Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q3 2022 Earnings Presentation
28 slides from Xerox's earnings presentation, Oct 25, 2022
Slide 1: Earnings Presentation Q3 2022 Results
Earnings Presentation Q3 2022 Results October 25, 2022
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 2022 Key Financial Measures
Q3 2022 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $1.76 $1.75 4.2% $81 3.7% $(18) 2021 2022 2021 2022 Operating 2021 2022 2022 % Change: (0.4)% @ AC, 4.7% @ CC1 Cash Flow $100 $(8) Revenue and Backlog Trend ($M) Adj1 Earnings Per Share Shareholder Returns ($M) $2
Slide 4: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox • Continuously improve operating efficiency, revenue flow through and return Optimize operations on assets • Invest in augmented reality, robotic process automation, business process for simplicity outsourcing, analytics, AI and system enhancements to drive e
Slide 5: Business Update: Q3 2022
Business Update: Q3 2022 Print & Managed Print IT & Digital Services New Businesses Services • Demand for our equipment and • IT Services: Seeing traction in newer PARC Innovation Managed Print Services is resilient markets like Canada by leveraging recent • Ongoing evaluation of investment prioriti
Slide 6: Frequently Asked Questions
Frequently Asked Questions Should investors expect a strategic shift now that Steve Bandrowczak has been named permanent CEO? In the near-term, we remain focused on the execution of our Print & Services strategy and improving operating margins amid a challenging macro backdrop. In the long-term, we
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) B/(W) % Change P&L Measures Q3 2022 YOY YOY P&L Ratios Q3 2022 B/(W) YOY (0.4)% AC Revenue $ 1,751 $ (7) Gross Margin 31.8% (60) bps 4.7% CC1 Operating Income – $ 65 $ (9) (12)% RD&E % 4.2% 50 bps Adjusted1 Other Expenses, net – $ 8 $ (1
Slide 8: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) $1.76 $1.78 $1.75 $1.75 $1.67 Q3 (in millions) % Total AC CC1 2022 Equipment $390 22% 0.8% 6.7% Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Post Sale $1,361 78% (0.7)% 4.1% Equipment Backlog as a % of ESR3: 69% 93% 139% 127% 110% Total Revenue $1,751 100% (0.4)% 4
Slide 9: Cash Flow
Cash Flow (in millions) Q3 2022 Q3 2021 Pre-tax (Loss) Income $ (380) $ 84 Non-Cash Add-Backs1 90 39 Non-Cash Goodwill Impairment, Net of Tax 395 - Restructuring Payments (17) (12) Pension Contributions (34) (39) Working Capital, net2 (14) 46 Change in Finance Assets3 (54) (8) Other4 6 (10) Cash (us
Slide 10: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It 4.8% 4.2% 3.7% • Project Own It is a 2.0% Expected Distribution of 2022 Gross Savings multi-year program to simplify our operations and instill (0.2)% a culture of Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 continuous improvement • Expect to ac
Slide 11: Segment Results
Segment Results Revenue and Profit Q3 2022 B/(W) YoY Print & Financing Intersegm ent Print & Financing (in m illions) Other (FITTLE) Elim inations 1 Total Xerox Other (FITTLE) Total Xerox Total Revenue $ 1,641 $ 150 $ (40) $ 1,751 Total Revenue 0.9% (12.5)% (0.4)% Segm ent Profit $ 57 $ 8 $ - $ 65 S
Slide 12: Capital Structure
Capital Structure Debt and Cash Senior Unsecured Debt Maturity Ladder ($B) (in billions) Q3 2022 Q2 2022 $0.75 $0.75 $0.65 Total Debt $(3.7) $(3.9) Less: FITTLE Allocated Debt 2.7 2.8 $0.30 $0.35 $0.25 Core Debt (1.0) (1.1) Less: Cash1 1.0 1.2 2022 2023 2024 2025 2028 2035 2039 Net Core Cash $0.0 $0
Slide 13: 2022 Guidance
2022 Guidance Full-Year Guidance • Revenue: $7.0 to $7.1 billion of revenue, in actual currency • Free Cash Flow 1: At least $125 million • Shareholder Returns: At least 50% of annual Free Cash Flow1 We adjusted revenue guidance primarily to reflect higher-than-expected currency effects associated w
Slide 14: Appendix
Appendix 14
Slide 15: Operating Trends
Operating Trends 2020 2021 2022 (in millions, except EPS) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Total Revenue $7,022 $1,710 $1,793 $1,758 $1,777 $7,038 $1,668 $1,747 $1,751 % Change (22.5)% (8.1)% 22.4% (0.5)% (7.9)% 0.2% (2.5)% (2.6)% (0.4)% CC 1 % Change (22.7)% (10.4)% 18.1% (1.6)% (7.4)% (1.4)% (0.7)% 1.1%
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 Adjusted Operating (Loss) Income and Margin We calculate and utilize adjusted operating (loss) income and margin measures by adjusting our reported pre-tax (loss) income and margin amounts. In addition to the costs and expenses noted as adjustments for our adjusted earnin
Slide 18: Net (Loss) Income and EPS Reconciliation
Net (Loss) Income and EPS Reconciliation Three Months Ended Three Months Ended September 30, 2022 September 30, 2021 Net (Loss) Diluted Net Diluted (in millions, except per share amounts) Income EPS Income EPS Reported (1) $ (383) $ (2.48) $ 90 $ 0.48 Adjustments: Goodwill impairment 412 - Restructu
Slide 19: Effective Tax Rate Reconciliation
Effective Tax Rate Reconciliation Three Months Ended Three Months Ended September 30, 2022 September 30, 2021 Pre-Tax (Loss) Income Tax Effective Tax Pre-Tax Income Tax Effective Tax (in millions) Income Expense Rate Income (Benefit) Rate (1) Reported $ (380) $ 3 (0.8%) $ 84 $ (4) (4.8%) Goodwill Im
Slide 20: Operating (Loss) Income and Margin Reconciliation
Operating (Loss) Income and Margin Reconciliation Three Months Ended Three Months Ended September 30, 2022 September 30, 2021 (Loss) Profit Revenue Margin Profit Revenue Margin (1) Reported $ (380) $ 1,751 (21.7)% $ 84 $ 1,758 4.8% Adjustments: Goodwill impairment 412 - Restructuring and related cos
Slide 21: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Three Months Ended September 30, (in millions) 2022 2021 Reported (1) $ (8) $ 100 Less: capital expenditures $ 10 $ 19 Fress Cash Flow $ (18) $ 81 (1)Net cash (used in) provided b y operating activities 21
Slide 22: Other Expenses, Net Reconciliation
Other Expenses, Net Reconciliation Three Months Ended September 30, (in millions) 2022 2021 Reported $ 1 $ (33) Less: non-service retirement-related costs (7) (22) Adjusted $ 8 $ (11) 22
Slide 23: Net Income (Loss) and EPS Reconciliation - Historical
Net Income (Loss) and EPS Reconciliation - Historical Year Ended Year Ended Decem ber 31, 2020 Q1-21 Q2-21 Q3-21 Q4-21 Decem ber 31, 2021 Q1-22 Q2-22 Net Net Net Net Net Net Net (Loss) (Loss) Net (Loss) (in millions, except per share amounts) Incom e EPS Incom e EPS Incom e EPS Incom e EPS Incom e E
Slide 24: Operating Income (Loss) and Margin Reconciliation - Historical
Operating Income (Loss) and Margin Reconciliation - Historical Year Ended Year Ended December 31, 2020 Q1-21 Q2-21 Q3-21 Q4-21 December 31, 2021 Q1-22 Q2-22 (Loss) (Loss) (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margi
Slide 25: Free Cash Flow Reconciliation – Historical
Free Cash Flow Reconciliation – Historical Year Ended Year Ended (in millions) December 31, 2020 Q1-21 Q2-21 Q3-21 Q4-21 December 31, 2021 Q1-22 Q2-22 (1) Reported $548 $117 $214 $100 $198 $629 $66 ($85) Less: capital expenditures 74 17 16 19 16 68 16 13 Free Cash Flow $474 $100 $198 $81 $182 $561 $
Slide 26: 2021 Quarterly Segment Results
2021 Quarterly Segment Results Total External Net Intersegm ent Segm ent % of Total Segm ent Segm ent (in millions) Revenue Net Revenue (1) Revenue Revenue Profit Margin(2) Q1 2021 Print and Other $ 1,533 $ 48 $ 1,581 90% $ 71 4.6% Financing (FITTLE) 177 3 180 10% 18 10.2% Total $ 1,710 $ 51 $ 1,761
Slide 27: Free Cash Flow – Guidance
Free Cash Flow – Guidance ( in m illio ns ) FY 2022 (1) Operating Cash Flow At least $180 Less: capital expenditures 55 Free Cash Flow At least $125 (1)Net cash provided by operating activities NOTE: Free cash flow guidance excludes the second quarter 2022 payment of a one-time product supply contra
Slide 28: © 2022 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation
© 2022 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.