Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q2 2024 Earnings Presentation
29 slides from Xerox's earnings presentation, Jul 25, 2024
Slide 1: Earnings Presentation Q2 2024 Results
Earnings Presentation Q2 2024 Results July 25, 2024
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 2024 Key Financial Measures
Q2 2024 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $1.75 $115 $1.58 6.1% 5.4% $88 2023 2024 2023 2024 2023 2024 Operating 2024 % Change: (10.0)% @ AC, (9.6)% @ CC1 Cash Flow $95 $123 Revenue Trend ($M) Adj1 Earnings Per Share Shareholder Returns ($M) $2,000 $0.44
Slide 4: Strategic Priorities for 2024
Strategic Priorities for 2024 • Re-align products, services and distribution with the needs of economic buyers of today’s hybrid workplace Strengthen Core • Business unit-led operating model to drive incremental Print, Digital and IT services penetration with existing and prospective clients Busines
Slide 5: Reinvention: Financial Algorithm
Reinvention: Financial Algorithm Savings Unlocks and Q2 Progress Estimated Gross Cost Savings Estimated Revenue Mix Shift Geographic Simplification 2023 2026/2027 • Transitioned Ecuador/Peru to indirect distribution model • Evaluating optimal mix of direct versus indirect distribution, by country, a
Slide 6: Frequently Asked Questions
Frequently Asked Questions Did you experience any lingering effects of disruption in Q2 associated with the organizational model changes made in Q1? We are confident any disruption to sales associated with the recent change in operating model was transitory and confined to Q1. Our sales organization
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) B/(W) % Change P&L Measures Q2 2024 YOY YOY P&L Ratios Q2 2024 B/(W) YOY (10.0)% AC Gross Margin – Revenue $ 1,578 $ (176) 33.5% (50) bps (9.6)% CC1 Adjusted1 Operating Income – 85 (22) (21)% RD&E % 3.2% 0 bps Adjusted1 Other Expenses, n
Slide 8: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) Q2 (in millions) % Total AC CC1 $1.75 $1.65 $1.77 2024 $1.50 $1.58 Equipment $356 23% (15.2)% (14.9)% Post Sale $1,222 77% (8.4)% (7.9)% Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Total Revenue $1,578 100% (10.0)% (9.6)% Q2 Installs & CC¹ Equipment Revenue B/(W)
Slide 9: Cash Flow
Cash Flow (in millions) Q2 2024 Q2 2023 Pre-tax Income (Loss) $25 ($89) 1 Non-Cash Add-Backs 123 119 Restructuring Payments (31) (8) Pension Contributions (27) (15) Working Capital, net 2 (133) (248) 3 Change in Finance Assets 161 210 PARC Donation - 132 4 Other 5 (6) Cash provided by Operations 123
Slide 10: Segment Results
Segment Results Revenue and Profit Q2 2024 B/(W) YoY Print & Intersegm ent Print & (in m illions) Other XFS1 Elim inations 2 Total Xerox Other XFS1 Total Xerox Total Revenue $ 1,508 $ 89 $ (19) $ 1,578 Total Revenue (10)% (12)% (10)% Segm ent Profit $ 81 $ 4 $ - $ 85 Segm ent Profit (24)% NM (21)% S
Slide 11: Capital Structure
Capital Structure Debt and Cash Debt Maturity Ladder³ ($M) $844 $805 (in billions) Q2 2024 Q1 2024 $55 Total Debt ($3.3) ($3.6) $344 Less: Financing Allocated Debt $2.0 $2.2 $517 Core Debt ($1.3) ($1.4) $129 $400 $350 Less: Cash1 $750 $0.6 $0.8 $250 Net Core Debt ($0.7) ($0.6) $500 $388 $67 $64 $55
Slide 12: Reinvention: Financial Implications
Reinvention: Financial Implications Estimated Reinvention Gross Cost Savings Targeted Reinvention Outcomes (2026)* Adjusted1 EPS: >$3.00 Adjusted1 EBITDA: >$900 million Cumulative FCF1: >$1.5 billion (2024-2026) *Financial outcomes above assume $300 million of adjusted¹ operating income improvement
Slide 13: 2024 Full-Year Guidance
2024 Full-Year Guidance Guidance • Revenue: Decline of 5% to 6% in constant currency1 • Adjusted1 Operating Margin: At least 6.5% • Free Cash Flow1: At least $550 million Revenue: Assumes growing Print demand and growth in Digital and IT Services in the second half of the year. The guided decline in
Slide 14: Appendix
Appendix 14
Slide 15: Operating Trends
Operating Trends 2022 2023 2024 (in millions, except EPS) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Total Revenue $7,107 $1,715 $1,754 $1,652 $1,765 $6,886 $1,502 $1,578 % Change 1.0% 2.8% 0.4% (5.7)% (9.1)% (3.1)% (12.4)% (10.0)% CC 1 % Change 4.8% 5.5% 0.5% (7.4)% (10.6)% (3.3)% (13.2)% (9.6)% Adj1 Operating Margin
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 under
Slide 17: Non-GAAP Financial Measures
Non-GAAP Financial Measures • Accelerated share vesting - in connection with the passing of Xerox Holdings Corporation’s former CEO. • Loss on early extinguishment of debt • Tax Indemnification – Conduent • Inventory-related impact - exit of certain Production Print manufacturing operations • Divest
Slide 18: Adjusted Net (Loss) Income and EPS Reconciliation
Adjusted Net (Loss) Income and EPS Reconciliation FY-22 Q1-23 Q2-23 Q3-23 Q4-23 FY-23 Q1-24 Q2-24 Net Net Net Net (Loss) Net (Loss) Net (Loss) Net (Loss) Net (in millions, except per share amounts) Incom e EPS Incom e EPS Incom e EPS Incom e EPS Incom e EPS Incom e EPS Incom e EPS Incom e EPS Report
Slide 19: Adjusted Effective Tax Rate Reconciliation
Adjusted Effective Tax Rate Reconciliation Q2-24 Q2-23 Pre-Tax Income Tax Pre-Tax Income Tax Effective Tax (Loss) (Benefit) Effective Tax (in millions) Income Expense Rate Income Expense Rate Reported(1) $ 25 $ 7 28.0% $ (89) $ (28) 31.5% PARC Donation (2) - - 132 40 Non-GAAP Adjustments (2) 30 7 47
Slide 20: Adjusted Gross Profit and Margin Reconciliation
Adjusted Gross Profit and Margin Reconciliation (in millions) Q2-24 Q2-23 (1) Revenue $ 1,578 $ 1,754 Cost of revenue (1) 1,058 1,157 Gross Profit and Margin 520 33.0% 597 34.0% Adjustment: Inventory-related impact - exit of certain Production Print manufacturing operations 8 - Adjusted Gross Profit
Slide 21: Adjusted Operating Income and Margin Reconciliation
Adjusted Operating Income and Margin Reconciliation FY-22 Q1-23 Q2-23 Q3-23 Q4-23 FY-23 (Loss) (Loss) (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Reported (1) $ (322) $ 7,107 $ 71 $ 1,715 $ (
Slide 22: Adjusted Operating Income and Margin Reconciliation (continued)
Adjusted Operating Income and Margin Reconciliation (continued) Q1-24 Q2-24 (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Reported (1) $ (113) $ 1,502 $ 18 $ 1,578 Income tax (benefit) expense (37) 7 Pre-tax (loss) income $ (150) $ 1,502 (10.0%) $ 25 $ 1,578 1.6% Adjustm ents: Inv
Slide 23: Adjusted EBITDA and Margin Reconciliation
Adjusted EBITDA and Margin Reconciliation FY-22 Q1-23 Q2-23 Q3-23 Q4-23 FY-23 (Loss) (Loss) (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Reported (1) $ (322) $ 7,107 $ 71 $ 1,715 $ (61) $ 1,75
Slide 24: Adjusted EBITDA and Margin Reconciliation (continued)
Adjusted EBITDA and Margin Reconciliation (continued) Q1-24 Q2-24 (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Reported (1) $ (113) $ 1,502 $ 18 $ 1,578 Adjustm ents: Other expenses, net (2) 44 33 Income tax (benefit) expense (37) 7 Depreciation and amortization (3) 59 59 EBITDA
Slide 25: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation (in millions) FY-22 Q1-23 Q2-23 Q3-23 Q4-23 FY-23 Q1-24 Q2-24 (1) Reported $159 $78 $95 $124 $389 $686 ($79) $123 Less: capital expenditures 57 8 7 12 10 37 10 8 Free Cash Flow $102 $70 $88 $112 $379 $649 ($89) $115 Add: one-time contract termination charge - product su
Slide 26: Other Expenses, net Reconciliation
Other Expenses, net Reconciliation (in millions) Q2-24 Q2-23 Reported $ 33 $ 31 Less: Non-service retirement-related costs 26 11 Less: Gain on early extinguishment of debt - 3 Less: Transaction and related costs, net (23) Adjusted $ 30 $ 17 26
Slide 27: Adjusted Operating Income and Margin – Guidance
Adjusted Operating Income and Margin – Guidance FY 2024 (in millions) Profit (2, 3) Margin Revenue (CC) (1) Estimated ~($10) ~$6,500 ~(0.2)% Adjustments: Restructuring and related costs, net 80 Amortization of intangible assets 40 Other expenses, net 315 (4) Adjusted ~$425 ~$6,500 At least 6.5% ____
Slide 28: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2024 (1) Operating Cash Flow At least $600 Less: capital expenditures 50 Free Cash Flow At least $550 (1)Net cash provided by operating activities. 28
Slide 29: © 2024 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation
© 2024 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.