Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q2 2020 Earnings Presentation
26 slides from Xerox's earnings presentation, Jul 28, 2020
Slide 1: Earnings Presentation Q2 2020 Results
Earnings Presentation Q2 2020 RESULTS I JULY 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: Q2 2020 Key Financial Measures
Q2 2020 Key Financial Measures Adj1 Earnings Per Share Revenue ($B) Adj1 Operating Margin $0.79 12.4% $2.3 $1.5 4.2% $0.15 2020 2019 2020 2019 2020 2019 GAAP EPS $0.11 $0.60 2020 % Change: (35.3)% @ AC, (34.6)% @ CC1 Free Cash Flow1 ($M) Shareholder Returns ($M) $260 $60 $197 $15 $57 2020 2019 2020
Slide 4: 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 5: Frequently Asked Questions
Frequently Asked Questions Do you expect long-term impacts What actions have you taken to What areas are you investing in Have your capital allocation to your business as a result of the mitigate the impact of revenue that could improve your longer- priorities changed for 2020? Will COVID-19 pandemi
Slide 6: Financial Results Summary
Financial Results Summary (in millions, except per share data) Q2 B/(W) % Change P&L Measures 2020 YOY YOY P&L Ratios Q2 2020 B/(W) YOY (35.3)% AC $1,465 $(798) Gross Margin 38.5% (60) bps Revenue (34.6)% CC1 Operating Income – Adjusted1 $62 $(218) (77.9)% RD&E % 5.2% (130) bps Other Expenses, net $
Slide 7: Cash Flow
Cash Flow (in millions) Q2 2020 Q2 2019 Pre-tax Income $ 35 $ 190 Non-cash add-backs1 133 195 Restructuring Payments (17) (21) Pension Contributions (31) (36) Working Capital, net2 (47) 21 Change in Finance Assets3 74 (4) Other4 (113) (69) Cash from Operations $ 34 $ 276 Cash used in Investing $(18)
Slide 8: Revenue
Revenue B/(W) YOY Equipment Revenue (in millions) Q2 2020 % Mix AC CC1 1% 11% 21% Equipment $ 310 21% (38.5)% (38.0)% Post Sale $1,155 79% (34.3)% (33.6)% Entry Mid-Range Total Revenue $1,465 100% (35.3)% (34.6)% High-End Americas 990 68% (34.2)% (33.6)% Other 67% EMEA 428 29% (39.6)% (38.5)% Other2
Slide 9: 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% 12.4% 12.0% Achieved ~$640M of Gross Savings in 2019 10.5% 11.0% 4.7% 4.2% 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Transaction Currency Impact • Project Own I
Slide 10: Capital Structure
Capital Structure Debt and Cash ($B) 6/30/2020 12/31/2019 Leverage Total Debt $4.0 $4.3 • Maintain 7:1 debt to equity leverage ratio on $3.4B of finance assets as of 6/30/2020 Less: Finance Debt $(3.0) $(3.3) • Paid down $313M bond in May with cash on hand and Core Debt $1.0 $1.0 effectively refinan
Slide 11: Q2 2020 Summary and Wrap Up
Q2 2020 Summary and Wrap Up Q2 2020 Results Revenue: $1.47B, down 34.6% at CC1 Free Cash Flow:1 $15M, down 94% ($245M) year-over-year Adjusted1 Operating Margin: 4.2%, a decrease of 820 basis Capital Allocation: Returned $57M to shareholders in points year-over-year dividends Adjusted1 EPS: $0.15, d
Slide 12: Appendix
@ xerox Appendix
Slide 13: Operating Trends – Continuing Operations
Operating Trends – Continuing Operations 2017 2018 2019 2020 (in millions, except EPS) FY FY Q1 Q2 Q3 Q4 FY Q1 Q2 Total Revenue $9,991 $9,662 $2,180 $2,263 $2,179 $2,444 $9,066 $1,860 $1,465 % Change (4.3)% (3.3)% (8.4)% (8.3)% (5.8)% (2.2)% (6.2)% (14.7)% (35.3)% CC1 % Change (4.3)% (4.0)% (6.0)% (
Slide 14: Non-GAAP Financial Measures
Non-GAAP Financial Measures 14 —
Slide 15: 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 16: Non-GAAP Financial Measures (cont'd)
Non-GAAP Financial Measures (cont’d) • Transaction and related costs, net: Transaction and related costs, net are costs and expenses primarily associated with certain strategic M&A projects including our announced proposal to acquire HP Inc., which was terminated in March 2020, and our planned trans
Slide 17: 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 income and margin amounts. In addition to the costs and expenses noted as adjustments for our Adjusted Earnings measures, adj
Slide 18: Net Income and EPS reconciliation
Net Income and EPS reconciliation Three Months Ended Three Months Ended June 30, 2020 June 30, 2019 Net Net (in millions, except per share amounts) Income EPS Income EPS Reported(1) $ 27 $ 0.11 $ 141 $ 0.60 Adjustments: Restructuring and related costs 3 37 Amortization of intangible assets 10 11 Tra
Slide 19: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended June 30, 2020 June 30, 2019 Pre-Tax Income Tax Effective Pre-Tax Income Tax Effective (in millions) Income Expense Tax Rate Income Expense Tax Rate Reported(1) $ 35 $ 8 22.9% $ 190 $ 50 26.3% Non-GAAP Adjustments(2) 12 3 62 17 A
Slide 20: Operating Income / Margin reconciliation
Operating Income / Margin reconciliation Three Months Ended Three Months Ended June 30, 2020 June 30, 2019 (in millions) Profit Revenue Margin Profit Revenue Margin Reported (1) $ 35 $ 1,465 2.4% $ 190 $ 2,263 8.4% Adjustments: Restructuring and related costs 3 37 Amortization of intangible assets 1
Slide 21: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended June 30, (in millions) 2020 2019 Change Reported (1) $ 34 $ 276 $ (242) Capital expenditures (19) (16) (3) Free Cash Flow $ 15 $ 260 $ (245) ____________________ (1) Net cash provided by operating activities of continuing operations. 21 —
Slide 22: Other Expenses, Net reconciliation
Other Expenses, Net reconciliation Three Months Ended June 30, (in millions) 2020 2019 Reported $ 7 $ 38 Less: Non-service retirement-related costs (8) 10 Adjusted $ 15 $ 28 22 —
Slide 23: Net Income (Loss) and EPS reconciliation – historical
Net Income (Loss) and EPS reconciliation – historical Year Ended Year Ended Year Ended December 31, 2017 Q3-18 Q4-18 December 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 December 31, 2019 Q1-20 Net Net Net Net Net Net Net Net Net Net (Loss) (in millions, except per share amounts) Income EPS Income EPS Income E
Slide 24: Operating Income / Margin reconciliation – historical
Operating Income / Margin reconciliation – historical Year Ended Year Ended Year Ended Decem ber 31, 2017 Q3-18 Q4-18 Decem ber 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 Decem ber 31, 2019 Q1-20 (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profi
Slide 25: 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 Q1-20 (in millions, except per share amounts) Reported (1) $ (249) $ 1,082 $ 222 $ 276 $ 348 $ 398 $ 1,244 $ 173 Incremental Voluntary contributio
Slide 26: © 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.