Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q1 2019 Earnings Presentation
25 slides from Xerox's earnings presentation, Apr 25, 2019
Slide 1: Earnings Presentation Q1 Results April 25, 2019
EARNINGS PRESENTATION Q1 Results I April 25, 2019
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: Key Financial Measures Q1 2019
Key Financial Measures I Q1 2019 Adj1 Earnings Per Share Revenue ($B) Adj1 Operating Margin 1.0 $0.91 3.0 $2.4 $2.2 15% 0.8 $0.68 11.3% 2.0 9.9% 0.6 10% 0.4 1.0 0.2 5% 0.0 0.0 2018 2019 0% 2018 2019 2018 2019 GAAP EPS $0.08 $0.55 2019 % Change: (9.4)% @ AC, (7.0)% @ CC1 Free Cash Flow1 ($M) Sharehol
Slide 4: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox Optimize operations for • Simplify operating model for greater accountability and efficiency • Optimize the supply chain and supplier competitiveness simplicity • Make it easier to do business with Xerox • More effectively support customers Drive revenue • Se
Slide 5: Frequently Asked Questions
Frequently Asked Questions Why adopt a holding What is the status of the When will you see What is the progress of company structure? potential sale of the benefits from the Project Own It? leasing business? investments you are making? The holding company We are evaluating strategic We are at the ea
Slide 6: Financial Results
Financial Results B/(W) % Change (in millions, except per share data) Q1 2019 Q1 2018 YOY YOY (9.4)% AC Revenue $ 2,206 $ 2,435 $ (229) (7.0)% CC1 Gross Margin 40.3% 39.8% 50 bps RD&E % 4.2% 4.1% (10) bps SAG % 24.8% 25.8% 100 bps Operating Income – Adjusted1 $ 249 $ 242 $7 3% Operating Margin – Adj
Slide 7: Cash Flow
Cash Flow (in millions) Q1 2019 Q1 2018 Pre-tax Income $ 83 $ 134 Non-cash add-backs1 185 146 Restructuring Payments (33) (54) Pension Contributions (34) (38) Working Capital, net2 (45) 3 Change in Finance Assets3 110 93 Other4 (40) (68) Cash from Operations $ 226 $ 216 Cash used in Investing $ (18)
Slide 8: Revenue
Revenue Equipment Revenue Breakdown YOY Change 1% (in millions) Q1 2019 % Mix AC CC1 12% 20% Entry 4 Equipment $ 448 20% (10.2)% (7.6)% Mid-Range Post Sale $1,758 80% (9.2)% (6.8)% High-End Other Total Revenue $2,206 100% (9.4)% (7.0)% 67% Americas 1,410 64% (8.1)% (7.5)% Q1 Installs5 (YOY Change) E
Slide 9: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It Contribution: At least $640M of Gross Savings in 2019 14.4% 9.9% 11.0% 10.9% 11.3% 1Q18 2Q18 3Q18 4Q18 1Q19 Transaction Currency Impact 70 bps 60 bps 40 bps 10 bps (30) bps Adjusted1 EPS $1.14 $0.91 $0.80 $0.85 $0.68 Shared Service
Slide 10: Capital Structure
Capital Structure Debt Breakdown Financing Debt $3.3B • Customer value proposition includes leasing of Xerox As of March 31, 2019 ($B) equipment Finance Assets Debt Cash2 • Maintain 7:1 debt to equity leverage ratio on these finance assets Financing $ 3.8 $ 3.3 Core - 1.5 Core Debt $1.5B Total Xerox
Slide 11: Q1 Summary
Q1 Summary Positive Start to 2019 on Raising Earnings and Share Executing on Key Measures Repurchase Expectations our strategic • Adjusted1 EPS up 34% year- • FY19 GAAP EPS range to $2.90 initiatives to over year - $3.05 (from $2.60 - $2.70) transform • Adjusted1 Operating Margin • FY19 Adjusted1 EP
Slide 12: Appendix
Appendix 12
Slide 13: Operating Trends
Operating Trends 2016 2017 2018 2019 (in millions) FY FY Q1 Q2 Q3 Q4 FY Q1 Total Revenue $10,771 $10,265 $2,435 $2,510 $2,352 $2,533 $9,830 $2,206 % Change (6.1)% (4.7)% (0.8)% (2.2)% (5.8)% (7.8)% (4.2)% (9.4)% CC1 % Change (4.3)% (4.7)% (4.6)% (4.0)% (4.7)% (6.1)% (4.9)% (7.0)% Adj1 Operating Marg
Slide 14: Non-GAAP Financial Measures
Non-GAAP Financial Measures 14
Slide 15: 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 16: Non-GAAP Financial Measures (cont'd)
Non-GAAP Financial Measures (cont’d) • 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
Slide 17: Non-GAAP Financial Measures (cont'd)
Non-GAAP Financial Measures (cont’d) Adjusted Operating Income/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, adj
Slide 18: Net Income and EPS reconciliation
Net Income and EPS reconciliation Three Months Ended Three Months Ended March 31, 2019 March 31, 2018 Net Diluted Net Diluted (in millions, except per share amounts) Income EPS Income EPS As Reported (1) $ 133 $ 0.55 $ 23 $ 0.08 Restructuring and related costs 112 28 Amortization of intangible asset
Slide 19: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended March 31, 2019 March 31, 2018 Income Tax Pre-Tax (Benefit) Effective Pre-Tax Income Tax Effective (in millions) Income Expense Tax Rate Income Expense Tax Rate Reported(1) $ 83 $ (8) (9.6)% $ 134 $ 40 29.9% Non-GAAP Adjustments
Slide 20: Operating Income / Margin reconciliation
Operating Income / Margin reconciliation Three Months Ended Three Months Ended March 31, 2019 March 31, 2018 (in millions) Profit Revenue Margin Profit Revenue Margin Reported (1) $ 83 $ 2,206 3.8% $ 134 $ 2,435 5.5% Restructuring and related costs 112 28 Amortization of intangible assets 15 12 Tran
Slide 21: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended March 31, (in millions) 2019 2018 Reported(1) $ 226 $ 216 Capital expenditures (15) (18) Free Cash Flow $ 211 $ 198 _________________ (1) Net cash provided by operating activities. 21
Slide 22: Net Income and EPS reconciliation - historical
Net Income and EPS reconciliation - historical Y e a r E nde d Y e a r E nde d Y e a r E nde d D e c e m be r 3 1, 2 0 16 D e c e m be r 3 1, 2 0 17 Q 1- 18 Q 2 - 18 Q 3 - 18 Q 4 - 18 D e c e m be r 3 1, 2 0 18 N et N et N et N et N et N et N et (in millio ns, except per share amo unts) Inc o m e EP
Slide 23: Operating Income / Margin reconciliation - historical
Operating Income / Margin reconciliation - historical Year Ended Year Ended Year Ended Decem ber 31, 2016 Decem ber 31, 2017 Q1-18 Q2-18 Q3-18 Q4-18 Decem ber 31, 2018 (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit R
Slide 24: Free Cash Flow reconciliation - historical
Free Cash Flow reconciliation - historical Y e a r E nde d Y e a r E nde d D e c e m be r 3 1, D e c e m be r 3 1, Y e a r E nde d 2 0 16 2 0 17 Q 1- 18 Q 2 - 18 Q 3 - 18 Q 4 - 18 D e c e m be r 3 1, 2 0 18 (in millions, except per share amounts) Reported (1) $ 716 $ (179) $ 216 $ 235 $ 274 $ 415 $
Slide 25: © 2019 Xerox Corporation. All rights reserved. Xerox® and “Made To Think” are trademarks
© 2019 Xerox Corporation. All rights reserved. Xerox® and “Made To Think” are trademarks of Xerox Corporation in the United States and/or other countries. BRXXXXX