Xerox Holdings(US:XRX)2025-05-12 20:37Revenue Performance - Total revenue for Q1 2025 was $1.46 billion, a decrease of 3.0% year-over-year, including a 6.6-percentage point benefit from the acquisition of ITsavvy and a 1.9-percentage point unfavorable impact from currency [199]. - Total revenue for Q1 2025 decreased by 3.0% to $1,457 million compared to Q1 2024, with a 1.9-percentage point adverse impact from currency fluctuations [212]. - The Print and Other segment revenue decreased by 9.4% to $1.294 billion, while IT Solutions segment revenue increased by 121.6% to $164 million [202]. - First quarter 2025 revenues for the Print and Other segment were $1,294 million, a decrease of 9.4% from $1,428 million in Q1 2024, with equipment sales down 2.1% and post-sale revenue down 11.2% [254][257]. - IT products revenue surged by 123.4% to $105 million, driven by the ITsavvy acquisition, although excluding this impact, revenue decreased by 20.4% [218]. Profitability and Loss - Adjusted operating income for Q1 2025 was $22 million, a decrease of $11 million compared to Q1 2024, reflecting lower revenue and gross profit [192]. - Net loss for Q1 2025 was $90 million, an improvement of $23 million from a net loss of $113 million in Q1 2024, primarily due to divestitures and lower restructuring costs [201]. - Adjusted operating income margin for Q1 2025 was 1.5%, a decrease of 0.7 percentage points compared to Q1 2024, reflecting lower revenue and gross profit [245]. - Pre-tax loss improved to $67 million in Q1 2025 from a loss of $150 million in Q1 2024, resulting in a pre-tax loss margin of (4.6)% [219]. - The company reported a pre-tax loss of $1,216 million for the full year 2024, impacted by a goodwill impairment of $1,058 million [276]. Expenses and Cost Management - Selling, Administrative and General (SAG) expenses were $378 million, a decrease of $19 million from Q1 2024, with SAG as a percentage of revenue at 25.9% [227]. - Research, Development and Engineering (RD&E) expenses totaled $42 million, down from $49 million in Q1 2024, with RD&E as a percentage of revenue decreasing to 2.9% [223]. - The company anticipates a $50 million reduction in operating income due to incremental tariff costs in 2025, but expects to offset this through price increases and supply chain mitigation efforts [193]. - The company incurred inventory-related charges of approximately $7 million in Q1 2025 due to the exit of certain production print manufacturing operations, compared to $32 million in Q1 2024 [321]. Cash Flow and Debt Management - Operating cash flows are projected to be between $420 million to $470 million, with capital expenditures expected to be approximately $70 million in 2025 [207]. - As of March 31, 2025, total cash, cash equivalents, and restricted cash decreased to $390 million from $631 million at December 31, 2024, reflecting a decrease of $241 million [279]. - Total debt as of March 31, 2025, was $3,298 million, down from $3,399 million at December 31, 2024 [288]. - The company plans to use proceeds from new debt financing to fund the $1.5 billion acquisition of Lexmark International II LLC [279]. - The company completed a private offering of $400 million in aggregate principal amount of 10.25% Senior Secured First Lien Notes and $400 million in aggregate principal amount of 13.5% Senior Secured Second Lien Notes due in 2031 [322]. Acquisitions and Strategic Initiatives - The pending acquisition of Lexmark is progressing, with 32% of the required shareholder vote secured and expected closing in Q3 2025 [195]. - The company is focusing on restructuring efforts and managing financial risks as outlined in the "Financial Risk Management" section of the quarterly report [324]. - The company has not materially modified its financial risk management strategies in response to current market events [303]. Market Conditions and Future Outlook - The company expects revenue growth at low single-digits in constant currency for the full year 2025, including a full year of revenue from ITsavvy [207]. - The company anticipates continued monitoring of economic conditions which may affect future bad debt reserves [228]. - The effective tax rate for the three months ended March 31, 2025, was -34.3%, while the adjusted effective tax rate was 60.0% [318]. - The company is exposed to market risks from foreign currency exchange rates and interest rates, managing these through derivative financial instruments [300].