Xerox Releases Fourth-Quarter and Full-Year Results
--Financial Summary
--Q4 2022
--FY 2022
Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2022 fourth-quarter and full-year results and guidance for 2023.
"Resilient demand and improvements in supply chain conditions drove solid Q4 growth in revenue and profits," said Steve Bandrowczak, chief executive officer at Xerox. "Our employees and partners worked hard to deliver the highest level of revenue since the start of the pandemic, and I am proud of the focus and dedication which led to these results. As macroeconomic uncertainty extends through this year, we will continue working alongside our clients to develop and deploy essential workplace solutions and services, positioning Xerox for long-term growth in profitability."
Fourth-Quarter Key Financial Results
(in millions, except per share data) Q4 2022 Q4 2022 Q4 2021 B/(W) % Change
YOY B/(W) YOY
--------------------------------------
Revenue $1,941 $1,941 $1,777 $164 9.2 % AC
13.9% CC(1)
34.8% 34.8% 32.9% 190 bps
Gross Margin
3.6% 3.6% 4.2% 60 bps
RD&E %
22.1% 22.1% 23.8% 170 bps
SAG %
Pre-Tax Income (Loss) $146 $146 $(711) $857 NM
Pre-Tax Income (Loss) Margin 7.5% 7.5% (40.0)% NM
Operating Income - Adjusted(1) $178 $178 $86 $92 107.0%
Operating Income Margin - Adjusted(1) 9.2% 9.2% 4.8% 440 bps
GAAP Diluted Earnings (Loss) per Share $0.74 $0.74 $(3.97) $4.71 NM
Full-Year Key Financial Results
(in millions, except per share data) FY 2022 FY 2022 FY 2021 FY 2021 B/(W) B/(W) % Change % Change
YOY YOY B/(W) YOY B/(W) YOY
-------------------------------------
Revenue $7,107 $7,107 $7,038 $69 1.0 % AC
4.8% CC(1)
32.6% 32.6% 34.1% (150) bps
Gross Margin
4.3% 4.3% 4.4% 10 bps
RD&E %
24.8% 24.8% 24.4% (40) bps
SAG %
Pre-Tax Loss $(328) $(328) $(475) $147 30.9%
Pre-Tax Loss Margin (4.6)% (4.6)% (6.7)% 210 bps
Operating Income - Adjusted(1) $275 $275 $375 $(100) (26.7)%
Operating Income Margin - Adjusted(1) 3.9% 3.9% 5.3% (140) bps
GAAP Diluted Loss per Share $(2.15) $(2.15) $(2.56) $0.41 16.0%
_____________________
(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. 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.
Beginning in the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE).
Fourth-Quarter Segment Results
(in millions) Q4 2022 Q4 2021 B/(W) % Change
YOY B/(W) YOY
-------------------------------
Revenue
$1,843 $1,659 $184 11.1%
Print and Other
151 167 (16) (9.6)%
Financing (FITTLE)
(53) (49) (4) 8.2%
Intersegment Elimination(1)
-------------------- -------------------- --------------------
Total Revenue $1,941 $1,777 $164 9.2%
==================== ==================== ====================
Profit
$183 $61 $122 NM
Print and Other
(5) 25 (30) (120.0)%
Financing (FITTLE)
-------------------- -------------------- --------------------
Full-Year Segment Results
(in millions) FY 2022 FY 2021 B/(W) % Change
YOY B/(W) YOY
-------------------------------
Revenue
$6,667 $6,548 $119 1.8%
Print and Other
610 695 (85) (12.2)%
Financing (FITTLE)
(170) (205) 35 (17.1)%
Intersegment Elimination(1)
-------------------- -------------------- --------------------
Total Revenue $7,107 $7,038 $69 1.0%
==================== ==================== ====================
Profit
$238 $293 $(55) (18.8)%
Print and Other
37 82 (45) (54.9)%
Financing (FITTLE)
-------------------- -------------------- --------------------
___________
(1) Reflects net revenue, primarily commissions and other payments, made by the Financing segment (FITTLE) to the Print and Other Segment for the lease of Xerox equipment placements.
2023 Guidance
Revenue growth: flat to down low-single-digits in constant currency Adjusted Operating Margin: at least 4.7% Free cash flow: at least $500 million
Free cash flow guidance includes the net benefit of a receivable funding agreement recently signed with an affiliate of HPS Investment Partners. This agreement covers sales of primarily U.S. direct lease receivables.
Non-GAAP Measures
This release refers to the following non-GAAP financial measures:
Adjusted EPS, which excludes the Goodwill impairment charge as well as Restructuring and related costs, net, Amortization of intangible assets, non-service retirement-related costs, and other discrete adjustments from GAAP EPS, as applicable. Adjusted operating income and margin, which exclude the EPS adjustments noted above as well as the remainder of Other expenses, net from pre-tax income (loss) and margin. Constant currency (CC) revenue change, which excludes the effects of currency translation. Free cash flow, which is operating cash flow less capital expenditures.
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.
Forward Looking Statements
This release 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", "should", "targeting", "projecting", "driving" and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include but are not limited to: the effects of pandemics, such as the COVID-19 pandemic, on our and our customers' businesses and the duration and extent to which this will impact our future results of operations and overall financial performance; our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; reliance on third parties, including subcontractors, for manufacturing of products and provision of services and the shared service arrangements entered into by us as part of Project Own It; our ability to attract and retain key personnel; the severity and persistence of global supply chain disruptions and inflation; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyberattacks or other intentional acts or that cyberattacks could result in a shutdown of our systems; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring and transformation actions; our ability to manage changes in the printing environment like the decline in the volume of printed pages and extension of equipment placements; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; interest rates, cost of borrowing and access to credit markets; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; and any impacts resulting from the restructuring of our relationship with Fujifilm Holdings Corporation. Additional risks that may affect Xerox's operations and other factors are set forth in the "Risk Factors" section, the "Legal Proceedings" section, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of Xerox Holdings Corporation's and Xerox Corporation's combined 2021 Annual Report on Form 10-K and combined Quarterly Reports on Form 10-Q, as well as in Xerox Holdings Corporation's and Xerox Corporation's Current Reports on Form 8-K filed with the Securities and Exchange Commission.
These forward-looking statements speak only as of the date of this release or as of the date to which they refer, and Xerox assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.
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XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
------------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------------------------
(in millions, except per-share data) 2022 2021 2022 2021
-------------------------------------------------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Revenues
$ 851 $ 653 $ 2,800 $ 2,582
Sales
1,039 1,069 4,100 4,235
Services, maintenance and rentals
51 55 207 221
Financing
-------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Total Revenues 1,941 1,777 7,107 7,038
-------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Costs and Expenses
572 476 2,002 1,862
Cost of sales
664 691 2,679 2,662
Cost of services, maintenance and rentals
30 26 108 111
Cost of financing
69 75 304 310
Research, development and engineering expenses
428 423 1,760 1,718
Selling, administrative and general expenses
-- 781 412 781
Goodwill impairment
24 (1 ) 65 38
Restructuring and related costs, net
11 13 42 55
Amortization of intangible assets
(3 ) 4 63 (24 )
Other expenses, net
-------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Total Costs and Expenses 1,795 2,488 7,435 7,513
-------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Income (Loss) before Income Taxes & Equity Income(1) 146 (711 ) (328 ) (475 )
24 (36 ) (3 ) (17 )
Income tax expense (benefit)
-- 1 3 3
Equity in net income of unconsolidated affiliates
-------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Net Income (Loss) 122 (674 ) (322 ) (455 )
1 1 -- --
Less: Net income attributable to noncontrolling interests
-------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Net Income (Loss) Attributable to Xerox Holdings $ 121 $ (675 ) $ (322 ) $ (455 )
==================== ============== ==================== ==================== ====== ==================== ==================== ============== ==================== ==================== ============== ====================
Basic Earnings (Loss) per Share $ 0.76 $ (3.97 ) $ (2.15 ) $ (2.56 )
___________________________
(1) Referred to as "Pre-tax income (loss)" throughout the remainder of this document.
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
-------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------
(in millions) 2022 2021 2022 2021
------------------------------------------------------------------------------------ -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Net Income (Loss) $ 122 $ (674 ) $ (322 ) $ (455 )
1 1 -- --
Less: Net income attributable to noncontrolling interests
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Net Income (Loss) Attributable to Xerox Holdings 121 (675 ) (322 ) (455 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Other Comprehensive Income (Loss), Net
259 (19 ) (377 ) (141 )
Translation adjustments, net
17 (1 ) (2 ) (4 )
Unrealized gains (losses), net
(267 ) 367 (171 ) 489
Changes in defined benefit plans, net
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Other Comprehensive Income (Loss), Net 9 347 (550 ) 344
(1 ) -- (1 ) --
Less: Other comprehensive loss, net attributable to noncontrolling interests
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Other Comprehensive Income (Loss), Net Attributable to Xerox Holdings 10 347 (549 ) 344
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Comprehensive Income (Loss), Net 131 (327 ) (872 ) (111 )
-- 1 (1 ) --
Less: Comprehensive income (loss), net attributable to noncontrolling interests
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share data in thousands) December 31, 2022 December 31, 2021
---------------------------------------------------------------------------------------- ------------------------------------------------------ -----------------------------------------------
Assets
Cash and cash equivalents $ 1,045 $ 1,840
Accounts receivable (net of allowance of $52 and $58, respectively) 857 818
Billed portion of finance receivables (net of allowance of $4 and $4, respectively) 93 94
Finance receivables, net 1,061 1,042
Inventories 797 696
Other current assets 254 211
-------------------- -------------- -------------------- -------------------- ------- --------------------
4,107 4,701
Total current assets
Finance receivables due after one year (net of allowance of $113 and $114, respectively) 1,948 1,934
Equipment on operating leases, net 235 253
Land, buildings and equipment, net 320 358
Intangible assets, net 208 211
Goodwill 2,820 3,287
Deferred tax assets 582 519
Other long-term assets 1,323 1,960
-------------------- -------------- -------------------- -------------------- ------- --------------------
$ 11,543 $ 13,223
Total Assets
==================== ============== ==================== ==================== ======= ====================
Liabilities and Equity
Short-term debt and current portion of long-term debt $ 860 $ 650
Accounts payable 1,331 1,069
Accrued compensation and benefits costs 258 239
Accrued expenses and other current liabilities 881 871
-------------------- -------------- -------------------- -------------------- ------- --------------------
3,330 2,829
Total current liabilities
Long-term debt 2,866 3,596
Pension and other benefit liabilities 1,175 1,373
Post-retirement medical benefits 184 277
Other long-term liabilities 411 481
-------------------- -------------- -------------------- -------------------- ------- --------------------
7,966 8,556
Total Liabilities
-------------------- -------------- -------------------- -------------------- ------- --------------------
Noncontrolling Interests 10 10
-------------------- -------------- -------------------- -------------------- ------- --------------------
Convertible Preferred Stock 214 214
-------------------- -------------- -------------------- -------------------- ------- --------------------
Common stock 156 168
Additional paid-in capital 1,588 1,802
Treasury stock, at cost -- (177 )
Retained earnings 5,136 5,631
Accumulated other comprehensive loss (3,537 ) (2,988 )
-------------------- -------------- -------------------- -------------------- ------- --------------------
3,343 4,436
Xerox Holdings shareholders' equity
Noncontrolling interests 10 7
-------------------- -------------- -------------------- -------------------- ------- --------------------
3,353 4,443
Total Equity
-------------------- -------------- -------------------- -------------------- ------- --------------------
$ 11,543 $ 13,223
Total Liabilities and Equity
==================== ============== ==================== ==================== ======= ====================
Shares of common stock issued 155,781 168,069
Treasury stock -- (8,675 )
-------------------- -------------- -------------------- -------------------- ------- --------------------
XEROX HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
-------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------
(in millions) 2022 2021 2022 2021
-------------------------------------------------------------------------------------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Cash Flows from Operating Activities
Net Income (Loss) $ 122 $ (674 ) $ (322 ) $ (455 )
Adjustments required to reconcile Net income (loss) to Cash flows provided by operating activities
65 78 270 327
Depreciation and amortization
17 8 65 46
Provisions
(39 ) -- (56 ) (40 )
Net gain on sales of businesses and assets
12 10 75 54
Stock-based compensation
-- 781 412 781
Goodwill impairment
18 (1 ) 62 27
Restructuring and asset impairment charges
(14 ) (11 ) (52 ) (72 )
Payments for restructurings
6 (25 ) (12 ) (89 )
Non-service retirement-related costs
(18 ) (41 ) (124 ) (160 )
Contributions to retirement plans
-- 71 (48 ) 41
Decrease (increase) in accounts receivable and billed portion of finance receivables
(7 ) 78 (143 ) 88
(Increase) decrease in inventories
(38 ) (37 ) (112 ) (129 )
Increase in equipment on operating leases
(131 ) (13 ) (141 ) 20
(Increase) decrease in finance receivables
(9 ) 4 27 68
(Increase) decrease in other current and long-term assets
80 44 278 118
Increase in accounts payable
5 (11 ) 34 9
Increase (decrease) in accrued compensation
82 9 9 89
Increase in other current and long-term liabilities
27 (68 ) (54 ) (79 )
Net change in income tax assets and liabilities
(12 ) 3 (22 ) 2
Net change in derivative assets and liabilities
20 (7 ) 13 (17 )
Other operating, net
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
186 198 159 629
Net cash provided by operating activities
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Cash Flows from Investing Activities
(18 ) (16 ) (57 ) (68 )
Cost of additions to land, buildings, equipment and software
38 5 87 44
Proceeds from sales of businesses and assets
-- (15 ) (93 ) (53 )
Acquisitions, net of cash acquired
(3 ) (5 ) (15 ) (8 )
Other investing, net
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
17 (31 ) (78 ) (85 )
Net cash provided by (used in) investing activities
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Cash Flows from Financing Activities
(24 ) (75 ) (529 ) (208 )
Net payments on debt
(43 ) (49 ) (174 ) (206 )
Dividends
-- (388 ) (113 ) (888 )
Payments to acquire treasury stock, including fees
-- (5 ) (6 ) (8 )
Other financing, net
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
(67 ) (517 ) (822 ) (1,310 )
Net cash used in financing activities
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Effect of exchange rate changes on cash, cash equivalents and restricted cash 2 (3 ) (29 ) (16 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Increase (decrease) in cash, cash equivalents and restricted cash 138 (353 ) (770 ) (782 )
Cash, cash equivalents and restricted cash at beginning of period 1,001 2,262 1,909 2,691
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Fourth Quarter 2022 Overview
2022 was a challenging year as revenue and profitability was impacted by an uncertain and unpredictable macroeconomic environment, which included increasing inflation and higher interest rates, supply chain challenges, currency disruption and a war in Ukraine. Despite these challenges, fourth quarter 2022 revenue grew in actual and constant currency(1) for the first time since the second quarter of 2021, due to strong demand for our products and services and improved product supply and mix.
Equipment sales revenue of $554 million in fourth quarter 2022 increased 44.3% in actual currency and 49.0% in constant currency(1) as compared to the prior year. Equipment sales revenue growth was driven by better availability of product across all categories and regions, particularly for higher margin A3 devices in the Americas region. The sequential growth in equipment sales revenue mirrored the decline in equipment backlog(2), revealing strong order activity amid an uncertain macroeconomic backdrop. Equipment sales revenue outpaced installations this quarter due to favorable product mix and the benefits of recent pricing actions. Installation growth was strongest for mid-range products and color A4 multifunction machines. Post-sale revenue declined 0.4% in actual currency and increased 4.2% in constant currency(1). Growth in constant currency(1) this quarter was driven by IT Services, which includes the acquisition of Powerland, and growth in supplies and paper. Contractual print services(3) revenue growth accelerated modestly this quarter in constant currency, aided by recent pricing actions and the acquisition of Go Inspire.
Pre-tax income and adjusted(1) operating income were both higher year-over-year, primarily due to increased equipment sales revenue, improved product and geography mix and lower logistics costs, partially offset by higher bad debt expense. We expect profitability to improve further in 2023 as we realize the benefits of price and cost actions taken in 2022, further improvements in product availability, lower logistics costs and additional operating efficiencies.
Total Revenue is expected to be flat to down low-single-digits in constant currency(1) in 2023. In 2023 we expect adjusted(1) operating income margin to be at least 4.7%, an 80 basis point increase over 2022 levels and we expect to generate at least $500 million of free cash flow(1), which reflects the benefits of our Financing (FITTLE) segment's receivable funding agreement.
Reportable Segment Change
During the first quarter of 2022, the Company made a change to its reportable segments from one reportable segment to two reportable segments - Print and Other, and Financing (FITTLE) to align with a change in how the Chief Operating Decision Maker (CODM), our Chief Executive Officer (CEO), allocates resources and assesses performance against the Company's key growth strategies. As such, prior period reportable segment results and related disclosures have been conformed to reflect the Company's current reportable segments.
__________________
(1) Refer to the Non-GAAP Financial Measures section for an explanation of the non-GAAP financial measure. Refer to the Non-GAAP Financial Measures section for an explanation of the non-GAAP financial measure. (2) Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT services offerings. Fourth quarter 2022 backlog of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. Backlog in Q2-22 and prior was revised to conform to current reporting methodology. Order backlog is measured as the value of unfulfilled sales orders, shipped and non-shipped, received from our customers waiting to be installed, including orders with future installation dates. It includes printing devices as well as IT hardware associated with our IT services offerings. Fourth quarter 2022 backlog of $246 million excludes sales orders from Russia and Powerland Computers, Ltd., which was acquired in the first quarter of 2022. Backlog in Q2-22 and prior was revised to conform to current reporting methodology.
Financial Review
Revenues
Three Months Ended % of Total Revenue
December 31,
---------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------
(in millions) 2022 2021 % CC % Change 2022 2021
Change
--------------------------------------------------------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------------- --------------------
Equipment sales $ 554 $ 384 44.3% 49.0% 29% 22%
Post sale revenue 1,387 1,393 (0.4)% 4.2% 71% 78%
-------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- --------------------
Total Revenue $ 1,941 $ 1,777 9.2% 13.9% 100% 100%
==================== ====== ==================== ==================== ====== ==================== ==================== ====================
Reconciliation to Condensed Consolidated Statements of Income (Loss):
Sales $ 851 $ 653 30.3% 34.7%
Less: Supplies, paper and other sales (297 ) (269 ) 10.4% 14.2%
-------------------- ------ -------------------- -------------------- ------ --------------------
Equipment Sales $ 554 $ 384 44.3% 49.0%
==================== ====== ==================== ==================== ====== ====================
Services, maintenance and rentals $ 1,039 $ 1,069 (2.8)% 1.9%
Add: Supplies, paper and other sales 297 269 10.4% 14.2%
Add: Financing 51 55 (7.3)% (1.4)%
-------------------- ------ -------------------- -------------------- ------ --------------------
Post Sale Revenue $ 1,387 $ 1,393 (0.4)% 4.2%
==================== ====== ==================== ==================== ====== ====================
Segments
---------------------------------------------------------------------
Print and Other $ 1,843 $ 1,659 11.1% 95% 93%
Financing (FITTLE) 151 167 (9.6)% 8% 10%
Intersegment elimination (1) (53 ) (49 ) 8.2% (3)% (3)%
-------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- --------------------
Total Revenue(2) $ 1,941 $ 1,777 9.2% 100% 100%
==================== ====== ==================== ==================== ====== ==================== ==================== ====================
Go-to-Market Operations
---------------------------------------------------------------------
Americas $ 1,277 $ 1,096 16.5% 17.4% 66% 62%
EMEA 619 636 (2.7)% 8.6% 32% 36%
Other 45 45 --% --% 2% 2%
-------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- --------------------
____________________________
CC - See "Constant Currency" in the Non-GAAP Financial Measures section for a description of constant currency. (1) Reflects net revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements.
Costs, Expenses and Other Income
Summary of Key Financial Ratios
The following is a summary of key financial ratios used to assess our performance:
Three Months Ended
December 31,
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in millions) 2022 2021 B/(W)
---------------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- ---------------------------------------------- --------------------
Gross Profit $ 675 $ 584 $ 91
RD&E 69 75 6
SAG 428 423 (5 )
Equipment Gross Margin 31.6 % 22.0 % 9.6 pts.
Post sale Gross Margin 36.1 % 35.8 % 0.3 pts.
Total Gross Margin 34.8 % 32.9 % 1.9 pts.
RD&E as a % of Revenue 3.6 % 4.2 % 0.6 pts.
SAG as a % of Revenue 22.1 % 23.8 % 1.7 pts.
Pre-tax Income (Loss) (1) $ 146 $ (711 ) $ 857
Pre-tax Income (Loss) Margin 7.5 % (40.0 )% 47.5 pts.
Adjusted(2) Operating Profit $ 178 $ 86 $ 92
____________________________
(1) Fourth quarter 2021 includes a pre-tax non-cash goodwill impairment charge of $781 million.
Other Expenses, Net
Three Months Ended
December 31,
----------------------------------------------------------------------------------------------------------------------
(in millions) 2022 2021
--------------------------------------- -------------------- ---- -------------------- -------------------- -------------- --------------------
Non-financing interest expense $ 18 $ 25
Interest income (3 ) (1 )
Non-service retirement-related costs 6 (25 )
Gains on sales of businesses and assets (39 ) --
Currency losses, net 11 1
All other expenses, net 4 4
-------------------- ---- -------------------- -------------------- -------------- --------------------
Segment Review
Three Months Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in millions) External Net Revenue Intersegment Net Revenue(1) Total Segment Revenue % of Total Revenue Segment Profit Segment Margin(2)
(Loss)
-------------------- ------------------------------ -------------------------- ------------------------------ ------------------- ---------------------------------------------- -------------------
2022
Print and Other $ 1,793 $ 50 $ 1,843 92 % $ 183 10.2 %
Financing (FITTLE) 148 3 151 8 % (5 ) (3.4 )%
-------------------- ---------- -------------------- ------ -------------------- ---------- ---------- --------- -------------------- ------ -------------------- ---------- ---------
Total $ 1,941 $ 53 $ 1,994 100 % $ 178 9.2 %
==================== ========== ==================== ====== ==================== ========== ========== ========= ==================== ====== ==================== ========== =========
2021
Print and Other $ 1,613 $ 46 $ 1,659 91 % $ 61 3.8 %
Financing (FITTLE) 164 3 167 9 % 25 15.2 %
-------------------- ---------- -------------------- ------ -------------------- ---------- ---------- --------- -------------------- ------ -------------------- ---------- ---------
_____________
(1) Reflects net revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements.
Print and Other
Print and Other includes the design, development and sale of document management systems, solutions and services as well as associated technology offerings including IT and software products and services.
Revenue
Three Months Ended
December 31,
----------------------------------------------------------------------
(in millions) 2022 2021 %
Change
---------------------------- -------------------- ----- -------------------- ----- --------------------
Equipment sales $ 548 $ 378 45.0 %
Post sale revenue 1,245 1,235 0.8 %
Intersegment net revenue (1) 50 46 8.7 %
-------------------- ----- -------------------- -----
___________________________
(1) Reflects net revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements.
Detail by product group is shown below.
Three Months Ended % of Equipment Sales
December 31,
-------------------------------------------------------------------- --------------------------------
(in millions) 2022 2021 % CC % Change 2022 2021
Change
-------------------- -------------------- ---- -------------------- ---- -------------------- -------------------- ------ ------
Entry $ 79 $ 76 3.9% 8.6% 14% 20%
Mid-range 369 214 72.4% 77.5% 67% 56%
High-end 100 86 16.3% 19.9% 18% 22%
Other 6 8 (25.0)% (25.0)% 1% 2%
-------------------- ---- -------------------- ---- ------ ------
_____________
CC - See "Constant Currency" in the Non-GAAP Financial Measures section for a description of constant currency. (1) Refer to Appendix II, Reportable Segments and Geographic Sales Channels, for definitions.
Financing (FITTLE)
Financing (FITTLE) represents a global financing solutions business, primarily enabling the sale of our equipment and services.
Revenue
Three Months Ended
December 31,
--------------------------------------------------------------------
(in millions) 2022 2021 %
Change
--------------------------- -------------------- ---- -------------------- ---- --------------------
Equipment sales $ 6 $ 6 --%
Financing 51 55 (7.3)%
Other Post sale revenue (1) 91 103 (11.7)%
Intersegment net revenue(2) 3 3 --%
-------------------- ---- -------------------- ----
___________________________
(1) Other Post sale revenue includes operating lease/rental revenues as well as lease renewal and fee income.
2021 Segment Review
The following are our 2021 results that correspond, for comparison purposes, to the new segment reporting in 2022.
(in millions) External Net Revenue Intersegment Net Revenue(1) Total Segment Revenue % of Total Revenue Segment Profit Segment 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 $ 1,761 100% $ 89 5.2%
==================== ========== ==================== ============= ==================== ========== ==================== ==================== ========== ====================
Q2 2021
Print and Other $ 1,619 $ 53 $ 1,672 90% $ 111 6.9%
Financing (FITTLE) 174 3 177 10% 15 8.6%
-------------------- ---------- -------------------- ------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total $ 1,793 $ 56 $ 1,849 100% $ 126 7.0%
==================== ========== ==================== ============= ==================== ========== ==================== ==================== ========== ====================
Q3 2021
Print and Other $ 1,590 $ 46 $ 1,636 91% $ 50 3.1%
Financing (FITTLE) 168 3 171 9% 24 14.3%
-------------------- ---------- -------------------- ------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total $ 1,758 $ 49 $ 1,807 100% $ 74 4.2%
==================== ========== ==================== ============= ==================== ========== ==================== ==================== ========== ====================
Q4 2021
Print and Other $ 1,613 $ 46 $ 1,659 91% $ 61 3.8%
Financing (FITTLE) 164 3 167 9% 25 15.2%
-------------------- ---------- -------------------- ------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total $ 1,777 $ 49 $ 1,826 100% $ 86 4.8%
==================== ========== ==================== ============= ==================== ========== ==================== ==================== ========== ====================
2021
Print and Other $ 6,355 $ 193 $ 6,548 90% $ 293 4.6%
Financing (FITTLE) 683 12 695 10% 82 12.0%
-------------------- ---------- -------------------- ------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
_____________
(1) Reflects net revenue, primarily commissions and other payments, made by the Financing (FITTLE) segment to the Print and Other segment for the lease of Xerox equipment placements.
Forward-Looking Statements
This release 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", "should", "targeting", "projecting", "driving" and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially.
Such factors include but are not limited to: the effects of pandemics, such as the COVID-19 pandemic, on our and our customers' businesses and the duration and extent to which this will impact our future results of operations and overall financial performance; our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; reliance on third parties, including subcontractors, for manufacturing of products and provision of services and the shared service arrangements entered into by us as part of Project Own It; our ability to attract and retain key personnel; the severity and persistence of global supply chain disruptions and inflation; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyberattacks or other intentional acts or that cyberattacks could result in a shutdown of our systems; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring and transformation actions; our ability to manage changes in the printing environment like the decline in the volume of printed pages and extension of equipment placements; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; interest rates, cost of borrowing and access to credit markets; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; and any impacts resulting from the restructuring of our relationship with Fujifilm Holdings Corporation. Additional risks that may affect Xerox's operations and other factors are set forth in the "Risk Factors" section, the "Legal Proceedings" section, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of Xerox Holdings Corporation's and Xerox Corporation's combined 2021 Annual Report on Form 10-K and combined Quarterly Reports on Form 10-Q, as well as in Xerox Holdings Corporation's and Xerox Corporation's Current Reports on Form 8-K filed with the Securities and Exchange Commission.
These forward-looking statements speak only as of the date of this release or as of the date to which they refer, and Xerox assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.
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 understand the trends in our business and to better understand and compare our results. Management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Accordingly, we believe it is necessary to adjust several reported amounts, determined in accordance with GAAP, to exclude the effects of certain items as well as their related income tax effects.
However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.
A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth below, as well as in the fourth quarter 2022 presentation slides available at www.xerox.com/investor.
Adjusted Earnings Measures
Net Income (Loss) and Earnings per share (EPS) Effective Tax Rate
The above measures were adjusted for the following items:
Restructuring and related costs, net: Restructuring and related costs, net include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges. Restructuring consists of costs primarily related to severance and benefits paid to employees pursuant to formal restructuring and workforce reduction plans. Asset impairment includes costs incurred for those assets sold, abandoned or made obsolete as a result of our restructuring actions, exiting from a business or other strategic business changes. Additional costs for our transformation programs are primarily related to the implementation of strategic actions and initiatives and include third-party professional service costs as well as one-time incremental costs. All of these costs can vary significantly in terms of amount and frequency based on the nature of the actions as well as the changing needs of the business. Accordingly, due to that significant variability, we will exclude these charges since we do not believe they provide meaningful insight into our current or past operating performance nor do we believe they are reflective of our expected future operating expenses as such charges are expected to yield future benefits and savings with respect to our operational performance. Amortization of intangible assets: The amortization of intangible assets is driven by our acquisition activity which can vary in size, nature and timing as compared to other companies within our industry and from period to period. The use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods. Non-service retirement-related costs: Our defined benefit pension and retiree health costs include several elements impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity markets as well as those that are predominantly legacy in nature and related to employees who are no longer providing current service to the Company (e.g. retirees and ex-employees). These elements include (i) interest cost, (ii) expected return on plan assets, (iii) amortization of prior plan amendments, (iv) amortized actuarial gains/losses and (v) the impacts of any plan settlements/curtailments. Accordingly, we consider these elements of our periodic retirement plan costs to be outside the operational performance of the business or legacy costs and not necessarily indicative of current or future cash flow requirements. This approach is consistent with the classification of these costs as non-operating in Other expenses, net. Adjusted earnings will continue to include the service cost elements of our retirement costs, which is related to current employee service as well as the cost of our defined contribution plans. Other discrete, unusual or infrequent items: We exclude these items, when applicable, given their discrete, unusual or infrequent nature and their impact on our results for the period. Non-cash goodwill impairment charge Contract termination cost - product supply Accelerated share vesting - stock compensation expense associated with the accelerated vesting of all outstanding equity awards, according to the terms of the award agreement, in connection with the passing of Xerox Holding's former CEO. Loss on extinguishment of debt
Adjusted Operating Income (Loss) and Margin
We calculate and utilize adjusted operating income (loss) and margin measures by adjusting our reported pre-tax income (loss) and margin amounts. In addition to the costs and expenses noted as adjustments for our adjusted earnings measures, adjusted operating income and margin also exclude the remaining amounts included in Other expenses, net, which are primarily non-financing interest expense and certain other non-operating costs and expenses. We exclude these amounts in order to evaluate our current and past operating performance and to better understand the expected future trends in our business.
Constant Currency
To better understand trends in our business, we believe that it is helpful to adjust revenue to exclude the impact of changes in the translation of foreign currencies into U.S. dollars. We refer to this adjusted revenue as "constant currency." This impact is calculated by translating current period activity in local currency using the comparable prior year period's currency translation rate. This impact is calculated for all countries where the functional currency is not the U.S. dollar. Management believes the constant currency measure provides investors an additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.
Free Cash Flow
To better understand trends in our business, we believe that it is helpful to adjust operating cash flows by subtracting amounts related to capital expenditures. Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestment. It provides a measure of our ability to fund acquisitions, dividends and share repurchase.
Net Income (Loss) and EPS reconciliation:
Three Months Ended December 31, Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2022 2021 2022 2021
------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------------------------- -------------------- -------------------------------------------------------------------------------------------- -------------------- ---------------------------------------------------------------------------------------------------- --------------------
(in millions, except per share amounts) Net Income Diluted Net Diluted Net Diluted Net Diluted
EPS (Loss) Income EPS (Loss) Income EPS (Loss) Income EPS
---------------------------------------------------------------- ------------------------------------------------------ ---------------------------------- ------------------------------------------------------ ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ------------------------------------------------------ ----------------------------------------------
Reported(1) $ 121 $ 0.74 $ (675 ) $ (3.97 ) $ (322 ) $ (2.15 ) $ (455 ) $ (2.56 )
Adjustments:
Goodwill impairment -- 781 412 781
Restructuring and related costs, net 24 (1 ) 65 38
Amortization of intangible assets 11 13 42 55
Non-service retirement-related costs 6 (25 ) (12 ) (89 )
Contract termination cost - product supply -- -- 33 --
Accelerated share vesting -- -- 21 --
Loss on extinguishment of debt 1 -- 5 --
Income tax on adjustments(2) (17 ) (31 ) (55 ) (37 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- ------ -------------------- -------------------- -------------- --------------------
Adjusted $ 146 $ 0.89 $ 62 $ 0.34 $ 189 $ 1.12 $ 293 $ $ 1.51
==================== ============== ==================== ==================== ============== ==================== ==================== ====== ==================== ==================== ============== ====================
Dividends on preferred stock used in adjusted EPS calculation(3) $ -- $ 3 $ 14 $ 14
Weighted average shares for adjusted EPS(3) 165 173 157 185
____________________________
(1) Net income (loss) and EPS attributable to Xerox Holdings. Fourth quarter and full year 2021 Net (loss) and EPS include an after-tax non-cash goodwill impairment charge of $750 million, or $4.38 per share and $4.08 per share, respectively. Full year 2022 Net (loss) and EPS include an after-tax non-cash goodwill impairment charges of $395 million or $2.54 per share. (2) Refer to Effective Tax Rate reconciliation. (3) For those periods that include the preferred stock dividend, the average shares for the calculations of diluted EPS exclude the 7 million shares associated with Xerox Holdings Corporation's Series A Convertible preferred stock.
Effective Tax Rate reconciliation:
Three Months Ended Three Months Ended
December 31, 2022 December 31, 2021
-------------------------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------------------------------------------------------------
(in millions) Pre-Tax Income Income Tax Expense Effective Tax Rate Pre-Tax (Loss) Income Effective Tax
Income Tax (Benefit) Expense Rate
----------------------------- ---------------------------------- ---------------------------------- -------------------- ----------------------------------------------- ------------------------------------------------------ --------------------
Reported(1) $ 146 $ 24 16.4% $ (711 ) $ (36 ) 5.1 %
Goodwill impairment -- -- 781 31
Other Non-GAAP adjustments(2) 42 17 (13 ) --
-------------------- -------------- -------------------- -------------- -------------------- ------- -------------------- -------------------- -------------- --------------------
Year Ended Year Ended
December 31, 2022 December 31, 2021
------------------------------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------
(in millions) Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax (Loss) Income Income Tax (Benefit) Expense Effective Tax
Rate
----------------------------- ----------------------------------------------- ------------------------------------------------- -------------------- ----------------------------------------------- ------------------------------------------------- --------------------
Reported(1) $ (328 ) $ (3 ) 0.9% $ (475 ) $ (17 ) 3.6%
Goodwill impairment 412 17 781 31
Other Non-GAAP Adjustments(2) 154 38 4 6
-------------------- ------- -------------------- -------------------- --------- -------------------- -------------------- ------- -------------------- -------------------- --------- --------------------
____________________________
(1) Pre-tax income (loss) and income tax expense (benefit). Pre-tax income (loss) and income tax expense (benefit). (2) Refer to Net Income (Loss) and EPS reconciliation for details. Refer to Net Income (Loss) and EPS reconciliation for details.
Operating Income (Loss) and Margin reconciliation:
Three Months Ended Three Months Ended
December 31, 2022 December 31, 2021
---------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------
(in millions) Profit Revenue Margin (Loss) Revenue Margin
Profit
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Reported(1) $ 146 $ 1,941 7.5 % $ (711) $ 1,777 (40.0) %
Adjustments:
Goodwill impairment -- 781
Restructuring and related costs, net 24 (1)
Amortization of intangible assets 11 13
Other expenses, net (3) 4
-------------------- -------------------- -------------------- --------------------
Year Ended Year Ended
December 31, 2022 December 31, 2021
---------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------
(in millions) (Loss) Revenue Margin (Loss) Revenue Margin
Profit Profit
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Reported(1) $ (328) $ 7,107 (4.6) % $ (475) $ 7,038 (6.7) %
Adjustments:
Goodwill impairment 412 781
Restructuring and related costs, net 65 38
Amortization of intangible assets 42 55
Accelerated share vesting 21 --
Other expenses, net 63 (24)
-------------------- -------------------- -------------------- --------------------
___________________________
(1) Pre-tax income (loss).
Free Cash Flow reconciliation:
Three Months Ended Year Ended
December 31, December 31,
---------------------------------------------------------------------------------------- ------------------------------------------------------------------------------
(in millions) 2022 2021 2022 2021
---------------------------------------------------------- -------------------- -------------- -------------------- -------------- -------------------- ---- -------------------- --------------
Reported(1) $ 186 $ 198 $ 159 $ 629
Less: capital expenditures 18 16 57 68
-------------------- -------------- -------------------- -------------- -------------------- ---- -------------------- --------------
Free Cash Flow $ 168 $ 182 $ 102 $ $ 561
-------------------- -------------- -------------------- -------------- -------------------- ---- -------------------- -------------------- --------------
Add: one-time contract termination charge - product supply -- -- 41 --
-------------------- -------------- -------------------- -------------- -------------------- ---- -------------------- --------------
____________________________
(1) Net cash provided by operating activities.
GUIDANCE:
Operating Income and Margin:
FY 2023
----------------------------------------------------------------------------------------------------
(in millions) Profit Revenue (CC)(2,3) Margin
------------------------------------ -------------------- -------------------- --------------------
Estimated(1) $200 $7,100 2.8%
Adjustments:
Restructuring and related costs, net 75
Amortization of intangible assets 40
Other expenses, net 20
-------------------- --------------------
____________________________
(1) Pre-tax income and revenue. Pre-tax income and revenue. (2) Full-year revenue is estimated to be flat to down low-single-digits, in constant currency. Revenue of $7.1 billion reflects the high end of the guidance range. Full-year revenue is estimated to be flat to down low-single-digits, in constant currency. Revenue of $7.1 billion reflects the high end of the guidance range.
Free Cash Flow
(in millions) FY 2023
-------------------------- --------------------
Operating Cash Flow (1) At least $550
Less: capital expenditures 50
--------------------
____________________________
(1) Net cash provided by operating activities.
APPENDIX I
Xerox Holdings Corporation
Earnings (Loss) per Common Share
(in millions, except per-share data, shares in thousands) Three Months Ended Year Ended
December 31, December 31,
----------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------
2022 2021 2022 2021
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Basic Earnings (Loss) per Share:
Net Income (Loss) Attributable to Xerox Holdings $ 121 $ (675 ) $ (322 ) $ (455 )
Accrued dividends on preferred stock (3 ) (3 ) (14 ) (14 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted net income (loss) available to common shareholders $ 118 $ (678 ) $ (336 ) $ (469 )
==================== ============== ==================== ==================== ============== ==================== ==================== ============== ==================== ==================== ============== ====================
Weighted average common shares outstanding 156,155 171,045 156,006 183,168
Basic Earnings (Loss) per Share $ 0.76 $ (3.97 ) $ (2.15 ) $ (2.56 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Diluted Earnings (Loss) per Share:
Net Income (Loss) Attributable to Xerox Holdings $ 121 $ (675 ) $ (322 ) $ (455 )
Accrued dividends on preferred stock -- (3 ) (14 ) (14 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted net income (loss) available to common shareholders $ 121 $ (678 ) $ (336 ) $ (469 )
==================== ============== ==================== ==================== ============== ==================== ==================== ============== ==================== ==================== ============== ====================
Weighted average common shares outstanding 156,155 171,045 156,006 183,168
Common shares issuable with respect to:
-- -- -- --
Stock Options
1,732 -- -- --
Restricted stock and performance shares
6,742 -- -- --
Convertible preferred stock
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted weighted average common shares outstanding 164,629 171,045 156,006 183,168
==================== ============== ==================== ==================== ============== ==================== ==================== ============== ==================== ==================== ============== ====================
Diluted Earnings (Loss) per Share $ 0.74 $ (3.97 ) $ (2.15 ) $ (2.56 )
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
The following securities were not included in the computation of diluted earnings per share as they were either contingently issuable shares or shares that if included would have been anti-dilutive:
Stock options 586 612 586 612
Restricted stock and performance shares 3,218 5,979 4,950 5,979
Convertible preferred stock -- 6,742 6,742 6,742
-------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
Total Anti-Dilutive Securities 3,804 13,333 12,278 13,333
==================== ============== ==================== ==================== ============== ==================== ==================== ============== ==================== ==================== ============== ====================
APPENDIX II
Xerox Holdings Corporation
Reportable Segments:
Our business is organized to ensure we focus on efficiently managing operations while serving our customers and the markets in which we operate.
Our Print and Other segment includes the sale of document systems, supplies and technical services and managed services. The segment also includes the delivery of managed services that involve a continuum of solutions and services that help our customers optimize their print and communications infrastructure, apply automation and simplification to maximize productivity, and ensure the highest levels of security. This segment also includes IT services and software. Our product groupings range from:
"Entry", which includes A4 devices and desktop printers and multifunction devices that primarily serve small and medium workgroups/work teams. "Mid-Range", which include A3 devices that generally serve large workgroup/work team environments as well as products in the Light Production monochrome and color segments serving centralized print centers, print for pay and lower volume production print establishments. "High-End", which include production printing and publishing systems that generally serve the graphic communications marketplace and print centers in large enterprises.
Customers range from small and mid-sized businesses to large enterprises. Customers also include graphic communication enterprises as well as channel partners including distributors and resellers. Segment revenues also include commissions and other payments from the Financing (FITTLE) segment for the exclusive right to provide lease financing for Xerox products. These revenues are reported as part of Intersegment Revenues, which are eliminated in consolidated revenues.
The Financing (FITTLE) segment provides leasing solutions through either bundled or unbundled lease agreements of Xerox and non-Xerox products. These leasing solutions support a wide range of customers, from government to graphic communications and SMB to Enterprise as well as financing for direct channel customer purchases of both Xerox and non-Xerox equipment. Segment revenues primarily include financing income on sales-type leases, operating lease income (including month to month rentals and extensions) and leasing fees.
Geographic Sales Channels
We also operate a matrix organization that includes a geographic focus that is primarily organized from a sales perspective on the basis of "go-to-market" (GTM) sales channels as follows:
Americas, which includes our sales channels in the U.S. and Canada, as well as Mexico, and Central and South America. EMEA, which includes our sales channels in Europe, the Middle East, Africa and India. Other, primarily includes sales to Fuji Xerox as well as royalties and licensing revenue.
These GTM sales channels are structured to serve a range of customers for our products and services, including financing. Accordingly, we will continue to provide information, primarily revenue related, with respect to our principal GTM sales channels.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230126005353/en/
SOURCE: Xerox Holdings Corporation
Media Contact: Justin Capella, Xerox, +1-203-258-6535, Justin.Capella@xerox.com Investor Contact: David Beckel, Xerox, +1-203-849-2318, David.Beckel@xerox.com
COMTEX_423330471/1006/2023-01-26T06:30:06