Lexmark Reports First Quarter Results: Results Reflect Growth in Enterprise Software

LEXINGTON, Ky., April 27, 2016 /PRNewswire/ — Lexmark International, Inc. today announced financial results for the first quarter of 2016.

First Quarter Results

Results reflect growth in MPS and Enterprise Software offset by the strong U.S. dollar, decline in non-MPS revenue and the ongoing exit of inkjet.

GAAP Results

Revenue of $806 million in 2016 compares to $852 million in 2015.
Gross profit margin of 38.0 percent compares to 38.7 percent in the same period last year.
Operating income margin was -4.8 percent and 5.0 percent in 2016 and 2015, respectively.
EPS of -$0.63 in 2016 compares to $0.32 in the same period last year.

Non-GAAP Results

Revenue of $812 million declined 5 percent, down 1 percent at constant currency.
Core revenue2 of $792 million declined 2 percent, up 3 percent at constant currency.
Gross profit margin of 41.2 percent compares to 40.5 percent in the same period last year.
Operating income margin was 4.8 percent and 9.5 percent in 2016 and 2015, respectively.
Adjusted EBITDA of $80 million in 2016 compares to $123 million in 2015.
EPS of $0.31 in 2016 compares to $0.81 in the same period last year.

Non-GAAP Segment Revenue

Enterprise Software revenue of $143 million grew 60 percent, up 62 percent at constant currency.
Deferred software revenue of $214 million increased 65 percent year to year.
Annualized subscription contract value increased 18 percent year to year.
ISS revenue of $669 million declined 13 percent, down 8 percent at constant currency.
MPS revenue of $189 million grew 2 percent, up 8 percent at constant currency.
Non-MPS revenue of $460 million declined 14 percent, down 9 percent at constant currency.
Inkjet Exit revenue of $20 million declined 58 percent.

Non-GAAP Higher Value Solutions Revenue

Lexmark’s Higher Value Solutions revenue of $332 million grew 21 percent, up 26 percent at constant currency.
Higher Value Solutions revenue accounted for 41 percent of total revenue, up from 32 percent in the same period in 2015.

Balance Sheet and Cash Flow

Cash was $127 million at quarter end, $118 million of which was non U.S.-based.
Total long-term and short-term debt declined $66 million year to date.
Net debt was $869 million.
Net cash flow provided by operating activities was $79 million.
Free cash flow was $56 million.

Lexmark Acquisition Announcement and Quarterly Dividend Declaration

Lexmark announced on April 19, 2016, that it entered into a definitive merger agreement with a consortium of investors led by Apex Technology and PAG Asia Capital. Legend Capital is also a member of the consortium.
This all-cash transaction is the result of an exhaustive six-month strategic alternatives review process undertaken by Lexmark’s Board of Directors to maximize shareholder value.

At closing, the transaction will provide Lexmark’s shareholders $40.50 per share in cash, representing a 30 percent premium to the undisturbed stock price on Oct. 21, 2015, the date prior to the news of Lexmark’s exploration of strategic alternatives becoming public.

In the April 19 announcement, Lexmark’s Board of Directors also declared its regular quarterly dividend of $0.36 per share of Lexmark Class A Common Stock payable on June 17, 2016, to shareholders of record as of the close of business on June 3, 2016.
Looking Forward

The merger, which is expected to close in the second half of 2016, is subject to approval by Lexmark shareholders, foreign and domestic regulatory approvals and other customary closing conditions.
The company will not conduct quarterly conference calls while this transaction is pending.

Upon closing, Lexmark common stock will cease to be publicly traded on the New York Stock Exchange.

Earnings Materials
This earnings release, including reconciliations between GAAP and non-GAAP financial measures, will be available on Lexmark’s investor relations website.

About Lexmark
Lexmark (NYSE: LXK) creates enterprise software, hardware and services that remove the inefficiencies of information silos and disconnected processes, connecting people to the information they need at the moment they need it. Open the possibilities at www.Lexmark.com.

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