125
_____________
(1)
Common shares outstanding at December 31,
2023, plus potential dilutive common shares used for the
calculation of adjusted diluted EPS for the fourth quarter 2023.
Excludes shares associated with our Series A convertible preferred
stock, which were anti-dilutive for the fourth quarter 2023.
(2)
Net (loss) income and EPS.
(3)
Refer to Adjusted Effective Tax Rate
reconciliation.
(4)
For those periods that include the
preferred stock dividend, the average shares for the calculations
of diluted EPS exclude the 7 million shares associated with our
Series A convertible preferred stock.
Adjusted Effective Tax Rate reconciliation
Three Months Ended December
31,
2023
2022
(in millions)
Pre-Tax (Loss) Income
Income Tax (Benefit) Expense
Effective Tax Rate
Pre-Tax Income
Income Tax Expense
Effective Tax
Rate
Reported(1)
$
(88
)
$
(30
)
34.1
%
$
145
$
24
16.6
%
Non-GAAP adjustments(2)
154
40
42
17
Adjusted(3)
$
66
$
10
15.2
%
$
187
$
41
21.9
%
Year Ended December 31,
2023
2022
(in millions)
Pre-Tax (Loss) Income
Income Tax (Benefit) Expense
Effective Tax Rate
Pre-Tax (Loss) Income
Income Tax (Benefit) Expense
Effective Tax
Rate
Reported(1)
$
(28
)
$
(29
)
103.6
%
$
(325
)
$
(3
)
0.9
%
Goodwill impairment
—
—
412
17
PARC donation
132
40
—
—
Non-GAAP adjustments(2)
232
38
154
38
Adjusted(3)
$
336
$
49
14.6
%
$
241
$
52
21.6
%
_____________
(1)
Pre-tax (loss) income and income tax
(benefit) expense.
(2)
Refer to Adjusted Net Income and EPS
reconciliation for details.
(3)
The tax impact on Adjusted Pre-Tax Income
is calculated under the same accounting principles applied to the
Reported Pre-Tax (Loss) Income under ASC 740, which employs an
annual effective tax rate method to the results.
Adjusted Operating Income and Margin
reconciliation
Three Months Ended December
31,
2023
2022
(in millions)
(Loss)
Profit
Revenue
Margin
Profit
Revenue
Margin
Reported(1)
$
(58
)
$
1,765
$
121
$
1,941
Income tax (benefit) expense
(30
)
24
Pre-tax (loss) income
$
(88
)
$
1,765
(5.0
)%
$
145
$
1,941
7.5
%
Adjustments:
Restructuring and related costs, net
132
24
Amortization of intangible assets
10
11
Other expenses, net
42
(2
)
Adjusted
$
96
$
1,765
5.4
%
$
178
$
1,941
9.2
%
Year Ended December 31,
2023
2022
(in millions)
Profit
Revenue
Margin
(Loss)
Profit
Revenue
Margin
Reported(1)
$
1
$
6,886
$
(322
)
$
7,107
Income tax (benefit)
(29
)
(3
)
Pre-tax (loss)
$
(28
)
$
6,886
(0.4
)%
$
(325
)
$
7,107
(4.6
)%
Adjustments:
Goodwill impairment
—
412
Restructuring and related costs, net
167
65
Amortization of intangible assets
43
42
PARC donation
132
—
Accelerated share vesting
—
21
Other expenses, net
75
60
Adjusted
$
389
$
6,886
5.6
%
$
275
$
7,107
3.9
%
_____________
(1)
Net (Loss) Income.
Free Cash Flow reconciliation
Three Months Ended
December 31,
Year Ended
December 31,
(in millions)
2023
2022
2023
2022
Reported(1)
$
389
$
186
$
686
$
159
Less: capital expenditures
10
18
37
57
Free Cash Flow
$
379
$
168
$
649
$
102
_____________
(1)
Net cash provided by operating
activities.
GUIDANCE
Adjusted Operating Income and
Margin
FY 2024
(in millions)
Profit
Revenue (CC)(2,3)
Margin
Estimated(1)
~ $335
~ $6,610
~ 5.1%
Adjustments:
Restructuring and related costs, net
40
Amortization of intangible assets
40
Other expenses, net
85
Adjusted (4)
~ $500
~ $6,610
At least 7.5%
_____________
(1)
Pre-tax income and Revenue.
(2)
Full-year revenue is estimated to decline
3% to 5% in constant currency. Revenue of $6.6 billion reflects the
midpoint of the guidance range.
(3)
See "Constant Currency" in the Non-GAAP
Financial Measures section for a description of constant
currency.
(4)
Adjusted pre-tax income reflects the
mid-point of the adjusted operating margin guidance range.
Free Cash Flow
(in millions)
FY 2024
Operating Cash Flow (1)
At least $650
Less: capital expenditures
50
Free Cash Flow
At least $600
_____________
(1)
Net cash provided by operating
activities.
APPENDIX I
Xerox Holdings Corporation
(Loss) Earnings per Share
(in millions, except per-share data,
shares in thousands)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Basic (Loss) Earnings per
Share:
Net (Loss) Income
$
(58
)
$
121
$
1
$
(322
)
Accrued dividends on preferred stock
(3
)
(3
)
(14
)
(14
)
Adjusted net (loss) income available to
common shareholders
$
(61
)
$
118
$
(13
)
$
(336
)
Weighted average common shares
outstanding
123,067
156,155
149,116
156,006
Basic (Loss) Earnings per Share
$
(0.50
)
$
0.76
$
(0.09
)
$
(2.15
)
Diluted (Loss) Earnings per
Share:
Net (Loss) Income
$
(58
)
$
121
$
1
$
(322
)
Accrued dividends on preferred stock
(3
)
—
(14
)
(14
)
Adjusted net (loss) income available to
common shareholders
$
(61
)
$
121
$
(13
)
$
(336
)
Weighted average common shares
outstanding
123,067
156,155
149,116
156,006
Common shares issuable with respect
to:
Stock Options
—
—
—
—
Restricted stock and performance
shares
—
1,732
—
—
Convertible preferred stock
—
6,742
—
—
Adjusted weighted average common shares
outstanding
123,067
164,629
149,116
156,006
Diluted (Loss) Earnings per
Share
$
(0.50
)
$
0.74
$
(0.09
)
$
(2.15
)
The following securities were not included
in the computation of diluted (loss) earnings per share as they
were either contingently issuable shares or shares that if included
would have been anti-dilutive:
Stock options
231
586
231
586
Restricted stock and performance
shares
6,711
3,218
6,711
4,950
Convertible preferred stock
6,742
—
6,742
6,742
Total Anti-Dilutive Securities
13,684
3,804
13,684
12,278
Dividends per Common Share
$
0.25
$
0.25
$
1.00
$
1.00
APPENDIX II
Xerox Holdings Corporation
Reportable Segments
Our reportable segments are aligned with how we manage the
business and view the markets we serve. We have two reportable
segments - Print and Other, and Financing (FITTLE).
Our two reportable segments are determined based on the information
reviewed by the Chief Operating Decision Maker (CODM), our Chief
Executive Officer (CEO), together with the Company’s management to
evaluate performance of the business and allocate resources.
Our Print and Other segment includes the sale of document
systems, supplies and technical services and managed services. The
segment also includes the delivery of managed services that involve
a continuum of solutions and services that help our customers
optimize their print and communications infrastructure, apply
automation and simplification to maximize productivity, and ensure
the highest levels of security. This segment also includes IT
services and software. The product groupings range from:
- “Entry”, which include A4 devices and desktop printers
and multifunction devices that primarily serve small and medium
workgroups/work teams.
- “Mid-Range”, which include A3 devices that generally
serve large workgroup/work team environments as well as products in
the Light Production product groups serving centralized print
centers, print for pay and low volume production print
establishments.
- “High-End”, which include production printing and
publishing systems that generally serve the graphic communications
marketplace and print centers in large enterprises.
Customers range from small and mid-sized businesses to large
enterprises. Customers also include graphic communication
enterprises as well as channel partners including distributors and
resellers. Segment revenues also include commissions and other
payments from our FITTLE segment for the exclusive right to provide
lease financing for Xerox products. These revenues are reported as
part of Intersegment Revenues, which are eliminated in consolidated
revenues.
The FITTLE segment provides global leasing solutions and
currently offers financing for direct channel customer purchases of
Xerox equipment through bundled lease agreements and lease
financing to end-user customers who purchase Xerox solutions
through our indirect channels. Segment revenues primarily include
financing income on sales-type leases (including month-to-month
extensions) and leasing fees. Segment revenues also include
gains/losses from the sale of finance receivables including
commissions, fees on the sales of underlying equipment residuals
and servicing fees.
In December 2022, the Company entered into a finance receivables
funding agreement with an affiliate of HPS Investment Partners
(HPS) pursuant to which the Company agreed to offer for sale, and
HPS agreed to purchase, certain eligible pools of finance
receivables on a monthly basis. During the second quarter 2023, the
finance receivables funding agreement with HPS was amended to
expand the pools of finance receivables eligible for sale and to
include the sale of the underlying leased equipment to HPS. In the
third quarter 2023, the Company entered into an agreement with PEAC
Solutions (a subsidiary of HPS) that named PEAC as the provider of
certain leasing and financial services programs for non-Xerox
equipment in the U.S. network of independent dealers and
resellers.
Geographic Sales Channels
We also operate a matrix organization that includes a geographic
focus that is primarily organized from a sales perspective on the
basis of “go-to-market” (GTM) sales channels as follows:
- Americas, which includes our sales channels in the U.S.
and Canada, as well as Mexico, Brazil and Central and South
America.
- EMEA, which includes our sales channels in Europe, the
Middle East, Africa and India.
- Other, which includes royalties and licensing
revenue.
These GTM sales channels are structured to serve a range of
customers for our products and services, including financing.
Accordingly, we will continue to provide information, primarily
revenue related, with respect to our principal GTM sales
channels.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240125843235/en/
Media: Justin Capella, Xerox, +1-203-258-6535,
Justin.Capella@xerox.com
Investor: David Beckel, Xerox, +1-203-849-2318,
David.Beckel@xerox.com
Xerox (NASDAQ:XRX)
過去 株価チャート
から 4 2024 まで 5 2024
Xerox (NASDAQ:XRX)
過去 株価チャート
から 5 2023 まで 5 2024