By Andy Slawetsky – Xerox Holdings Corporation (NASDAQ: XRX) recently unveiled its third-quarter results for 2023. Despite witnessing a reduction in revenue, the company has managed to grow its earnings and cash flow.
Financial Highlights from Q3 2023:
- Revenue touched $1.65 billion, representing a decrease of 5.7% or 7.4% in constant currency.
- GAAP net income stood at $49 million, marking a significant rise of $432 million year-over-year.
- Adjusted net income was recorded at $77 million, up $44 million from the previous year.
- The adjusted operating margin reached 4.1%, a rise of 40 basis points year-over-year.
- Operating cash flow witnessed a surge of $132 million, standing at $124 million.
- Free cash flow amounted to $112 million, an improvement of $130 million from the preceding year.
Commenting on the performance, Steve Bandrowczak, Xerox’s CEO, expressed satisfaction. He stated, “Despite a challenging macro backdrop, we’ve seen growth in adjusted profit, EPS, and free cash flow. This demonstrates a solid execution of our strategic priorities. With the Reinvention strategy in place, we aim to enhance our profit and revenue growth by expanding services that resonate with our clients.”
Overview of Q3 2023:
In Q3 2023, Xerox successfully expanded its earnings and cash flow, even though it witnessed a dip in its revenue. This indicates the company’s capability to maintain profitability amidst revenue inconsistencies. The decrease in Q3 2023 revenue is attributed to declines in certain cyclical, low-margin post-sale revenue categories. However, a consistent demand for Xerox products and services somewhat offset these declines.
Equipment sales in Q3 2023 were valued at $386 million, experiencing a decrease due to a reduction in the previous year’s backlog. However, post-sale revenue reached $1,266 million, declining by 7.0% in actual currency or 9.0% in constant currency. The decline is primarily attributed to reductions in cyclical transactional items, including a significant reduction in paper sales and IT endpoint devices.
Despite these challenges, there’s still hope for Xerox’s trajectory. There’s a growing demand for Xerox’s products and services in the Americas, particularly its Digital Services. However, a mild dip in demand was noted in European markets in the third quarter, likely due to weaker macroeconomic conditions.
Looking Ahead – 2023 Projections:
For 2023, Xerox projects its total revenue to be flat to down by low-single-digits in constant currency. The company anticipates facing challenges in equipment sales revenue in the fourth quarter, primarily due to a substantial reduction in the previous year’s backlog. Yet, with the ongoing cost-efficiency programs and a focus on generating profitable revenue, the adjusted operating income margin is expected to range between 5.5% to 6.0% for the full year. Xerox also anticipates its free cash flow to be at least $600 million.
Xerox’s commitment to its Reinvention strategy underscores its intent to streamline operations and seek sustainable profit enhancement, paving the way for potential growth in the coming years.
SOURCE Industry Analysts Inc.
