Xerox Reports Q4 and Full-Year Financial Results, 2019 Guidance

John Visentin, vice chairman and CEO, Xerox

Xerox, Norwalk, Conn., announced its fourth-quarter and full year 2018 financial results.

“Our Q4 results reflect continued progress on our strategic initiatives to optimize our operations, reenergize our innovation engine and increase shareholder returns,” said Xerox Vice Chairman and CEO John Visentin. “We remain focused on removing complexity in the way we work, organizing more effectively, and creating a better customer experience, and we are seeing those efforts reflected in this quarter’s results.

“We are well-positioned as we enter 2019 to continue to build on all our initiatives to deliver greater shareholder value,” he continued. “We look forward to sharing the details around our strategy and three-year financial expectations at our investor day on Feb. 5.”

Business highlights from the quarter included:

• To drive revenue through expansion of our U.S. SMB business, we are transitioning over 28,000 of our small- and mid-sized government, healthcare, education and graphic communications accounts to Xerox Business Solutions (formerly Global Imaging Systems). This will provide these customers a high-touch, locally accessible model that aligns to the route to market best suited to deliver an exceptional experience for them.
• Over the last two quarters, we have focused on creating a simpler, more agile and effective organization through Project Own It, Xerox’s enterprise-wide transformation program. During the fourth quarter, we ramped up implementation of the program, which contributed to this quarter’s operating margin expansion.
• The company recently renewed a long-standing relationship with Office Depot, supplying more than 8,000 devices across Office Depot/OfficeMax’s retail stores and regional offsite production facilities. The contract covers print technology in approximately 1,400 locations, making walk-up customer use more efficient, and providing high-quality color output for promotional materials, posters, invitations and other applications.
• In a recent IDC report, Xerox was identified as the clear leader among document services providers, reflecting our broad portfolio of software and services solutions which deliver unique and differentiated value to our customers. Xerox's focus on security and digital transformation were highlighted as setting us apart from competitors, as were our industry-specific solutions expertise and global service delivery model.

Fourth Quarter and Full Year 2018 Financial Results

Earnings Per Share from continuing operations:

• GAAP EPS of $0.56 in the fourth quarter, an increase of $1.34 year-over-year, and $1.38 full year, an increase of $0.68 year-over-year. Prior year included a $400 million charge associated with the enactment of U.S. tax reform.
• Adjusted EPS of $1.14 in the fourth quarter, an increase of $0.11 year-over-year, and $3.46 full year, an increase of $0.01 year-over-year.
• Total Revenue: $2.53 billion in the quarter, a decrease of 7.8 percent year-over-year or 6.1 percent in constant currency; $9.83 billion full year, a decrease of 4.2 percent year-over-year or 4.9 percent in constant currency.
• Adjusted Operating Margin: 16.1 percent in the fourth quarter, an increase of 180 basis points year-over-year; 12.9 percent full year, an increase of 20 basis points year-over-year.
• Cash, Cash Equivalents and Restricted Cash: $1.15 billion at the end of the year.

Cash Flow:

• Operating cash flow of $415 million in the fourth quarter, an increase of $564 million year-over year, or $83 million year-over-year on an adjusted basis, and $1.14 billion full year, an increase of $1.32 billion year-over-year, or $168 million year-over-year on an adjusted basis.
• Free cash flow of $398 million in the fourth quarter, an increase of $101 million year-over-year, and $1.05 billion full year, an increase of $183 million year-over-year.
• Return to Shareholders: The company returned $969 million to shareholders in the form of share repurchases and dividends in 2018, or 92 percent of its free cash flow, exceeding its commitment to return at least 50 percent of free cash flow to shareholders.

2019 Guidance

The company expects continued progress on its strategic initiatives in 2019, as projected in its financial guidance:

• Operating cash flow between $1.15 and $1.25 billion and free cash flow between $1.0 and $1.1 billion.
• Revenue decline of approximately 5 percent at constant currency.
• Adjusted operating margin of 12.6 percent to 13.1 percent, an expansion of between 100 and 150 basis points year-over-year. In 2019, we are revising our definition of adjusted operating margin to exclude equity income.
• GAAP earnings between $2.60 and $2.70 per share.
• Adjusted earnings between $3.70 and $3.80 per share

Xerox plans to update investors on its strategy and longer-term financial expectations during its investor day on Feb. 5, 2019.

For more information, visit www.xerox.com.

The preceding press release was provided by a company unaffiliated with Print+Promo. The views expressed within do not directly reflect the thoughts or opinions of Print+Promo.