Strong Quarter for Lexmark; MPS and Perceptive Software Revenue Forecast to Reach $1 Billion

headquarters 2Lexmark International today reported revenue growth of 3 percent versus the same quarter a year ago, and earnings of $66 million, an increase versus the $65 million for the third quarter a year ago. Both revenue growth and earnings per share exceeded the firm’s forecast. While both Lexmark’s managed print services (MPS) and Perceptive Software made strong gains, of note was that hardware revenue – MFP/copiers and printers – was $196 million, an increase of 8 percent compared to last year’s third quarter.

Total revenue for the third quarter was $918 million compared to $890 million for third-quarter 2013. Excluding Lexmark’s inkjet business, which it’s exiting, revenue growth was 6 percent. Managed print services and Perceptive Software combined revenue grew 21 percent in the third quarter.

Also in the third quarter, MPS and Perceptive Software revenue of $291 million represented nearly one-third (32 percent) of Lexmark’s total revenue – up from 27 percent in third-quarter 2013 – and is on track to exceed $1 billion this year, according to Lexmark Chairman and CEO Paul Rooke. Rooke noted that, “Our strong results reflect the work we have been doing to transform Lexmark to a solutions company, creating a unique portfolio of higher value imaging and software solutions.

“The acquisition of ReadSoft further broadens Lexmark’s solutions capabilities and reach, and supports our target of generating Perceptive Software revenue of $500 million in 2016,” he added. “This acquisition demonstrates the disciplined execution of our capital allocation framework, which fuels Lexmark’s transformation and rewards our shareholders through the ongoing return of capital.”

Third quarter results include ReadSoft results; ReadSoft results added $14 million to revenue and affected earnings per share by approximately -$0.06. Third-quarter revenue of $918 million also included acquisition-related adjustments of $3 million. Earnings per share for the third quarter of 2014 were $0.60.

Segment Revenue

Imaging Solutions and Services (ISS) revenue of $835 million was about flat compared to the same period last year. ISS revenue, excluding Inkjet Exit revenue, grew 3 percent compared to last year. On a year-to-year basis:

  • MPS revenue of $205 million grew 12 percent.
  • Non-MPS revenue of $570 million was about flat.
  • Inkjet Exit revenue of $60 million (6 percent of total revenue) declined 29 percent.
  • Perceptive Software revenue was $83 million. Excluding acquisition-related adjustments, Perceptive Software revenue (including $14 million ReadSoft revenue) of $86 million grew 46 percent compared to the same period in 2013.

Product Revenue

  • Hardware revenue of $196 million grew 8 percent compared to last year.
  • Supplies revenue of $593 million declined 2 percent compared to 2013.
  • Laser supplies revenue of $533 million grew 2 percent year-to-year.
  • Software and Other revenue was $129 million.

Fourth-Quarter Forecast

Lexmark forecasts total revenue for its fourth quarter to be down 2 to 4 percent compared to fourth quarter last year. The company expects its 2012 decision to exit the inkjet-printer business to have a diminishing negative impact on revenue growth. Excluding Inkjet Exit revenue, fourth-quarter 2014 revenue is expected to grow year-to-year. Lexmark is also forecasting earnings per share in the range of $0.56 to $0.66 for fourth-quarter 2014.

The firm forecasts full-year 2014 total revenue to be in the range of flat, to down 1 percent year-to-year, an increase to the mid-point of the previous revenue guidance of flat, to down 2 percent year-to-year. It forecasts full-year 2014 earnings per share to be around $2.21 to $2.31.

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