Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q2 2023 Earnings Presentation
29 slides from Xerox's earnings presentation, Jul 25, 2023
Slide 1: Earnings Presentation Q2 2023 Results
Earnings Presentation Q2 2023 Results July 25, 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: Q2 2023 Key Financial Measures
Q2 2023 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $1.75 $1.75 6.1% $88 2.0% $(98) 2022 2023 2022 2023 2022 2023 Operating 2023 % Change: 0.4% @ AC, 0.5% @ CC1 Cash Flow $(85) $95 Revenue Trend ($M) Adj1 Earnings Per Share Shareholder Returns ($M) $2,000 $0.44 $1,
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: Strategic Initiatives Provide Foundation for Growth
Strategic Initiatives Provide Foundation for Growth Stability and Focus Growth Operating Discipline Financial Discipline Print, Digital and IT Services • Institutionalized the productivity • Greater focus on product and • Leverage trust, institutional platform instilled by Project service profitabil
Slide 6: Frequently Asked Questions
Frequently Asked Questions How has the demand outlook for Xerox print equipment and services evolved in the past three months? Demand for our products and services remains resilient amid a dynamic macroeconomic backdrop. Consistent with recent quarters, we see Macro / isolated pockets of softer inst
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) B/(W) % Change P&L Measures Q2 2023 YOY YOY P&L Ratios Q2 2023 B/(W) YOY 0.4% AC Revenue $ 1,754 $ 7 Gross Margin 34.0% 210 bps 0.5% CC1 Operating Income – $ 107 $ 72 206% RD&E % 3.2% 160 bps Adjusted1 Other Expenses, net – $ 17 $ (9) (1
Slide 8: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) Q2 $1.94 (in millions) % Total AC CC1 $1.75 $1.75 $1.72 $1.75 2023 Equipment $420 24% 14.8% 14.3% Post Sale $1,334 76% (3.4)% (3.2)% Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Total Revenue $1,754 100% 0.4% 0.5% Installs3 B/(W) YOY Americas 1,154 66% 0.3% 0.7% Co
Slide 9: Cash Flow
Cash Flow (in millions) Q2 2023 Q2 2022 Pre-tax (Loss) ($89) ($5) 1 Non-Cash Add-Backs 119 116 Restructuring Payments (8) (14) Pension Contributions (15) (34) 2 Working Capital, net (248) (65) 3 Change in Finance Assets 210 (35) PARC donation 132 - One-time contract termination payment - (41) Other4
Slide 10: Segment Results
Segment Results Revenue and Profit Q2 2023 B/(W) YoY Print & Intersegm ent Print & (in m illions) Other FITTLE Elim inations 1 Total Xerox Other FITTLE Total Xerox Total Revenue $ 1,674 $ 101 $ (21) $ 1,754 Total Revenue 0.1% 5.2% 0.4% Segm ent Profit $ 107 $ - $ - $ 107 Segm ent Profit 269% NM 206%
Slide 11: Capital Structure
Capital Structure Debt and Cash Senior Unsecured Debt Maturity Ladder ($B) (in billions) Q2 2023 Q1 2023 $0.75 $0.75 Total Debt ($3.12) ($3.28) Less: Financing Allocated Debt $2.60 $2.83 $0.30 $0.35 $0.25 Core Debt ($0.52) ($0.45) 1 Less: Cash $0.57 $0.70 Net Core Cash $0.05 $0.25 2023 2024 2025 202
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 Gu
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 Total Revenue $7,038 $1,668 $1,747 $1,751 $1,941 $7,107 $1,715 $1,754 % Change 0.2% (2.5)% (2.6)% (0.4)% 9.2% 1.0% 2.8% 0.4% CC 1 % Change (1.4)% (0.7)% 1.1% 4.7% 13.9% 4.8% 5.5% 0.5% Adj1 Operating Margin 5.3% (0.2)%
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 June 30, 2023 June 30, 2022 Net (Loss) Diluted Net (Loss) Diluted (in millions, except per share amounts) Income EPS Income EPS Reported (1) $ (61) $ (0.41) $ (4) $ (0.05) Adjustments: PARC donation 132 - Restructuring
Slide 20: Adjusted Effective Tax Rate Reconciliation
Adjusted Effective Tax Rate Reconciliation Three Months Ended Three Months Ended June 30, 2023 June 30, 2022 Pre-Tax Income Tax Pre-Tax (Loss) (Benefit) Effective Tax (Loss) Income Tax Effective Tax (in millions) Income Expense Rate Income Expense Rate (1) Reported $ (89) $ (28) 31.5% $ (5) $ 1 (20.
Slide 21: Adjusted Operating Income and Margin Reconciliation
Adjusted Operating Income and Margin Reconciliation Three Months Ended Three Months Ended June 30, 2023 June 30, 2022 (in millions) (Loss) Profit Revenue Margin (Loss) Profit Revenue Margin (1) Reported $ (89) $ 1,754 (5.1)% $ (5) $ 1,747 (0.3)% Adjustments: Restructuring and related costs, net 23 1
Slide 22: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Three Months Ended June 30, (in millions) 2023 2022 (1) Reported $ 95 $ (85) Less: capital expenditures 7 13 Free Cash Flow $ 88 $ (98) (1) Net cash provided b y operating activities. 22
Slide 23: Other Expenses, net Reconciliation
Other Expenses, net Reconciliation Three Months Ended June 30, (in millions) 2023 2022 Reported $ 31 $ 8 Less: non-service retirement-related costs 11 (4) Less: Loss on early extinguishment of debt 3 4 Adjusted $ 17 $ 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 Net Net Net Net (Loss) Net (Loss) (Loss) Net (Loss) Net (in millions, except per share amounts) Incom e EPS Loss EPS Incom e EPS Incom e EPS Incom e EPS Inc
Slide 25: Adjusted Operating Income (Loss) 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 Q1-23 (Loss) (Loss) (Loss) (Loss) (Loss) (in millions) Profit Revenue Margin Loss Revenue Margin Profit Revenue Margin Profit Revenue Margin Profi
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 (1) Reported $629 $66 ($85) ($8) $186 $159 $78 Less: capital expenditures 68 16 13 10 18 57 8 Free Cash Flow $561 $50 ($98) ($18) $168 $102 $70 Add: one-ti
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 ~$7,100 ~1.8% Adjustments: PARC donation 132 Restructuring and related costs, net 75 Amortization of intangible assets 40 Other expenses, net 40 (4) Adjusted ~$410 ~$7,100 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.