Xerox Holdings(US:XRX)2025-10-30 10:35Financial Performance - Q3 2025 revenue reached $1.96 billion, an increase of 28.3% year-over-year, or 27.0% in constant currency[3] - GAAP net loss narrowed to $(760) million, or $(6.01) per share, improving by $445 million or $3.70 per share year-over-year[3] - Adjusted net income was $27 million, or $0.20 per share, down $7 million or $0.05 per share year-over-year[3] - Operating cash flow increased to $159 million, up $43 million year-over-year, while free cash flow rose to $131 million, up $24 million year-over-year[3] - Total revenues for Q3 2025 were $1,961 million, a 28.4% increase from $1,528 million in Q3 2024[18] - Net loss for Q3 2025 was $760 million, compared to a net loss of $1,205 million in Q3 2024, representing a 36.9% improvement[21] - The company reported a comprehensive loss of $769 million for Q3 2025, compared to a comprehensive loss of $1,032 million in Q3 2024, indicating a 25.5% reduction[21] - Reported net loss for Q3 2025 was $760 million, resulting in a diluted EPS of $(6.01), compared to a net loss of $1,205 million and diluted EPS of $(9.71) in Q3 2024[75] - Adjusted net income for Q3 2025 was $27 million, with an adjusted EPS of $0.20, while adjusted net income for Q3 2024 was $34 million with an adjusted EPS of $0.25[75] Revenue Segments - IT Solutions segment revenue grew by 162.8% year-over-year, reaching $226 million[6] - Total revenues for the Print and Other segment reached $1,739 million in Q3 2025, a 20.6% increase from $1,442 million in Q3 2024[46] - Equipment sales for Q3 2025 were $383 million, a 13.0% increase in actual currency and 12.1% in constant currency compared to Q3 2024, benefiting from the Lexmark acquisition by 26.0 percentage points[25] - Post-sale revenue reached approximately $1.6 billion, up 32.7% in actual currency and 31.3% in constant currency year-over-year, with Lexmark and ITsavvy contributing 30.2 and 10.3 percentage points respectively[25] - The IT Products category within IT Solutions saw a 200.0% increase in revenue to $165 million in Q3 2025[52] - Post-sale revenue for Q3 2025 was $1,578 million, a 32.7% increase compared to $1,189 million in Q3 2024[94] Cost and Expenses - Research, development, and engineering expenses increased to $74 million in Q3 2025 from $45 million in Q3 2024, a 64.4% rise[18] - Total liabilities increased to $9,474 million as of September 30, 2025, compared to $7,061 million at the end of 2024, a 34.3% increase[22] - The company incurred $467 million in tax expense related to the establishment of a valuation allowance against certain deferred tax assets in Q3 2025[78] - Restructuring and related costs for Q3 2025 amounted to $59 million, compared to $56 million in Q3 2024[75] - The company incurred approximately $230 million in non-financing interest expense related to the Lexmark acquisition financing[88] Guidance and Projections - 2025 guidance revised to 13% revenue growth in constant currency, down from 16-17%[11] - Adjusted operating margin guidance lowered to around 3.5%, down from around 4.5%[11] - Free cash flow guidance reduced to around $150 million, down from around $250 million[11] - Xerox expects 2025 revenue growth of 13% in constant currency, with an adjusted operating income margin of approximately 3.5% and free cash flow of around $150 million[25] - The overall segment profit for 2025 is projected to be $184 million, with a total revenue of $3,978 million[54] Acquisitions and Integration - Lexmark integration is ahead of plan, with cost synergies now forecasted to be at least $300 million, an increase of $50 million from previous estimates[4] - The Lexmark acquisition was completed on July 1, 2025, for approximately $1.5 billion, including cash of $811 million and the assumption of $323 million in debt[26] - Xerox anticipates over $1 per share of accretion from the Lexmark transaction, with no material impact from proposed U.S. tariffs due to Lexmark's manufacturing capabilities in Mexico[27] - The acquisition of ITsavvy has led to a reassessment of reportable segments, now categorized as Print and Other, and IT Solutions[111] Market Conditions and Strategy - The company experienced delays in purchasing decisions among clients due to macroeconomic challenges, particularly affecting transactional Print equipment revenues[24] - Actions taken through the Reinvention strategy have provided Xerox with a flexible operating structure to adapt to market uncertainties[24] - The company is focused on expanding its market presence through strategic acquisitions and enhancing its product offerings[51] - Forward-looking statements indicate potential risks including global macroeconomic conditions and integration challenges with recent acquisitions[57] Other Financial Metrics - Adjusted operating income for Q3 2025 was $65 million, down $15 million from Q3 2024, primarily due to lower gross profit and unfavorable revenue mix[25] - Adjusted operating income for FY 2025 is projected to be around $245 million, with an adjusted margin of approximately 3.5%[86] - Total gross profit for Q3 2025 was $445 million, down from $495 million in Q3 2024, leading to a total gross margin of 22.7%[94] - Adjusted gross profit for Q3 2025 was $566 million, with a margin of 28.9%, down from $495 million and 32.4% in Q3 2024[83] - The company declared dividends of $0.025 per common share for Q3 2025, down from $0.25 in Q3 2024[109]