Xerox Revenue Down, Cites Charge for Fuji Xerox New Zealand Operations

Xerox today reported its first-quarter 2017 financial results, with total revenue of $2.45 billion, down 6.2 percent year-over-year. Earnings per share (EPS) were 2 cents and net income was $16 million, compared to 6 cents a share and $34 million, respectively, for its first quarter in 2016.

Xerox explained that, during the quarter, its earnings were affected by a charge related to its equity investment in Fuji Xerox, resulting in a 3-cent reduction in both GAAP (Generally Accepted Accounting Principles) and adjusted EPS. Xerox owns a 25-percent share in Fuji Xerox, while Fujifilm Holdings owns a 75-percent share in Fuji Xerox. On April 20, 2017, Fujifilm announced it’s conducting a review of accounting irregularities at Fuji Xerox’s New Zealand subsidiary. The Fujifilm review is ongoing and a charge of approximately $30 million in the first quarter of 2017 represents Xerox’s share of the current Fujifilm estimated adjustments from this review.

First-quarter adjusted operating margin, excluding the impact of the Fuji Xerox charge, was 11.4 percent, up 0.9 percentage points from the same quarter a year ago.

Equipment and Managed Document Services Revenue

Equipment revenue totaled $502 million, down 7.4 percent year-over-year, while Managed Document Services revenue was $819 million, down 2.0 percent year-over-year.

As for equipment installations, Xerox saw very promising installations of A4 copier/MFP/printers in the first quarter: entry-level A4 installations were up 15 percent, while entry-level black-and-white A4 installations were up 2 percent, mid-range black-and-white installations were down 24 percent, high-end color installations were down 15 percent, and high-end black-and-white installations were down 25 percent.

Xerox continues to state that it will focus on three promising areas: managed print services (MPS) and workflow automation, A4 MFPs, and production-color systems.

“I am pleased with our operational results in the first quarter,” said Xerox CEO Jeff Jacobson. “Revenue and cash flow were in-line with our expectations and, despite currency headwinds, operating margin expanded driven by productivity savings from our Strategic Transformation initiatives. While we still have a lot to do, we laid the foundation to deliver on our full-year commitments.”

Full Year 2017 Forecast

Xerox reiterated its full-year 2017 guidance of earnings from continuing operations of 44 to 52 cents per share and adjusted EPS of 80 to 88 cents per share. It expects to generate operating cash flow from continuing operations of $700 to $900 million and free cash flow from continuing operations of $525 to $725 million in 2017.

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