Xerox’s Q2 revenue declines amid strategic overhaul
July 26, 2024
Xerox reports a significant drop in Q2 revenue due to strategic changes and macroeconomic challenges.
Xerox Holdings Corporation announced its second-quarter 2024 financial results, revealing a 10% year-over-year revenue decline to $1.58 billion (€1.43 billion). This downturn is attributed to strategic changes and macroeconomic challenges, including customers retaining equipment longer to maximize its useful life, which affected printer hardware and consumables sales.
The company’s GAAP net income improved to $18 million (€16.3 million), or $0.11 per share, compared to a $61 million (€55.1 million) loss in the same period last year. Adjusted net income was $41 million (€37.1 million), or $0.29 per share, down from $72 million (€65.2 million) in Q2 2023. The adjusted operating margin decreased by 70 basis points to 5.4%. However, operating cash flow increased by $28 million year-over-year to $123 million (€111.3 million), and free cash flow rose by $27 million to $115 million (€104.2 million)
Xerox’s printer hardware segment experienced a significant decline, with equipment sales falling to $356 million (€322 million), a 15.2% decrease in actual currency and 14.9% in constant currency compared to last year. This decline was primarily due to an unfavourable product mix, the effects of backlog fluctuations, and geographic simplification.
The Print and Other segment, which includes the sale of document systems, supplies, and managed services, saw its revenue decrease to $1.51 billion (€1.37 billion), down 9.9% from Q2 2023. This segment covers a range of products:
- Entry-Level devices: A4 devices and desktop printers aimed at small and medium workgroups.
- Mid-Range devices: A3 devices for large workgroups and Light Production products for centralized print centres and low-volume production print establishments.
- High-End devices: Production printing and publishing systems catering to the graphic communications market and large enterprise print centres.
Meanwhile, the Xerox Financial Services (XFS) segment, which provides global leasing solutions, reported an 11.9% revenue decline, impacted by lower financing income. This segment facilitates the sale of Xerox equipment through bundled lease agreements and financing to end-user customers.
In light of the ongoing economic pressures and strategic shifts, Xerox has revised its 2024 guidance, projecting a revenue decline of 5-6% in constant currency. The adjusted operating income margin is now expected to be at least 6.5%, down from the previous target of 7.5%, and free cash flow is projected to be at least $550 million (€498.2 million).
CEO Steve Bandrowczak emphasised that the strategic changes implemented in the first quarter are beginning to yield improvements in financial results. “The comprehensive and strategic operating model changes implemented in Q1 caused a short period of disruption but are delivering the intended improvements in financial results. Adjusted operating income margin, free cash flow, and revenue trajectory improved sequentially in Q2. Momentum in orders, enhanced sales operations, and new product initiatives are expected to drive a return to revenue growth in the second half of the year,” said Bandrowczak.
Despite the challenging environment, Xerox says it remains focused on achieving an incremental $300 million (€738 million) in adjusted operating income over 2023 levels and returning to a double-digit adjusted operating income margin by 2026. The company’s resilience in navigating these challenges will be crucial as it strives to maintain its market position and deliver value to its shareholders.
Categories : World Focus
