On July 25, 2024, Xerox Holdings Corp (XRX, Financial) released its 8-K filing for the second quarter of 2024. Xerox, an original equipment manufacturing and software company, operates in the design, development, and sale of printing technology and related solutions. The company derives 60% of its revenue from the U.S. and 40% from international markets, focusing on large enterprise markets with multifunction printers (MFPs) and managed print services.
Performance and Challenges
Xerox Holdings Corp (XRX, Financial) reported a revenue of $1.58 billion for Q2 2024, a 10% decline from the previous year. The company's GAAP net income was $18 million, or $0.11 per share, which is an improvement of $79 million or $0.52 per share year-over-year. However, adjusted net income fell to $41 million, or $0.29 per share, down $31 million or $0.15 per share from the previous year. The adjusted operating margin also decreased by 70 basis points to 5.4%.
The company faced significant challenges, including lower equipment and post-sale revenue, which impacted gross profits. The strategic changes implemented in Q1 caused short-term disruptions but are expected to drive long-term improvements.
Financial Achievements
Despite the revenue decline, Xerox achieved an operating cash flow of $123 million, up $28 million year-over-year, and a free cash flow of $115 million, up $27 million year-over-year. These achievements are crucial for the company as they indicate improved cash management and operational efficiency.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | Change | % Change |
|---|---|---|---|---|
| Revenue | $1,578M | $1,754M | $(176)M | (10.0)% |
| Gross Profit | $520M | $597M | $(77)M | (12.9)% |
| Gross Margin | 33.0% | 34.0% | (100) bps | - |
| GAAP Net Income | $18M | $(61)M | $79M | NM |
| Adjusted Net Income | $41M | $72M | $(31)M | (43.1)% |
| Adjusted Operating Margin | 5.4% | 6.1% | (70) bps | - |
Balance Sheet and Cash Flow
As of June 30, 2024, Xerox reported total assets of $9.49 billion, down from $10.01 billion at the end of 2023. The company's cash and cash equivalents stood at $485 million, a decrease from $519 million. Total liabilities were $6.90 billion, down from $7.24 billion, indicating a reduction in debt and other obligations.
Guidance and Future Outlook
Xerox has revised its full-year revenue guidance to a decline of 5% to 6% in constant currency, down from the previous estimate of 3% to 5%. The adjusted operating income margin guidance has also been lowered to at least 6.5%, from the previous estimate of at least 7.5%. Free cash flow guidance has been adjusted to at least $550 million, down from $600 million.
"The comprehensive and strategic operating model changes implemented in Q1 caused a short period of disruption but are delivering the intended improvements in financial results. Adjusted operating income margin, free cash flow and revenue trajectory improved sequentially in Q2. Momentum in orders, enhanced sales operations and new product initiatives are expected to drive a return to revenue growth in the second half of the year,” said Steve Bandrowczak, chief executive officer at Xerox.
In summary, while Xerox Holdings Corp (XRX, Financial) faced challenges in Q2 2024, the company is making strategic changes aimed at long-term improvement. The revised guidance reflects the company's cautious optimism about future growth and operational efficiency.
Explore the complete 8-K earnings release (here) from Xerox Holdings Corp for further details.
