Lexmark Reports Third-Quarter Results; Exploring 'Strategic Alternatives'; Sale Rumored

Lexmark-perceptive HQ

Lexmark International today reported results for its third-quarter 2015, with revenue of $851 million, down 3 percent from $918 million for third-quarter 2014, and net earnings of $35 million, versus net earnings of $66 million for third-quarter 2014.

According to the The Wall Street Journal, Lexmark is reviewing various options including a sale of the company, but declined to comment on any such sale. In a public statement, Lexmark CEO Paul Rooke noted: “While Lexmark continues to focus on this growth and transforming the company, Lexmark also recently announced that our board of directors has initiated an exploration of strategic alternatives to enhance shareholder value and unlock the intrinsic value created by the company.” A press release issued by Lexmark also stated: “Exploration of strategic alternatives to enhance shareholder value (is) underway.”

Rooke noted that the company’s revenues from solutions and software (versus hardware such as printers and copier/MFPs) continue to grow: “While the third quarter was challenging, Lexmark Enterprise Software drove strong growth in our Higher Value Solutions revenue, which now accounts for 43 percent of total revenue.”

Third-quarter 2015 year-over-year comparisons:

  • Gross profit margin of 37.6 percent, compared to 38.9 percent for third-quarter 2014.
  • Operating income margin was -2.5 and 5.9 percent for third-quarters 2015 and 2014, respectively.
  • Earnings per share (EPS) of -$0.25 in third-quarter 2015, compared to $0.55 for third-quarter 2014.

Third-quarter non-GAAP (Generally Accepted Accounting Principles) segment revenue year-over-year comparisons:

  • Imaging Solutions and Services (printers, copiers/MFPs, etc.) revenue declined 16 percent, down 11 percent in constant currency.
  • Managed Print Services (MPS) revenue grew 1 percent, up 8 percent in constant currency.
  • Non-MPS revenue declined 18 percent, down 14 percent in constant currency. (Note that non-MPS revenue consists of revenue derived from ISS laser hardware, laser supplies, dot-matrix hardware, and dot-matrix supplies not sold as a part of an MPS agreement. Non-MPS also includes parts and service related to hardware maintenance.)
  • Inkjet-Exit revenue declined 48 percent, down 45 percent in constant currency.
  • Enterprise Software revenue was $148 million. Excluding adjustments, Enterprise Software revenue of $165 million grew 92 percent, up 102 percent in constant currency.
  • Deferred-software revenue increased 66 percent year-over-year.
  • Annualized-subscription contract value increased 25 percent year-over-year.

Fourth-Quarter 2015 forecast:

  • Core revenue is expected to decline -1 to -3 percent year-over-year.
  • Total revenue is expected to be in the range of -4 to -6 percent year-over-year.
  • EPS are expected to be around $0.00 to $0.10.
  • Non-GAAP EPS are expected to be around $1.05 to $1.15.

Full-year 2015 forecast:

  • Core revenue is expected to be flat, to down 1 percent year-over-year.
  • Total revenue is expected to be in the range of -3 to -4 percent year-over-year.
  • EPS are expected to be around -$0.38 to -$0.48.
  • Non-GAAP EPS are expected to be around $3.42 to $3.52.

More Resources

July 2015: Revenue Flat for Lexmark, Announces Restructuring Plan and 500 Job Cuts

May 2015: Lexmark Completes Kofax Acquisition; Bish is New President of Lexmark Enterprise Software Division

April 2015: Lower Revenue at Lexmark for First Quarter, But Meets Earnings Forecast

April 2015: Lexmark Launches New Tagline, ‘Open the Possibilities,’ and Logo

January 2015: Lexmark Reports Loss for Fourth Quarter, but Seventh Consecutive Quarter of Revenue Growth

January 2015: Lexmark Acquires Claron, Provider of Medical-Imaging and Distribution Software

November 2014: ReadSoft is Now Officially Part of Lexmark International, Merged into Perceptive Software

October 2014: Strong Quarter for Lexmark; MPS and Perceptive Software Revenue Forecast to Reach $1 Billion

July 2014: Strong Quarter for Lexmark; Growth in MPS; Increases Full-Year Outlook

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