Lower Revenue at Lexmark for First Quarter, But Meets Earnings Forecast

new hqApril 28, 2015 – Lexmark International today reported results for its first-quarter 2015, with Lexmark Chairman and CEO Paul Rooke noting, “Despite a strong currency headwind, Lexmark delivered revenue and EPS (earnings per share) at the top of our January guidance range. Double-digit revenue growth in Higher Value Solutions is another clear indication that our transformation strategy is working. Our annuity revenue represents approximately 70 percent of core revenue, fueling Lexmark’s ability to invest in growing our Higher Value Solutions, capabilities while also returning capital to shareholders through dividends and share repurchases.”

Lexmark reported first-quarter revenue of $852 million, compared to $878 million in 2014. First-quarter profit was $19.7 million, compared to $29.3 million for first-quarter 2014. Gross profit margin for the first quarter was 38.7 percent. compared to 38.9 percent for first-quarter 2014. Earnings per share (EPS) was $0.32, compared to $0.46 for first-quarter 2014.

During Lexmark’s first-quarter 2015:

  • Lexmark’s combined Enterprise Software and MPS (managed print services) revenue grew 13 percent year-over-year. Annuity revenue grew 5 percent year-over-year, making up 70 percent of Lexmark’s core revenue.
  • Annualized subscription contract value increased 108 percent year-over-year.
  • Deferred software revenue increased 35 percent year-over-year.
  • Lexmark paid its 14th consecutive quarterly dividend and continued its share repurchases.

First Quarter 2015 Segment Revenue

  • Imaging Solutions and Services (ISS) revenue of $766 million declined 6 percent year-over-year.
    • Managed Print Services (MPS) revenue of $185 million grew 3 percent year-over-year.
    • Non-MPS revenue of $533 million declined 6 percent year-over-year.
    • Inkjet-exit revenue of $48 million declined 34 percent year-over-year.
  • Enterprise Software revenue was $86 million. Excluding adjustments, Enterprise Software revenue of $90 million grew 40 percent year-over-year.
    • Deferred software revenue increased 35 percent year-over-year.
    • Annualized subscription contract value increased 108 percent year-over-year.

First Quarter Higher-Value Solutions Revenue

Lexmark’s Higher Value Solutions revenue is made up of Enterprise Software and MPS. Higher-value solutions revenue, excluding adjustments, grew 13 percent year-over-year, accounting for 32 percent of total revenue, up from 28 percent in first-quarter 2014.

First-Quarter Annuity Revenue

Lexmark says it’s growing a more predictable annuity revenue base of laser MFP and printer supplies, software maintenance, software subscriptions, and ISS extended warranties. Its annuity revenue of $2.419 billion for the trailing four quarters grew 5 percent compared to the same period a year ago, and made up 70 percent of its core revenue.

Second-Quarter 2015 and Full-Year 2015 Forecast

Lexmark expects its core revenue to be approximately flat year-over-year in second-quarter 2015, with second-quarter total revenue expected to decline in the range of 2 to 4 percent year-over-year. For the second quarter, it’s expecting EPS to be around $0.07 to $0.17.

For full-year 2015, Lexmark expects its core revenue to decline slightly year-over-year. It’s forecasting full-year revenue to decline in the range of 3 to 5 percent year-over-year, and EPS to be around $1.42 to $1.62.

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