Xerox Reports Third-Quarter 2015 Earnings

NORWALK, Conn., Oct. 26, 2015 -Xerox (NYSE: XRX) announced today third-quarter 2015 adjusted earnings per share of 24 cents. Adjusted EPS excludes 5 cents related to the amortization of intangibles, and 23 cents for the previously announced Health Enterprise charge; resulting in a GAAP loss from continuing operations of 4 cents per share.

The company also today announced that its Board of Directors has authorized a review of the company’s business portfolio and capital allocation options, with the goal of enhancing shareholder value.

“Xerox’s Board of Directors and management team continually review the company’s strategy and consider a range of opportunities regarding our businesses and operations with the goal of maximizing value for shareholders,” said Ursula Burns, Xerox Chairman and Chief Executive Officer. “Although we already have taken steps to accelerate cost reductions and prioritize investments to drive improved productivity and higher margins, our Board determined that undertaking a comprehensive review of structural options for the company’s portfolio is the right decision at this time.”

Burns added, “During the third quarter, the company achieved adjusted earnings in line with our guidance. We continue to focus on strengthening our offering portfolio, improving productivity and targeting our highest-margin segments. We remain focused on serving our clients and leading in the most attractive market segments where we are best positioned to compete and differentiate.”

Third Quarter Financial Results

Following is a breakdown of the company’s results on both a reported and an adjusted basis:




Total Revenue



% Change



% Change CC



Gross Margin



SAG % of Revenue



Earnings per Share



   *Adjusted excludes the Health Enterprise charge.

    CC = constant currency


In the third quarter, total adjusted revenue of $4.4 billion was down 4 percent in constant currency. Annuity revenue was 85 percent of total revenue.

On a GAAP basis, revenue from the company’s Services business was $2.4 billion, down 8 percent or 4 percent in constant currency. Services margin was negative 7.6 percent.

Adjusted to exclude the Health Enterprise charge, Services revenue, which represented 57 percent of total revenue, was $2.5 billion, consistent in constant currency with the same period last year. Adjusted services margin, was 8.1 percent, down 1.0 percentage point year-overyear.

Revenue from the company’s Document Technology business was $1.8 billion, down 12 percent or 9 percent in constant currency. Document Technology margin was 12.8 percent, down 1.2 percentage points.

Third-quarter operating margin of 8.7 percent was down 0.9 percentage points from the same quarter a year ago. Adjusted gross margin was 30.9 percent, and adjusted selling, administrative and general expenses were 19.2 percent of revenue.

Xerox generated $271 million in cash flow from operations during the third quarter, ending the quarter with a cash balance of $804 million. The company repurchased $691 million in stock in the quarter bringing the total to $1.3 billion through the first nine months of 2015.

2015 Guidance

Xerox expects fourth-quarter 2015 GAAP earnings of 23 to 25 cents per share and adjusted EPS of 28 to 30 cents per share.

For full-year 2015, Xerox expects GAAP earnings at the low end of 46 to 52 cents per share and adjusted EPS at the low end of $0.95 to $1.01 per share.

Xerox expects full-year 2015 cash flow from operations of $1.6 to $1.7 billion and free cash flow from operations of $1.3 to $1.4 billion.

About Xerox

Xerox is helping change the way the world works. By applying our expertise in imaging, business process, analytics, automation and user-centric insights, we engineer the flow of work to provide greater productivity, efficiency and personalization. We conduct business in 180 countries, and our more than 130,000 employees create meaningful innovations and provide business process services, printing equipment, software and solutions that make a real difference for our clients – and their customers. Learn more at

Non-GAAP Measures: 

This release refers to the following non-GAAP financial measures:

•       Adjusted Revenue, Gross Margin, SAG as % of revenue as well as Services segment Revenues and Margin for the third-quarter 2015 that excludes the Health Enterprise charge.

•       Adjusted EPS (earnings per share) for the third-quarter 2015 as well as for the fourthquarter and full-year 2015 guidance that excludes certain items including the Health Enterprise charge.

•       Operating margin for third-quarter 2015 that excludes certain costs and expenses.

•       Constant Currency revenue growth for the third-quarter 2015, which excludes the effects of currency translation.

•       Free cash flow for the full-year 2015, 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 measure.

Forward-Looking Statements

This release contains “forward-looking statements” as defined in the Private Securities

Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forwardlooking 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: changes in economic conditions, political conditions, trade protection measures, licensing requirements and tax matters in the United States and in the foreign countries in which we do business; 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 our bids do not accurately estimate the resources and costs required to implement and service very complex, multi-year governmental and commercial contracts, often in advance of the final determination of the full scope and design of such contracts or as a result of the scope of such contracts being changed during the life of such contracts; the risk that subcontractors, software vendors and utility and network providers will not perform in a timely, quality manner; service interruptions; 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 and the relocation of our service delivery centers; the risk that individually identifiable information of customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security systems; the risk in the hiring and retention of qualified personnel; the risk that unexpected costs will be incurred; our ability to recover capital investments; the risk that our Services business could be adversely affected if we are unsuccessful in managing the start-up of new contracts; the collectability of our receivables for unbilled services associated with very large, multi-year contracts; reliance on third parties, including subcontractors, for manufacturing of products and provision of services; our ability to expand equipment placements; interest rates, cost of borrowing and access to credit markets; the risk that our products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives; the outcome of litigation and regulatory proceedings to which we may be a party; 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 Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 and our 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission. 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.

Xerox announced today that its Board of Directors has authorized a review of the company’s business portfolio and capital allocation options, with the goal of enhancing shareholder value. No assurance can be given as to the outcome or timing of completion of the review. Xerox does not intend to make any further public comment regarding the review prior to its completion. The forward looking statements in this release are subject to the risk that the company’s business portfolio and/or capital allocation could change as a result of the review. 

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