Xerox has announced its third-quarter 2017 financial results.
“We posted another solid quarter of earnings, margins, and cash flow in line with our expectations, supported by our on-going Strategic Transformation initiatives,” said Jeff Jacobson, Xerox chief executive officer. “Revenue decline improved sequentially which we expect to carry through the rest of the year.” Jacobson added, “All 29 of our new ConnectKey-enabled office products are now available and shipping to large and small customers around the globe; momentum is building, as expected, entering the last quarter of the year.”
The company delivered third-quarter 2017 GAAP earnings per share (EPS) from continuing operations of 67 cents, up 1.5% year-over-year. Adjusted EPS was 89 cents, up 6% year-over-year, and excludes 22 cents per share of after-tax costs related to the amortization of intangibles, restructuring and related costs, and certain retirement-related costs.
Revenues were $2.5 billion in the quarter, down 5% or 5.9% in constant currency. Post-sale revenue was 79% of total revenue.
Third-quarter adjusted operating margin was 12.2%, down 0.4 points year-over-year.
Operating cash flow from continuing operations was a $383 million use of cash and included $671 million in pension contributions, which reflect the incremental $500 million contribution to domestic pension plans that Xerox announced in September. Excluding total pension contributions in both years, operating cash flow increased $44 million year-over-year. Cash balance at the end of the quarter was $1.8 billion. This includes $475 million, paid in October, for the redemption of a portion of the 6.35% Senior Notes due May 2018. The company returned $68 million in dividends to shareholders.
Full-Year 2017 Guidance
The company updated its full-year 2017 guidance of GAAP EPS from continuing operations to $1.97 to $2.13 (from previous $1.84 to $2.08) and adjusted EPS to $3.28 to $3.44 (from previous $3.20 to $3.44). Xerox revised its operating cash flow from continuing operations guidance to reflect incremental pension contributions, the elimination of certain accounts receivable (A/R) sales programs and higher operational cash flow. The company expects to end the year with more than $1.0 billion of cash on its balance sheet.
Although Xerox’s revenues are down, the company is putting a positive spin on its third quarter performance with Xerox CEO Jeff Jacobson noting that "Revenue decline improved sequentially which we expect to carry through the rest of the year."
The best we can do at this point is to accept Jacobson's interpretation of the company's financial performance, which when looking at Xerox's second quarter total revenues were an improvement over the previous year. For the record, total revenue for the second quarter of 2017 was $2.57 billion, down 8.1% or 6.4% in constant currency year-over-year, which Jacobson at the time attributed to lower equipment sales as the company transitioned to the new ConnectKey product line.
- GAAP EPS from continuing operations of 67 cents up one cent year-over-year; adjusted EPS of 89 cents up five cents year-over-year
- Total revenue of $2.5 billion, down 5% or 5.9% in constant currency year-over-year
- Adjusted operating margin of 12.2%, down 0.4 points year-over-year
- Cash flow reflects continued good results excluding higher year-over-year pension contributions
- Affirms full-year revenue and adjusted operating margin guidance; raises lower-end of EPS guidance
- Updates operating cash flow guidance to reflect the net impact of higher operational cash flow, incremental pension contributions and the elimination of certain accounts receivable sales programs
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