Xerox reports lower third quarter sales, increased profits
Xerox Corp. reported third-quarter revenue dropped more than 6% to $2.2 billion, compared to $2.35 billion last year. Net income was $221 million, compared to $89 million in 2018. The company cited improvements in cash flow – $356 million of operating cash flow, up $82 million year-over-year, and $339 million of free cash flow, up $88 million year-over-year – and in earnings per share as positive indicators for the future. As a result, the company is increasing2019 guidance for GAAP EPS to $3.10 – $3.20, adjusted EPS to $4.00 – $4.10, operating cash flow to $1.2 – $1.3 billion and free cash flow to $1.1 – $1.2 billion.
The full press release is here.
“Our strategy and execution delivered a strong third quarter despite industry headwinds. We increased cash flow, earnings per share and adjusted operating margin while we improved the revenue trend. These results give us confidence to raise our earnings and cash flow guidance for the year as we position Xerox for long-term growth,” says John Visentin, vice chairman and CEO, Xerox.
Key Financial Results:
|
(in millions, except per share data) |
Q3 2019 |
Q3 2018 |
B/(W) YOY |
% Change YOY |
||||
|
Revenue |
$2,200 |
|
$2,352 |
|
$(152) |
|
(6.5)% AC |
|
|
Gross Margin |
40.0% |
|
40.1% |
|
(10) bps |
|
|
|
|
RD&E % |
4.5% |
|
4.3% |
|
(20) bps |
|
|
|
|
SAG % |
23.3% |
|
24.8% |
|
150 bps |
|
|
|
|
Pre-Tax Income |
$230 |
|
$192 |
|
$38 |
|
19.8% |
|
|
Pre-Tax Income Margin |
10.5% |
|
8.2% |
|
230 bps |
|
|
|
|
Operating Income – Adjusted1 |
$267 |
|
$257 |
|
$10 |
|
3.9% |
|
|
Operating Margin – Adjusted1 |
12.1% |
|
10.9% |
|
120 bps |
|
|
|
|
GAAP EPS |
$0.96 |
|
$0.34 |
|
$0.62 |
|
nm |
|
|
EPS – Adjusted1 |
$1.08 |
|
$0.85 |
|
$0.23 |
|
27.1% |
- Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures.
Key Business Highlights:
- On track to drive 2019 gross savings of at least $640 million under Project Own It, Xerox’s enterprise-wide initiative to simplify operations, drive continuous improvement and free up capital to reinvest in the business
- Added and renewed several contracts with Fortune 500 and public sector clients such as AstraZeneca, Leonardo S.p.A., Cardiff Council, and Prince George’s County Public Schools
- Launched new products and enhancements such as the Xerox PrimeLink™ C9065/C9070and the iGen® 5 XLSto capture incremental production volume
Xerox also announced it has completed its evaluation of its customer financing business and will not pursue a sale of the business at this time. The company received and reviewed bids from multiple potential counterparties that were interested in purchasing the business at an attractive premium but ultimately determined that retaining and optimizing the business through Project Own It will generate the greatest return for shareholders.