Xerox Delivers EPS Growth and Margin Expansion, Raises 2019 EPS Guidance
First-Quarter 2019 Financial Highlights:
- GAAP earnings per share (EPS) of $0.55, up $0.47 year-over-year, and adjusted EPS of $0.91, up $0.23 year-over-year
- $226 million of operating cash flow, up $10 million year-over-year, and $211 million of free cash flow, up $13 million year-over-year
- Adjusted operating margin of 11.3%, up 140 basis points year-over-year
- $2.2 billion of revenue in the quarter, a decrease of 9.4% year-over-year or 7% percent in constant currency
- Raising 2019 guidance for GAAP EPS to $2.90 to $3.05 and adjusted EPS to $3.80 to $3.95. Prior guidance was $2.60 to $2.70 and $3.70 to $3.80, respectively.
NORWALK, Conn.–(BUSINESS WIRE)–lt;a href="https://twitter.com/search?q=%24XRX&src=ctag" target="_blank"gt;$XRXlt;/agt; lt;a href="https://twitter.com/hashtag/Xerox?src=hash" target="_blank"gt;#Xeroxlt;/agt;–Today Xerox (NYSE: XRX) announced its first-quarter 2019 financial results.
“Our transformation initiatives are yielding results, which give us confidence to raise our full-year earnings guidance despite revenue declines. We are investing in our core business as well as new technologies that create value for our stakeholders and position us for long-term growth,” said Xerox Vice Chairman and CEO John Visentin.
Key Financial Results:
| (in millions, except per share data) | Q1 2019 | Q1 2018 |
B/(W) |
% Change |
|||||||||||
| Revenue | $ | 2,206 | $ | 2,435 | $ | (229 | ) |
(9.4) % AC |
|||||||
| Gross Margin | 40.3 | % | 39.8 | % | 50 bps | ||||||||||
| RD&E % | 4.2 | % | 4.1 | % | (10) bps | ||||||||||
| SAG % | 24.8 | % | 25.8 | % | 100 bps | ||||||||||
| Pre-Tax Income | $ | 83 | $ | 134 | $ | (51 | ) | (38 | )% | ||||||
| Pre-Tax Income Margin | 3.8 | % | 5.5 | % | (170) bps | ||||||||||
| Operating Income – Adjusted1 | $ | 249 | $ | 242 | $ | 7 | 3 | % | |||||||
| Operating Margin – Adjusted1 | 11.3 | % | 9.9 | % | 140 bps | ||||||||||
| GAAP EPS | $ | 0.55 | $ | 0.08 | $ | 0.47 | nm | ||||||||
| EPS – Adjusted1 | $ | 0.91 | $ | 0.68 | $ | 0.23 | 34 | % | |||||||
(1) Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures.
Key Business Highlights:
- On track to drive gross savings in 2019 of at least $640 million under Project Own It, Xerox’s enterprise-wide transformation initiative to create a simpler, more effective organization
- Introduced a new services portfolio to deepen the integration of Xerox’s software, services and technology to deliver differentiated, higher margin solutions
- Enabled mobile, on-the-go print services with the launch of Xerox Instant Print Kiosk, positioning Xerox for growth in the self-service print and document management market
- Announced the new Xerox Rialto® 900 MP Inkjet Press, a roll-to-cut sheet platform designed to deliver maximum productivity per square meter
- Introduced software enhancements to the Xerox AltaLink® Multifunction Printers that enable clients to detect and neutralize cyber threats instantaneously
About Xerox
In the era of intelligent work, we’re not just thinking about the future, we’re making it. Xerox Corporation (NYSE: XRX) is a technology leader focused on the intersection of digital and physical. We use automation and next-generation personalization to redefine productivity, drive growth and make the world more secure. Every day, our innovative technologies and intelligent work solutions-Powered by Xerox®-help people communicate and work better. Discover more at www.xerox.com and follow us on Twitter at @Xerox.
Non-GAAP Measures
This release refers to the following non-GAAP financial measures for the first quarter 2019 and full-year 2019 guidance:
- Adjusted EPS, which excludes restructuring and related costs (including our share of Fuji Xerox restructuring), the amortization of intangibles, non-service retirement-related costs and other discrete adjustments.
- Adjusted operating margin and income, which excludes the EPS adjustments noted above as well as the remainder of other expenses, net.
- Constant currency (CC) revenue growth, which excludes the effects of currency translation.
- Free cash flow, which is cash flow from operations less capital expenditures.
Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measures.
Forward-Looking Statements
This release, and other written or oral statements made from time to time by management contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “should”, “targeting”, “projecting”, “driving” and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Such factors include but are not limited to: our ability to address our business challenges in order to reverse revenue declines, reduce costs and increase productivity so that we can invest in and grow our business; our ability to attract and retain key personnel; changes in economic and political conditions, trade protection measures, licensing requirements and tax laws in the United States and in the foreign countries in which we do business; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; changes in foreign currency exchange rates; our ability to successfully develop new products, technologies and service offerings and to protect our intellectual property rights; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable law; the risk that partners, subcontractors and software vendors will not perform in a timely, quality manner; actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring actions; the risk that confidential and/or individually identifiable information of ours, our customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems due to cyber attacks or other intentional acts; reliance on third parties, including subcontractors, for manufacturing of products and provision of services; the exit of the United Kingdom from the European Union; our ability to manage changes in the printing environment and expand equipment placements; interest rates, cost of borrowing and access to credit markets; funding requirements associated with our employee pension and retiree health benefit plans; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; any potential termination or restructuring of our relationship with Fujifilm Holdings Corporation; the proposed holding company reorganization; the occurrence and timing of any closing of the proposed holding company reorganization; the shared services arrangements entered into by the Company as part of Project Own It; any potential strategic transaction involving our customer financing business and/or related assets; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of our 2018 Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K filed with the SEC. Our forward-looking statements are also subject to the factors and other information set forth in the “Summary of the Holding Company Reorganization Proposal” section, the “Risk Factors” section and the “Proposal 1 – Approval of the Holding Company Reorganization” section of our definitive Joint Proxy Statement/Prospectus dated April 22, 2019 filed on Schedule 14A with the SEC. These forward-looking statements speak only as of the date of this release or as of the date to which they refer, and Xerox assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.
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Xerox®, AltaLink®, Rialto® and Powered by Xerox® are trademarks of Xerox in the United States and/or other countries.
| XEROX CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||
|
Three Months Ended |
||||||||
| (in millions, except per-share data) | 2019 | 2018 | ||||||
| Revenues | ||||||||
| Sales(1) | $ | 750 | $ | 845 | ||||
| Services, maintenance and rentals(1) | 1,393 | 1,519 | ||||||
| Financing | 63 | 71 | ||||||
| Total Revenues | 2,206 | 2,435 | ||||||
| Costs and Expenses | ||||||||
| Cost of sales(1) | 464 | 532 | ||||||
| Cost of services, maintenance and rentals(1) | 821 | 899 | ||||||
| Cost of financing | 32 | 34 | ||||||
| Research, development and engineering expenses | 92 | 100 | ||||||
| Selling, administrative and general expenses | 548 | 628 | ||||||
| Restructuring and related costs | 112 | 28 | ||||||
| Amortization of intangible assets | 15 | 12 | ||||||
| Transaction and related costs, net | — | 38 | ||||||
| Other expenses, net | 39 | 30 | ||||||
| Total Costs and Expenses | 2,123 | 2,301 | ||||||
| Income before Income Taxes & Equity Income(2) | 83 | 134 | ||||||
| Income tax (benefit) expense | (8 | ) | 40 | |||||
| Equity in net income (loss) of unconsolidated affiliates | 45 | (68 | ) | |||||
| Net Income | 136 | 26 | ||||||
| Less: Net income attributable to noncontrolling interests | 3 | 3 | ||||||
| Net Income Attributable to Xerox | $ | 133 | $ | 23 | ||||
| Basic Earnings per Share | $ | 0.57 | $ | 0.08 | ||||
| Diluted Earnings per Share | $ | 0.55 | $ | 0.08 | ||||
| ____________________________ | ||
| (1) | Certain prior year amounts have been conformed to the current year presentation. See Appendix III for this change in presentation. | |
| (2) | Referred to as “Pre-Tax Income” throughout the remainder of this document. | |
| XEROX CORPORATION | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | |||||||
|
Three Months Ended |
|||||||
| (in millions) | 2019 | 2018 | |||||
| Net income | $ | 136 | $ | 26 | |||
| Less: Net income attributable to noncontrolling interests | 3 | 3 | |||||
| Net Income Attributable to Xerox | 133 | 23 | |||||
| Other Comprehensive Income, Net | |||||||
| Translation adjustments, net | 37 | 176 | |||||
| Unrealized gains, net | 2 | 17 | |||||
| Changes in defined benefit plans, net | 1 | 18 | |||||
| Other Comprehensive Income, Net Attributable to Xerox | 40 | 211 | |||||
| Comprehensive Income, Net | 176 | 237 | |||||
| Less: Comprehensive income, net attributable to noncontrolling interests | 3 | 3 | |||||
| Comprehensive Income, Net Attributable to Xerox | $ | 173 | $ | 234 | |||
| XEROX CORPORATION | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
| (in millions, except share data in thousands) | March 31, 2019 |
December 31, 2018 |
||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 723 | $ | 1,084 | ||||
| Accounts receivable, net | 1,234 | 1,276 | ||||||
| Billed portion of finance receivables, net | 102 | 105 | ||||||
| Finance receivables, net | 1,191 | 1,218 | ||||||
| Inventories | 859 | 818 | ||||||
| Other current assets | 204 | 194 | ||||||
| Total current assets | 4,313 | 4,695 | ||||||
| Finance receivables due after one year, net | 2,080 | 2,149 | ||||||
| Equipment on operating leases, net | 414 | 442 | ||||||
| Land, buildings and equipment, net | 469 | 499 | ||||||
| Investments in affiliates, at equity | 1,452 | 1,403 | ||||||
| Intangible assets, net | 208 | 220 | ||||||
| Goodwill | 3,889 | 3,867 | ||||||
| Deferred tax assets | 753 | 740 | ||||||
| Other long-term assets | 1,221 | 859 | ||||||
| Total Assets | $ | 14,799 | $ | 14,874 | ||||
| Liabilities and Equity | ||||||||
| Short-term debt and current portion of long-term debt | $ | 555 | $ | 961 | ||||
| Accounts payable | 1,054 | 1,091 | ||||||
| Accrued compensation and benefits costs | 298 | 349 | ||||||
| Accrued expenses and other current liabilities | 1,022 | 850 | ||||||
| Total current liabilities | 2,929 | 3,251 | ||||||
| Long-term debt | 4,268 | 4,269 | ||||||
| Pension and other benefit liabilities | 1,481 | 1,482 | ||||||
| Post-retirement medical benefits | 348 | 350 | ||||||
| Other long-term liabilities | 496 | 269 | ||||||
| Total Liabilities | 9,522 | 9,621 | ||||||
| Convertible Preferred Stock | 214 | 214 | ||||||
| Common stock | 230 | 232 | ||||||
| Additional paid-in capital | 3,282 | 3,321 | ||||||
| Treasury stock, at cost | (103 | ) | (55 | ) | ||||
| Retained earnings | 5,270 | 5,072 | ||||||
| Accumulated other comprehensive loss | (3,652 | ) | (3,565 | ) | ||||
| Xerox shareholders’ equity | 5,027 | 5,005 | ||||||
| Noncontrolling interests | 36 | 34 | ||||||
| Total Equity | 5,063 | 5,039 | ||||||
| Total Liabilities and Equity | $ | 14,799 | $ | 14,874 | ||||
| Shares of common stock issued | 229,732 | 231,690 | ||||||
| Treasury stock | (3,321 | ) | (2,067 | ) | ||||
| Shares of Common Stock Outstanding | 226,411 | 229,623 | ||||||
| XEROX CORPORATION | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
|
Three Months Ended |
||||||||
| (in millions) | 2019 | 2018 | ||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income | $ | 136 | $ | 26 | ||||
| Adjustments required to reconcile Net Income to Cash flows from operating activities | ||||||||
| Depreciation and amortization | 118 | 138 | ||||||
| Provisions | 22 | 17 | ||||||
| Net gain on sales of businesses and assets | (1 | ) | (16 | ) | ||||
| Undistributed equity in net income of unconsolidated affiliates | (42 | ) | 68 | |||||
| Stock-based compensation | 15 | 16 | ||||||
| Restructuring and asset impairment charges | 54 | 28 | ||||||
| Payments for restructurings | (33 | ) | (54 | ) | ||||
| Defined benefit pension cost | 36 | 27 | ||||||
| Contributions to defined benefit pension plans | (34 | ) | (38 | ) | ||||
| Decrease in accounts receivable and billed portion of finance receivables | 39 | 46 | ||||||
| Increase in inventories | (50 | ) | (87 | ) | ||||
| Increase in equipment on operating leases | (30 | ) | (56 | ) | ||||
| Decrease in finance receivables | 81 | 85 | ||||||
| Increase in other current and long-term assets | (2 | ) | (17 | ) | ||||
| (Decrease) increase in accounts payable | (34 | ) | 44 | |||||
| Decrease in accrued compensation | (73 | ) | (32 | ) | ||||
| Increase in other current and long-term liabilities | 46 | 1 | ||||||
| Net change in income tax assets and liabilities | (21 | ) | 13 | |||||
| Net change in derivative assets and liabilities | 8 | (6 | ) | |||||
| Other operating, net | (9 | ) | 13 | |||||
| Net cash provided by operating activities | 226 | 216 | ||||||
| Cash Flows from Investing Activities | ||||||||
| Cost of additions to land, buildings, equipment and software | (15 | ) | (18 | ) | ||||
| Proceeds from sales of businesses and assets | 1 | 16 | ||||||
| Acquisitions, net of cash acquired | (4 | ) | — | |||||
| Net cash used in investing activities | (18 | ) | (2 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Net payments on debt | (402 | ) | (37 | ) | ||||
| Dividends | (62 | ) | (67 | ) | ||||
| Payments to acquire treasury stock, including fees | (103 | ) | — | |||||
| Other financing, net | (2 | ) | (13 | ) | ||||
| Net cash used in financing activities | (569 | ) | (117 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1 | ) | 9 | |||||
| (Decrease) increase in cash, cash equivalents and restricted cash | (362 | ) | 106 | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 1,148 | 1,368 | ||||||
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 786 | $ | 1,474 | ||||
|
Revenues |
||||||||||||||||||||
|
Three Months Ended |
% of Total Revenue | |||||||||||||||||||
| (in millions) | 2019 | 2018 |
% Change |
CC% |
2019 | 2018 | ||||||||||||||
| Equipment sales | $ | 448 | $ | 499 | (10.2 | )% | (7.6 | )% | 20 | % | 20 | % | ||||||||
| Post sale revenue | 1,758 | 1,936 | (9.2 | )% | (6.8 | )% | 80 | % | 80 | % | ||||||||||
| Total Revenue | $ | 2,206 | $ | 2,435 | (9.4 | )% | (7.0 | )% | 100 | % | 100 | % | ||||||||
|
Reconciliation to Condensed Consolidated |
||||||||||||||||||||
| Sales(1) | $ | 750 | $ | 845 | (11.2 | )% | (8.9 | )% | ||||||||||||
| Less: Supplies, paper and other sales(1) | (302 | ) | (346 | ) | (12.7 | )% | (10.7 | )% | ||||||||||||
| Equipment Sales | $ | 448 | $ | 499 | (10.2 | )% | (7.6 | )% | ||||||||||||
| Services, maintenance and rentals(1) | $ | 1,393 | $ | 1,519 | (8.3 | )% | (5.8 | )% | ||||||||||||
| Add: Supplies, paper and other sales(1) | 302 | 346 | (12.7 | )% | (10.7 | )% | ||||||||||||||
| Add: Financing | 63 | 71 | (11.3 | )% | (9.0 | )% | ||||||||||||||
| Post Sale Revenue | $ | 1,758 | $ | 1,936 | (9.2 | )% | (6.8 | )% | ||||||||||||
| Americas | $ | 1,410 | $ | 1,535 | (8.1 | )% | (7.5 | )% | 64 | % | 63 | % | ||||||||
| EMEA | 712 | 795 | (10.4 | )% | (4.3 | )% | 32 | % | 33 | % | ||||||||||
| Other | 84 | 105 | (20.0 | )% | (20.0 | )% | 4 | % | 4 | % | ||||||||||
| Total Revenue(2) | $ | 2,206 | $ | 2,435 | (9.4 | )% | (7.0 | )% | 100 | % | 100 | % | ||||||||
| Memo: | ||||||||||||||||||||
| Xerox Services(3) | $ | 853 | $ | 908 | (6.1 | )% | (2.9 | )% | 39 | % | 37 | % | ||||||||
| ____________________________ | ||
| CC – Constant Currency (see “Non-GAAP Financial Measures” section). | ||
| (1) | Certain prior year amounts have been conformed to the current year presentation. See Appendix III for this change in presentation. | |
| (2) | Refer to Appendix II for our Geographic Sales Channels and Products and Offerings Definitions. | |
| (3) | Excluding equipment revenue, Xerox Services was $750 million and $799 million in the first quarter 2019 and 2018, respectively, representing a decrease of 6.1% including a 3.1-percentage point unfavorable impact from currency. | |
First quarter 2019 total revenue decreased 9.4% as compared to first quarter 2018, including a 2.4-percentage point unfavorable impact from currency, and an approximate 1.0-percentage point unfavorable impact from lower OEM sales. First quarter 2019 total revenue reflected the following:
- Post sale revenue primarily reflects contracted services, equipment maintenance, supplies and financing. These revenues are associated not only with the population of devices in the field, which is affected by installs and removals, but also by the page volumes generated from the usage of such devices, and the revenue per printed page. Post sale revenue decreased 9.2% as compared to first quarter 2018, including a 2.4-percentage point unfavorable impact from currency, and reflected the following:
- Services, maintenance and rentals revenue includes rental and maintenance revenue (including bundled supplies) as well as the post sale component of the document services revenue from our Xerox Services offerings. These revenues decreased 8.3% as compared to the first quarter 2018, including a 2.5-percentage point unfavorable impact from currency. The decline at constant currency1 reflected the continuing trends of lower page volumes (including a higher mix of lower usage products), an ongoing competitive price environment, and a lower population of devices, which are partially associated with continued lower Enterprise signings and lower installs in prior periods. These declines were larger in the U.S. where we recently implemented organizational changes as part of our Project Own It transformation actions.
- Supplies, paper and other sales includes unbundled supplies and other sales. These revenues decreased 12.7% as compared to first quarter 2018, including a 2.0-percentage point unfavorable impact from currency and a 2.9-percentage point unfavorable impact from lower OEM sales. The decline at constant currency1 also reflected the impact of lower supplies revenues primarily from our developing market regions, and lower transactional IT network integration solutions sales from our XBS sales unit, as well as lower paper sales from Latin America.
- Financing revenue is generated from financed equipment sale transactions. The 11.3% decline in these revenues reflected a continued decline in the finance receivables balance due to lower equipment sales in prior periods and included a 2.3-percentage point unfavorable impact from currency.
|
Three Months Ended |
% of Equipment Sales |
|||||||||||||||||||
| (in millions) | 2019 | 2018 |
% Change |
CC% |
2019 | 2018 | ||||||||||||||
| Entry | $ | 53 | $ | 53 | — | % | 3.2 | % | 12 | % | 11 | % | ||||||||
| Mid-range | 302 | 334 | (9.6 | )% | (7.2 | )% | 67 | % | 67 | % | ||||||||||
| High-end | 89 | 92 | (3.3 | )% | (0.3 | )% | 20 | % | 18 | % | ||||||||||
| Other | 4 | 20 | (80.0 | )% | (80.0 | )% | 1 | % | 4 | % | ||||||||||
| Equipment Sales | $ | 448 | $ | 499 | (10.2 | )% | (7.6 | )% | 100 | % | 100 | % | ||||||||
|
____________________________ CC – Constant Currency (see “Non-GAAP Financial Measures” section). |
||||||||||||||||||||
- Equipment sales revenue decreased 10.2% as compared to first quarter 2018, including a 2.6-percentage point unfavorable impact from currency. These revenues were impacted by price declines of approximately 5% and included a 2.8-percentage point unfavorable impact from the absence of OEM equipment sales in the first quarter 2019. The decline at constant currency1 was mainly impacted by lower revenues from our mid-range products, and reflected the following:
- Entry – The increase reflected higher installs of our ConnectKey devices in our Americas sales organization, and it also partially benefited from lower U.S. indirect channel sales in the prior year.
- Mid-range – The decrease reflected lower sales from our Americas sales organization, including our XBS sales unit, which were further affected by the transitional impact associated with recently implemented organizational changes as part of our Project Own It transformation actions (including the transitioning of accounts to implement coverage changes, consolidation of real estate locations and the reduction of management layers), partially offset by higher sales from our European sales operations.
- High-end – The nearly flat revenue was driven by lower sales from our Americas sales organization, mostly offset by growth from our European region. The decline in installs was partially offset by a favorable revenue mix driven by strong demand for the higher-configuration models of our Iridesse production press.
While the rate of our first quarter 2019 revenue decline was greater than the rate we expect for the year as a whole (largely due to the impact of organizational changes implemented in the first quarter 2019), we expect such decline to improve each quarter sequentially on a year-over-year basis, resulting in an overall revenue decline of about 5% for the year as a whole, excluding an approximate 1.0-percentage point unfavorable impact from currency.
Total Installs
Installs reflect new placement of devices only. Revenue associated with equipment installations may be reflected up-front in Equipment sales or over time either through rental income or as part of our Xerox Services revenues (which are both reported within our post sale revenues), depending on the terms and conditions of our agreements with customers. Installs include activity from Xerox Services and Xerox-branded products shipped to our XBS sales unit. Detail by product group (see Appendix II) is shown below:
Entry2
- 10% increase in color multifunction devices reflecting higher installs of ConnectKey devices in the higher-value Workteam/Workgroup through our indirect channels in the U.S., partially offset by lower activity from our EMEA organization.
- 2% decrease in black-and-white multifunction devices driven by lower activity from our EMEA organization, including low-end devices in developing market regions, partially offset by higher installs of ConnectKey devices through our indirect channels in the U.S.
Mid-Range3
- 7% decrease in mid-range color installs reflecting lower installs of ConnectKey devices through our indirect channels in the U.S. and from our XBS sales unit. Higher installs from our EMEA organization provided a partial offset.
- 19% decrease in mid-range black-and-white reflecting lower installs of ConnectKey devices through our indirect channels in the U.S. and from our XBS sales unit. The decline also reflected market trends, partially offset by higher installs from our EMEA organization.
High-End3
- 14% decrease in high-end color installs reflecting lower installs of our iGen and lower-end production systems, including Versant systems, partially offset by strong demand for the higher-configuration models of our Iridesse production press and higher installs of our inkjet production systems.
- 12% decrease in high-end black-and-white systems reflecting market trends.
| ____________________________ | ||
| (1) | See the “Non-GAAP Financial Measures” section for an explanation of the non-GAAP financial measure. | |
| (2) | When combined with OEM sales, Entry color multifunction devices decreased 32%, while Entry black-and-white multifunction devices decreased 22%. | |
| (3) | Mid-range and High-end color installations exclude Fuji Xerox digital front-end sales; including Fuji Xerox digital front-end sales, Mid-range color devices decreased 7%, and High-end color systems decreased 14%. | |
Costs, Expenses and Other Income
Summary of Key Financial Ratios
|
The following is a summary of key financial ratios used to assess our performance: |
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| Three Months Ended March 31, | ||||||||||||
| (in millions) | 2019 | 2018 | B/(W) | |||||||||
| Gross Profit | $ | 889 | $ | 970 | $ | (81 | ) | |||||
| RD&E | 92 | 100 | 8 | |||||||||
| SAG | 548 | 628 | 80 | |||||||||
| Equipment Gross Margin | 35.7 | % | 32.6 | % | 3.1 pts. | |||||||
| Post sale Gross Margin | 41.5 | % | 41.7 | % | (0.2) pts. | |||||||
| Total Gross Margin | 40.3 | % | 39.8 | % | 0.5 pts. | |||||||
| RD&E as a % of Revenue | 4.2 | % | 4.1 | % | (0.1) pts. | |||||||
| SAG as a % of Revenue | 24.8 | % | 25.8 | % | 1.0 pts. | |||||||
| Pre-tax Income | $ | 83 | $ | 134 | $ | (51 | ) | |||||
| Pre-tax Income Margin | 3.8 | % | 5.5 | % | (1.7) pts. | |||||||
| Adjusted(1) Operating Profit | $ | 249 | $ | 242 | $ | 7 | ||||||
| Adjusted(1) Operating Margin | 11.3 | % | 9.9 | % | 1.4 pts. | |||||||
Contacts
Media:
Caroline Gransee-Linsey, Xerox, +1-203-849-2359, [email protected]
Investors:
Jennifer Horsley, Xerox, +1-203-849-2656, [email protected]
Mafe Cala, Xerox, +1-203-849-2671, [email protected]
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