Xerox margins and EPS up but sales down in Q1

Xerox has reported operating margin and earnings per share (EPS) growth in Q1 but its revenue fell by 9.4%.

In its results for the period ended 31 March 2019, which were released yesterday (25 April), the manufacturer recorded sales of $2.21bn (£1.71bn), down from $2.43bn a year ago, and down by 7% on a constant currency basis.

It also reported GAAP EPS of $0.55, up by $0.47 year-on-year, and adjusted EPS of $0.91, up by $0.23 year-on-year.

The company’s adjusted operating income was up 3% year-on-year, from $242m to $249m, while its adjusted operating margin was 11.3% (Q1 2018: 9.9%).

It has raised its guidance for GAAP EPS to $2.90 to $3.05 and adjusted EPS to $3.80 to $3.95. Prior guidance was $2.60 to $2.70 and $3.70 to $3.80, respectively.

“Our transformation initiatives are yielding results, which gives us confidence to raise our full-year earnings guidance despite revenue declines,” said Xerox vice-chairman and chief executive John Visentin in a conference call to investors yesterday.

“We are investing in our core business as well as new technologies that create value for our stakeholders and position Xerox for long-term growth.

“As a result [of the constant currency revenue decline], we are increasing investments in near-term revenue directed initiatives, which we expect to see benefits from as we move through the balance of 2019.

“The anticipated benefits of these investments, together with the relative stability of our underlying page volume trends, give us confidence to maintain our revenue guidance of approximately 5% down for the year at constant currency.”

Sales of Xerox’s high-end production printing equipment fell by 3.3% year-on-year from $92m to $89m while mid-range equipment sales were down by 9.6% from $334m to $302m.

The business said the “nearly flat” high-end revenue was driven by lower sales from its Americas sales organisation, mostly offset by growth from its European region.

It noted a 14% decrease in high-end colour installs and a 12% drop in high-end black and white systems, which it said reflected market trends.

The decline in installs was partially offset “by a favourable revenue mix driven by strong demand for the higher-configuration models of our Iridesse production press”, the company said.

“Iridesse performed well in Q1 and continues to attract new customers and knockout competition with a strong value proposition, while also protecting our critical machines in the field. In the first quarter, 40% of our placements came from competitive trade-ins and new business,” said Visentin.

Xerox unveiled the Rialto 900 MP inkjet press, a more productive version of its 2015-launched Rialto 900 that has been designed to help printers optimise their inkjet production. The roll-to-cut-sheet printer increases output by 33% to a maximum production speed of 64m/min.

The manufacturer also said it is on track to drive gross savings in 2019 of at least $640m under Project Own It, its transformation initiative to create a simpler, more effective organisation.

Separately, Xerox has appointed Naresh Shanker as senior vice president, chief technology officer, effective from 6 May.

Shanker, who was previously chief information officer at HP Inc, will report to Visentin and will serve as a member of Xerox’s executive committee.

Shanker, who joined Xerox in January, will succeed Steve Hoover in the role and will be responsible for research and product development and an increasingly digital information technology operation.

Xerox’s share price fell by around 5.4% to $31.86 shortly after the results were published yesterday and had since rallied to $32.21 at the time of writing.


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