Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q3 2023 Earnings Presentation
29 slides from Xerox's earnings presentation, Oct 24, 2023
Slide 1: Earnings Presentation Q3 2023 Results
Earnings Presentation Q3 2023 Results October 24, 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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”, “
Slide 3: Q3 2023 Key Financial Measures
Q3 2023 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $1.75 4.1% $112 $1.65 3.7% $(18) 2022 2023 2022 2023 2022 2023 Operating 2023 % Change: (5.7)% @ AC, (7.4)% @ CC1 Cash Flow $(8) $124 Revenue Trend ($M) Adj1 Earnings Per Share Shareholder Returns3 ($M) $2,000 $0.
Slide 4: Xerox Priorities for 2023
Xerox Priorities for 2023 Employ a holistic, client-centric approach to deliver essential products Client Success and services that address the productivity challenges of a hybrid workplace and distributed workforce Implement a more flexible cost base and operating model to expand Focus on Profitabi
Slide 5: Xerox Reinvention
Xerox Reinvention Operational simplification and strategic repositioning of our business, enabling sustainable growth in profit and free cash flow¹ through an expansion of services that address clients’ most challenging workplace productivity needs. Simplification Reposition for Growth Financial Obj
Slide 6: Frequently Asked Questions
Frequently Asked Questions To what extent did the decline in revenue in Q3 reflect changes in macroeconomic conditions? The decline in revenue was largely anticipated and driven primarily by declines in cyclical, transactional post sale items. Equipment revenue declined only slightly, reflecting sta
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) B/(W) % Change P&L Measures Q3 2023 YOY YOY P&L Ratios Q3 2023 B/(W) YOY (5.7)% AC Revenue $ 1,652 $ (99) Gross Margin 32.4% 60 bps (7.4)% CC1 Operating Income – $ 68 $ 3 5% RD&E % 3.1% 110 bps Adjusted1 Other Expenses, net – $ (21) $ 29
Slide 8: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) Q3 $1.94 (in millions) % Total AC CC1 $1.75 $1.72 $1.75 $1.65 2023 Equipment $386 23% (1.0)% (2.1)% Post Sale $1,266 77% (7.0)% (9.0)% Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Total Revenue $1,652 100% (5.7)% (7.4)% Installs³ and CC¹ revenue B/(W) YOY Americas
Slide 9: Cash Flow
Cash Flow (in millions) Q3 2023 Q3 2022 Pre-tax Income (Loss) $63 ($380) 1 Non-Cash Add-Backs 71 90 Non-Cash Goodwill Impairment, Net of Tax - 395 Restructuring Payments (9) (17) Pension Contributions (43) (34) Working Capital, net 2 27 (14) Change in Finance Assets3 51 (54) Other4 (36) 6 Cash provi
Slide 10: Segment Results
Segment Results Revenue and Profit Q3 2023 B/(W) YoY Print & Intersegm ent Print & (in m illions) Other FITTLE Elim inations 1 Total Xerox Other FITTLE Total Xerox Total Revenue $ 1,575 $ 98 $ (21) $ 1,652 Total Revenue (6.0)% 0.0% (5.7)% Segm ent Profit $ 64 $ 4 $ - $ 68 Segm ent Profit 1.6% 100.0%
Slide 11: Capital Structure
Capital Structure Debt and Cash Senior Unsecured Debt Maturity Ladder² ($B) (in billions) Q3 2023 Q2 2023 $0.75 $0.75 Total Debt ($3.61) ($3.12) Less: Financing Allocated Debt $2.49 $2.60 $0.30 $0.35 $0.25 Core Debt ($1.12) ($0.52) 1 Less: Cash $0.62 $0.57 Net Core Debt ($0.50) $0.05 2023 2024 2025
Slide 12: 2023 Full-Year Guidance and Capital Allocation
2023 Full-Year Guidance and Capital Allocation Guidance • Revenue growth: Flat, to down low-single digits in constant currency • Adjusted1 Operating Margin: 5.5% to 6.0% • Free Cash Flow1: At least $600 million Capital Allocation Policy • Shareholder Returns: At least 50% of annual Free Cash Flow1 G
Slide 13: Appendix
Appendix 13
Slide 14: Operating Trends
Operating Trends 2021 2022 2023 (in millions, except EPS) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Total Revenue $7,038 $1,668 $1,747 $1,751 $1,941 $7,107 $1,715 $1,754 $1,652 % Change 0.2% (2.5)% (2.6)% (0.4)% 9.2% 1.0% 2.8% 0.4% (5.7)% CC 1 % Change (1.4)% (0.7)% 1.1% 4.7% 13.9% 4.8% 5.5% 0.5% (7.4)% Adj1 Opera
Slide 15: 2023 Segment Reporting Change
2023 Segment Reporting Change 2022 2023 Q1 Q2 Q3 Q4 Full Year Q1 Segment Revenues As Reported Print and Other $ 1,550 $ 1,633 $ 1,641 $ 1,843 $ 6,667 $ 1,613 FITTLE 158 151 150 151 610 154 (1) Intersegment revenue (40) (37) (40) (53) (170) (52) Total External Revenue $ 1,668 $ 1,747 $ 1,751 $ 1,941
Slide 16: 2023 Segment Reporting Change (continued)
2023 Segment Reporting Change (continued) 2022 2023 Q1 Q2 Q3 Q4 Full Year Q1 Segment Profit/(Loss) As Reported Print and Other $ (20) $ 18 $ 57 $ 183 $ 238 $ 106 FITTLE 17 17 8 (5) 37 12 Total $ (3) $ 35 $ 65 $ 178 $ 275 $ 118 Change Print and Other $ 9 $ 11 $ 6 $ (6) $ 20 $ (6) FITTLE (9) (11) (6)
Slide 17: Non-GAAP Financial Measures
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 under
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Operating Income (Loss) and Margin We calculate and utilize adjusted operating income (loss) and margin measures by adjusting our reported pre-tax income (loss) and margin amounts. In addition to the costs and expenses noted as adjustments for our adjusted earnin
Slide 19: Adjusted Net Income and EPS Reconciliation
Adjusted Net Income and EPS Reconciliation Three Months Ended Three Months Ended September 30, 2023 September 30, 2022 Net Diluted Net (Loss) Diluted (in millions, except per share amounts) Income EPS Income EPS (1) Reported $ 49 $ 0.28 $ (383) $ (2.48) Adjustments: Goodwill Impairment - 412 Restruc
Slide 20: Adjusted Effective Tax Rate Reconciliation
Adjusted Effective Tax Rate Reconciliation Three Months Ended Three Months Ended September 30, 2023 September 30, 2022 Income Tax Pre-Tax Pre-Tax (Benefit) Effective Tax (Loss) Income Tax Effective Tax (in millions) Income Expense Rate Income Expense Rate Reported(1) $ 63 $ 15 23.8% $ (380) $ 3 -0.8
Slide 21: Adjusted Operating Income and Margin Reconciliation
Adjusted Operating Income and Margin Reconciliation Three Months Ended Three Months Ended September 30, 2023 September 30, 2022 (in millions) Profit Revenue Margin (Loss) Profit Revenue Margin Reported (1) $ 63 $ 1,652 3.8% $ (380) $ 1,751 (21.7)% Adjustments: Goodwill impairment - 412 Restructuring
Slide 22: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Three Months Ended September 30, (in millions) 2023 2022 Reported (1) $ 124 $ (8) Less: capital expenditures 12 10 Free Cash Flow $ 112 $ (18) (1) Net cash provided b y (used in) operating activities. 22
Slide 23: Other Expenses, net Reconciliation
Other Expenses, net Reconciliation Three Months Ended September 30, (in millions) 2023 2022 Reported $ (17) $ 1 Less: non-service retirement-related costs 4 (7) Adjusted $ (21) $ 8 23
Slide 24: Net Income (Loss) and EPS Reconciliation - Historical
Net Income (Loss) and EPS Reconciliation - Historical Year Ended Year Ended Decem ber 31, 2021 Q1-22 Q2-22 Q3-22 Q4-22 Decem ber 31, 2022 Q1-23 Q2-23 Net Net Net Net Net (Loss) Net (Loss) (Loss) Net (Loss) Net (Loss) (in millions, except per share amounts) Incom e EPS Loss EPS Incom e EPS Incom e EP
Slide 25: Adjusted Operating Income and Margin Reconciliation - Historical
Adjusted Operating Income (Loss) and Margin Reconciliation - Historical Year Ended Year Ended December 31, 2021 Q1-22 Q2-22 Q3-22 Q4-22 December 31, 2022 (Loss) (Loss) (Loss) (Loss) (Loss) (in millions) Profit Revenue Margin Loss Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Reve
Slide 26: Free Cash Flow Reconciliation – Historical
Free Cash Flow Reconciliation – Historical Year Ended Year Ended (in millions) December 31, 2021 Q1-22 Q2-22 Q3-22 Q4-22 December 31, 2022 Q1-23 Q2-23 (1) Reported $629 $66 ($85) ($8) $186 $159 $78 $95 Less: capital expenditures 68 16 13 10 18 57 8 7 Free Cash Flow $561 $50 ($98) ($18) $168 $102 $70
Slide 27: Adjusted Operating Income and Margin – Guidance
Adjusted Operating Income and Margin – Guidance FY 2023 (in millions) Profit (2, 3) Margin Revenue (CC) (1) Estimated ~$125 ~$7,000 ~1.8% Adjustments: PARC donation 132 Restructuring and related costs, net 65 Amortization of intangible assets 40 Other expenses, net 40 (4) Adjusted ~$400 ~$7,000 5.5-
Slide 28: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2023 (1) Operating Cash Flow At least $650 Less: capital expenditures 50 Free Cash Flow At least $600 (1)Net cash provided by operating activities. 28
Slide 29: © 2022 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation
© 2022 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.