Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Q4 2022 Earnings Presentation
30 slides from Xerox's earnings presentation, Jan 26, 2023
Slide 1: Earnings Presentation Q4 2022 Results
Earnings Presentation Q4 2022 Results January 26, 2023
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: Full Year 2022 Key Financial Measures
Full Year 2022 Key Financial Measures Revenue ($B) Adj1 Operating Margin Free Cash Flow1 ($M) $7.04 $7.11 $561 5.3% 3.9% $1434 $102 2021 2022 2021 2022 2021 2022 Operating 2022 % Change: 1.0% @ AC, 4.8% @ CC1 Cash Flow $629 $159 Revenue and Backlog Trend ($M) Adj1 Earnings Per Share Shareholder Retu
Slide 4: Business Update: Q4 2022
Business Update: Q4 2022 Print & Managed Print Services IT & Digital Services FITTLE • Demand for our equipment and print-related services • IT Services revenue grew double digits for FITTLE remains resilient amid an uncertain macro the quarter and year, including contributions • Grew captive and no
Slide 5: Xerox Priorities for 2023
Xerox Priorities for 2023 Employ a holistic, client-centric approach to deliver essential products Customer Success and services that address the productivity challenges of a hybrid workplace and distributed workforce Implement a more flexible cost base and operating model to expand Focus on Profita
Slide 6: Frequently Asked Questions
Frequently Asked Questions How have demand trends evolved since Q3 earnings? Does guidance account for macroeconomic uncertainty? Demand for our portfolio of products and services has remained resilient amid an uncertain macroeconomic environment. We continue to see strength Macro in demand for our
Slide 7: Financial Results Summary
Financial Results Summary (in millions, except per share data) B/(W) % Change P&L Measures Q4 2022 YOY YOY P&L Ratios Q4 2022 B/(W) YOY 9.2% AC Revenue $ 1,941 $ 164 Gross Margin 34.8% 190 bps 13.9% CC1 Operating Income – $ 178 $ 92 107% RD&E % 3.6% 60 bps Adjusted1 Other Expenses, net – $ (9) $ 38
Slide 8: Revenue
Revenue % Change YOY Quarterly Revenue Trend ($B) $1.94 $1.78 $1.75 $1.75 $1.67 Q4 (in millions) % Total AC CC1 2022 Equipment $554 29% 44.3% 49.0% Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Post Sale $1,387 71% (0.4)% 4.2% Equipment Backlog as a % of ESR3: 85% 119% 110% 100% 40% Total Revenue $1,941 100% 9.2% 1
Slide 9: Cash Flow
Cash Flow (in millions) Q4 2022 Change YOY FY 2022 Change YOY Pre-tax Income (Loss) $146 $857 ($328) $147 Non-Cash Add-Backs1 79 9 404 79 Non-Cash Goodwill Impairment, Net of Tax - (750) 395 (355) Restructuring Payments (14) (3) (52) 20 Pension Contributions (18) 23 (124) 36 2 Working Capital, net 7
Slide 10: Profitability and Earnings
Profitability and Earnings Adjusted1 Operating Margin Project Own It: Status 9.2% • We achieved gross 4.8% Distribution of 2022 Gross Savings cost savings of 3.7% 2.0% $450M in 2022 and ~$2.2B of gross cost (0.2)% savings from 2018 to Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 2022 • We are not providing a savin
Slide 11: Segment Results
Segment Results Revenue and Profit Q4 2022 B/(W) YoY Print & Financing Intersegm ent Print & Financing (in m illions) Other (FITTLE) Elim inations 1 Total Xerox Other (FITTLE) Total Xerox Total Revenue $ 1,843 $ 151 $ (53) $ 1,941 Total Revenue 11.1% (9.6)% 9.2% Segm ent Profit $ 183 $ (5) $ - $ 178
Slide 12: Receivable Funding Arrangement – Effect on FCF
Receivable Funding Arrangement – Effect on FCF 2 • Background: In Q4 2022, Xerox and FITTLE entered into an agreement with an affiliate of 2 HPS Investment Partners to sell pools of lease receivables. • Effect on Cash Flow ‒ The agreement contemplates sales of lease receivables of approximately $600
Slide 13: Capital Structure
Capital Structure Debt and Cash Senior Unsecured Debt Maturity Ladder ($B) (in billions) Q4 2022 Q3 2022 $0.75 $0.75 Total Debt $(3.7) $(3.7) Less: FITTLE Allocated Debt 2.9 2.7 $0.30 $0.30 $0.35 $0.25 Core Debt (0.8) (1.0) Less: Cash1 1.1 1.0 2023 2024 2025 2028 2035 2039 Net Core Cash $0.3 $- • En
Slide 14: 2023 Full-Year Guidance and Capital Allocation
2023 Full-Year Guidance and Capital Allocation Guidance • Revenue growth: Flat to down low-single-digits in constant currency • Adjusted1 Operating Margin: At least 4.7% • Free Cash Flow1: At least $500 million Capital Allocation Policy • Shareholder Returns: At least 50% of annual Free Cash Flow1 G
Slide 15: Appendix
Appendix 15
Slide 16: Operating Trends
Operating Trends 2021 2022 (in millions, except EPS) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Total Revenue $1,710 $1,793 $1,758 $1,777 $7,038 $1,668 $1,747 $1,751 $1,941 $7,107 % Change (8.1)% 22.4% (0.5)% (7.9)% 0.2% (2.5)% (2.6)% (0.4)% 9.2% 1.0% CC 1 % Change (10.4)% 18.1% (1.6)% (7.4)% (1.4)% (0.7)% 1.1%
Slide 17: 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 under
Slide 18: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 earnin
Slide 19: Net Income (Loss) and EPS Reconciliation
Net Income (Loss) and EPS Reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Net Diluted Net (Loss) Diluted Net (Loss) Diluted Net (Loss) Diluted (in millions, except per share amounts) Income EPS Income
Slide 20: Effective Tax Rate Reconciliation
Effective Tax Rate Reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Pre-Tax Income Tax Pre-Tax Income Tax Pre-Tax Income Tax Pre-Tax Income Tax Effective Tax (Loss) (Benefit) Effective Tax (Loss) (Benef
Slide 21: Operating Income (Loss) and Margin Reconciliation
Operating Income (Loss) and Margin Reconciliation Three Months Ended Three Months Ended Year Ended Year Ended December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (Loss) (Loss) (Loss) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin (1) Repor
Slide 22: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Three Months Ended Year Ended December 31, December 31, (in millions) 2022 2021 2022 2021 (1) Reported $ 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
Slide 23: Other Expenses, Net Reconciliation
Other Expenses, Net Reconciliation Three Months Ended Year Ended December 31, December 31, (in millions) 2022 2021 2022 2021 Reported $ (3) $ 4 $ 63 $ (24) Less: non-service retirement-related costs 6 (25) (12) (89) Adjusted $ (9) $ 29 $ 75 $ 65 23
Slide 24: Net Income (Loss) and EPS Reconciliation - Historical
Net Income (Loss) and EPS Reconciliation - Historical Year Ended Q1-21 Q2-21 Q3-21 Q4-21 Decem ber 31, 2021 Q1-22 Q2-22 Q3-22 Net Net Net Net Net Net Net (Loss) (Loss) Net (Loss) (Loss) (in millions, except per share amounts) Incom e EPS Incom e EPS Incom e EPS Incom e EPS Incom e EPS Loss EPS Incom
Slide 25: Operating Income (Loss) and Margin Reconciliation - Historical
Operating Income (Loss) and Margin Reconciliation - Historical Year Ended Q1-21 Q2-21 Q3-21 Q4-21 December 31, 2021 Q1-22 Q2-22 Q3-22 (Loss) (Loss) (Loss) (Loss) (in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Loss Revenue M
Slide 26: Free Cash Flow Reconciliation – Historical
Free Cash Flow Reconciliation – Historical Year Ended (in millions) Q1-21 Q2-21 Q3-21 Q4-21 December 31, 2021 Q1-22 Q2-22 Q3-22 (1) Reported $117 $214 $100 $198 $629 $66 ($85) ($8) Less: capital expenditures 17 16 19 16 68 16 13 10 Free Cash Flow $100 $198 $81 $182 $561 $50 ($98) ($18) _____________
Slide 27: 2021 Quarterly Segment Results
2021 Quarterly Segment Results Total External Net Intersegm ent Segm ent % of Total Segm ent Segm ent (in millions) Revenue Net Revenue (1) Revenue Revenue Profit 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
Slide 28: Operating Income and Margin – Guidance
Operating Income and Margin – Guidance FY 2023 (in millions) Profit (2, 3) Margin Revenue (CC) (1) Estimated ~$200 ~$7,100 ~2.8% Adjustments: Restructuring and related costs, net 75 Amortization of intangible assets 40 Other expenses, net 20 Adjusted ~$335 ~$7,100 At least 4.7% __________ (1) Pre-ta
Slide 29: Free Cash Flow – Guidance
Free Cash Flow – Guidance (in millions) FY 2023 (1) Operating Cash Flow At least $550 Less: capital expenditures 50 Free Cash Flow At least $500 (1)Net cash provided by operating activities 29
Slide 30: © 2022 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation
© 2022 Xerox Corporation. All rights reserved. Xerox® is a trademark of Xerox Corporation in the United States and/or other countries.