NORWALK, Conn., Jan. 31, 2018 – Xerox (NYSE: XRX) today announced its fourth-quarter 2017 financial results that reflect meaningful improvements in revenue, operating margin and earnings.
“One year ago, I told the market that to position Xerox for long-term success and deliver shareholder value, we would focus on the growth areas in our industry to improve our revenue trajectory while continuing with our Strategic Transformation initiatives to increase our profitability and margins,” said Xerox CEO Jeff Jacobson. “With positive results across all metrics, our fourth-quarter performance clearly demonstrates the progress we have made and enabled us to deliver on our commitments for the full-year.”
Jacobson added, “Building on the positive momentum from 2017, today we announced an agreement to combine with Fuji Xerox to create a world leader in innovative print technologies and intelligent work solutions. The new company expands the long-standing relationship between Xerox and Fujifilm, and will be better positioned to meet customer expectations and deliver incremental value to our shareholders.”
Fourth Quarter 2017 Results
In the fourth quarter, Xerox recorded an estimated non-cash charge of $400 million related to the enactment of the U.S. Tax Cuts and Jobs Act (U.S. tax reform). Including this charge, the company had a fourth-quarter 2017 GAAP loss from continuing operations of 78 cents per share. Adjusted earnings per share (EPS) was $1.04, up 4 cents year-over-year and excludes $1.82 per share of after-tax costs related to the amortization of intangibles, restructuring and related costs, certain retirement-related costs, and other discrete adjustments including a $1.55 per share charge associated with the enactment of U.S. tax reform.
Revenues were $2.7 billion in the quarter, up 0.5 percent or down 2.0 percent in constant currency. The successful launch of new products earlier in the year helped drive equipment sale revenue growth of 4.3 percent or 1.5 percent in constant currency. Post sale revenue was 75 percent of total revenue.
Fourth-quarter adjusted operating margin was 14.4 percent, up 0.2 points year-over-year.
Including the previously announced $350 million impact from the termination of certain accounts receivable sales programs, operating cash flow from continuing operations was a $28 million use of cash. On an adjusted basis, operating cash flow from continuing operations was $322 million. Cash balance at the end of 2017 was $1.3 billion. The company returned $68 million in dividends to shareholders in the quarter.
Full Year 2017 Results
• Total revenue of $10.3 billion, down 4.7 percent and in line with the company’s guidance of down mid-single digits
• Adjusted operating margin of 12.8 percent, up 0.3 points and within the expected range of 12.5 to 13.5 percent
• Strategic Transformation cost savings of $680 million, above the $600 million target
• Including the previously announced $500 million in incremental U.S. pension contributions and $350 million impact from the termination of certain accounts receivable sales programs, operating cash flow from continuing operations of $122 million. Adjusted operating cash flow from continuing operations of $972 million.
• Including estimated non-cash charge of $400 million associated with the enactment of U.S. tax reform, GAAP EPS from continuing operations of $0.70
• Adjusted EPS of $3.48 cents, exceeded the company’s guidance range of $3.28 to $3.44
Full Year 2018 Guidance
The company expects continued progress in 2018, as projected in its financial guidance. Xerox expects 2018 GAAP earnings from continuing operations of $2.30 to $2.50 per share and adjusted EPS of $3.50 to $3.70. The company expects its revenue trajectory to improve, declining 2 to 4 percent at constant currency. 2018 adjusted operating margin is expected to expand and be in the range of 13 to 14 percent. Xerox expects to generate operating cash flow from continuing operations of $900 to $1,100 million and free cash flow from continuing operations of $750 to $950 million.