Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q4 2020 Earnings Presentation
28 slides from Xerox's earnings presentation, Jan 26, 2021
Slide 1: Earnings Presentation Q4 2020 Results
Earnings Presentation Q4 2020 RESULTS I JANUARY 26, 2021
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: Full Year 2020 Key Financial Measures
Full Year 2020 Key Financial Measures Adj1 Earnings Per Share Revenue ($B) Adj1 Operating Margin $3.55 13.1% $9.1 $7.0 $1.41 6.6% 2020 2019 2020 2019 2020 2019 GAAP EPS $0.84 $2.78 2020 % Change: (22.5)% @ AC, (22.7)% @ CC1 Free Cash Flow1 ($M) Shareholder Returns ($M) $1,179 $243 $474 $230 $300 $60
Slide 4: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox • Continuously improve operating model for greater efficiency Optimize operations • Invest further in robotic process automation, augmented reality and analytics to drive efficiencies for simplicity • Reduce complexity and choice around billing and offerings
Slide 5: Frequently Asked Questions
Frequently Asked Questions Do you expect long-term What has changed that makes What structural changes are Have your capital allocation impacts to your business as a you confident in your guidance you making to help drive priorities changed for 2021? result of the COVID-19 for 2021? growth? pandemic
Slide 6: Financial Results Summary
Financial Results Summary (in millions, except per share data) Q4 B/(W) % Change P&L Measures 2020 YOY YOY P&L Ratios Q4 2020 B/(W) YOY (21.0)% AC Revenue $ 1,930 $ (514) Gross Margin 36.2% (540) bps (22.3)% CC1 Operating Income – $ 184 $ (227) (55.2)% RD&E % 3.9% (10) bps Adjusted1 Other Expenses,
Slide 7: Cash Flow
Cash Flow (in millions) Q4 2020 FY 2020 Pre-tax Income $ 103 $ 252 Non-cash add-backs1 180 672 Restructuring Payments (18) (81) Pension Contributions (42) (139) Working Capital, net2 123 112 Change in Finance Assets3 (70) 65 Other4 (41) (333) Cash from Operations $ 235 $ 548 Cash used in Investing $
Slide 8: Revenue
Revenue B/(W) YOY Q4 Equipment Revenue 2% 12% Q4 Q4 Q4 22% (in millions) % Mix 2020 2020 2020 AC CC1 Entry Mid-Range Equipment $ 510 26% (17.2)% (18.8)% High-End Post Sale $1,420 74% (22.3)% (23.5)% Other 64% Total Revenue $1,930 100% (21.0)% (22.3)% Americas 1,208 63% (22.6)% (22.5)% Installs3 B/(W
Slide 9: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It Contribution: 16.8% Achieved $450M of Gross Savings in 2020 14.1% 12.4% 12.0% Achieved ~$1.4B of Gross Savings since late 2018 10.5% 11.0% 9.5% 7.4% 4.7% 4.2% 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Transaction Currency I
Slide 10: Capital Structure
Capital Structure Debt and Cash ($B) 12/31/2020 12/31/2019 Leverage Total Debt $ 4.4 $ 4.3 • Maintain 7:1 debt to equity leverage ratio on $3.5B of Xerox Financial Services (XFS) assets as of 12/31/2020 Less: Finance Debt (3.0) (3.3) • Prepaid $1.1B of bonds due May 2021 with combination of Core Deb
Slide 11: 2021 Guidance
2021 Guidance Full Year Guidance Revenue (CC)1 At least $7.2B, ~2.5% growth Free Cash Flow 1 At least $500M Shareholder Returns At least 50% of annual Free Cash Flow1 In 2021, our four strategic initiatives—optimize operations for simplicity, drive revenue, reenergize the innovation engine and focus
Slide 12: Appendix
© xerox Appendix
Slide 13: Operating Trends – Continuing Operations
Operating Trends – Continuing Operations 2018 2019 2020 (in millions, except EPS) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Total Revenue $9,662 $2,180 $2,263 $2,179 $2,444 $9,066 $1,860 $1,465 $1,767 $1,930 $7,022 % Change (3.3)% (8.4)% (8.3)% (5.8)% (2.2)% (6.2)% (14.7)% (35.3)% (18.9)% (21.0)% (22.5)% CC1
Slide 14: Impact of OEM License Agreement between Xerox and Fuji Xerox
Impact of OEM License Agreement between Xerox and Fuji Xerox In November 2019, Xerox Holdings Corporation completed a series of transactions to restructure its relationship with FUJIFILM Holdings Corporation (“FH”), including the sale of its indirect 25% equity interest in Fuji Xerox (“FX”) for appr
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 costs and expenses primarily associated with certain strategic M&A projects. These costs are primarily for third-party legal, accounting, consulting and other similar type professional s
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 income and margin amounts. In addition to the costs and expenses noted as adjustments for our Adjusted Earnings measures, adj
Slide 19: Net Income and EPS reconciliation
Net Income and EPS reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Net Net Net Net (in millions, except per share amounts) Income EPS Income EPS Income EPS Income EPS Reported(1) $ 77 $ 0.36 $ 266 $ 1.
Slide 20: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Pre-Tax Income Effective Pre-Tax Income Effective Pre-Tax Income Effective Pre-Tax Income Effective (in millions) Income Tax Tax Rate
Slide 21: Operating Income / Margin reconciliation
Operating Income / Margin reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Reported (1) $ 103 $ 1,93
Slide 22: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended Year Ended December 31, December 31, (in millions) 2020 2019 Change 2020 2019 Change Reported (1) $ 235 $ 398 $ (163) $ 548 $ 1,244 $ (696) Capital expenditures (14) (17) 3 (74) (65) (9) Free Cash Flow $ 221 $ 381 $ (160) $ 474 $ 1,179 $ (705) _______
Slide 23: Other Expenses, Net reconciliation
Other Expenses, Net reconciliation Three Months Ended Year Ended December 31, December 31, (in millions) 2020 2019 2020 2019 Reported $ 30 $ 8 $ 45 $ 84 Less: Non-service retirement-related costs (9) (3) (29) 18 Less: Contract termination costs – IT services - (4) 3 (12) Less: Loss on early extingui
Slide 24: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2021 Operating Cash Flow(1) At least $ 600 Less: capital expenditures (100) Free Cash Flow At least $ 500 ___________________________ (1)Net cash provided by operating activities from continuing operations. 24 —
Slide 25: Net Income (Loss) and EPS reconciliation – historical
Net Income (Loss) and EPS reconciliation – historical Year Ended Year Ended Q3-18 Q4-18 December 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 December 31, 2019 Q1-20 Q2-20 Q3-20 Net Net Net Net Net Net Net Net Net (Loss) Net Net (in millions, except per share amounts) Income EPS Income EPS Income EPS Income EPS
Slide 26: Operating Income / Margin reconciliation – historical
Operating Income / Margin reconciliation – historical Year Ended Year Ended Q3-18 Q4-18 Decem ber 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 Decem ber 31, 2019 Q1-20 Q2-20 Q3-20 (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin P
Slide 27: Free Cash Flow reconciliation – historical
Free Cash Flow reconciliation – historical Year Ended Year Ended December 31, December 31, 2018 Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20 Q2-20 Q3-20 (in millions, except per share amounts) Reported (1) $ 1,082 $ 222 $ 276 $ 348 $ 398 $ 1,244 $ 173 $ 34 $ 106 Capital expenditures (90) (15) (16) (17) (17) (
Slide 28: © 2021 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation
© 2021 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.