President & CEO Sam Errigo accentuates the positive during a webinar with office technology industry press and analysts.
On Wednesday, May 10, Konica Minolta Business Solutions U.S.A. held a webinar for press and analysts following the May 9 announcement on the Tokyo Stock Exchange about the revision of its parent company, Konica Minolta Inc.’s forecast for fiscal year 2022. This included a significant downward revision of dividend forecasts and an impairment loss. The company announced that it was taking a 116.6-billion-yen impairment loss and revising its projections for the coming year despite record-high revenues. (An impairment is a permanent reduction in the value of a company asset.) The consolidated net loss for FY ’22 is $105 billion yen, the company’s fourth consecutive year of losses reported by the company.
According to Sam Errigo, president & CEO, Konica Minolta Business Solutions U.S.A., the impairment charge will allow Konica Minolta Inc. to clean up its balance sheet and focus on strategic positioning for the new businesses and work on the selection and concentration of businesses that would generate long-term revenue growth and long-term profit.
“When businesses are not performing, one of the decisions required is how do you allocate your dollars for investment and how do you generate cash for the organization at a quicker pace?” explained Errigo. “All efforts are in place, and we are in a good place coming out of our FY ’22 fiscal year, headed into FY ’23. The management team in Japan has learned a lot on the acquisition side and is taking corrective actions.”
The business segments, all outside of the U.S., responsible for the impairments included MOBOTIX Germany, the Imaging-IoT solutions unit, and the QOL solutions business (patient monitoring and safety), all of which experienced significant losses ranging from $8.8 million to $27.4 million. Despite the impairment losses, Konica Minolta Inc. reported a quarterly surplus in Q4 as the result of fewer supply shortages of semiconductors and other materials.
Konica Minolta had no impairments in the U.S. “The acquisitions that we’ve made here are all performing and are profitable for the company,” said Errigo.
Konica Minolta revised its revenue forecast upward to 1.13 billion yen or 8.4 billion U.S. dollars for the year ending March 31, 2023, from a forecast of $8.3 billion. In addition, Konica Minolta’s operating profit generated $155 million, which surpassed the original forecast of $111 million at the start of the fiscal year. “We are making steady progress towards our business recovery plan and actually performed better than expected,” observed Errigo.
Accentuating the Positive
After a deep dive into the various segments of the business outside of the U.S. that were underperforming and the reasons for their disappointing performance, Errigo switched gears and shared recent positive developments, including market share numbers from IDC. As of the first quarter of 2023, IDC reported that Konica Minolta had a market share of 15.7% for the office and production print markets, up from 12.8 in the second quarter of 2022 and up from 13.5% in FY 22 quarters three and four. That places Konica Minolta fourth behind Ricoh (20.1%), Canon (17.9%), and Xerox (15.9%) in market share for the office and production print segments.
Total company revenue in the U.S. and Canada was up 17.6% year over year, with U.S. independent dealer channel revenues up 21.7% (Canada was also up 21.7%). Konica Minolta’s direct channel was up 16.3%. The company’s DX business, including IMM, Managed IT, and MOBOTIX was up 7.6%. Production print was up 9.3%. “Those are solid results despite all the turmoil we faced,” said Errigo.
A comparative chart depicting year-over-year growth for Konica Minolta versus the total market revealed that the office segment grew 105% and production print by 53%. “In every category, we overperformed,” said Errigo. “We’re looking to keep that same growth going into our FY ’23.”
For the MOBOTIX business in the U.S., Konica Minolta grew its top-line revenue by 40%. “Despite the financial performance of that business, we did really, really well,” said Errigo. “I’m bullish on the number this year. And you’re going to see some activity coming from Konica Minolta here shortly about investments in this business and what we’re doing to bolster this top line at a faster rate.”
Monthly recurring revenue (MMR) for All Covered grew at 6.2%, with total service revenue up 1.9%. Total revenue, including procurement, was 1.8%. “Procurement did slow a little bit last year,” acknowledged Errigo. “After the big boom during the COVID period, that has slowed, especially with changes in the economic conditions and interest rates. People are still not back to work a hundred percent. But the bright spot is that our business contribution, BCP, was 33.7% growth. These numbers obviously show that we’re very, very healthy here in the U.S.”
The company’s Rev’d Up MSP partner program is also performing well, with 107 dealers engaged in the program, up 27% from a year ago, contributing revenues of 47%. Also showing positive improvement were Konica Minolta’s managed IT business (+14%), MMR services (+22%), unified communications (+25%), and tech assurance (+81%).
A big reason for the upswing was improvements in the supply chain, which increased access to inventory in the third and fourth quarters of Konica Minolta’s fiscal year. “We’re back, we have inventory, and we’re going to be aggressive in the market, and we’re going after share,” emphasized Errigo. “We have an unbelievable team of executives and people below them that support our customers, support our dealers, and get the job done day in and day out. Our teams are intact, we’re stronger than ever. And more importantly, we’ve got something to prove. We’re fired up. We’re coming after the market hard, and we’re going to get our good name back in order.”
Investing in the Core Business
Despite rumors to the contrary, Errigo emphasized that Konica Minolta is investing in the core business. Expect to see investments in technology and services beginning in June with cloud-enhanced products and services, followed by new A4 and A3 introductions between December 2023 and May 2024. The professional print business, which encompasses commercial and industrial print products, is also a high priority for the company.
“We’re adding capabilities to our product line, not only in our office space, but we are making big investments in production print and IP products, one of our fastest-growing segments,” said Errigo. “We are the top-performing channel for distribution for Konica Minolta in the IP sector of the business worldwide. I am absolutely set on that where not only will we be number one in Konica Minolta for revenue growth in IP, but we’re also going to do the same in our production print and the office segment of the business.”
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