Revenue, Earnings Down for Lexmark's First Quarter, but Exceeds Forecast

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Lexmark International reported results for its first quarter, with revenue and earnings per share exceeding its January guidance. First-quarter revenue of $878 million includes $3 million of acquisition-related adjustments, compared to $884 million for first-quarter 2013. Net earnings were $29 million compared to first-quarter 2013 net earnings of $40 million.

Earnings per share for the first quarter of 2014 were $0.46, compared with earnings of $0.62 per share in the first quarter of 2013.

“In the first quarter our higher-value solutions portfolio revenue, composed of Managed Print Services and Perceptive Software, grew 18 percent, accounted for 28 percent of Lexmark’s total revenue, and is expected to exceed $1 billion this year,” commented Paul Rooke, Lexmark chairman and chief executive officer. “We also had strong laser-supplies revenue growth again this quarter, and delivered increased non-GAAP gross profit, operating income and pretax earnings.”

Higher Value Solutions Portfolio

Lexmark’s higher-value solutions portfolio revenue, composed of Managed Print Services (MPS) and Perceptive Software, is expected to exceed $1 billion in 2014.

Combined MPS and Perceptive Software revenue of $244 million, excluding acquisition-related adjustments of $3 million, grew 18 percent year-over-year and accounted for 28 percent of total revenue, up from 23 percent in the same period last year.

Segment Revenue

Imaging Solutions and Services (ISS) revenue of $817 million declined 3 percent compared to the same period last year. ISS revenue, excluding Inkjet Exit revenue, grew 4 percent compared to last year. On a year-to-year basis:

  • MPS revenue of $180 million grew 12 percent.
  • Non-MPS revenue of $565 million grew 1 percent.
  • Inkjet Exit revenue of $73 million declined 40 percent, represented 8 percent of total company revenue, and is expected to decline as a percentage of total revenue as the trailing inkjet supplies revenue from the remaining installed base of inkjet printers naturally decreases over time.
  • Perceptive Software revenue was $61 million. Perceptive Software revenue, excluding acquisition-related adjustments of $3 million, was $64 million and grew 38 percent compared to the same period in 2013.

Product Revenue

  • Hardware revenue of $167 million declined 8 percent compared to last year.
  • Hardware revenue, excluding Inkjet Exit, declined 7 percent.
  • Supplies revenue of $605 million declined 1 percent year to year. Laser supplies revenue grew 9 percent.
  • Software and Other revenue of $106 million grew 13 percent compared to last year.

Other results:

  • Gross profit margin was 38.9 percent versus 38.0 percent in 2013.
  • Operating expense was $288 million compared to $274 million last year.
  • Operating income was $54 million compared to $62 million in 2013.
  • Operating income margin was 6.1 percent compared to 7.0 percent in 2013.

Lexmark projects that second-quarter 2014 revenue, excluding Inkjet Exit revenue, is expected to grow year-over-year. The company expects a continued negative impact from the decision to exit the inkjet business. Total revenue is currently expected to decline 2 to 4 percent, compared to last year.

It expects earnings per share in the second quarter of 2014 to be around $0.47 to $0.57. Earnings per share of $1.47 in the second quarter of 2013 included a $71 million gain on the sale of the company’s inkjet technology and assets, net of related costs.

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