Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q1 2020 Earnings Presentation
27 slides from Xerox's earnings presentation, Apr 28, 2020
Slide 1: Earnings Presentation Q1 2020 Results
Earnings Presentation Q1 2020 RESULTS I APRIL 28, 2020
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: Q1 2020 Key Financial Measures
Q1 2020 Key Financial Measures Adj1 Earnings Per Share Revenue ($B) Adj1 Operating Margin $0.66 11.0% $2.2 $1.9 4.7% $0.21 2020 2019 2020 2019 2020 2019 GAAP (Loss) EPS $(0.03) $0.34 2020 % Change: (14.7)% @ AC, (13.9)% @ CC1 Free Cash Flow1 ($M) Shareholder Returns ($M) $207 $150 $62 $103 $58 2020
Slide 4: First-Quarter Impact from COVID-19
First-Quarter Impact from COVID-19 ~96% ~50% ~$100M ~$60M of countries where Xerox operates decrease in page volumes during the of lower revenues due to bad debt charge recorded had partial or full lockdowns March timeframe delayed installs during the quarter Countries with partial or full lockdowns
Slide 5: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox • Continuously improve operating model for greater efficiency Optimize operations • Further optimize the supply chain and supplier competitiveness for simplicity • Leverage digital technologies to make it easier to work with Xerox • Enhance the customer exper
Slide 6: Frequently Asked Questions
Frequently Asked Questions What is the impact of COVID-19 What is the status of Project Own What is your longer term revenue What are your capital allocation on your three-year plan? It and your cost-saving trajectory in light of COVID-19? priorities for the balance of 2020? initiatives? We finished
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) Q1 B/(W) % Change P&L Measures 2020 YOY YOY P&L Ratios Q1 2020 B/(W) YOY (14.7)% AC $1,860 $(320) Gross Margin 38.3% (190) bps Revenue (13.9)% CC Operating Income – Adjusted1 $87 $(152) (63.6)% RD&E % 4.5% (30) bps Other Expenses, net $2
Slide 8: Cash Flow
Cash Flow (in millions) Q1 2020 Q1 2019 Pre-tax (Loss)/Income $ (5) $ 73 Non-cash add-backs1 237 244 Restructuring Payments (35) (33) Pension Contributions (33) (34) Working Capital, net2 91 (42) Change in Finance Assets3 61 51 Other4 (143) (37) Cash from Operations $ 173 $ 222 Cash used in Investin
Slide 9: Revenue
Revenue B/(W) YOY Equipment Revenue (in millions) Q1 2020 % Mix AC CC1 1% 20% 12% Equipment $ 325 17% (27.5)% (27.0)% Post Sale $1,535 83% (11.4)% (10.5)% Entry Mid-Range Total Revenue $1,860 100% (14.7)% (13.9)% High-End Americas 1,239 67% (12.1)% (11.8)% Other 67% EMEA 575 31% (19.2)% (17.6)% Othe
Slide 10: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It Contribution: 16.8% Target at least $450M of Gross Savings in 2020 14.1% 10.7% 12.4% 12.0% Achieved ~$640M of Gross Savings in 2019 10.5% 11.0% 9.8% 4.7% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 • Project Own It is a multi- Tra
Slide 11: Capital Structure
Capital Structure Debt and Cash ($B) 3/31/2020 12/31/2019 Leverage Total Debt $4.3 $4.3 Less: Finance Debt $(3.0) $(3.3) Maintain 7:1 debt to equity leverage ratio on $3.5B of Core Debt $1.3 $1.0 finance assets as of 3/31/2020 Less: Cash1 $(2.7) $(2.8) Net Core Cash $(1.4) $(1.8) Debt Maturity Ladde
Slide 12: Q1 2020 Summary and Wrap Up
Q1 2020 Summary and Wrap Up Q1 2020 Results Revenue: $1.86B, down 13.9% at CC1 Free Cash Flow:1 $150M, down 28% ($57M) year-over-year Adjusted1 Operating Margin: 4.7%, a decrease of 630 basis Capital Allocation: Returned $58M to shareholders in points year-over-year dividends (39% of Q1 Free Cash Fl
Slide 13: Appendix
@ xerox Appendix
Slide 14: Operating Trends – Continuing Operations
Operating Trends – Continuing Operations 2017 2018 2019 2020 (in millions) FY FY Q1 Q2 Q3 Q4 FY Q1 Total Revenue $9,991 $9,662 $2,180 $2,263 $2,179 $2,444 $9,066 $1,860 % Change (4.3)% (3.3)% (8.4)% (8.3)% (5.8)% (2.2)% (6.2)% (14.7)% CC1 % Change (4.3)% (4.0)% (6.0)% (6.7)% (4.7)% (1.6)% (4.7)% (13
Slide 15: Non-GAAP Financial Measures
Non-GAAP Financial Measures 15 —
Slide 16: 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 unders
Slide 17: Non-GAAP Financial Measures (cont’d)
Non-GAAP Financial Measures (cont’d) • Transaction and related costs, net: Transaction and related costs, net are expenses incurred in connection with i) our announced proposal to acquire HP Inc. and ii) our planned transaction with Fujifilm/Fuji Xerox, which was terminated in May 2018, inclusive of
Slide 18: Non-GAAP Financial Measures (cont’d)
Non-GAAP Financial Measures (cont’d) Adjusted Operating Income/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 measur
Slide 19: Net (Loss) Income and EPS reconciliation
Net (Loss) Income and EPS reconciliation Three Months Ended Three Months Ended March 31, 2020 March 31, 2019 Net (Loss) Net Income (in millions, except per share amounts) Income EPS EPS Reported(1) $ (2) $ (0.03) $ 84 $ 0.34 Adjustments: Restructuring and related costs 41 112 Amortization of intangi
Slide 20: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended March 31, 2020 March 31, 2019 Pre-Tax Income Tax Pre-Tax Income Tax (Loss) (Benefit) Effective (Loss) (Benefit) Effective (in millions) Income Expense Tax Rate Income Expense Tax Rate Reported(1) $ (5) $ (1) 20.0% $ 73 $ (10) (1
Slide 21: Operating Income / Margin reconciliation
Operating Income / Margin reconciliation Three Months Ended Three Months Ended March 31, 2020 March 31, 2019 (in millions) (Loss) Profit Revenue Margin Profit Revenue Margin Reported (1) $ (5) $ 1,860 (0.3)% $ 73 $ 2,180 3.3% Adjustments: Restructuring and related costs 41 112 Amortization of intang
Slide 22: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended March 31, (in millions) 2020 2019 Change Reported (1) $ 173 $ 222 $ (49) Capital expenditures (23) (15) (8) Free Cash Flow $ 150 $ 207 $ (57) ____________________ (1) Net cash provided by operating activities of continuing operations. 22 —
Slide 23: Other Expenses, Net – Adjusted reconciliation
Other Expenses, Net – Adjusted reconciliation Three Months Ended March 31, (in millions) 2020 2019 Other Expenses, net - as reported $ 23 $ 39 Less: Non-service retirement-related costs 1 13 Less: Contract termination costs - IT services 3 - Other Expenses, net - as adjusted $ 19 $ 26 23 —
Slide 24: Net Income and EPS reconciliation – historical
Net Income and EPS reconciliation – historical Year Ended Year Ended Year Ended December 31, 2017 December 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 December 31, 2019 Net Net Net Net Net Net Net (in millions, except per share amounts) Income EPS Income EPS Income EPS Income EPS Income EPS Income EPS Income E
Slide 25: Operating Income / Margin reconciliation – historical
Operating Income / Margin reconciliation – historical Year Ended Year Ended Year Ended Decem ber 31, 2017 Decem ber 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 Decem ber 31, 2019 (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit R
Slide 26: Free Cash Flow reconciliation – historical
Free Cash Flow reconciliation – historical Year Ended Year Ended Year Ended December 31, December 31, December 31, 2017 2018 Q1-19 Q2-19 Q3-19 Q4-19 2019 (in millions, except per share amounts) Reported (1) $ (249) $ 1,082 $ 222 $ 276 $ 348 $ 398 $ 1,244 Incremental Voluntary contributions to U.S. d
Slide 27: © 2020 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation
© 2020 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.