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Xerox Releases Third-Quarter Results

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Xerox (XRX) reported Q3 2024 revenue of $1.53 billion, down 7.5% year-over-year. The company posted a GAAP net loss of $1.2 billion, or $9.71 per share, including a $1.0 billion goodwill impairment charge and a $161 million tax valuation allowance. Adjusted net income was $34 million ($0.25 per share), down from $77 million ($0.46 per share) year-over-year.

The company lowered its 2024 guidance, now expecting revenue to decline around 10% in constant currency, with adjusted operating margin around 5.0% and free cash flow between $450-500 million. Despite equipment revenue falling short, adjusted operating margin improved 110 basis points to 5.2%.

Xerox (XRX) ha riportato per il terzo trimestre del 2024 un fatturato di 1,53 miliardi di dollari, in diminuzione del 7,5% rispetto all'anno precedente. L'azienda ha registrato una perdita netta secondo i principi contabili GAAP di 1,2 miliardi di dollari, ovvero 9,71 dollari per azione, inclusi un'imministrazione di goodwill di 1,0 miliardi di dollari e una riserva fiscale di valutazione di 161 milioni di dollari. L'utile netto rettificato è stato di 34 milioni di dollari (0,25 dollari per azione), in calo rispetto ai 77 milioni di dollari (0,46 dollari per azione) dell'anno precedente.

L'azienda ha abbassato le previsioni per il 2024, ora prevedendo un calo del fatturato di circa il 10% a valuta costante, con un margine operativo rettificato attorno al 5,0% e un flusso di cassa libero compreso tra 450 e 500 milioni di dollari. Nonostante i ricavi delle attrezzature siano risultati inferiori, il margine operativo rettificato è migliorato di 110 punti base, raggiungendo il 5,2%.

Xerox (XRX) reportó ingresos de 1.53 mil millones de dólares en el tercer trimestre de 2024, una disminución del 7.5% en comparación con el año anterior. La compañía reportó una pérdida neta GAAP de 1.2 mil millones de dólares, o 9.71 dólares por acción, incluyendo un cargo por deterioro de la buena voluntad de 1.0 mil millones de dólares y una provisión fiscal de 161 millones de dólares. La utilidad neta ajustada fue de 34 millones de dólares (0.25 dólares por acción), en comparación con 77 millones de dólares (0.46 dólares por acción) del año anterior.

La compañía redujo sus expectativas para 2024, ahora esperando que los ingresos disminuyan alrededor del 10% en moneda constante, con un margen operativo ajustado alrededor del 5.0% y un flujo de caja libre entre 450 y 500 millones de dólares. A pesar de que los ingresos por equipos fueron inferiores, el margen operativo ajustado mejoró 110 puntos básicos al 5.2%.

제록스 (XRX)는 2024년 3분기 매출이 15억 3천만 달러로 전년 대비 7.5% 감소했다고 보고했습니다. 회사는 12억 달러의 GAAP 순손실, 즉 주당 9.71달러를 기록했으며, 여기에는 10억 달러의 goodwill 손상 차감과 1억 6100만 달러의 세금 평가 충당금이 포함되어 있습니다. 조정된 순이익은 3400만 달러(주당 0.25달러)로, 전년의 7700만 달러(주당 0.46달러)에서 감소했습니다.

회사는 2024년 가이던스를 하향 조정하여, 현재 수익이 상수통화로 약 10% 감소할 것으로 예상하고 있으며, 조정 운영 마진은 약 5.0%, 자유 현금 흐름은 4억 5천만에서 5억 달러 사이로 예상하고 있습니다. 장비 수익이 기대에 미치지 못했음에도 불구하고, 조정된 운영 마진은 110베이시스 포인트 개선되어 5.2%에 도달했습니다.

Xerox (XRX) a annoncé un chiffre d'affaires de 1,53 milliard de dollars pour le troisième trimestre de 2024, en baisse de 7,5 % par rapport à l'année précédente. L'entreprise a affiché une perte nette GAAP de 1,2 milliard de dollars, soit 9,71 dollars par action, y compris une charge de dépréciation de goodwill de 1,0 milliard de dollars et une provision fiscale de 161 millions de dollars. Le résultat net ajusté était de 34 millions de dollars (0,25 dollar par action), en baisse par rapport à 77 millions de dollars (0,46 dollar par action) l'année précédente.

L'entreprise a abaissé ses prévisions pour 2024, s'attendant désormais à un recul du chiffre d'affaires d'environ 10 % à taux de change constant, avec une marge opérationnelle ajustée d'environ 5,0 % et un flux de trésorerie disponible compris entre 450 et 500 millions de dollars. Malgré une baisse des revenus liés aux équipements, la marge opérationnelle ajustée a progressé de 110 points de base pour atteindre 5,2 %.

Xerox (XRX) hat im dritten Quartal 2024 einen Umsatz von 1,53 Milliarden Dollar gemeldet, was einem Rückgang von 7,5% im Vergleich zum Vorjahr entspricht. Das Unternehmen verzeichnete einen GAAP-Nettoverlust von 1,2 Milliarden Dollar, oder 9,71 Dollar pro Aktie, einschließlich einer Abschreibung von 1,0 Milliarden Dollar auf das Firmenwert und einer Steuerbewertungserstattung von 161 Millionen Dollar. Das bereinigte Nettoergebnis betrug 34 Millionen Dollar (0,25 Dollar pro Aktie), ein Rückgang von 77 Millionen Dollar (0,46 Dollar pro Aktie) im Vorjahresvergleich.

Das Unternehmen hat die Prognosen für 2024 gesenkt und erwartet nun einen Rückgang des Umsatzes um etwa 10% in konstanter Währung, mit einer bereinigten Betriebsgewinnmarge von etwa 5,0% und einem freien Cashflow zwischen 450 und 500 Millionen Dollar. Trotz eines Rückgangs der Ausrüstungsumsätze verbesserte sich die bereinigte Betriebsgewinnmarge um 110 Basispunkte auf 5,2%.

Positive
  • Adjusted operating margin increased 110 basis points to 5.2%
  • Operating cash flow reached $116 million
  • Free cash flow of $107 million maintained
  • XFS segment profit increased 225% to $13 million
Negative
  • Revenue declined 7.5% to $1.53 billion
  • GAAP net loss of $1.2 billion ($9.71 per share)
  • $1.0 billion goodwill impairment charge
  • Adjusted EPS decreased 45.7% to $0.25
  • Lowered 2024 revenue guidance to -10%
  • Reduced 2024 operating margin guidance from 6.5% to 5.0%
  • Decreased free cash flow guidance to $450-500 million from $550 million

Insights

The Q3 results reveal significant challenges at Xerox, with revenue declining 7.5% to $1.53 billion. The most concerning aspect is the $1.2 billion GAAP net loss, largely due to a $1.0 billion goodwill impairment charge and $161 million tax valuation allowance. The adjusted figures show some resilience with $34 million in adjusted net income, though down significantly year-over-year.

The downward revision of 2024 guidance is particularly troubling, with revenue now expected to decline 10% versus the previous 5-6% forecast. The adjusted operating margin guidance reduction from 6.5% to 5.0% and lowered free cash flow expectations signal ongoing operational challenges. The abandonment of the $300 million operating income growth target by 2026 suggests deeper structural issues in the transformation strategy.

Reinvention drives increased profitability despite a challenging quarter for equipment sales; pending acquisition of ITsavvy to improve revenue mix from higher growth businesses

Financial Summary

Q3 2024

  • Revenue of $1.53 billion, down 7.5 percent, or 7.3 percent in constant currency.
  • GAAP net (loss) of $(1.2) billion, or $(9.71) per share, a decrease of $1.3 billion or $9.99 per share, year-over-year, respectively. This quarter includes an after-tax non-cash goodwill impairment charge of $1.0 billion, or $8.16 per share and a charge to tax expense related to the establishment of a valuation allowance of $161 million, or $1.29 per share.
  • Adjusted net income of $34 million, or $0.25 per share, down $43 million or $0.21 per share, year-over-year, respectively.
  • Adjusted operating margin of 5.2 percent, up 110 basis points year-over-year.
  • Operating cash flow of $116 million, down $8 million year-over-year.
  • Free cash flow of $107 million, down $5 million year-over-year.
  • Lowered 2024 revenue guidance to a decline of around 10% in constant currency, adjusted operating margin guidance to around 5.0%, and free cash flow guidance to a range of $450 to $500 million.

NORWALK, Conn.--(BUSINESS WIRE)-- Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2024 third-quarter results.

"While equipment revenue fell short of expectations, we continue to see steady progress from Reinvention initiatives taken to date. Adjusted operating income and margin grew year-over-year, and the pending acquisition of ITsavvy will improve Xerox's value proposition with clients, as well as the mix of revenue from growing businesses,” said Steve Bandrowczak, chief executive officer at Xerox. “Q3 results demonstrate no single quarter or performance metric in isolation defines our Reinvention. Operational improvements and enterprise-wide efficiencies are driving services signings momentum, improved decision-making and a sustainably lower cost base. These gains give us confidence Reinvention will enable long-term profitable growth as we continue this multi-year journey."

Third-Quarter Key Financial Results

(in millions, except per share data)

Q3 2024

 

Q3 2023

 

B/(W)

YOY

 

% Change

B/(W) YOY

Revenue

$1,528

 

$1,652

 

$(124)

 

(7.5)% AC (7.3)% CC1

Gross Margin

32.4%

 

32.4%

 

 

 

RD&E %

2.9%

 

3.1%

 

20 bps

 

 

SAG %

24.2%

 

25.2%

 

100 bps

 

 

Pre-Tax (Loss) Income2

$(1,087)

 

$64

 

$(1,151)

 

NM

Pre-Tax (Loss) Income Margin2

(71.1)%

 

3.9%

 

NM

 

 

Operating Income - Adjusted1

$80

 

$68

 

$12

 

17.6%

Operating Income Margin - Adjusted1

5.2%

 

4.1%

 

110 bps

 

 

GAAP Diluted (Loss) Earnings per Share2

$(9.71)

 

$0.28

 

$(9.99)

 

NM

Diluted Earnings Per Share - Adjusted1

$0.25

 

$0.46

 

$(0.21)

 

(45.7)%

Third-Quarter Segment Results

(in millions)

Q3 2024

 

Q3 2023

 

B/(W)
YOY

 

% Change
B/(W) YOY

Revenue

 

 

 

 

 

 

 

Print and Other

$1,457

 

$1,575

 

$(118)

 

(7.5)%

XFS

88

 

98

 

(10)

 

(10.2)%

Intersegment Elimination3

(17)

 

(21)

 

4

 

(19.0)%

Total Revenue

$1,528

 

$1,652

 

$(124)

 

(7.5)%

Profit

 

 

 

 

 

 

 

Print and Other

$67

 

$64

 

$3

 

4.7%

XFS

13

 

4

 

9

 

225.0%

Total Profit

$80

 

$68

 

$12

 

17.6%

_____________

  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. Third quarter 2024 Pre-Tax (Loss) and EPS include a pre-tax non-cash goodwill impairment charge of approximately $1.1 billion, and approximately $1.0 billion after-tax, respectively, or $8.16 per diluted share. EPS includes a tax expense charge of $161 million, or $1.29 per share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. This adjustment was excluded due to its unique nature and significant impact which is not considered part of our core operations.
  3. Reflects revenue, primarily commissions and other payments, made by the XFS segment to the Print and Other segment for the lease of Xerox equipment placements.

2024 Guidance Update

  • Revenue: from a decline of 5% to 6% in constant currency1 to a decline of around 10% in constant currency 1
  • Adjusted 1 Operating Margin: from at least 6.5% to around 5.0%
  • Free cash flow1: from at least $550 million to a range of $450 to $500 million

2024 guidance excludes any impact from the pending acquisition of ITsavvy. Revenue guidance was lowered to reflect additional reductions in non-strategic revenue and lower-than-expected equipment sales. Adjusted 1 operating income margin guidance was lowered primarily to reflect the reduction in revenue guidance. Free cash flow1 guidance was lowered to reflect the after-tax impact of lower adjusted 1 operating income margin guidance.

Due to lower-than-expected revenue in 2024, we no longer expect to grow adjusted 1 operating income $300 million above 2023 levels by 2026. However, we continue to expect growth in adjusted1 operating income and a return to double-digit adjusted1 operating income margin over the course of our Reinvention.

Non-GAAP Measures

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

  • Adjusted1 EPS, which excludes the Goodwill impairment charge and a tax expense charge related to the establishment of a valuation allowance against certain deferred tax assets, 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 1 operating income and margin, which exclude the EPS adjustments noted above, except the tax expense charge related to the establishment of a valuation allowance against certain deferred tax assets, 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 1, which is operating cash flow less capital expenditures.

_____________

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.

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, 2023. 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

September 30,

 

Nine Months Ended

September 30,

(in millions, except per-share data)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues

 

 

 

 

 

 

 

 

Sales

 

$

588

 

 

$

644

 

 

$

1,722

 

 

$

1,999

 

Services, maintenance and rentals

 

 

902

 

 

 

962

 

 

 

2,768

 

 

 

2,975

 

Financing

 

 

38

 

 

 

46

 

 

 

118

 

 

 

147

 

Total Revenues

 

 

1,528

 

 

 

1,652

 

 

 

4,608

 

 

 

5,121

 

Costs and Expenses

 

 

 

 

 

 

 

 

Cost of sales

 

 

390

 

 

 

435

 

 

 

1,117

 

 

 

1,312

 

Cost of services, maintenance and rentals

 

 

617

 

 

 

651

 

 

 

1,951

 

 

 

1,987

 

Cost of financing

 

 

26

 

 

 

30

 

 

 

82

 

 

 

100

 

Research, development and engineering expenses

 

 

45

 

 

 

52

 

 

 

144

 

 

 

173

 

Selling, administrative and general expenses

 

 

370

 

 

 

416

 

 

 

1,160

 

 

 

1,256

 

Goodwill impairment

 

 

1,058

 

 

 

 

 

 

1,058

 

 

 

 

Restructuring and related costs, net

 

 

56

 

 

 

10

 

 

 

107

 

 

 

35

 

Amortization of intangible assets

 

 

10

 

 

 

12

 

 

 

30

 

 

 

33

 

Divestitures

 

 

 

 

 

 

 

 

51

 

 

 

 

PARC Donation

 

 

 

 

 

 

 

 

 

 

 

132

 

Other expenses, net

 

 

43

 

 

 

(18

)

 

 

120

 

 

 

33

 

Total Costs and Expenses

 

 

2,615

 

 

 

1,588

 

 

 

5,820

 

 

 

5,061

 

(Loss) Income before Income Taxes(1)

 

 

(1,087

)

 

 

64

 

 

 

(1,212

)

 

 

60

 

Income tax expense

 

 

118

 

 

 

15

 

 

 

88

 

 

 

1

 

Net (Loss) Income

 

 

(1,205

)

 

 

49

 

 

 

(1,300

)

 

 

59

 

Less: Preferred stock dividends, net

 

 

(4

)

 

 

(4

)

 

 

(11

)

 

 

(11

)

Net (Loss) Income attributable to Common Shareholders

 

$

(1,209

)

 

$

45

 

 

$

(1,311

)

 

$

48

 

 

 

 

 

 

 

 

 

 

Basic (Loss) Earnings per Share

 

$

(9.71

)

 

$

0.29

 

 

$

(10.55

)

 

$

0.31

 

Diluted (Loss) Earnings per Share

 

$

(9.71

)

 

$

0.28

 

 

$

(10.55

)

 

$

0.30

 

___________________________

(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

September 30,

 

Nine Months Ended

September 30,

(in millions)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

Net (Loss) Income

 

$

(1,205

)

 

$

49

 

 

$

(1,300

)

 

$

59

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss), Net

 

 

 

 

 

 

 

 

Translation adjustments, net

 

 

192

 

 

 

(123

)

 

 

140

 

 

 

19

Unrealized gains, net

 

 

5

 

 

 

1

 

 

 

4

 

 

 

Changes in defined benefit plans, net

 

 

(24

)

 

 

55

 

 

 

18

 

 

 

14

Other Comprehensive Income (Loss), Net

 

 

173

 

 

 

(67

)

 

 

162

 

 

 

33

 

 

 

 

 

 

 

 

 

Comprehensive (Loss) Income, Net

 

$

(1,032

)

 

$

(18

)

 

$

(1,138

)

 

$

92

XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share data in thousands)

 

September 30, 2024

 

December 31, 2023

Assets

 

 

 

 

Cash and cash equivalents

 

$

521

 

 

$

519

 

Accounts receivable (net of allowance of $71 and $64, respectively)

 

 

821

 

 

 

850

 

Billed portion of finance receivables (net of allowance of $3 and $4, respectively)

 

 

50

 

 

 

71

 

Finance receivables, net

 

 

664

 

 

 

842

 

Inventories

 

 

732

 

 

 

661

 

Other current assets

 

 

223

 

 

 

234

 

Total current assets

 

 

3,011

 

 

 

3,177

 

Finance receivables due after one year (net of allowance of $68 and $88, respectively)

 

 

1,275

 

 

 

1,597

 

Equipment on operating leases, net

 

 

255

 

 

 

265

 

Land, buildings and equipment, net

 

 

225

 

 

 

266

 

Intangible assets, net

 

 

149

 

 

 

177

 

Goodwill, net

 

 

1,709

 

 

 

2,747

 

Deferred tax assets

 

 

635

 

 

 

745

 

Other long-term assets

 

 

1,063

 

 

 

1,034

 

Total Assets

 

$

8,322

 

 

$

10,008

 

Liabilities and Equity

 

 

 

 

Short-term debt and current portion of long-term debt

 

$

519

 

 

$

567

 

Accounts payable

 

 

895

 

 

 

1,044

 

Accrued compensation and benefits costs

 

 

227

 

 

 

306

 

Accrued expenses and other current liabilities

 

 

752

 

 

 

862

 

Total current liabilities

 

 

2,393

 

 

 

2,779

 

Long-term debt

 

 

2,752

 

 

 

2,710

 

Pension and other benefit liabilities

 

 

1,126

 

 

 

1,216

 

Post-retirement medical benefits

 

 

166

 

 

 

171

 

Other long-term liabilities

 

 

354

 

 

 

360

 

Total Liabilities

 

 

6,791

 

 

 

7,236

 

 

 

 

 

 

Noncontrolling Interests

 

 

10

 

 

 

10

 

 

 

 

 

 

Convertible Preferred Stock

 

 

214

 

 

 

214

 

 

 

 

 

 

Common stock

 

 

124

 

 

 

123

 

Additional paid-in capital

 

 

1,123

 

 

 

1,114

 

Retained earnings

 

 

3,570

 

 

 

4,977

 

Accumulated other comprehensive loss

 

 

(3,514

)

 

 

(3,676

)

Xerox Holdings shareholders’ equity

 

 

1,303

 

 

 

2,538

 

Noncontrolling interests

 

 

4

 

 

 

10

 

Total Equity

 

 

1,307

 

 

 

2,548

 

Total Liabilities and Equity

 

$

8,322

 

 

$

10,008

 

 

 

 

 

 

Shares of Common Stock Issued and Outstanding

 

 

124,363

 

 

 

123,144

 

XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

(in millions)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net (Loss) Income

 

$

(1,205

)

 

$

49

 

 

$

(1,300

)

 

$

59

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile Net (loss) income to Net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

59

 

 

 

63

 

 

 

177

 

 

 

189

 

Provisions

 

 

13

 

 

 

16

 

 

 

92

 

 

 

37

 

Net gain on sales of businesses and assets

 

 

(2

)

 

 

(35

)

 

 

(3

)

 

 

(37

)

Divestitures

 

 

 

 

 

 

 

 

51

 

 

 

 

PARC Donation

 

 

 

 

 

 

 

 

 

 

 

132

 

Stock-based compensation

 

 

9

 

 

 

12

 

 

 

38

 

 

 

40

 

Goodwill impairment

 

 

1,058

 

 

 

 

 

 

1,058

 

 

 

 

Restructuring and asset impairment charges

 

 

46

 

 

 

11

 

 

 

80

 

 

 

25

 

Payments for restructurings

 

 

(11

)

 

 

(9

)

 

 

(58

)

 

 

(23

)

Non-service retirement-related costs

 

 

25

 

 

 

4

 

 

 

74

 

 

 

14

 

Contributions to retirement plans

 

 

(56

)

 

 

(43

)

 

 

(114

)

 

 

(75

)

Decrease (increase) in accounts receivable and billed portion of finance receivables

 

 

50

 

 

 

(11

)

 

 

18

 

 

 

(47

)

Decrease (increase) in inventories

 

 

12

 

 

 

38

 

 

 

(136

)

 

 

50

 

Increase in equipment on operating leases

 

 

(28

)

 

 

(32

)

 

 

(78

)

 

 

(109

)

Decrease in finance receivables

 

 

97

 

 

 

83

 

 

 

496

 

 

 

490

 

Decrease (increase) in other current and long-term assets

 

 

2

 

 

 

(23

)

 

 

16

 

 

 

(8

)

Decrease in accounts payable

 

 

(55

)

 

 

 

 

 

(143

)

 

 

(290

)

Increase (decrease) in accrued compensation

 

 

15

 

 

 

23

 

 

 

(78

)

 

 

16

 

Decrease in other current and long-term liabilities

 

 

(31

)

 

 

(20

)

 

 

(83

)

 

 

(159

)

Net change in income tax assets and liabilities

 

 

108

 

 

 

(7

)

 

 

44

 

 

 

(24

)

Net change in derivative assets and liabilities

 

 

3

 

 

 

(6

)

 

 

9

 

 

 

16

 

Other operating, net

 

 

7

 

 

 

11

 

 

 

 

 

 

1

 

Net cash provided by operating activities

 

 

116

 

 

 

124

 

 

 

160

 

 

 

297

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Cost of additions to land, buildings, equipment and software

 

 

(9

)

 

 

(12

)

 

 

(27

)

 

 

(27

)

Proceeds from sales of businesses and assets

 

 

8

 

 

 

37

 

 

 

27

 

 

 

40

 

Acquisitions, net of cash acquired

 

 

 

 

 

 

 

 

 

 

 

(7

)

Other investing, net

 

 

(6

)

 

 

 

 

 

(26

)

 

 

(3

)

Net cash (used in) provided by investing activities

 

 

(7

)

 

 

25

 

 

 

(26

)

 

 

3

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Net (payments) proceeds on debt

 

 

(42

)

 

 

495

 

 

 

(7

)

 

 

(131

)

Purchases of capped calls

 

 

 

 

 

 

 

 

(23

)

 

 

 

Dividends

 

 

(36

)

 

 

(43

)

 

 

(107

)

 

 

(131

)

Payments to acquire treasury stock, including fees

 

 

 

 

 

(544

)

 

 

(3

)

 

 

(544

)

Other financing, net

 

 

4

 

 

 

(2

)

 

 

(9

)

 

 

(13

)

Net cash used in financing activities

 

 

(74

)

 

 

(94

)

 

 

(149

)

 

 

(819

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

4

 

 

 

(7

)

 

 

(12

)

 

 

(3

)

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

39

 

 

 

48

 

 

 

(27

)

 

 

(522

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

551

 

 

 

569

 

 

 

617

 

 

 

1,139

 

Cash, Cash Equivalents and Restricted Cash at End of Period

 

$

590

 

 

$

617

 

 

$

590

 

 

$

617

 

Third Quarter 2024 Overview

In the third quarter of 2024, the benefits of Reinvention drove improved financial results, albeit at a slower pace than expected. Third quarter 2024 included a second consecutive period of moderating revenue declines, year over year improvements in adjusted1 operating income and income margin, and more than 100 percent free cash flow conversion from adjusted1 operating income. Further, the pending acquisition of ITsavvy is expected to improve our mix of revenue from complementary, value-added businesses with higher underlying rates of revenue growth.

Equipment sales of $339 million in the third quarter 2024 declined 12.2% in actual and constant currency1, as compared to the third quarter 2023. The effects of fluctuations in backlog2 in the prior and current years and other Reinvention actions drove approximately 4.0-percentage points of the year-over-year decline. The remainder of the decline primarily reflects the delayed global launch of two new products, lower-than-expected improvements in sales force productivity, delays in the timing of installations associated with Hurricane Helene, unfavorable mix, and a large Production equipment sale in the prior year. Total equipment installations increased approximately 17.0% year-over-year, due to growth in entry level equipment.

Post-sale revenue of $1.2 billion declined 6.1% in actual currency, or 5.7% in constant currency1, as compared to third quarter 2023. The decline was primarily due to lower outsourcing and service revenue, intentional reductions in non-strategic revenue, and the effects of geographic simplification. Excluding non-strategic effects, post sale revenue decreased low-single digits.

Pre-tax loss of approximately $1.1 billion for the third quarter 2024 decreased by approximately $1.2 billion as compared to pre-tax income of $64 million in the third quarter 2023. Third quarter 2024 includes a pre-tax, non-cash goodwill impairment charge of $1.1 billion ($1.0 billion after-tax) or $8.16 per share. As a result of a sustained market capitalization below our book value and current results, in the third quarter 2024 we performed a quantitative assessment of Goodwill. Although operating results and related cash flows are expected to sequentially improve in the fourth quarter 2024, and in 2025, we see greater risk to our previous outlooks and estimates, at least in the near term. This impact and the resulting effect on discounted future cash flows, continues to negatively impact the Company’s valuation resulting in the goodwill impairment charge for the third quarter 2024. The decrease associated with this charge was partially offset by an increase in adjusted1 operating income.

Adjusted1 operating income increased by $12 million as compared to third quarter 2023, reflecting lower Selling, administrative and general expenses associated with actions taken to simplify our organization, partially offset by lower equipment and post sale revenue and associated gross profits.

Revenue guidance was reduced from a decline of 5% to 6% in constant currency¹ to a decline of about 10% in constant currency¹, reflecting the incremental effects of intentional reductions in non-strategic revenue and lower equipment revenue associated with the delayed global launch of two new products and lower-than-expected improvements in sales force productivity.

The reduction in adjusted1 operating income guidance, from at least 6.5% to around 5.0%, reflects the effects of gross profit declines associated with the decline in revenue guidance, and to a lesser extent, delays in the implementation of certain cost reduction initiatives to 2025.

Free cash flow1 guidance was reduced from at least $550 million to a range of $450 million to $500 million, reflecting the after-tax effects of the reduction in adjusted1 operating income guidance.

Due to lower-than-expected revenue in 2024, we no longer expect to grow adjusted1 operating income $300 million above 2023 levels by 2026. However, we continue to expect growth in adjusted1 operating income and a return to double-digit adjusted1 operating income margin over the course of our Reinvention.

__________

(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

September 30,

 

 

 

 

 

% of Total Revenue

(in millions)

 

 

2024

 

 

 

2023

 

 

%

Change

 

CC % Change

 

2024

 

 

2023

 

Equipment sales

 

$

339

 

 

$

386

 

 

(12.2

)%

 

(12.2

)%

 

22

%

 

23

%

Post sale revenue

 

 

1,189

 

 

 

1,266

 

 

(6.1

)%

 

(5.7

)%

 

78

%

 

77

%

Total Revenue

 

$

1,528

 

 

$

1,652

 

 

(7.5

)%

 

(7.3

)%

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to Condensed Consolidated Statements of (Loss) Income:

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

588

 

 

$

644

 

 

(8.7

)%

 

(8.3

)%

 

 

 

 

Less: Supplies, paper and other sales

 

 

(249

)

 

 

(258

)

 

(3.5

)%

 

(2.3

)%

 

 

 

 

Equipment Sales

 

$

339

 

 

$

386

 

 

(12.2

)%

 

(12.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services, maintenance and rentals

 

$

902

 

 

$

962

 

 

(6.2

)%

 

(6.1

)%

 

 

 

 

Add: Supplies, paper and other sales

 

 

249

 

 

 

258

 

 

(3.5

)%

 

(2.3

)%

 

 

 

 

Add: Financing

 

 

38

 

 

 

46

 

 

(17.4

)%

 

(17.6

)%

 

 

 

 

Post Sale Revenue

 

$

1,189

 

 

$

1,266

 

 

(6.1

)%

 

(5.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segments

 

 

 

 

 

 

 

 

 

 

 

 

Print and Other

 

$

1,457

 

 

$

1,575

 

 

(7.5

)%

 

 

 

95

%

 

95

%

XFS

 

 

88

 

 

 

98

 

 

(10.2

)%

 

 

 

6

%

 

6

%

Intersegment elimination (1)

 

 

(17

)

 

 

(21

)

 

(19.0

)%

 

 

 

(1

)%

 

(1

)%

Total Revenue(2)

 

$

1,528

 

 

$

1,652

 

 

(7.5

)%

 

 

 

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 XFS segment, to the Print and Other segment for the lease of Xerox equipment placements.
(2) Refer to Appendix II, Reportable Segments, 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

September 30,

(in millions)

 

 

2024

 

 

 

2023

 

 

B/(W)

 

Gross Profit

 

$

495

 

 

$

536

 

 

$

(41

)

 

RD&E

 

 

45

 

 

 

52

 

 

 

7

 

 

SAG

 

 

370

 

 

 

416

 

 

 

46

 

 

 

 

 

 

 

 

 

 

Equipment Gross Margin

 

 

28.5

%

 

 

31.0

%

 

 

(2.5

)

pts.

Post sale Gross Margin

 

 

33.5

%

 

 

32.9

%

 

 

0.6

 

pts.

Total Gross Margin

 

 

32.4

%

 

 

32.4

%

 

 

 

pts.

RD&E as a % of Revenue

 

 

2.9

%

 

 

3.1

%

 

 

0.2

 

pts.

SAG as a % of Revenue

 

 

24.2

%

 

 

25.2

%

 

 

1.0

 

pts.

 

 

 

 

 

 

 

 

Pre-tax (Loss) Income

 

$

(1,087

)

 

$

64

 

 

$

(1,151

)

 

Pre-tax (Loss) Income Margin

 

 

(71.1

)%

 

 

3.9

%

 

 

(75.0

)

pts.

 

 

 

 

 

 

 

 

Adjusted(1) Operating Income

 

$

80

 

 

$

68

 

 

$

12

 

 

Adjusted(1) Operating Income Margin

 

 

5.2

%

 

 

4.1

%

 

 

1.1

 

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

September 30,

(in millions)

 

 

2024

 

 

 

2023

 

Non-financing interest expense

 

$

31

 

 

$

14

 

Interest income

 

 

(3

)

 

 

(3

)

Non-service retirement-related costs

 

 

25

 

 

 

4

 

Gains on sales of business and assets

 

 

(2

)

 

 

(35

)

Currency losses, net

 

 

2

 

 

 

6

 

Tax Indemnification - Conduent

 

 

 

 

 

(7

)

Transaction and related costs, net

 

 

(15

)

 

 

 

All other expenses, net

 

 

5

 

 

 

3

 

Other expenses, net

 

$

43

 

 

$

(18

)

Segment Review

 

 

Three Months Ended September 30,

(in millions)

 

External Revenue

 

Intersegment Revenue(1)

 

Total Segment Revenue

 

% of Total Revenue

 

Segment Profit

 

Segment Margin(2)

2024

 

 

 

 

 

 

 

 

 

 

 

 

Print and Other

 

$

1,440

 

$

17

 

$

1,457

 

94

%

 

$

67

 

4.7

%

XFS

 

 

88

 

 

 

 

88

 

6

%

 

 

13

 

14.8

%

Total

 

$

1,528

 

$

17

 

$

1,545

 

100

%

 

$

80

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

Print and Other

 

$

1,554

 

$

21

 

$

1,575

 

94

%

 

$

64

 

4.1

%

XFS

 

 

98

 

 

 

 

98

 

6

%

 

 

4

 

4.1

%

Total

 

$

1,652

 

$

21

 

$

1,673

 

100

%

 

$

68

 

4.1

%

_____________

(1) Reflects revenue, primarily commissions and other payments, made by the XFS 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

September 30,

 

 

(in millions)

 

 

2024

 

 

2023

 

%

Change

Equipment sales

 

$

335

 

$

381

 

(12.1

)%

Post sale revenue

 

 

1,105

 

 

1,173

 

(5.8

)%

Intersegment revenue (1)

 

 

17

 

 

21

 

(19.0

)%

Total Print and Other Revenue

 

$

1,457

 

$

1,575

 

(7.5

)%

_____________

(1) Reflects revenue, primarily commissions and other payments, made by the XFS segment to the Print and Other segment for the lease of Xerox equipment placements.

Detail by product group is shown below.

 

 

Three Months Ended

September 30,

 

 

 

 

 

% of Equipment Sales

(in millions)

 

 

2024

 

 

2023

 

%

Change

 

CC % Change

 

2024

 

 

2023

 

Entry

 

$

53

 

$

56

 

(5.4

)%

 

(4.4

)%

 

16

%

 

15

%

Mid-range

 

 

224

 

 

260

 

(13.8

)%

 

(13.4

)%

 

66

%

 

67

%

High-end

 

 

57

 

 

67

 

(14.9

)%

 

(15.1

)%

 

17

%

 

17

%

Other

 

 

5

 

 

3

 

66.7

%

 

66.7

%

 

1

%

 

1

%

Equipment Sales (1),(2)

 

$

339

 

$

386

 

(12.2

)%

 

(12.2

)%

 

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, for definitions.
(2) Includes equipment sales related to the XFS segment of $4 million and $5 million for the third quarter 2024 and 2023, respectively.

Xerox Financial Services

Xerox Financial Services (XFS), represents a global financing solutions business, primarily enabling the sale of our equipment and services.

Revenue

 

 

Three Months Ended

September 30,

 

 

(in millions)

 

 

2024

 

 

2023

 

%

Change

Equipment sales

 

$

4

 

$

5

 

(20.0

)%

Financing

 

 

38

 

 

46

 

(17.4

)%

Other Post sale revenue (1)

 

 

46

 

 

47

 

(2.1

)%

Total XFS Revenue

 

$

88

 

$

98

 

(10.2

)%

_____________

(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, 2023. 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 third quarter 2024 presentation slides available at www.xerox.com/investor.

Adjusted Earnings Measures

  • Adjusted Net Income and Earnings per share (Adjusted 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.

Transaction and related costs, net: Transaction and related costs, net are costs and expenses primarily associated with certain major or significant strategic M&A projects. These costs are primarily for third-party legal, accounting, consulting and other similar type professional services as well as potential legal settlements that may arise in connection with those M&A transactions. These costs are considered incremental to our normal operating charges and were incurred or are expected to be incurred solely as a result of the planned transactions. Accordingly, we are excluding these expenses from our Adjusted Earnings Measures in order to evaluate our performance on a comparable basis.

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
  • Tax Indemnification - Conduent
  • Deferred Tax Asset Valuation Allowance

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 above 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.

Adjusted Gross Profit and Margin

We calculate non-GAAP gross Profit and Margin by excluding the inventory impact related to the exit of certain Production Print manufacturing operations, included in Cost of services, maintenance and rentals.

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 September 30,

 

 

2024

 

2023

(in millions, except per share amounts)

 

Net
(Loss)
Income

 

Diluted
EPS

 

Net
Income

 

Diluted
EPS

Reported(1)

 

$

(1,205

)

 

$

(9.71

)

 

$

49

 

 

$

0.28

Adjustments:

 

 

 

 

 

 

 

 

Goodwill impairment

 

 

1,058

 

 

 

 

 

 

 

 

Restructuring and related costs, net

 

 

56

 

 

 

 

 

10

 

 

 

Amortization of intangible assets

 

 

10

 

 

 

 

 

12

 

 

 

Non-service retirement-related costs

 

 

25

 

 

 

 

 

4

 

 

 

Transaction and related costs, net

 

 

(15

)

 

 

 

 

 

 

 

Tax Indemnification - Conduent

 

 

 

 

 

 

 

(7

)

 

 

Deferred tax asset valuation allowance

 

 

161

 

 

 

 

 

 

 

Income tax (benefit) on Goodwill impairment

 

 

(43

)

 

 

 

 

 

 

 

Income tax on adjustments(2)

 

 

(13

)

 

 

 

 

9

 

 

 

Adjusted

 

$

34

 

 

$

0.25

 

 

$

77

 

 

$

0.46

 

 

 

 

 

 

 

 

 

Dividends on preferred stock used in adjusted EPS calculation(3)

 

 

 

$

4

 

 

 

 

$

4

Weighted average shares for adjusted EPS(3)

 

 

 

 

126

 

 

 

 

 

159

Fully diluted shares at end of period(4)

 

 

 

 

126

 

 

 

 

 

_____________

(1) Net (Loss) Income and EPS. Third quarter 2024 Net (Loss) and EPS include an after-tax non-cash goodwill impairment charge of approximately $1.0 billion (approximately $1.1 billion pre-tax), or $8.16 per share. In addition, third quarter 2024 includes a tax expense charge of $161 million, or $1.29 per share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. This adjustment was excluded due to its unique nature and significant impact which is not considered part of our core operations.
(2) Refer to Adjusted Effective Tax Rate reconciliation
(3) 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.
(4) Common shares outstanding at September 30, 2024, plus potential dilutive common shares used for the calculation of adjusted diluted EPS for the third quarter 2024. Excludes shares associated with our Series A convertible preferred stock, which were anti-dilutive for the third quarter 2024 and 2023, respectively.

Adjusted Effective Tax Rate reconciliation

 

 

Three Months Ended September 30,

 

 

2024

 

2023

(in millions)

 

Pre-Tax (Loss) Income

 

Income Tax Expense

 

Effective Tax Rate

 

Pre-Tax Income

 

Income Tax Expense

 

Effective Tax

Rate

Reported(1)

 

$

(1,087

)

 

$

118

 

 

(10.9

)%

 

$

64

 

$

15

 

 

23.4

%

Goodwill impairment

 

 

1,058

 

 

 

43

 

 

 

 

 

 

 

 

 

 

Deferred tax asset valuation allowance(2)

 

 

 

 

 

(161

)

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments(3)

 

 

76

 

 

 

13

 

 

 

 

 

19

 

 

(9

)

 

 

Adjusted(4)

 

$

47

 

 

$

13

 

 

27.7

%

 

$

83

 

$

6

 

 

7.2

%

_____________

(1) Pre-tax (loss) income and income tax expense. Third quarter 2024 Pre-Tax (Loss) includes a non-cash goodwill impairment charge of approximately $1.1 billion (approximately $1.0 billion after-tax).

(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 September 30,

 

 

2024

 

2023

(in millions)

 

(Loss)

Profit

 

Revenue

 

Margin

 

 

Profit

 

Revenue

 

Margin

Reported(1)

 

$

(1,205

)

 

$

1,528

 

 

 

$

49

 

 

$

1,652

 

 

Income tax expense

 

 

118

 

 

 

 

 

 

 

15

 

 

 

 

 

Pre-tax (loss) income

 

$

(1,087

)

 

$

1,528

 

(71.1

)%

 

$

64

 

 

$

1,652

 

3.9

%

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill impairment

 

 

1,058

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and related costs, net

 

 

56

 

 

 

 

 

 

 

10

 

 

 

 

 

Amortization of intangible assets

 

 

10

 

 

 

 

 

 

 

12

 

 

 

 

 

Other expenses, net (2)

 

 

43

 

 

 

 

 

 

 

(18

)

 

 

 

 

Adjusted

 

$

80

 

 

$

1,528

 

5.2

%

 

$

68

 

 

$

1,652

 

4.1

%

_____________

(1) Net (Loss) Income. Third quarter 2024 Net (Loss) includes an after-tax non-cash goodwill impairment charge of approximately $1.0 billion (approximately $1.1 billion pre-tax), or $8.16 per share. In addition, third quarter 2024 includes a tax expense charge of $161 million, or $1.29 per share, related to the establishment of a valuation allowance against certain deferred tax assets to reflect their realizability. This adjustment was excluded due to its unique nature and significant impact which is not considered part of our core operations.

(2) Includes non-service retirement-related costs.

Free Cash Flow reconciliation

 

 

Three Months Ended

September 30,

(in millions)

 

2024

 

2023

Reported(1)

 

$

116

 

$

124

Less: capital expenditures

 

 

9

 

 

12

Free Cash Flow

 

$

107

 

$

112

_____________

(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)

 

~ $(1,170)

 

~ $6,200

 

~ (19.0)%

Adjustments:

 

 

 

 

 

 

Goodwill impairment

 

1,058

 

 

 

 

Restructuring and related costs, net

 

110

 

 

 

 

Amortization of intangible assets

 

40

 

 

 

 

Other expenses, net

 

272

 

 

 

 

Adjusted (4)

 

~ $310

 

~ $6,200

 

~ 5.0%

_____________

(1) Pre-tax (loss) and Revenue
(2) Full-year revenue estimated to decline around 10% in constant currency.
(3) See "Constant Currency" in the Non-GAAP Financial Measures section for a description of constant currency.
(4) Adjusted pre-tax income reflects the adjusted operating margin guidance of around 5.0%.

Free Cash Flow

(in millions)

 

FY 2024

Operating Cash Flow (1)

 

$490 - $540

Less: capital expenditures

 

40

Free Cash Flow

 

$450 - $500

_____________

(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

September 30,

 

Nine Months Ended

September 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Basic (Loss) Earnings per Share:

 

 

 

 

 

 

 

 

Net (Loss) Income

 

$

(1,205

)

 

$

49

 

 

$

(1,300

)

 

$

59

 

Accrued dividends on preferred stock

 

 

(4

)

 

 

(4

)

 

 

(11

)

 

 

(11

)

Adjusted net (loss) income available to common shareholders

 

$

(1,209

)

 

$

45

 

 

$

(1,311

)

 

$

48

 

Weighted average common shares outstanding

 

 

124,344

 

 

 

157,132

 

 

 

124,149

 

 

 

156,914

 

 

 

 

 

 

 

 

 

 

Basic (Loss) Earnings per Share

 

$

(9.71

)

 

$

0.29

 

 

$

(10.55

)

 

$

0.31

 

 

 

 

 

 

 

 

 

 

Diluted (Loss) Earnings per Share:

 

 

 

 

 

 

 

 

Net (Loss) Income

 

$

(1,205

)

 

$

49

 

 

$

(1,300

)

 

$

59

 

Accrued dividends on preferred stock

 

 

(4

)

 

 

(4

)

 

 

(11

)

 

 

(11

)

Adjusted net (loss) income available to common shareholders

 

$

(1,209

)

 

$

45

 

 

$

(1,311

)

 

$

48

 

Weighted average common shares outstanding

 

 

124,344

 

 

 

157,132

 

 

 

124,149

 

 

 

156,914

 

Common shares issuable with respect to:

 

 

 

 

 

 

 

 

Stock Options

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock and performance shares

 

 

 

 

 

1,761

 

 

 

 

 

 

1,305

 

Convertible preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted weighted average common shares outstanding

 

 

124,344

 

 

 

158,893

 

 

 

124,149

 

 

 

158,219

 

 

 

 

 

 

 

 

 

 

Diluted (Loss) Earnings per Share

 

$

(9.71

)

 

$

0.28

 

 

$

(10.55

)

 

$

0.30

 

 

 

 

 

 

 

 

 

 

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

 

 

155

 

 

 

245

 

 

 

155

 

 

 

245

 

Restricted stock and performance shares

 

 

7,973

 

 

 

5,233

 

 

 

7,973

 

 

 

5,688

 

Convertible preferred stock

 

 

6,742

 

 

 

6,742

 

 

 

6,742

 

 

 

6,742

 

Convertible notes

 

 

19,196

 

 

 

 

 

 

19,196

 

 

 

 

Total Anti-Dilutive Securities

 

 

34,066

 

 

 

12,220

 

 

 

34,066

 

 

 

12,675

 

 

 

 

 

 

 

 

 

 

Dividends per Common Share

 

$

0.25

 

 

$

0.25

 

 

$

0.75

 

 

$

0.75

 

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 Xerox Financial Services (XFS) (formerly 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 Digital and 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 XFS 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 XFS 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.

Media Contact:

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



Investor Contact:

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

Source: Xerox Holdings Corporation

FAQ

What was Xerox (XRX) revenue in Q3 2024?

Xerox reported revenue of $1.53 billion in Q3 2024, representing a 7.5% decline year-over-year.

Why did Xerox (XRX) stock report a large loss in Q3 2024?

Xerox reported a $1.2 billion net loss primarily due to a $1.0 billion goodwill impairment charge and a $161 million tax valuation allowance charge.

What is Xerox (XRX) revised revenue guidance for 2024?

Xerox lowered its 2024 revenue guidance to expect a decline of around 10% in constant currency.

How much was Xerox (XRX) adjusted operating margin in Q3 2024?

Xerox's adjusted operating margin was 5.2% in Q3 2024, up 110 basis points year-over-year.

Xerox Holdings Corporation

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