Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q3 2024 Earnings Presentation
29 slides from Xerox's earnings presentation, Oct 29, 2024
Slide 1: Earnings Presentation Q3 2024 Results
Earnings Presentation Q3 2024 Results October 29, 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: Q3 2024 Key Financial Measures
Q3 2024 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $1.65 $1.53 5.2% $112 4.1% $107 2023 2024 2023 2024 2023 2024 Operating 2024 % Change: (7.5)% @ AC, (7.3)% @ CC1 Cash Flow $124 $116 Revenue Trend ($M) Adj1 Earnings Per Share Shareholder Returns ($M) $2,000 $0.46
Slide 4: Strategic Priorities
Strategic Priorities • Re-align products, services and distribution with the needs of economic buyers of today’s hybrid workplace • Improve sales efficiency and effectiveness by optimizing go-to-market coverage Strengthen Core and streamlining functional sales support Businesses • Drive incremental
Slide 5: Reinvention: Financial Algorithm
Reinvention: Financial Algorithm Savings Unlocks and Q3 Progress Estimated Gross Cost Savings Estimated Revenue Mix Shift Geographic Simplification 2023 2026/2027 • Transitioned Hungary and Bulgaria’s operations to indirect distribution models • Signed agreement to sell EMEA paper business to Antali
Slide 6: Pending Acquisition of ITsavvy
Pending Acquisition of ITsavvy Transaction Overview Strategic Rationale • Xerox recently announced the intended acquisition of ITsavvy, • Experienced Team, Proven Platform. ITsavvy management for total consideration of $400 million. team to lead Xerox IT Services, implement proven, integrated IT inf
Slide 7: Frequently Asked Questions
Frequently Asked Questions What drove equipment sales underperformance in Q3? What are your expectations for equipment sales in Q4 and 2025? Equipment revenue fell short of expectations this quarter due to delays in the global launch of two new products and lower-than-expected improvements in sales
Slide 8: Financial Results Summary
Financial Results Summary (in millions, except per share data) B/(W) % Change P&L Measures Q3 2024 YOY YOY P&L Ratios Q3 2024 B/(W) YOY (7.5)% AC Revenue $ 1,528 $ (124) Gross Margin 32.4% 0 bps (7.3)% CC1 Operating Income – 80 12 18% RD&E % 2.9% 20 bps Adjusted1 Other Expenses, net 33 (55) NM SAG %
Slide 9: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) Q3 (in millions) % Total AC CC1 $1.65 $1.77 2024 $1.50 $1.58 $1.53 Equipment $339 22% (12.2)% (12.2)% Post Sale $1,189 78% (6.1)% (5.7)% Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 Total Revenue $1,528 100% (7.5)% (7.3)% Q3 Installs & CC¹ Equipment Revenue B/(W) Y
Slide 10: Cash Flow
Cash Flow (in millions) Q3 2024 Q3 2023 Pre-tax (Loss) Income (1,087) 64 1 Non-Cash Add-Backs 150 71 Non-Cash Goodwill Impairment, Net of Tax 1,015 - Restructuring Payments (11) (9) Pension Contributions (56) (43) Working Capital, net 2 7 27 Change in Finance Assets3 69 51 Other4 29 (37) Cash provid
Slide 11: Segment Results
Segment Results Revenue and Profit Q3 2024 B/(W) YoY Print & Intersegm ent Print & (in m illions) Other XFS Elim inations 1 Total Xerox Other XFS Total Xerox Total Revenue $ 1,457 $ 88 $ (17) $ 1,528 Total Revenue (7)% (10)% (8)% Segm ent Profit $ 67 $ 13 $ - $ 80 Segm ent Profit 5% 225% 18% Segment
Slide 12: Capital Structure
Capital Structure Debt and Cash Debt Maturity Ladder³ ($M) $805 $844 (in billions) Q3 2024 Q2 2024 $55 Total Debt ($3.3) ($3.3) $344 Less: Financing Allocated Debt $2.0 $2.0 $518 Core Debt ($1.3) ($1.3) $130 $400 $350 1 $750 Less: Cash $0.6 $0.6 $250 $500 Net Core Debt ($0.7) ($0.7) $388 $36 $58 $55
Slide 13: Reinvention: Gross Cost Savings
Reinvention: Gross Cost Savings Estimated Reinvention Gross Cost Savings Realized/Expected Gross Cost Savings by Year 2023 • More than $100 million in gross savings realized 2024 • Close to $200 million in incremental gross Reinvention savings 2025-2026 • Around $125 million of incremental gross Rei
Slide 14: 2024 Full-Year Guidance
2024 Full-Year Guidance Guidance • Revenue: Decline of ~10% in constant currency1 • Adjusted1 Operating Margin: ~5.0% • Free Cash Flow1: $450 million to $500 million 2024 guidance excludes any impact from the pending acquisition of ITsavvy. Revenue: The guided decline in full-year revenue is affecte
Slide 15: Appendix
Appendix 15
Slide 16: Operating Trends
Operating Trends 2022 2023 2024 (in millions, except EPS) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Total Revenue $7,107 $1,715 $1,754 $1,652 $1,765 $6,886 $1,502 $1,578 $1,528 % Change 1.0% 2.8% 0.4% (5.7)% (9.1)% (3.1)% (12.4)% (10.0)% (7.5)% CC 1 % Change 4.8% 5.5% 0.5% (7.4)% (10.6)% (3.3)% (13.2)% (9.6)% (7.3
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 under
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures • Accelerated share vesting - in connection with the passing of Xerox Holdings Corporation’s former CEO. • Loss (gain) on early extinguishment of debt • Tax Indemnification – Conduent • Inventory-related impact - exit of certain Production Print manufacturing operations •
Slide 19: 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 Q3-24 Net Net Net Net Net (Loss) Net (Loss) Net (Loss) Net (Loss) Net (Loss) (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 I
Slide 20: Adjusted Effective Tax Rate Reconciliation
Adjusted Effective Tax Rate Reconciliation Q3-24 Q3-23 Pre-Tax (Loss) Income Tax Effective Tax Pre-Tax Income Tax Effective Tax (in millions) Income Expense Rate Income Expense Rate (1) Reported $ (1,087) $ 118 (10.9%) $ 64 $ 15 23.4% Goodwill impairment 1,058 43 - - (2) Deferred tax asset valuation
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 Q3-24 (Loss) (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin (1) Reported $ (113) $ 1,502 $ 18 $ 1,578 $ (1,205) $ 1,528 Income tax (benefit) expense (37) 7 118 Pre-tax (loss) income $
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 Q3-24 (Loss) (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Reported (1) $ (113) $ 1,502 $ 18 $ 1,578 $(1,205) $ 1,578 Adjustm ents: Other expenses, net (2) 44 33 43 Income tax (benefit) expense
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 Q3-24 (1) Reported $159 $78 $95 $124 $389 $686 ($79) $123 $116 Less: capital expenditures 57 8 7 12 10 37 10 8 9 Free Cash Flow $102 $70 $88 $112 $379 $649 ($89) $115 $107 Add: one-time contract termination c
Slide 26: Other Expenses, net Reconciliation
Other Expenses, net Reconciliation (in millions) Q3-24 Q3-23 Reported $ 43 $ (18) Less: Non-service retirement-related costs 25 4 Less: Transaction and related costs, net (15) - Adjusted $ 33 $ (22) 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 ~($1,170) ~$6,200 ~(19.0)% Adjustments: Goodwill impairment 1,058 Restructuring and related costs, net 110 Amortization of intangible assets 40 Other expenses, net 272 (4) Adjusted ~
Slide 28: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2024 (1) Operating Cash Flow $490-540 Less: capital expenditures 40 Free Cash Flow $450-500 (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.