Xerox Q4 Earnings: Revenue Beat, $334 Million In Free Cash Flow, Issues Cautious FY25 Outlook

Zinger Key Points

Xerox Q4 2024 revenue declined 8.6% YoY to $1.613B, topping estimates, but adjusted EPS missed at $0.36 vs. $0.53 expected.
Equipment sales dropped 14.2%, gross margin fell 240 bps to 31.1%, and free cash flow for the quarter totaled $334M.
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Xerox Holdings Corp (NASDAQ: XRX) reported a fiscal fourth-quarter 2024 sales decline of 8.6% year-on-year to $1.613 billion, topping the analyst consensus of $1.571 billion.

Revenues declined 8.0% at constant currency. Adjusted EPS of $0.36 missed the analyst consensus estimate of $0.53.

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Equipment sales decreased by 14.2%, while post-sale revenue declined by 6.7%.

Gross margin declined 240 bps to 31.1%. The equipment margin fell by 500 bps to 27.4%. The post-sale margin decreased by 160 bps to 32.4%.

The company reported an adjusted operating income of $104 million, compared to $96 million last year, and the margin grew 100 basis points to 6.4%.

Xerox held $576 million in cash and equivalents as of December 31, 2024. Operating cash flow for the quarter totaled $351 million, with a free cash flow of $334 million.

Xerox chief Steve Bandrowczak marked 2024 as a critical year as it implemented a new operating model and structural process improvements.

He flagged steady progress in its Reinvention. In 2025, the company expects to build on changes made in 2024 in order to focus on executing our Reinvention strategy, realizing the benefits of the ITsavvy and pending Lexmark acquisitions, and strengthening its balance sheet.

FY25 Outlook: The company expects a revenue growth of low single-digit growth in constant currency. The company projected a free cash flow guidance of $350 million to $400 million.

Xerox maintained an adjusted operating margin outlook of a minimum of 5.0%.

Xerox Holdings stock has plunged ~51% in the last 12 months. Wall Street analysts shaved their price targets on the stock thrice in October 2024.

Price Action: XRX stock is down 1.85% at $9.54 premarket at last check on Tuesday.

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