Xerox Holdings(US:XRX)2021-01-26 20:10Financial Data and Key Metrics Changes - GAAP EPS from continuing operations totaled $0.84, down from $1.94 in 2019, and adjusted EPS was $1.41, down from $2.14 in 2019 [4] - Operating cash flow from continuing operations was $548 million, down $696 million year-over-year, and free cash flow was $474 million, down $705 million year-over-year [4] - Revenue declined to approximately $7 billion, a decrease of 22.7% in constant currency from the prior year [5] Business Line Data and Key Metrics Changes - Equipment sales of $510 million declined 18.8% in constant currency, with strong demand in government accounts [30] - Post sales revenue of $1.42 billion in Q4 declined 20.1% in constant currency, adjusting for the OEM fee impact [31] - IT services delivered organic growth in 2020, driven by demand for remote working solutions [11] Market Data and Key Metrics Changes - Xerox regained the top spot in total equipment sales revenue market share in its territory, holding the number one position in both mid and production segments [12] - Demand within government accounts was a key driver, resulting in year-over-year equipment sales growth in the US Enterprise business [12] - The SMB channel in the US and EMEA faced challenges due to increased restrictions caused by the pandemic [30] Company Strategy and Development Direction - The company plans to stand up three separate businesses: Software, Financing, and Innovation by 2022 to provide greater focus and flexibility [20] - Project Own It has generated $1.4 billion in savings over the last 2.5 years, with a target of $375 million in savings for 2021 [5][33] - The acquisition of CareAR aims to enhance the software business and support clients' digital needs [9] Management's Comments on Operating Environment and Future Outlook - The management expressed optimism about vaccine distribution and economic recovery, although they do not expect a return to growth in Q1 [5] - The company expects revenue to be at least $7.2 billion in constant currency for 2021, with operating cash flow from continuing operations to be at least $600 million [6][38] - Management emphasized the importance of maintaining a flexible cost structure to adapt to changing market conditions [75] Other Important Information - The company returned over 100% of free cash flow to shareholders in 2020, with a $500 million repurchase authorization for 2021 [19][29] - The corporate venture capital fund of $250 million will invest in start-ups aligned with the company's innovation goals [18][37] - The net unfunded pension liability was $905 million, reflecting a $307 million year-over-year reduction [34] Q&A Session Summary Question: Can you walk through the philosophy behind the business separation? - The separation allows each area to be more focused and flexible in responding to market demands [41] Question: What should be considered for free cash flow generation in the future? - Revenue will be a key driver, and the company will maintain investment in innovation while managing working capital [42][43] Question: Can you discuss the cost side of the equation in 2021? - Project Own It has successfully delivered savings, and the company is confident in its ability to grow free cash flow year-over-year [46][47] Question: What is the status of the relationship with Fuji? - The relationship remains strong, and financial modeling is in line with expectations [49] Question: How are customer conversations going regarding contract renewals? - There has been an increase in signings and retention, particularly in government and healthcare sectors [52] Question: How is the company adjusting to potential lower print volumes post-COVID? - The company has demonstrated the ability to adjust its cost structure and is monitoring print volume trends closely [75]