Xerox Earnings Down for 1st Quarter, Services Revenue Up 10%
Xerox reported first-quarter earnings of $269 million, down from the $281 million it reported for first-quarter 2011. Total revenue was $5.5 billion, up 1 percent versus first quarter 2011, with services revenue up 9 percent and technology revenue down 5 percent. Earnings per share were flat at 19 cents.
The firm reports that its growth in services was driven by a 13 percent increase in business process outsourcing and 7 percent growth in document outsourcing. Technology revenue, which represents the sale of document systems, supplies, technical service and financing of products, was impacted by the weak economic environment, as well as clients’ increasing shift to Xerox managed print services. Installations of Xerox products were up 7 percent in the first quarter.
“Services now represents more than half of our total revenue and will continue to be the growth engine of our company as we expand our BPO (business process outsourcing) offerings and strengthen our leadership in managed print services,” commented Xerox Chairman and CEO Ursula Burns. “Our first-quarter results reflect the successful execution of our strategy: accelerate services, grow our install base of Xerox color products, and efficiently operate our business to deliver strong earnings and shareholder value.”
As Xerox had anticipated, overall margins were down in the first quarter. First-quarter gross margin was 31 percent, and selling, administrative and general expenses made up 19.4 percent of revenue. Operating margin of 8.5 percent was down 0.6 points from first-quarter 2011.
“Our business mix continues to change as we significantly scale our revenue in services and invest in growth through new offerings and long-term contracts,” added Burns. “As a result, we see short-term pressure on margins that we will offset through cost reductions and operational improvements. We’re accelerating top-line services growth that leads to solid bottom-line performance.”
In line with expectations and cash flow seasonality, the company used $15 million in operating cash during the first quarter.
Xerox expects second-quarter 2012 earnings of 21 cents to 24 cents per share. The company reiterated its expectations for full-year 2012 GAAP earnings per share of 97 cents to $1.03. Including restructuring, Xerox continues to expect full-year adjusted earnings per share of $1.12 to $1.18. It also continues to expect full-year operating cash flow of $2 billion to $2.3 billion, and plans to repurchase $900 million to $1.1 billion in Xerox stock during the year.