Xerox earnings came out today and while overall, the company is doing pretty well, the technology group once again took a bit of a beating. Color A4 MFD installs were down 9% from Q4 last year and monochrome A4 MFD installs were down a whopping 25%. Their Mono production devices are also down 19%. If I remember correctly, last year at this time, Xerox actually posted slight growth in mono production. What happened?

Screen Shot 2015-01-30 at 1.51.15 PMConsidering the aftermarket cash that comes in for the next 3-5 years after selling hardware, these low numbers will be an ongoing thorn in Xerox’s side for many years to come.

On the upside, color printers were up 9%, mid range color (A3) were flat and high end color was up 12% – impressive, although not as good as the 20% growth they had last year in this area.

I’m hoping a decent amount of the A4 mono drop is just a transition to color, but if that’s the case, the color growth isn’t keeping up with the mono losses.

Other interesting articles

Xerox has been going through a long transition, away from the direct sales organization it had been in the past. Their Global Imaging organization continues to grow and I’ve noticed they’ve been signing a large number of new dealers over the last 12 months. They’re also very focused on a variety of alternative channels. It’s not like they’re standing still, but these investments need to start gaining traction.

Screen Shot 2013-10-04 at 9.47.03 AMXerox is still synonymous with printing. They continue to expand their distribution network. The services part of the company represents an increasingly higher percentage of their annual revenue. But there is still a lot of money (and jobs) in print. When will these moves start to yield results? And what can they do to stop the bleeding until that happens?

Here’s the earnings release from Xerox:

  • GAAP EPS from continuing operations of 26 cents
  • Xerox Reports Fourth-Quarter 2014 Earnings
  • Adjusted EPS of 31 cents
  • Revenue of $5 billion, 54 percent from Services
  • Operating margin of 10.4 percent, up one percentage point year-over-year
  • Cash flow from operations of $2.06 billion for full-year 2014
  • Share repurchases of $1.07 billion for full-year 2014
  • Quarterly cash dividend increase to 7 cents per share

NORWALK, Conn., Jan. 30, 2015 – Xerox (NYSE: XRX) announced today fourth-quarter 2014 adjusted earnings per share of 31 cents. Adjusted EPS excludes 5 cents related to the amortization of intangibles, resulting in GAAP EPS from continuing operations of 26 cents.

Click here to download the presentation.

As previously reported, these results reflect the pending sale of the company’s ITO business to Atos, and the related presentation of the ITO business as a discontinued operation.

In the fourth quarter, total revenue of $5.0 billion was down 3 percent or 1 percent in constant currency. Revenue from the company’s Services business, which represented 54 percent of total revenue, was $2.7 billion, up 1 percent or 3 percent in constant currency. Services margin was 9.8 percent.

Revenue from the company’s Document Technology business, which represented 43 percent of total revenue, was $2.2 billion, down 8 percent or 6 percent in constant currency. Document Technology margin was 14.4 percent.

“We delivered strong profit and cash in the fourth quarter,” said Ursula Burns, chairman and chief executive officer. “Services revenue growth improved and margin expanded both sequentially and year-over-year. This is an indication that our plan is delivering positive results. Total contract signings increased 20 percent, driven by renewals. We continue to lead in Document Technology, where we are executing well and where we expanded profit year-over-year.”

“We’re encouraged by these results, which demonstrate our ability to win in segments where Xerox is uniquely differentiated like healthcare, graphic communications and transportation,” Burns added.

Fourth-quarter operating margin of 10.4 percent was up one percentage point over the same quarter a year ago. Gross margin was 32.1 percent, and selling, administrative and general expenses were 18.7 percent of revenue.

Xerox generated $857 million in cash flow from operations during the fourth quarter and $2.06 billion for the year. Xerox ended 2014 with a cash balance of $1.4 billion. The company repurchased $341 million in stock in the quarter and $1.07 billion for the full-year.

The Xerox Board of Directors increased the company’s quarterly cash dividend by 12 percent to 7 cents per share, beginning with the dividend payable on April 30, 2015.

For first-quarter 2015, Xerox expects GAAP earnings per share of 16 to 18 cents and adjusted EPS of 20 to 22 cents.

Xerox 2015 adjusted earnings per share guidance is $1.00 to $1.06, reflecting a 5 cent per share impact of recent shifts in currency rates, specifically the weakening of the Euro. Xerox expects full-year GAAP earnings per share from continuing operations of $0.83 to $0.89.

As a result of the ITO divestiture and recent shifts in currency rates, Xerox 2015 guidance for cash flow from operations is $1.7 to $1.9 billion and free cash flow is $1.3 to $1.5 billion, reflecting a negative $200 million impact to cash flow from operations and a negative $100 million impact to free cash flow. Xerox expects to offset the impact from the ITO sale on free cash flow by 2016.

Full-year 2014 results include:

  • GAAP EPS from continuing operations of 90 cents, adjusted EPS of 
$1.07
  • Total revenue of $19.5 billion; $10.6 billion from Services, $8.4 billion 
from Document Technology
  • Operating margin of 9.6 percent
  • Operating cash flow of $2.06 billion
  • Net income from continuing operations of $1.1 billion, adjusted net 
income of $1.3 billion
  • Share repurchases of $1.07 billion

About Xerox

Xerox is a global business services, technology and document
management company helping organizations transform the way they
manage their business processes and information. Headquartered in Norwalk, Conn., we have more than 140,000 Xerox employees and do business in more than 180 countries. Together, we provide business process services, printing equipment, hardware and software technology for managing information — from data to documents. Learn more at www.xerox.com.