Core Viewpoint - Xerox Holdings Corporation reported mixed fourth-quarter 2024 results, with earnings missing estimates while revenues exceeded expectations, indicating potential challenges ahead for the company [2][12]. Financial Performance - Fourth-quarter adjusted EPS was 36 cents, missing the Zacks Consensus Estimate by 30.8% and declining 16.3% year over year [2]. - Total revenues for the quarter were $1.5 billion, surpassing the consensus mark by 1.5% but decreasing 8.6% year over year [2]. - Post-sale revenues were $1.22 billion, down 6.7% year over year, while equipment sales declined 14.2% to $393 million [3]. - The Print and Other segment's revenues totaled $1.54 billion, down 8.7% year over year [4]. - Sales revenues were $656 million, down 9% year over year, and services, maintenance, and rental revenues totaled $924 million, down 7.6% [5]. Operating Performance - Adjusted operating income was $104 million, reflecting a year-over-year increase of 6.4%, with an adjusted operating margin of 6.4%, up 100 basis points year over year [6]. Balance Sheet and Cash Flow - Xerox ended the quarter with cash and cash equivalents of $576 million, up from $521 million in the prior quarter [7]. - Operating cash flow and free cash flow were reported at $351 million and $334 million, respectively [7]. Future Guidance - The company expects low single-digit revenue growth at constant currency and an adjusted operating margin of at least 5% [8]. - Free cash flow is anticipated to be between $350 million and $400 million [8]. Estimate Trends - Recent estimates have trended downward, with the consensus estimate shifting by -63.64% [9]. - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating expectations of below-average returns in the coming months [12]. VGM Scores - Xerox has a strong Growth Score of A and a Value Score of A, but is lagging in Momentum Score with a B, resulting in an aggregate VGM Score of A [10][11].

Business Strategy and Acquisitions - Xerox's Reinvention strategy aims to strengthen core business and improve financial flexibility, with a gross savings target of over $200 million achieved in 2024[25]. - The company closed the acquisition of ITsavvy for $405 million and announced a pending acquisition of Lexmark for $1.5 billion, expected to enhance IT Solutions offerings and expand the Total Addressable Market[29]. - Xerox's focus for 2025 includes executing Reinvention initiatives, realizing benefits from recent acquisitions, and enhancing balance sheet strength[31]. - The company aims to realize over $200 million in expected synergies from the integration of ITsavvy and Lexmark within two years of closing the acquisitions[33]. - The Lexmark acquisition remains subject to regulatory approvals and shareholder approval, which may delay or prevent the completion of the transaction[171]. - The Lexmark acquisition may incur up to $30 million in documented out-of-pocket expenses if either party fails to obtain necessary approvals[172]. - The company expects to finance the Lexmark acquisition through third-party indebtedness and issuing notes, increasing overall indebtedness risks[174]. - The company faces risks related to the Lexmark acquisition that may disrupt current business plans and operations[175]. - Legal proceedings may arise following the announcement of the Lexmark acquisition, potentially increasing transaction costs[175]. Financial Performance and Management - The company plans to reduce its annual dividend from $1 per share to $0.50 per share starting in Q1 2025, prioritizing debt reduction alongside the Lexmark acquisition[34]. - Xerox's total finance assets amounted to approximately $2.0 billion, including $1.75 billion in finance receivables and $245 million in equipment on operating leases[82]. - As of December 31, 2024, the company's total debt was $3.4 billion, consisting of $2.6 billion in Senior and Unsecured Debt and approximately $813 million in Secured Borrowings[128]. - The company may incur additional indebtedness for growth, which could affect financial flexibility and operational capabilities[128]. - As of December 31, 2024, the total principal debt is $3,451 million, with $593 million in secured borrowings carrying variable interest rates[458]. - The consolidated average interest rate associated with total debt for 2024 is approximately 6.5%[457]. - The projected benefit obligations for defined benefit pension and retiree-health benefit plans exceeded the value of the assets by approximately $1.1 billion as of December 31, 2024[137]. - The company expects additional funding requirements for its pension plans in future years, which may impact operating flexibility and cash flow[138]. Operational Efficiency and Simplification - Xerox's operational simplification includes the establishment of a Global Business Services organization to drive efficiencies and productivity gains[25]. - The implementation of a new Enterprise Resource Planning (ERP) system is critical for operational efficiency, but it involves substantial expenditures and risks of disruption during the transition[121]. - The company is adopting new pricing strategies and distribution models, which may not align with customer expectations, potentially leading to reduced demand[119]. Environmental and Sustainability Goals - Xerox aims for net zero emissions by 2040, with an interim goal to reduce Scope 1 and Scope 2 GHG emissions by at least 60% by 2030 from a 2016 baseline[55]. - In 2023, Xerox achieved a 15.7% reduction in Scope 1 and Scope 2 GHG emissions, totaling a 51% reduction since 2016[55]. - Approximately 90% of spent toner cartridges and other supplies were recycled, reused, or remanufactured through the Xerox Supplies Recycling Program in 2023[56]. - The company has set a voluntary goal to achieve net zero greenhouse gas emissions by 2040, recognizing associated risks and uncertainties[144]. - The company faces substantial costs related to compliance with environmental laws and regulations, which could impact its financial condition[165]. Workforce and Human Resources - As of December 31, 2024, Xerox had approximately 16,800 employees, a reduction of 3,300 or 16.4% from the previous year[57]. - Approximately 20% of Xerox employees are represented by unions, with 87% of those located outside the U.S.[59]. - Xerox's long-term incentive program included approximately 35% of employees in 2024, aligning leaders with shareholder interests[66]. - The company is undergoing significant changes in its business model, which may lead to challenges in attracting and retaining key personnel due to market competition and economic uncertainty[117]. Market and Economic Conditions - The company faces risks from global macroeconomic conditions, including rising inflation and interest rates, which could decrease demand for products and services[99]. - Supply chain disruptions have increased costs for materials and components, impacting the overall cost structure and profitability[112]. - Xerox's profitability depends on obtaining adequate pricing for products and services, which may be pressured by market conditions such as tariffs and inflation[110]. - The company is focusing on expanding into adjacent markets with new products and services, including integrated IT infrastructure solutions and Intelligent Document Processing[105]. - The success of the Managed Print and Digital services business relies on attracting and retaining customers, with contracts generally renewable at the customer's option[107]. Risks and Compliance - The company faces risks related to government contracts, including potential terminations and audits that could negatively impact revenue and reputation[123][124]. - The company has offshored and outsourced certain operations, which may expose it to geopolitical uncertainties and service quality issues[122]. - Increased credit market volatility has raised borrowing costs and reduced access to debt and equity markets, impacting the company's financing business[127]. - The company is subject to numerous federal, state, local, and foreign taxes, and any adverse outcomes from tax audits could impact financial results[153]. - The company relies on intellectual property rights for its products and services, with potential risks of infringement or challenges that could affect competitive position[139]. - The company may face increased scrutiny from stakeholders regarding CSR practices, which could impact reputation and financial performance[146]. - The company operates globally and is exposed to risks from foreign exchange, political instability, and regulatory changes that could adversely affect results[147]. - The company has implemented reasonable security measures to protect its information systems and confidential information, but remains vulnerable to cyber-attacks and data breaches[154]. - Cybersecurity incidents could lead to operational disruptions, legal exposure, and damage to the company's reputation, potentially affecting profitability and cash flow[157]. - The company is subject to numerous privacy and data protection laws, including the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR), which could impose additional compliance costs[159][162]. - The anticipated use of artificial intelligence (AI) technologies may create new regulatory or operational risks, including potential misuse and legal exposure[164].

Core Viewpoint - Xerox Holdings Corporation's stock has declined 9.5% following disappointing fourth-quarter 2024 earnings performance [1] Financial Performance - Fourth-quarter adjusted EPS was 36 cents, missing the Zacks Consensus Estimate by 30.8% and declining 16.3% year over year [2] - Total revenues were $1.5 billion, surpassing the consensus mark by 1.5% but decreasing 8.6% year over year on a reported basis; revenues declined 8% on a constant-currency basis [2] Revenue Breakdown - Post-sale revenues were $1.22 billion, down 6.7% year over year on a reported basis and 6.1% at constant currency, exceeding the estimate of $1.21 billion [3] - Equipment sales declined 14.2% year over year on a reported basis to $393 million, beating the estimate of $378.7 million [3] - The Print and Other segment's revenues totaled $1.54 billion, down 8.7% year over year, surpassing the estimate of $1.51 billion [4] - Xerox Financial Services revenues were $89 million, down 11% year over year, lagging the estimate of $98.5 million [4] - Sales revenues totaled $656 million, down 9% year over year on a reported basis [5] - Services, maintenance, and rental revenues totaled $924 million, down 7.6% year over year [5] - Financing revenues decreased 25% year over year to $33 million [5] Operating Performance - Adjusted operating income was $104 million, up 6.4% year over year; adjusted operating margin was 6.4%, up 100 basis points year over year [6] Balance Sheet and Cash Flow - Xerox ended the quarter with cash and cash equivalents of $576 million, up from $521 million at the end of the prior quarter [7] - Operating cash flow and free cash flow were $351 million and $334 million, respectively, for the quarter [7] 2025 Guidance - Xerox expects low single-digit revenue growth at constant currency and an adjusted operating margin of at least 5% [8] - The company anticipates free cash flow to be between $350 million and $400 million [8] - Xerox currently holds a Zacks Rank 5 (Strong Sell) [8]

Group 1 - The core viewpoint is that Xerox Holdings (NASDAQ: XRX) is considered to have a structurally impaired business with no potential for positive earnings growth, leading to a sell recommendation [1] - The investment approach emphasizes a fundamentals-based strategy, focusing on companies with long-term durability and robust balance sheets rather than merely low multiples [1] - There is a recognition that investing in successful companies carries risks, particularly regarding valuation, but some situations may justify less concern about price in the short term due to significant development potential [1]

Earnings Presentation Q4 2024 Results January 28, 2025 Forward-Looking Statements This presentation and other written or oral statements made from time to time by management contain "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate", "believe", "estimate", "expect", "intend", "will", "would", "could", "can", "should", "targeting", "projecting", "driving", "future", "plan", "predict", "may" and similar expressions, as they relate to us, our ...

Core Viewpoint - Xerox Holdings experienced a significant decline in stock price following disappointing quarterly earnings, despite beating sales expectations [1][2]. Financial Performance - In fiscal Q4, Xerox reported sales of just over $1.6 billion, slightly above analyst expectations, but earnings per share were only $0.36, missing the forecast of $0.49 [1][2]. - Year-over-year sales declined nearly 9%, contributing to a total revenue of $6.2 billion for fiscal 2024, which represents a nearly 10% decline compared to the previous year [2][3]. - The company reported a GAAP loss of $10.75 per share for the year, with $8.17 per share attributed to an "after-tax non-cash goodwill impairment" [3][4]. Cash Flow and Future Guidance - Xerox generated positive free cash flow of $467 million for the year, which fell short of the target of at least $600 million [4]. - CEO Steve Bandrowczak forecasts "low-single-digit" sales growth for 2025, with free cash flow expected to range from $350 million to $400 million, indicating a potential contraction despite sales growth [5]. Investment Considerations - The stock is currently trading at a low price-to-free-cash-flow ratio of 3, suggesting it may be undervalued [5].

Core Insights - Xerox Holdings Corporation reported quarterly earnings of $0.36 per share, missing the Zacks Consensus Estimate of $0.52 per share, and down from $0.43 per share a year ago, representing an earnings surprise of -30.77% [1] - The company posted revenues of $1.61 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.53%, but down from $1.77 billion year-over-year [2] - Xerox has not surpassed consensus EPS estimates over the last four quarters and has topped consensus revenue estimates only once during the same period [2] Earnings Outlook - The sustainability of Xerox's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $1.54 billion, and for the current fiscal year, it is $1.30 on revenues of $6.31 billion [7] Industry Context - The Office Supplies industry, to which Xerox belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Acco Brands, another company in the same industry, is expected to report quarterly earnings of $0.41 per share, reflecting a year-over-year change of +5.1%, with revenues projected to be $455.06 million, down 6.9% from the previous year [9]

Financial Performance - Q4 2024 revenue was $1.613 billion, down 8.6% year-over-year, with a gross profit of $502 million and a gross margin of 31.1%[5] - Full-year 2024 revenue totaled $6.221 billion, a decrease of 9.7% compared to 2023, with a GAAP net loss of $1.32 billion, or $(10.75) per share[6] - Adjusted net income for Q4 2024 was $49 million, or $0.36 per share, down from $56 million, or $0.43 per share in Q4 2023[6] - The Print and Other segment revenue for Q4 2024 was $1.540 billion, a decline of 8.7% year-over-year[9] - Full-year 2024 adjusted operating income was $302 million, down 22.4% from the previous year[7] - Total revenues for Q4 2024 were $1,613 million, a decrease of 8.6% from $1,765 million in Q4 2023[18] - Net loss attributable to common shareholders for Q4 2024 was $24 million, compared to a net loss of $61 million in Q4 2023[18] - Comprehensive loss for the year 2024 was $1,344 million, compared to a comprehensive loss of $138 million in 2023[20] - The company reported a goodwill impairment of $1,058 million for the year 2024[18] - Fourth quarter 2024 reported net loss was $1.321 billion, with diluted loss per share of $8.17, primarily due to a $1.1 billion goodwill impairment charge[1] - Full-year 2024 revenue was $6.221 billion, a decrease of 9.6% compared to $6.886 billion in 2023[1] - Adjusted operating income for Q4 2024 was $104 million, with an adjusted operating margin of 6.4%[1] - Adjusted gross profit for Q4 2024 was $509 million, with a margin of 31.6%[1] - The company incurred $1.216 billion in pre-tax losses for the full year 2024, resulting in an effective tax rate of -8.6%[2] Cash Flow and Projections - Free cash flow for 2025 is projected to be between $350 million and $400 million[12] - Q4 2024 operating cash flow was $351 million, down $38 million year-over-year[6] - Free cash flow for Q4 2024 was $334 million, down from $379 million in Q4 2023[1] - The company expects FY 2025 adjusted operating income to be approximately $320 million, with revenue projected at around $6.350 billion[1] - FY 2025 guidance includes an adjusted operating margin of at least 5.0%[1] - The company anticipates adjusted operating income margin to be at least 5.0% in 2025, reflecting incremental gross cost savings[25] Acquisitions and Strategic Initiatives - The pending acquisition of Lexmark is expected to close in the second half of 2025, which is not included in the 2025 guidance[11] - The company closed the acquisition of ITsavvy and plans to acquire Lexmark, aiming to enhance core operations and achieve revenue stability[24] - The company plans to continue focusing on strategic actions and initiatives to drive future growth and operational efficiency[51] Operational Metrics - Equipment sales decreased by 14.2% to $393 million, while post-sale revenue declined by 6.7% to $1.2 billion year-over-year[28] - Total equipment installations increased by approximately 19.0% year-over-year, driven by growth in entry-level and mid-range equipment[24] - The decline in post-sale revenue was attributed to lower managed print service revenue and intentional reductions in non-strategic revenue[24] Expenses and Liabilities - Research, development, and engineering expenses for the year 2024 were $191 million, down from $229 million in 2023[18] - Total assets decreased to $8,365 million as of December 31, 2024, down from $10,008 million a year earlier[22] - Total liabilities decreased to $7,061 million as of December 31, 2024, from $7,236 million a year earlier[22] - The company incurred restructuring and related costs of $5 million during the quarter, with total restructuring costs for the year amounting to $167 million[61] Shareholder Information - Basic loss per share for Q4 2024 was $0.20, unchanged from Q4 2023[18] - Basic Loss per Share for Q4 2024 was $(0.20), compared to $(0.50) in Q4 2023, indicating a 60% improvement year-over-year[76] - Dividends per common share remained stable at $0.25 for both Q4 2024 and Q4 2023, with an annual total of $1.00 for both years[76] Segment Information - Xerox operates through two reportable segments: Print and Other, and Xerox Financial Services (XFS), which are aligned with the company's business management strategy[78] - The Print and Other segment includes sales of document systems, supplies, and managed services, catering to a diverse customer base from small businesses to large enterprises[79] - The XFS segment provides global leasing solutions, primarily generating revenue from financing income on sales-type leases and leasing fees[80] - The product offerings in the Print segment are categorized into Entry, Mid-Range, and High-End devices, targeting different market needs[81] Non-GAAP Measures and Adjustments - The company highlighted the importance of non-GAAP measures to better understand business trends and performance[48] - Transaction and related costs associated with M&A activities were noted as significant, impacting overall financial results[54] - The impact of foreign currency translation was adjusted to provide a clearer view of revenue trends, referred to as "constant currency"[58]

Xerox Holdings Corporation Sued for Securities Law Violations - Contact Levi & Korsinsky Before January 21, 2025 to Discuss Your Rights - XRX ...

INVESTOR ALERT: Faruqi & Faruqi, LLP Investigates Claims on Behalf of Investors of Xerox ...