Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q4 2019 Earnings Presentation
29 slides from Xerox's earnings presentation, Jan 28, 2020
Slide 1: Earnings Presentation Q4 Results
EARNINGS PRESENTATION Q4 Results I January 28, 2020 Updated February 10, 2020
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 2019
Key Financial Measures I 2019 Q4 Adj1 Earnings Per Share Q4 Revenue ($B) Q4 Adj1 Operating Margin GAAP EPS $1.17 $0.37 2019 % Change: (2.2)% @ AC, (1.6)% @ CC1 FY Free Cash Flow1 ($M) FY Shareholder Returns ($M) Operating Cash Flow $1,244 $1,082 NOTE 1: The financial results presented in these slide
Slide 4: Strategic Initiatives to Transform Xerox
Strategic Initiatives to Transform Xerox Optimize operations for • Continuously improve operating model for greater efficiency • Further optimize the supply chain and supplier competitiveness simplicity • Leverage digital technologies to make it easier to work with Xerox • Enhance the customer exper
Slide 5: Frequently Asked Questions
Frequently Asked Questions Are you on track with the Will you still be able to How are you thinking What’s the status of your three-year plan outlined achieve flat revenue in about your supply chain bid to acquire HP? last February? 2021? and sourcing? We are ahead of schedule on our We expect to ac
Slide 6: Financial Results
Financial Results B/(W) % Change (in millions, except per share data) Q4 2019 Q4 2018 YOY YOY (2.2)% AC Revenue $ 2,444 $ 2,498 $ (54) (1.6)% CC1 Gross Margin 41.6% 40.0% 160 bps RD&E % 3.8% 3.8% - SAG % 20.9% 22.1% 120 bps Operating Income - Adjusted1 $ 411 $ 352 $ 59 16.8% Operating Margin - Adjus
Slide 7: Cash Flow
Cash Flow (in millions) Q4 2019 FY 2019 Pre-tax Income $ 336 $ 822 Non-cash add-backs1 135 542 Restructuring Payments (22) (93) Pension Contributions (34) (141) Working Capital, net2 5 72 Change in Finance Assets3 (10) 174 Other4 (12) (132) Cash provided by Operating Activities of Continuing Operati
Slide 8: Revenue
Revenue Q4 Equipment Revenue YOY Change (in millions) Q4 2019 % Mix AC CC1 Equipment $ 616 25% (2.1)% (1.5)% Post Sale $1,828 75% (2.2)% (1.7)% Total Revenue $2,444 100% (2.2)% (1.6)% Americas 1,562 64% (3.4)% (3.3)% Installs4 (YOY Change) EMEA 756 31% (8.9)% (7.4)% Q4 2019 FY 2019 Color B&W Color B
Slide 9: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It Contribution: Achieved ~$640M of Gross Savings in 2019 It is a multi-year program to simplify our operations and instill a culture of continuous improvement Transaction Currency Impact 70 bps 60 bps 40 bps 10 bps (30) bps (30) bps
Slide 10: Capital Structure
Capital Structure Debt and Cash ($B) As of December 31, 2019 Finance Financing Debt $3.3B Assets Debt 1 Cash • Customer value proposition includes leasing of Xerox equipment Financing $3.7 $3.3 • Maintain 7:1 debt to equity leverage ratio on these finance Core - 1.0 $2.8 assets Total Xerox $3.7 $4.3
Slide 11: 2019 Summary and 2020 Guidance
2019 Summary and 2020 Guidance FY 2019 Results FY 2020 Guidance Revenue (CC)1 down 4.7% Revenue (CC)1 down ~4%2 Adjusted1 Operating Margin expansion of 180 basis Adjusted1 Operating Margin ~13% points year-over-year GAAP EPS range $2.80 - $2.90 Adjusted1 EPS up 23% year-over-year Adjusted1 EPS range
Slide 12: Appendix
Appendix 12
Slide 13: Operating Trends
Operating Trends 2017 2018 2019 (in millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Total Revenue $9,991 $2,381 $2,469 $2,314 $2,498 $9,662 $2,180 $2,263 $2,179 $2,444 9,066 % Change (4.3)% 0.1% (1.0)% (4.6)% (6.8)% (3.3)% (8.4)% (8.3)% (5.8)% (2.2)% (6.2)% 1 CC % Change (4.3)% (3.7)% (2.8)% (3.5)% (5.1)
Slide 14: Impact of OEM License Agreement between Xerox and Fuji Xerox
Impact of OEM License Agreement between Xerox and Fuji Xerox In November 2019, Xerox Holdings Corporation completed a series of transactions to restructure its relationship with FUJIFILM Holdings Corporation (“FH”), including the sale of its indirect 25% equity interest in Fuji Xerox (“FX”) for appr
Slide 15: Non-GAAP Financial Measures
Non-GAAP Financial Measures 15
Slide 16: 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 17: Non-GAAP Financial Measures (cont'd)
Non-GAAP Financial Measures (cont’d) • Transaction and related costs, net: Transaction and related costs, net are expenses incurred in connection with i) our announced proposal to acquire HP Inc. and ii) our planned transaction with Fuji, which was terminated in May 2018, inclusive of costs related
Slide 18: 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 19: Net Income and EPS reconciliation
Net Income and EPS reconciliation Three Months Ended Year Ended December 31, December 31, 2019 2018 2019 2018 Net Net Net Net (in millions, except per share amounts) Income EPS Income EPS Income EPS Income EPS Reported(1) $ 266 $ 1.17 $ 91 $ 0.37 $ 648 $ 2.78 $ 306 $ 1.16 Adjustments: Restructuring
Slide 20: Effective Tax Rate reconciliation
Effective Tax Rate reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December co 31, e 2019 December 31, 2018 December 31, 2019 December 31, 2018 Pre-Tax Tax Income Tax Income (Loss) (Benefit) Effective Pre-Tax (Benefit) Effective Pre-Tax Tax Effective Pre-Tax Income Tax Eff
Slide 21: Operating Income / Margin reconciliation
Operating Income / Margin reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Reported (1) $ 336 $ 2,44
Slide 22: Free Cash Flow reconciliation
Free Cash Flow reconciliation Three Months Ended Year Ended December 31, December 31, (in millions) 2019 2018 Change 2019 2018 Change Reported(1) $ 398 $ 384 $ 14 $ 1,244 $ 1,082 $ 162 Capital expenditures (17) (17) - (65) (90) 25 Free Cash Flow $ 381 $ 367 $ 14 $ 1,179 $ 992 $ 187 _________________
Slide 23: Operating Income / Margin – Guidance
Operating Income / Margin – Guidance FY 2020 (in millions) Profit Revenue(2) Margin Estimated (1) $ 845 $ 8,625 ~ 10% Adjustments: Restructuring and related costs 175 Amortization of intangible assets 35 Non-service retirement-related costs 35 Other expenses, net 40 Adjusted $ 1,130 $ 8,625 ~ 13% __
Slide 24: Net Income and EPS – Guidance
Net Income and EPS – Guidance FY 2020 (in millions, except per share amounts) Net Income EPS Estimated (1) $ 625 ~ $2.80 - $2.90 Adjustments: Restructuring and related costs 175 Amortization of intangible assets 35 Non-service retirement-related costs 35 Income tax on adjustments (70) Adjusted $ 800
Slide 25: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2020 Operating Cash Flow(1) ~ $1,300 Less: capital expenditures (100) Free Cash Flow ~ $1,200 ___________________________ (1)Net cash provided by operating activities from continuing operations. 25
Slide 26: Net Income and EPS reconciliation – historical
Net Income and EPS reconciliation – historical Year Ended Year Ended December 31, 2017 Q1-18 Q2-18 Q3-18 Q4-18 December 31, 2018 Q1-19 Q2-19 Q3-19 Net Net Net Net Net Net Net Net Net (in millions, except per share amounts) Income EPS Income EPS Income EPS Income EPS Income EPS Income EPS Income EPS
Slide 27: Operating Income / Margin reconciliation – historical
Operating Income / Margin reconciliation – historical Year Ended Year Ended Decem ber 31, 2017 Q1-18 Q2-18 Q3-18 Q4-18 Decem ber 31, 2018 Q1-19 Q2-19 Q3-19 (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margi
Slide 28: Free Cash Flow reconciliation – historical
Free Cash Flow reconciliation – historical Year Ended Year Ended December 31, December 31, 2017 Q1-18 Q2-18 Q3-18 Q4-18 2018 Q1-19 Q2-19 Q3-19 (in millions, except per share amounts) Reported (1) $ (244) $ 210 $ 229 $ 259 $ 384 $ 1,082 $ 223 $ 275 $ 348 Incremental Voluntary contributions to U.S. de
Slide 29: © 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