Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q4 2013 Earnings Presentation
31 slides from Xerox's earnings presentation, Jan 24, 2014
Slide 1: Fourth-Quarter 2013 Earnings Presentation
Fourth-Quarter 2013 Earnings Presentation Ursula Burns Chairman & CEO Kathy Mikells Chief Financial Officer January 24, 2014
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to id
Slide 3: Xerox Direction
Xerox Direction • Services driven revenue growth Annuity 83% • Differentiated portfolio, analytics enabled of Total Revenue • Customer and employee focused Services 55% of Total Revenue • Profitability in-line with industry best • Shareholder centered capital allocation 3
Slide 4: Fourth-Quarter Overview
Fourth-Quarter Overview Adjusted EPS1 of 29 cents, GAAP EPS2 of 25 cents Total revenue of $5.6B, down 3%, 4% CC1 Services revenue flat; margin of 9.6% – Revenue growth in-line with guidance; good signings growth – Focus on margin improvement continues Document Technology revenue down 6%; margin of 1
Slide 5: Earnings
Earnings (in millions, except per share data) Q4 2013 FY 2013 Comments FY Services grew 3%, Document Technology Revenue $ 5,569 $ 21,435 declined 6% Gross Margin 30.7% 31.0% RD&E $ 153 $ 601 SAG $ 1,037 $ 4,137 SAG % of Revenue 18.6% 19.3% Adjusted Operating Income1 $ 519 $ 1,910 Student loan run-of
Slide 6: Services Segment
Services Segment Q4 % B/(W) YOY FY % B/(W) YOY (in millions) 2013 Act Cur CC1 2013 Act Cur CC1 Revenue in-line with expectations $3,039 Flat (1)% $11,859 3% 3% BPO down 3%, impacted by student loan run-off Total Revenue and lack of inorganic contribution Segment Profit $291 (15)% $1,157 (1)% ITO up
Slide 7: Document Technology Segment
Document Technology Segment Q4 % B/(W) YOY FY % B/(W) YOY (in millions) 2013 Act Cur CC1 2013 Act Cur CC1 Revenue down mid-single digits Positive U.S. and High-end results, developing Total Revenue $2,351 (6)% (6)% $8,908 (6)% (6)% markets weaker Segment Profit $274 (11)% $966 (9)% Continued strong
Slide 8: Cash Flow
Cash Flow (in millions) Q4 2013 FY 2013 Net Income $ 311 $ 1,179 Depreciation and amortization 346 1,358 • Cash From Ops ~$1B in Q4, $2.4B FY Restructuring and asset impairment charges 56 116 Restructuring payments (29) (136) • Underlying Cash from Ops2 $2.1B FY Contributions to defined benefit pens
Slide 9: Balance Sheet and Capital Allocation
Balance Sheet and Capital Allocation 2014 Guidance Common Dividend Increase (in billions) Current New2 Cash from Ops $1.8 - $2.0 CAPEX $(0.5) Quarterly Dividend / share 5.75 cents 6.25 cents Free Cash Flow1 $1.3 - $1.5 Share Repurchase >$0.5 Annual Dividend amount ~$300M ~$300M Acquisitions <$0.5 Di
Slide 10: Summary
Summary 2013 Progress – Addressing Services headwinds; signings and renewal rates positive – Document Technology trend stable; improving share while managing cost Focused on executing our strategy in 2014 – Implementing our five plank strategy to improve Services growth and profitability – Continue
Slide 11: Q&A
Q&A
Slide 12: Xerox Direction
Xerox Direction • Services driven revenue growth Annuity 83% • Differentiated portfolio, analytics enabled of Total Revenue • Customer and employee focused Services 55% of Total Revenue • Profitability in-line with industry best • Shareholder centered capital allocation 12
Slide 13: Appendix
Appendix
Slide 14: Revenue Trend
Revenue Trend 2011 2012 2013 (not Restated) (Restated) (Restated) Pro - (in millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY forma3 Total Revenue1 $ 22,626 $5,331 $5,368 $5,275 $5,763 $21,737 $5,202 5,402 5,262 $5,569 $21,435 Growth 5% 2% 1% (1)% (2)% (1)% (1)% (2)% 1% Flat (3)% (1)% CC2 Growth 3% Flat 2%
Slide 15: Segment Revenue Trend
Segment Revenue Trend 2011 2012 2013 (not Restated) (Restated) (Restated) Pro - (in millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY forma3 Services $10,837 $2,821 $2,806 $2,847 $3,054 $11,528 $2,920 $2,956 $2,944 $3,039 $11,859 Growth 12% 6% 9% 5% 5% 7% 6% 4% 5% 3% Flat 3% CC2 Growth 11% 5% 10% 7% 6% 7%
Slide 16: Metrics Reference
Metrics Reference Signings and Renewal Rate Install, MIF and Page Growth FY Entry Installs FY A4 Mono MFDs (20)% Business Process Outsourcing $8.9 A4 Color MFDs 24% Color Printers 5% Document Outsourcing $3.3 Mid-Range Installs Mid-Range B&W MFDs (3)% Information Technology Outsourcing $1.0 Mid-Rang
Slide 17: Underlying Cash Flow
Underlying Cash Flow Estimated (in billions) 2011 2012 2013 2014 Operating Cash Flow (OCF) $2.0 $2.6 $2.4 $1.8 - $2.0 Adjustments: Cash From F/R Sales - ($0.6) ($0.6) - Impact from prior F/R Sales 1 - - $0.3 $0.4 Underlying OCF2 $2.0 $2.0 $2.1 $2.2 - $2.4 1Represents cash that would have been collec
Slide 18: 2014 Guidance
2014 Guidance 2014 Revenue Growth @ CC Flat to up 2% Revenue dynamics continue Services Mid-single digit growth - Services a larger portion of the total Document Technology Mid-single digit decline - Document Technology trend stable to improving Adjusted EPS1 (incl restructuring) $1.10 - $1.16 GAAP
Slide 19: Discontinued Operations Summary
Discontinued Operations Summary Three Months Ended Year Ended December 31, December 31, (in millions) 2013 2012 2013 2012 Revenues * $ 34 $ 160 $ 403 $ 653 (Loss) income from operations $ (2) $ 1 $ 3 $ 16 Loss on disposal (2) - (25) - Net (loss) income before income taxes (4) 1 (22) 16 Income tax ex
Slide 20: Discontinued Operations Restatement Summary
Discontinued Operations Restatement Summary Detailed below is the restatement for Other Segment and Total Segment results by quarter for 2013 and 2012 related to the movement of the North American and European Paper business to Discontinued Operations. The entire restated income statement for these
Slide 21: Non-GAAP Measures
Non-GAAP Measures
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures “Adjusted Earnings Measures”: To better understand the trends in our business, we believe it is necessary to adjust the following amounts determined in accordance with GAAP to exclude the effects of certain items as well as their related income tax effects. • Net income a
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures “Constant Currency”: 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.” Currenc
Slide 24: Q4 and FY GAAP EPS to Adjusted EPS Track
Q4 and FY GAAP EPS to Adjusted EPS Track Three Months Ended Three Months Ended December 31, 2013 December 31, 2012 (in millions; except per share amounts) Net Income EPS Net Income EPS Reported(1) $ 310 $ 0.25 $ 334 $ 0.26 Adjustments: Amortization of intangible assets 51 0.04 51 0.04 Adjusted $ 361
Slide 25: GAAP EPS to Adjusted EPS Guidance Track
GAAP EPS to Adjusted EPS Guidance Track Earnings Per Share Guidance Q1 2014 FY 2014 GAAP EPS from Continuing Operations $0.19 - $0.21 $0.93 - $0.99 Adjustments: Amortization of intangible assets 0.04 0.17 Adjusted EPS $0.23 - $0.25 $1.10 - $1.16 Note: GAAP and Adjusted EPS guidance includes anticipa
Slide 26: Q4 and FY Adjusted Operating Income/Margin
Q4 and FY Adjusted Operating Income/Margin Three Months Ended Three Months Ended December 31, 2013 December 31, 2012 (in millions) Profit Revenue Margin Profit Revenue Margin (1) Reported pre-tax income $ 345 $ 5,569 6.2% $ 366 $ 5,763 6.4% Adjustments: Amortization of intangible assets 83 82 Xerox
Slide 27: Q4 and FY Adjusted Other, net
Q4 and FY Adjusted Other, net Three Months Ended Three Months Ended (in millions) December 31, 2013 December 31, 2012 Other expenses, net - Reported $ 35 $ 71 Adjustments: Xerox restructuring charge 56 91 Net income attributable to noncontrolling interests 5 8 Other expenses, net - Adjusted $ 96 $ 1
Slide 28: Q4 and FY Adjusted Effective Tax Rate
Q4 and FY Adjusted Effective Tax Rate Three Months Ended Three Months Ended December 31, 2013 December 31, 2012 Income Effective Income Pre-Tax Tax Tax Pre-Tax Tax Effective (in millions) Income Expense Rate Income Expense Tax Rate Reported(1) $ 345 $ 73 21.2% $ 366 $ 71 19.4% Adjustments: Amortizat
Slide 29: Q4 and FY Free Cash Flow
Q4 and FY Free Cash Flow Three Months Ended Three Months Ended (in millions) December 31, 2013 December 31, 2012 Cash Flow from Operations $ 968 $ 1,773 Additions to land, buildings and equipment (93) (105) Additions to internal use software (18) (25) Free Cash Flow $ 857 $ 1,643 Year Ended Year End
Slide 30: Q4 and FY Services Revenue Breakdown
Q4 and FY Services Revenue Breakdown Three Months Ended December 31, Year Ended December 31, (in millions) 2013 2012 Change 2013 2012 Change Business Processing Outsourcing $ 1,803 $ 1,853 (3%) $ 7,160 $ 7,061 1% Document Outsourcing 889 856 4% 3,337 3,210 4% Information Technology Outsourcing 397 3
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