The split is going to be a bit more expensive than Xerox had apparently originally forecasted and Wall Street hammered them for it. Earnings are just out and it was another tough quarter for the imaging industry giant.
A 10% drop for the Technology Group’s revenue is an ongoing trend that Xerox will be working hard to reverse. I can’t remember the last time that group had good news on earnings, but this is why they’re splitting.
The next year is going to be very difficult for Xerox as they transition into two companies. You can’t make an omelette without breaking some eggs, right?
Here’s the release from Xerox…
Xerox Reports First-Quarter 2016 Earnings and Provides Update on Strategic Transformation and Separation
- Delivers GAAP EPS of 3 cents and adjusted EPS of 22 cents, within guidance
- Services delivers revenue of $2.5 billion, up 1 percent or 2 percent at constant currency
- Document Technology revenue of $1.6 billion, declines 10 percent or 9 percent at constant currency
- Operating margin of 7.2 percent, seasonally lower
- Affirms full year 2016 revenue and adjusted earnings guidance
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Separation on track to complete by the end of 2016
NORWALK, Conn., April 25, 2016 – Xerox (NYSE: XRX) announced today its first-quarter financial results and reaffirmed its full-year adjusted earnings guidance. The company reported it remains on track to complete its planned separation into two independent, publicly-traded companies by the end of the year and said it has made important progress on its three-year, $2.4 billion strategic transformation program.
Xerox delivered adjusted earnings per share of 22 cents in the first quarter of 2016. Adjusted EPS excludes after- tax costs of $197 million or 19 cents per share, related to the amortization of intangibles, restructuring and related costs, certain retirement related costs and separation costs, resulting in GAAP EPS from continuing operations of 3 cents.
Click to see Xerox Q1 2016 Earnings Presentation
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“We delivered adjusted EPS in line with our guidance, revenue growth in both the Document Outsourcing and BPO businesses of our Services segment, and a strong renewal rate in Services. Document Technology revenue declines remained in line with last quarter and continue to be pressured by weak developing markets economies. We have accelerated our cost reduction efforts across the company and expect to begin realizing the benefits in the second quarter,” said Ursula Burns, Xerox chairman and chief executive officer.
“I’m pleased with our progress on our strategic transformation and separation,” Burns added. “We put in place a robust program management structure, mapped our path to the separation, initiated leadership searches and began building the strategic, operational and financial foundation of each company.”
First Quarter Results
First-quarter total revenue of $4.3 billion was down 4 percent or 3 percent in constant currency. The Services business, which represented 58 percent of total revenue, delivered $2.5 billion in revenue, representing an increase of 1 percent or 2 percent in constant currency. Services margin was 7.7 percent, up 0.1 percentage point.
Revenue from the company’s Document Technology business was $1.6 billion, down 10 percent or 9 percent in constant currency. Document Technology margin was 10.2 percent, down 2.5 percentage points.
First-quarter operating margin of 7.2 percent was down 1.3 percentage points from the same quarter a year ago. Gross margin and selling, administrative and general expenses were 29.9 percent and 20.6 percent, respectively. Adjusted gross margin and selling, administrative and general expenses (excluding certain retirement related costs) were 30.3 percent and 20.1 percent, respectively.
Xerox used $25 million in cash flow from operations during the first quarter, in line with normal seasonality, and ended the quarter with a cash balance of $1.2 billion.
Click here to read the full press release
Xerox Office Technology Awards – Great Video if you sell Xerox…