Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q3 2021 Earnings Presentation
29 slides from Xerox's earnings presentation, Oct 26, 2021
Slide 1: Earnings Presentation Q3 2021 Results
Earnings Presentation Q3 2021 Results October 26, 2021 1
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: Q3 2021 Key Financial Measures
Q3 2021 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $88 $81 $1.8 $1.8 7.4% 4.2% 2020 2021 2020 2021 2020 2021 Operating 2021 % Change: (0.5)% @ AC, (1.6)% @ CC1 Cash Flow $106 $100 Revenue and Backlog Trend ($M) Adj1 Earnings Per Share Shareholder Returns ($M) $2,0
Slide 4: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox • Continuously improve our operating model for greater efficiency, including Optimize operations actions to mitigate supply chain disruption for simplicity • Invest in augmented reality, robotic process automation, business process outsourcing, analytics and
Slide 5: New Businesses: Q3 2021 Progress Update
New Businesses: Q3 2021 Progress Update Software Innovation XFS • Announced the formation of CareAR, IoT • Year-over-year growth in originations an augmented reality-driven Service • Deploying Eloque’s sensor-based of approximately 10% Experience Management platform, bridge monitoring technology in
Slide 6: Frequently Asked Questions
Frequently Asked Questions What gives you confidence in your free cash flow 1 guidance despite a lower outlook for revenue? Free cash flow generation is a strategic focal point that has been ingrained in Xerox’s culture. Our focus on cash has allowed us to Guidance deliver positive free cash flow ev
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) Q3 B/(W) % Change P&L Measures 2021 YOY YOY P&L Ratios Q3 2021 B/(W) YOY (0.5)% AC Revenue $ 1,758 $ (9) Gross Margin 32.4% (440) bps (1.6)% CC1 Operating Income – $ 74 $ (57) (43.5)% RD&E % 4.7% (40) bps Adjusted1 Other Expenses, net $
Slide 8: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) $1.86 $1.93 $1.79 $1.77 $1.71 $1.76 Q3 $1.47 (in millions) % Mix AC CC1 2021 Equipment $ 387 22% (7.6)% (8.4)% Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Post Sale $ 1,371 78% 1.7% 0.5% Equipment Backlog as a % of ESR Revenue: 26% 31% 29% 24% 34% 41%
Slide 9: Cash Flow
Cash Flow (in millions) Q3 2021 Q3 2020 Pre-tax Income $ 84 $ 119 Non-Cash Add-Backs1 58 122 Restructuring Payments (12) (11) Pension Contributions (33) (33) Working Capital, net2 46 (55) Change in Finance Assets3 (8) - Other4 (35) (36) Cash from Operations $ 100 $ 106 Cash from Investing $ 18 $ 9 C
Slide 10: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It 9.5% 7.4% 7.0% 5.2% 4.7% 4.2% 4.2% • Project Own It is a multi- year program to simplify our operations and instill Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 a culture of continuous improvement • Achieved ~$1.4B of gross cost savin
Slide 11: Xerox Financial Services (XFS)
Xerox Financial Services (XFS) XFS Strategy XFS Portfolio • Create a global leasing solutions business serving • XFS assets: $3.33 billion as of Sept 30, 2021, a (2%) technology, office equipment and adjacent markets decline QoQ • Growth will be driven by expanding the portfolio, offering • Leases m
Slide 12: Capital Structure
Capital Structure Debt and Cash Senior Unsecured Debt Maturity Ladder ($B) 2 (in billions) Q3 2021 Q4 2020 Total Debt $ (4.3) $ (4.4) $1.00 $0.75 $0.75 Less: XFS debt 2.9 3.0 $0.30 $0.30 $0.35 $0.25 Core Debt (1.4) (1.4) Less: Cash1 2.3 2.7 2022 2023 2024 2025 2028 2035 2039 Net Core Cash $ 0.9 $ 1.
Slide 13: Summary and 2021 Guidance
Summary and 2021 Guidance Full-Year Guidance • Revenue: Approximately $7.1B (AC), $7.0B (CC)1 • Free Cash Flow 1: At least $500M • Shareholder Returns: At least 50% of annual Free Cash Flow1 We continue to see strong demand for our products and services, and we expect a broader return of employees t
Slide 14: Appendix
Appendix 14 25 October 2021 14
Slide 15: Operating Trends – Continuing Operations
Operating Trends – Continuing Operations 2019 2020 2021 (in millions, except EPS) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Total Revenue $9,066 $1,860 $1,465 $1,767 $1,930 $7,022 $1,710 $1,793 $1,758 % Change (6.2)% (14.7)% (35.3)% (18.9)% (21.0)% (22.5)% (8.1)% 22.4% (0.5)% CC1 % Change (4.7)% (13.9)% (34.6)% (1
Slide 16: Non-GAAP Financial Measures
Non-GAAP Financial Measures 16 25 October 2021 16
Slide 17: 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 18: 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 19: Non-GAAP Financial Measures (cont’d)
Non-GAAP Financial Measures (cont’d) Adjusted Operating Income and 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,
Slide 20: Net Income and EPS reconciliation
Net Income and EPS reconciliation Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 (in millions, except per share amounts) Net Income EPS Net Income EPS Reported(1) $ 90 $ 0.48 $ 90 $ 0.41 Adjustments: Restructuring and related costs, net 10 20 Amortization of intangible a
Slide 21: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 Pre-Tax Income Tax Effective Pre-Tax Income Tax Effective (in millions) Income Benefit Tax Rate Income Expense Tax Rate Reported(1) $ 84 $ (4) (4.8)% $ 119 $ 29 24.4% Non-GAAP Adjustments(2)
Slide 22: Operating Income and Margin reconciliation
Operating Income and Margin reconciliation Three Months Ended Three Months Ended September 30, 2021 September 30, 2020 (in millions) Profit Revenue Margin Profit Revenue Margin Reported (1) $ 84 $ 1,758 4.8% $ 119 $ 1,767 6.7% Adjustments: Restructuring and related costs, net 10 20 Amortization of i
Slide 23: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended September 30, (in millions) 2021 2020 Change Reported (1) $ 100 $ 106 $ (6) Less: capital expenditures (19) (18) (1) Free Cash Flow $ 81 $ 88 $ (7) ____________________ (1) Net cash provided by operating activities. 23
Slide 24: Other Expenses, net reconciliation
Other Expenses, net reconciliation Three Months Ended September 30, (in millions) 2021 2020 Reported $ (33) $ (15) Less: Non-service retirement-related costs (22) (13) Adjusted $ (11) $ (2) 24
Slide 25: 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. 25
Slide 26: Net Income (Loss) and EPS reconciliation – historical
Net Income (Loss) and EPS reconciliation – historical Year Ended Year Ended December 31, 2019 Q1-20 Q2-20 Q3-20 Q4-20 December 31, 2020 Q1-21 Q2-21 Net Net (Loss) 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
Slide 27: Operating Income and Margin reconciliation – historical
Operating Income and Margin reconciliation – historical Year Ended Year Ended Decem ber 31, 2019 Q1-20 Q2-20 Q3-20 Q4-20 Decem ber 31, 2020 Q1-21 Q2-21 (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Ma
Slide 28: Free Cash Flow reconciliation – historical
Free Cash Flow reconciliation – historical Year Ended Year Ended December 31, December 31, 2019 Q1-20 Q2-20 Q3-20 Q4-20 2020 Q1-21 Q2-21 (in millions, except per share amounts) Reported (1) $ 1,244 $ 173 $ 34 $ 106 $ 235 $ 548 $ 117 $ 214 Less: capital expenditures (65) (23) (19) (18) (14) (74) (17)
Slide 29: © 2021 Xerox Corporation. All rights reserved.
© 2021 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.