Xerox Holdings(XRX) - 2025 Q1 - Quarterly Results

Revenue Performance - Revenue for Q1 2025 was $1.46 billion, a decrease of 3.0% year-over-year, and a decline of 1.1% in constant currency[5] - Total revenue for Q1 2025 was $1,457 million, a decrease of 3.0% compared to $1,502 million in Q1 2024[33] - The company expects FY 2025 revenue to be approximately $6,350 million, reflecting low single-digit growth in constant currency[85] Profitability and Loss - GAAP net loss was $(90) million, or $(0.75) per share, an improvement of $23 million or $0.19 per share compared to Q1 2024[5] - Adjusted operating income for Q1 2025 was $22 million, a decrease of $11 million compared to Q1 2024, attributed to lower revenue and gross profit[24] - Adjusted net loss for Q1 2025 was $4 million, or $0.06 per share, while in Q1 2024, it was $11 million, or $0.06 per share[72] Cash Flow - Operating cash flow was $(89) million, a decrease of $10 million year-over-year, and free cash flow was $(109) million, down $20 million year-over-year[5] - Free cash flow guidance for 2025 is projected to be between $350 million and $400 million[13] - Free cash flow for FY 2025 is projected to be in the range of $350 million to $400 million, with operating cash flow estimated at $420 million to $470 million[87] Segment Performance - IT Solutions revenue increased by 121.6% year-over-year to $164 million, while Print and Other revenue decreased by 9.4% to $1.29 billion[6] - The Print and Other segment generated $1,294 million in revenue, a 9.4% decrease from $1,428 million in the previous year[42] - Equipment sales for Q1 2025 were $284 million, a decline of 2.1% in actual currency and 0.7% in constant currency compared to Q1 2024[23] Guidance and Expectations - The company expects low single-digit revenue growth in constant currency for the remainder of 2025[13] - Adjusted operating margin guidance for 2025 is at least 5.0%[13] - The expected reduction in operating income due to tariffs is around $50 million in 2025, with plans to mitigate this through price increases and supply chain adjustments[26] Acquisitions and Strategic Moves - The pending acquisition of Lexmark is not included in the current financial guidance[10] - Progress on the Lexmark acquisition includes receiving key regulatory approvals, with 32% of the required shareholder vote secured[28] - The company plans to finance and close the acquisition of Lexmark, aiming to realize anticipated synergies[56] Market and Product Strategy - The company categorizes its products into three segments: "Entry" for A4 devices and desktop printers serving small and medium workgroups, "Mid-Range" for A3 devices serving large workgroups, and "High-End" for production printing systems targeting graphic communications[22] - The company aims to enhance its market presence by expanding its product offerings across all three segments[22] - There is an emphasis on innovation in new product development to maintain competitive advantage in the printing industry[22] Financial Position - Total assets decreased to $8,211 million as of March 31, 2025, down from $8,365 million at December 31, 2024, reflecting a decline of approximately 1.8%[21] - The company established a valuation allowance of $59 million against certain deferred tax assets, impacting the effective tax rate significantly[76] - The company completed a private offering of $400 million in aggregate principal amount of senior secured notes, which will affect future financing costs[81] Risks and Challenges - The company anticipates potential risks including global macroeconomic conditions, supply chain disruptions, and competitive pressures affecting future performance[56] - The company is working with suppliers to mitigate tariff-related cost increases and monitor client sentiment[11]