Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q3 2019 Earnings Presentation
28 slides from Xerox's earnings presentation, Oct 29, 2019
Slide 1: Earnings Presentation Q3 Results
EARNINGS PRESENTATION Q3 Results I October 29, 2019
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: Key Financial Measures Q3 2019
Key Financial Measures I Q3 2019 Adj1 Earnings Per Share Revenue ($B) Adj1 Operating Margin GAAP EPS $0.34 $0.96 2019 % Change: (6.5)% @ AC, (5.3)% @ CC1 Free Cash Flow1 ($M) Shareholder Returns ($M) Operating Cash Flow $274 $356 3 (1) Adjusted Measures, Free Cash Flow and Constant Currency (CC): se
Slide 4: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox Optimize operations for • Simplify operating model for greater accountability and efficiency • Optimize the supply chain and supplier competitiveness simplicity • Make it easier to do business with Xerox • More effectively support customers Drive revenue • Se
Slide 5: Frequently Asked Questions
Frequently Asked Questions How are you progressing on Given your strong balance What’s the status of your How do current macro- your business sheet, what’s your appetite evaluation of the customer economic conditions impact transformation? for M&A? financing business? your business? Project Own It i
Slide 6: Financial Results
Financial Results B/(W) % Change (in millions, except per share data) Q3 2019 Q3 2018 YOY YOY (6.5)% AC Revenue $ 2,200 $ 2,352 $ (152) (5.3)% CC1 Gross Margin 40.0% 40.1% (10) bps RD&E % 4.5% 4.3% (20) bps SAG % 23.3% 24.8% 150 bps Operating Income - Adjusted1 $ 267 $ 257 $ 10 3.9% Operating Margin
Slide 7: Cash Flow
Cash Flow (in millions) Q3 2019 YTD 2019 Pre-tax Income $ 230 $ 513 Non-cash add-backs1 85 408 Restructuring Payments (17) (71) Pension Contributions (37) (107) Working Capital, net2 88 61 Change in Finance Assets3 20 183 Other4 (13) (92) Cash from Operations $ 356 $ 895 Cash from (used in) Investin
Slide 8: Revenue
Revenue Equipment Revenue Breakdown YOY Change (in millions) Q3 2019 % Mix AC CC1 4 Equipment $ 494 22% (3.3)% (2.2)% Post Sale $1,706 78% (7.3)% (6.2)% Total Revenue $2,200 100% (6.5)% (5.3)% Americas 1,487 68% (3.7)% (3.6)% Q3 Installs5 (YOY Change) EMEA 641 29% (10.1)% (6.8)% Color B&W Entry A4 M
Slide 9: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It Contribution: At least $640M of Gross Savings in 2019 It is a multi-year program to simplify our operations and instill a culture of continuous improvement Transaction Currency Impact 70 bps 60 bps 40 bps 10 bps (30) bps (30) bps (
Slide 10: Capital Structure
Capital Structure Debt Breakdown ($B) Financing Debt $3.2B As of September 30, 2019 • Customer value proposition includes leasing of Xerox Finance 2 equipment Assets Debt Cash • Maintain 7:1 debt to equity leverage ratio on these finance Financing $3.7 $3.2 assets Core - 1.6 Core Debt $1.6B Total Xe
Slide 11: Q3 Summary
Q3 Summary Continue to Deliver on Key Measures FY 2019 Guidance Measures • Adjusted1 EPS up 27.1% year-over-year GAAP EPS range $3.10 - $3.20 (increased from $2.90 - $3.05) • Adjusted1 Operating Margin expansion of 120 Adjusted1 EPS range $4.00 to $4.10 (increased from $3.80 - $3.95) basis points ye
Slide 12: Appendix
Appendix 12
Slide 13: Operating Trends
Operating Trends 2016 2017 2018 2019 (in millions) FY FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Total Revenue $10,771 $10,265 $2,435 $2,510 $2,352 $2,533 $9,830 $2,206 $2,289 $2,200 % Change (6.1)% (4.7)% (0.8)% (2.2)% (5.8)% (7.8)% (4.2)% (9.4)% (8.8)% (6.5)% CC1 % Change (4.3)% (4.7)% (4.6)% (4.0)% (4.7)% (6.1)%
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 expenses incurred in connection with Xerox's planned transaction with Fuji, which was terminated in May 2018, as well as costs and expenses related to the previously disclosed settlement
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 September 30, 2019 September 30, 2018 Net Net (in millions, except per share amounts) Income EPS Income EPS (1) As Reported $ 221 $ 0.96 $ 89 $ 0.34 Restructuring and related costs 27 29 Amortization of intangible assets 9 12 Tr
Slide 19: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended September 30, 2019 September 30, 2018 Pre-Tax Income Tax Effective Pre-Tax Income Tax Effective (in millions) Income Expense Tax Rate Income Expense Tax Rate Reported $ 230 $ 66 28.7% $ 192 $ 142 74.0% Non-GAAP Adjustments (1) 3
Slide 20: Operating Income / Margin reconciliation
Operating Income / Margin reconciliation Three Months Ended Three Months Ended Septem ber 30, 2019 Septem ber 30, 2018 (in millions) Profit Revenue Margin Profit Revenue Margin Reported (1) $ 230 $ 2,200 10.5% $ 192 $ 2,352 8.2% Restructuring and related costs 27 29 Amortization of intangible assets
Slide 21: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended Nine Months Ended (in millions) September 30, 2019 September 30, 2019 Reported(1) $ 356 $ 895 Capital expenditures (17) (48) Free Cash Flow $ 339 $ 847 _________________ (1) Net cash provided by operating activities. 21
Slide 22: Operating Income / Margin – Guidance
Operating Income / Margin – Guidance FY 2019 (in millions) Profit Revenue(2) Margin Estimated(1) $ 740 $ 9,050 ~ 8.0% - 8.5% Adjustments: Restructuring and related costs 225 Amortization of intangible assets 45 Non-service retirement-related costs 40 Other expenses, net 100 Adjusted $ 1,150 $ 9,050
Slide 23: Net Income and EPS – Guidance
Net Income and EPS – Guidance FY 2019 (in millions, except per share amounts) Net Income EPS Estimated(1) $ 740 ~$3.10 - $3.20 Adjustments: Restructuring and related costs(2) 244 Amortization of intangible assets 45 Non-service retirement-related costs 40 Income tax on adjustments (86) Tax Act (31)
Slide 24: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2019 Operating Cash Flow(1) $1,175 - $1,275 Less: capital expenditures (75) Free Cash Flow $1,100 - $1,200 ____________________________ (1) Net cash provided by operating activities. 24
Slide 25: Net Income and EPS reconciliation - historical
Net Income and EPS reconciliation - historical Y e a r E nde d Y e a r E nde d Y e a r E nde d D e c e m be r 3 1, D e c e m be r 3 1, D e c e m be r 3 1, 2 0 16 2 0 17 Q 1- 18 Q 2 - 18 Q 3 - 18 Q 4 - 18 2 0 18 Q 1- 19 Q 2 - 19 N et N et N et N et N et N et N et N et N et (in millio ns, except per s
Slide 26: Operating Income / Margin reconciliation - historical
Operating Income / Margin reconciliation - historical Year Ended Year Ended Year Ended Decem ber 31, 2016 Decem ber 31, 2017 Q1-18 Q2-18 Q3-18 Q4-18 Decem ber 31, 2018 Q1-19 Q2-19 (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Mar
Slide 27: Free Cash Flow reconciliation - historical
Free Cash Flow reconciliation - historical Y e a r E nde d Y e a r E nde d Y e a r E nde d D e c e m be r 3 1, D e c e m be r 3 1, D e c e m be r 3 1, 2 0 16 2 0 17 Q 1- 18 Q 2 - 18 Q 3 - 18 Q 4 - 18 2 0 18 Q 1- 19 Q 2 - 19 (in millions, except per share amounts) Reported (1) $ 716 $ (179) $ 216 $ 2
Slide 28: © 2019 Xerox Corporation. All rights reserved. Xerox® and “Made To Think” are trademarks
© 2019 Xerox Corporation. All rights reserved. Xerox® and “Made To Think” are trademarks of Xerox Corporation in the United States and/or other countries. BRXXXXX