Xerox's Challenging Q4: Stock Drops On Earnings Dip, CEO Emphasizes On Simplifying Business Structure

Xerox Holdings Corp (NASDAQ: XRX) reported a fiscal fourth-quarter 2023 sales decline of 9.1% year-on-year to $1.77 billion, missing the consensus of $1.79 billion. 

Revenues declined 10.6% at constant currency. Adjusted EPS of $0.43 missed the analyst consensus of $0.52. 

Equipment sales decreased by 17.3%, while post-sale revenue declined by 5.8%. 

Gross margin declined 130 basis points Y/Y to 33.5%. The equipment margin increased by 80 bps to 32.4%. Post-sale margin declined by 210 bps to 34.0%.

The company reported an adjusted operating income of $96 million, compared to $178 million last year, and the margin declined 380 basis points to 5.4%.

Xerox held $519 million in cash and equivalents. Operating cash flow for the quarter totaled $389 million, with a free cash flow of $379 million.

CEO Steve Bandrowczak acknowledged that steps it took to simplify its business structurally impacted revenue but led to 170 basis points of adjusted operating margin expansion.

He also focused on stabilizing and strengthening its core Print business, driving enterprise-wide efficiency and productivity gains through its new Global Business Services organization, and further capturing Digital and IT Services opportunities. 

FY24 Outlook: The company expects revenue of $6.54 billion – $6.68 billion vs. consensus of $6.71 billion. The company projected a free cash flow guidance of at least $600 million.

Xerox anticipates an adjusted operating margin of at least 7.5%.

Price Action: XRX shares are trading lower by 6.02% at $15.45 premarket on the last check Thursday.

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