Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q4 2016 Earnings Presentation
28 slides from Xerox's earnings presentation, Jan 31, 2017
Slide 1: Fourth Quarter 2016 Earnings Presentation
Fourth Quarter 2016 Earnings Presentation Jeff Jacobson, CEO Bill Osbourn, CFO January 31, 2017 1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to id
Slide 3: The New Xerox – Well Positioned for the Future
The New Xerox – Well Positioned for the Future Attractive Market opportunity of ~$85B Business Model >75% annuity1 revenue and strong cash flow Laser Focus on Track record of operating discipline Cost and Productivity $1.5B+ three-year strategic transformation program Well Positioned to Increasing o
Slide 4: 2016 Highlights
2016 Highlights • Completed separation of Conduent • Exceeded Year 1 Strategic Transformation goal • Streamlined operating model • Continued recognition for innovation and market leadership 4
Slide 5: Fourth-Quarter Overview
Fourth-Quarter Overview Strategic Transformation savings offset revenue declines • Revenue pressure driven by equipment, annuity trend stable • Operating margin expanded Operating cash flow seasonally strong and above expectations Revenue Profitability Cash $2.7B, down 7% or 5% CC2 Operating margin2
Slide 6: Earnings (Continuing Operations)
Earnings (Continuing Operations) (in millions, except per share data) Q4 2016 B/(W) YOY Revenue $ 2,734 $ (212) Adjusted Gross Margin1 40.3% 0.1 pts Adjusted RD&E1 $ 109 $ 14 Adjusted SAG1 $ 631 $ 68 Equity Income $ 23 $ (9) Adjusted Operating Income1 $ 384 $ (9) Operating Income % of Revenue 14.0%
Slide 7: Full-Year Performance Trends
Full-Year Performance Trends Revenue Operating Profit1 Key Messages $M $M $12,679 $1,686 $11,465 $10,771 $1,457 Constant Currency revenue $1,342 declines stable for past three years 2016 Adjusted Operating Margin1 at high-end of expected range 2014 2015 2016 2014 2015 2016 Currency remains a headwin
Slide 8: Key Performance Metrics
Key Performance Metrics Strategic Growth Areas Installs Strategic Transformation MPS & Workflow Automation Color B&W 2016 FY Gross Savings2 $550M (% change YOY) Q4 FY Q4 FY 2016 Target $500M A4 MFPs High-End 3% 16% (18)% (13)% 2017 Target $600M Mid-Range 0% 3% (13)% (16)% Color Production Cumulative
Slide 9: Cash Flow
Cash Flow (in millions) Pre-tax Income from Continuing Ops Q4 2016 $ 179 FY 2016 $ 568 Operating Cash Flow: Non-cash add-backs1 191 743 • Strong Q4 cash flow of $462M, Restructuring payments (35) (118) $1,018M FY Pension Contributions (76) (178) • Restructuring payments of Working Capital, net2 194
Slide 10: Capital Structure
Capital Structure Customer Financing and Leverage • Value proposition includes leasing of Xerox equipment • Maintain 7:1 debt to equity leverage ratio on these finance assets Core debt level managed to Year Ended December 31, 2016 Pro forma maintain investment grade (in billions) Fin. Assets Debt* C
Slide 11: 2017 Full-Year Guidance
Revenue assumptions 2017 Full-Year • At recent exchange rates, translation currency an Guidance approximate (2) pt impact Operating Margin assumptions Revenue: down mid-single digits CC2 • Strategic Transformation gross savings of $600M • ~ $100M negative transaction currency Operating Margin2: 12.5
Slide 12: Capital Allocation
Capital Allocation Available Cash Sources • Committed to maintaining investment grade Pro forma Q4’16 Ending Cash $1.4B credit profile 2017 Targeted Ending Cash $1.0B • Incremental debt repayment of $300M Available Cash Balance $400M Payment of Separation Costs in 2017 $(100)M • Initial annualized c
Slide 13: In Summary: A new Xerox
In Summary A new Xerox 1 Streamlining and re-focusing our operations to deliver innovative products and solutions to our customers and strong returns for our shareholders 2016 results 2 Laid foundation for future with launch of Strategic Transformation program and Strategic Growth area focus 2017 co
Slide 14: Appendix
Appendix 14
Slide 15: Revenue Trend
Revenue Trend 2015 2016 (in millions) FY Q1 Q2 Q3 Q4 FY Total Revenue $11,465 $2,615 $2,793 $2,629 $2,734 $10,771 Growth (9.6)% (6.8)% (4.6)% (5.6)% (7.2)% (6.1)% CC1 Growth (4.6)% (4.7)% (3.4)% (4.1)% (5.0)% (4.3)% Annuity $8,684 $2,055 $2,118 $2,016 $2,057 $8,246 Growth (9.3)% (5.9)% (4.0)% (4.8)%
Slide 16: Non-GAAP Financial Measures
Non-GAAP Financial Measures 16
Slide 17: Non-GAAP Financial Measures
Non-GAAP Financial Measures NOTE: In 2016 we revised our calculation of Adjusted Earnings Measures to exclude the following items in addition to the amortization of intangibles: • Restructuring and related costs including those related to Fuji Xerox • The non-service related elements of our defined
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures Restructuring and related costs: Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our Strategic Transformation program beyond those normally included in restructuring and asset impairment charges. Restruct
Slide 19: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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.” In 2016 we
Slide 20: Q4/FY GAAP EPS to Adjusted EPS from Continuing Operations
Q4/FY GAAP EPS to Adjusted EPS from Continuing Operations Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Net Diluted Net Diluted Net Diluted Net Diluted (in millions, except per share amounts) Income EPS Income EPS
Slide 21: FY EPS from Continuing Operations Guidance
FY EPS from Continuing Operations Guidance FY 2017 GAAP EPS from Continuing Operations $0.44 - $0.52 Non-GAAP Adjustments 0.36 Adjusted EPS from Continuing Operations $0.80 - $0.88 Note: Adjusted EPS guidance excludes non-service retirement related costs, restructuring and related costs, amortizatio
Slide 22: Q4/FY Adj Effective Tax Rate from Continuing Operations
Q4/FY Adj Effective Tax Rate from Continuing Operations Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Income Income Pre-Tax Tax Effective Pre-Tax Income Tax Effective Pre-Tax Tax Effective Pre-Tax Income Tax Effect
Slide 23: Q4 Adjusted Operating Income/Margin
Q4 Adjusted Operating Income/Margin Three Months Ended Three Months Ended December 31, 2016 December 31, 2015 (in millions) Profit Revenue Margin Profit Revenue Margin (1) Reported Pre-tax Income $ 179 $ 2,734 6.5% $ 287 $ 2,946 9.7% Adjustments: Amortization of intangible assets 14 14 Restructuring
Slide 24: FY Adjusted Operating Income/Margin
FY Adjusted Operating Income/Margin Year Ended Year Ended December 31, 2016 December 31, 2015 (in millions) Profit Revenue Margin Profit Revenue Margin (1) Reported Pre-tax Income $ 568 $ 10,771 5.3% $ 924 $ 11,465 8.1% Adjustments: Amortization of intangible assets 58 60 Restructuring and related c
Slide 25: Q4/FY Free Cash Flow
Q4/FY Free Cash Flow (in millions) Q4 2016 Actual FY 2016 Actual FY 2017 Estimated Operating Cash Flow from Continuing Operations $ 462 $ 1,018 $ 700 - 900 Less: CAPEX (39) (138) (175) Free Cash Flow from Continuing Operations $ 423 $ 880 $ 525 - 725 25
Slide 26: Q4 Adjusted Key Financial Ratios
Q4 Adjusted Key Financial Ratios Three Months Ended Three Months Ended (in millions) December 31, 2016 December 31, 2015 Non-service Non-service As retirement- As retirement- Reported(1) related costs Adjusted Reported(1) related costs Adjusted Revenue $ 2,734 $ - $ 2,734 $ 2,946 $ - $ 2,946 Gross P
Slide 27: Q4 Adjusted Other, Net
Q4 Adjusted Other, Net Three Months Ended Three Months Ended (in millions) December 31, 2016 December 31, 2015 Other expenses, net - Reported $ 57 $ 30 Adjustment: Net income attributable to noncontrolling interests 3 5 Other expenses, net - Adjusted $ 60 $ 35 27
Slide 28: © 2017 Xerox Corporation. All rights reserved. Xerox® and Xerox and Design® are trademarks
© 2017 Xerox Corporation. All rights reserved. Xerox® and Xerox and Design® are trademarks of Xerox Corporation in the United States and/or other countries. 12/16 MPSPA-18EB