Core Viewpoint - Xerox Holdings Corporation's stock has declined 9.5% following disappointing fourth-quarter 2024 earnings performance [1] Financial Performance - Fourth-quarter adjusted EPS was 36 cents, missing the Zacks Consensus Estimate by 30.8% and declining 16.3% year over year [2] - Total revenues were $1.5 billion, surpassing the consensus mark by 1.5% but decreasing 8.6% year over year on a reported basis; revenues declined 8% on a constant-currency basis [2] Revenue Breakdown - Post-sale revenues were $1.22 billion, down 6.7% year over year on a reported basis and 6.1% at constant currency, exceeding the estimate of $1.21 billion [3] - Equipment sales declined 14.2% year over year on a reported basis to $393 million, beating the estimate of $378.7 million [3] - The Print and Other segment's revenues totaled $1.54 billion, down 8.7% year over year, surpassing the estimate of $1.51 billion [4] - Xerox Financial Services revenues were $89 million, down 11% year over year, lagging the estimate of $98.5 million [4] - Sales revenues totaled $656 million, down 9% year over year on a reported basis [5] - Services, maintenance, and rental revenues totaled $924 million, down 7.6% year over year [5] - Financing revenues decreased 25% year over year to $33 million [5] Operating Performance - Adjusted operating income was $104 million, up 6.4% year over year; adjusted operating margin was 6.4%, up 100 basis points year over year [6] Balance Sheet and Cash Flow - Xerox ended the quarter with cash and cash equivalents of $576 million, up from $521 million at the end of the prior quarter [7] - Operating cash flow and free cash flow were $351 million and $334 million, respectively, for the quarter [7] 2025 Guidance - Xerox expects low single-digit revenue growth at constant currency and an adjusted operating margin of at least 5% [8] - The company anticipates free cash flow to be between $350 million and $400 million [8] - Xerox currently holds a Zacks Rank 5 (Strong Sell) [8]

Group 1 - The core viewpoint is that Xerox Holdings (NASDAQ: XRX) is considered to have a structurally impaired business with no potential for positive earnings growth, leading to a sell recommendation [1] - The investment approach emphasizes a fundamentals-based strategy, focusing on companies with long-term durability and robust balance sheets rather than merely low multiples [1] - There is a recognition that investing in successful companies carries risks, particularly regarding valuation, but some situations may justify less concern about price in the short term due to significant development potential [1]

Earnings Presentation Q4 2024 Results January 28, 2025 Forward-Looking Statements This presentation and other written or oral statements made from time to time by management contain "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate", "believe", "estimate", "expect", "intend", "will", "would", "could", "can", "should", "targeting", "projecting", "driving", "future", "plan", "predict", "may" and similar expressions, as they relate to us, our ...

Core Viewpoint - Xerox Holdings experienced a significant decline in stock price following disappointing quarterly earnings, despite beating sales expectations [1][2]. Financial Performance - In fiscal Q4, Xerox reported sales of just over $1.6 billion, slightly above analyst expectations, but earnings per share were only $0.36, missing the forecast of $0.49 [1][2]. - Year-over-year sales declined nearly 9%, contributing to a total revenue of $6.2 billion for fiscal 2024, which represents a nearly 10% decline compared to the previous year [2][3]. - The company reported a GAAP loss of $10.75 per share for the year, with $8.17 per share attributed to an "after-tax non-cash goodwill impairment" [3][4]. Cash Flow and Future Guidance - Xerox generated positive free cash flow of $467 million for the year, which fell short of the target of at least $600 million [4]. - CEO Steve Bandrowczak forecasts "low-single-digit" sales growth for 2025, with free cash flow expected to range from $350 million to $400 million, indicating a potential contraction despite sales growth [5]. Investment Considerations - The stock is currently trading at a low price-to-free-cash-flow ratio of 3, suggesting it may be undervalued [5].

Core Insights - Xerox Holdings Corporation reported quarterly earnings of $0.36 per share, missing the Zacks Consensus Estimate of $0.52 per share, and down from $0.43 per share a year ago, representing an earnings surprise of -30.77% [1] - The company posted revenues of $1.61 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.53%, but down from $1.77 billion year-over-year [2] - Xerox has not surpassed consensus EPS estimates over the last four quarters and has topped consensus revenue estimates only once during the same period [2] Earnings Outlook - The sustainability of Xerox's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $1.54 billion, and for the current fiscal year, it is $1.30 on revenues of $6.31 billion [7] Industry Context - The Office Supplies industry, to which Xerox belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Acco Brands, another company in the same industry, is expected to report quarterly earnings of $0.41 per share, reflecting a year-over-year change of +5.1%, with revenues projected to be $455.06 million, down 6.9% from the previous year [9]

Financial Performance - Q4 2024 revenue was $1.613 billion, down 8.6% year-over-year, with a gross profit of $502 million and a gross margin of 31.1%[5] - Full-year 2024 revenue totaled $6.221 billion, a decrease of 9.7% compared to 2023, with a GAAP net loss of $1.32 billion, or $(10.75) per share[6] - Adjusted net income for Q4 2024 was $49 million, or $0.36 per share, down from $56 million, or $0.43 per share in Q4 2023[6] - The Print and Other segment revenue for Q4 2024 was $1.540 billion, a decline of 8.7% year-over-year[9] - Full-year 2024 adjusted operating income was $302 million, down 22.4% from the previous year[7] - Total revenues for Q4 2024 were $1,613 million, a decrease of 8.6% from $1,765 million in Q4 2023[18] - Net loss attributable to common shareholders for Q4 2024 was $24 million, compared to a net loss of $61 million in Q4 2023[18] - Comprehensive loss for the year 2024 was $1,344 million, compared to a comprehensive loss of $138 million in 2023[20] - The company reported a goodwill impairment of $1,058 million for the year 2024[18] - Fourth quarter 2024 reported net loss was $1.321 billion, with diluted loss per share of $8.17, primarily due to a $1.1 billion goodwill impairment charge[1] - Full-year 2024 revenue was $6.221 billion, a decrease of 9.6% compared to $6.886 billion in 2023[1] - Adjusted operating income for Q4 2024 was $104 million, with an adjusted operating margin of 6.4%[1] - Adjusted gross profit for Q4 2024 was $509 million, with a margin of 31.6%[1] - The company incurred $1.216 billion in pre-tax losses for the full year 2024, resulting in an effective tax rate of -8.6%[2] Cash Flow and Projections - Free cash flow for 2025 is projected to be between $350 million and $400 million[12] - Q4 2024 operating cash flow was $351 million, down $38 million year-over-year[6] - Free cash flow for Q4 2024 was $334 million, down from $379 million in Q4 2023[1] - The company expects FY 2025 adjusted operating income to be approximately $320 million, with revenue projected at around $6.350 billion[1] - FY 2025 guidance includes an adjusted operating margin of at least 5.0%[1] - The company anticipates adjusted operating income margin to be at least 5.0% in 2025, reflecting incremental gross cost savings[25] Acquisitions and Strategic Initiatives - The pending acquisition of Lexmark is expected to close in the second half of 2025, which is not included in the 2025 guidance[11] - The company closed the acquisition of ITsavvy and plans to acquire Lexmark, aiming to enhance core operations and achieve revenue stability[24] - The company plans to continue focusing on strategic actions and initiatives to drive future growth and operational efficiency[51] Operational Metrics - Equipment sales decreased by 14.2% to $393 million, while post-sale revenue declined by 6.7% to $1.2 billion year-over-year[28] - Total equipment installations increased by approximately 19.0% year-over-year, driven by growth in entry-level and mid-range equipment[24] - The decline in post-sale revenue was attributed to lower managed print service revenue and intentional reductions in non-strategic revenue[24] Expenses and Liabilities - Research, development, and engineering expenses for the year 2024 were $191 million, down from $229 million in 2023[18] - Total assets decreased to $8,365 million as of December 31, 2024, down from $10,008 million a year earlier[22] - Total liabilities decreased to $7,061 million as of December 31, 2024, from $7,236 million a year earlier[22] - The company incurred restructuring and related costs of $5 million during the quarter, with total restructuring costs for the year amounting to $167 million[61] Shareholder Information - Basic loss per share for Q4 2024 was $0.20, unchanged from Q4 2023[18] - Basic Loss per Share for Q4 2024 was $(0.20), compared to $(0.50) in Q4 2023, indicating a 60% improvement year-over-year[76] - Dividends per common share remained stable at $0.25 for both Q4 2024 and Q4 2023, with an annual total of $1.00 for both years[76] Segment Information - Xerox operates through two reportable segments: Print and Other, and Xerox Financial Services (XFS), which are aligned with the company's business management strategy[78] - The Print and Other segment includes sales of document systems, supplies, and managed services, catering to a diverse customer base from small businesses to large enterprises[79] - The XFS segment provides global leasing solutions, primarily generating revenue from financing income on sales-type leases and leasing fees[80] - The product offerings in the Print segment are categorized into Entry, Mid-Range, and High-End devices, targeting different market needs[81] Non-GAAP Measures and Adjustments - The company highlighted the importance of non-GAAP measures to better understand business trends and performance[48] - Transaction and related costs associated with M&A activities were noted as significant, impacting overall financial results[54] - The impact of foreign currency translation was adjusted to provide a clearer view of revenue trends, referred to as "constant currency"[58]

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Faruqi & Faruqi, LLP Securities Litigation Partner James (Josh) Wilson Encourages Investors Who Suffered Losses Exceeding $75,000 In Xerox To Contact Him Directly To Discuss Their Options If you suffered losses exceeding $75,000 in Xerox between January 25, 2024 and October 28, 2024 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). [You may also click here for additional information] NEW YORK, Jan. 17, 2025 (GLOBE NEW ...

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