Xerox Revenue Down for First Quarter, Adjusts Forecast

new xeroxApril 27, 2015 – Xerox has reported results for its  first-quarter 2015, with adjusted earnings per share of 21 cents. Net income was was $225 million, down 20 percent from net income of $281 million a year ago.

Total revenue for the quarter was $4.5 billion, down 6 percent or 2 percent in constant currency. Revenue from the company’s Services business, which represented 56 percent of total revenue, was $2.5 billion, down 3 percent or up 1 percent in constant currency. Services margin was 7.5 percent, down 1.1 percentage points, primarily due to higher costs in Xerox’s legacy Health Enterprise platform implementations.

Revenue from the company’s Document Technology business was $1.8 billion, down 10 percent or 6 percent in constant currency. Document Technology margin was 11.1 percent, down 1.1 percentage points due to increased pension expense, as expected.

“Our earnings are in-line with the guidance we provided,” commented Ursula Burns,Xerox chairman and chief executive officer. “Results in Document Technology, which included the increased impact from foreign currency, largely met our expectations. Several of our Services businesses performed well, but overall Services segment results fell short of our expectations driven by higher implementation costs in certain Health Enterprise platform accounts.”

First-quarter operating margin of 7.6 percent was down 1.1 percentage points from the same quarter a year ago. Gross margin was 31.2 percent, and selling, administrative, and general expenses were 20.5 percent of revenue.

Xerox generated $113 million in cash flow from operations during the first quarter, ending the quarter with a cash balance of $872 million. The company repurchased $216 million in stock in the quarter.

2015  Guidance

Xerox expects “increased currency headwinds” (referring to a stronger U.S. dollar versus foreign currency, which is generally believed to make U.S. products less competitive), lower signings, and acquisition timing to affect revenue. It expects its Services margin to be affected by increased implementation costs in legacy Health Enterprise accounts. As a result, Xerox is   adjusting its  full year expectations. For second-quarter 2015, Xerox expects earnings of 17 to 19 cents per share, which is lower than its previous guidance of $0.83 – $0.89.

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