Xerox Reports Progress on Key Priorities to Drive Business Improvement; Delivers Strong Cash Flow and Operating Margin Expansion

Increasing Full-Year Free Cash Flow Expectations
Third-Quarter 2018 Highlights:
• Operating cash flow of $274 million increases $717 million or $157 million on an adjusted basis
• Adjusted Operating margin of 13.1 percent expands 1.0 point year-over-year
• GAAP EPS from continuing operations of 34 cents, down 33 cents year-over-year, driven by an incremental non-cash charge of $95 million associated with the 2017 enactment of the U.S. Tax Act
• Adjusted EPS of 85 cents, down 4 cents year-over-year, driven by higher year-over-year tax rate
• Returned $353 million to shareholders in the form of share repurchases and dividends; increasing share repurchase expectations for 2018 to $700 million from $500 million

“We are progressing on our priorities, which include optimizing our operations for greater simplicity, re-energizing our innovation engine and focusing on cash flow to drive increasing shareholder returns,” said Xerox Vice Chairman and CEO John Visentin.

“Work remains on the priority to drive revenue. Actions are underway to streamline the organizational structure, expand our channel presence, and further differentiate our products and services to provide greater value to customers.”

Recent accomplishments that demonstrate Xerox’s continued market strength include:
• Named the first and only MPS vendor to receive security authorization for cloud-based managed print services from the U.S. government. It is federal policy to move agencies to secure cloud computing. Receiving FedRAMP certification validates our leading-edge security capabilities and will help Xerox penetrate the nearly $100 billion annual federal IT market
• Launch of e-commerce apps platform opens up a global marketplace for Xerox and channel partners – making it easier to browse, deploy and purchase apps powered by ConnectKey® devices
• Leadership position for ninth consecutive year in Quocirca Managed Print Services Market Landscape Report

Increasing Full-Year Free Cash Flow Expectations
Third-Quarter 2018 Highlights:
• Operating cash flow of $274 million increases $717 million or $157 million on an adjusted basis
• Adjusted Operating margin of 13.1 percent expands 1.0 point year-over-year
• GAAP EPS from continuing operations of 34 cents, down 33 cents year-over-year, driven by an incremental non-cash charge of $95 million associated with the 2017 enactment of the U.S. Tax Act
• Adjusted EPS of 85 cents, down 4 cents year-over-year, driven by higher year-over-year tax rate
• Returned $353 million to shareholders in the form of share repurchases and dividends; increasing share repurchase expectations for 2018 to $700 million from $500 million

“We are progressing on our priorities, which include optimizing our operations for greater simplicity, re-energizing our innovation engine and focusing on cash flow to drive increasing shareholder returns,” said Xerox Vice Chairman and CEO John Visentin.

“Work remains on the priority to drive revenue. Actions are underway to streamline the organizational structure, expand our channel presence, and further differentiate our products and services to provide greater value to customers.”

Recent accomplishments that demonstrate Xerox’s continued market strength include:
• Named the first and only MPS vendor to receive security authorization for cloud-based managed print services from the U.S. government. It is federal policy to move agencies to secure cloud computing. Receiving FedRAMP certification validates our leading-edge security capabilities and will help Xerox penetrate the nearly $100 billion annual federal IT market
• Launch of e-commerce apps platform opens up a global marketplace for Xerox and channel partners – making it easier to browse, deploy and purchase apps powered by ConnectKey® devices
• Leadership position for ninth consecutive year in Quocirca Managed Print Services Market Landscape Report

Third Quarter 2018 Financial Results
• Earnings Per Share: GAAP earnings per share (EPS) from continuing operations of 34 cents, down 33 cents year-over-year, driven by an incremental non-cash charge of $95 million associated with the 2017 enactment of the U.S. Tax Act. Adjusted EPS of 85 cents, down 4 cents year-over-year, driven by higher year-over-year tax rate
• Total Revenue: $2,352 million, down 5.8 percent year-over-year or 4.7 percent in constant currency
• Adjusted Operating Margin: 13.1 percent, up 1.0 point year-over-year
• Cash, Cash Equivalents and Restricted Cash: $1,218 million at the end of the third quarter
• Cash Flow: Operating cash flow of $274 million in the third quarter and $725 million year-to-date
• Return to Shareholders: Returned $284 million through share repurchase and $69 million through dividends in the third quarter; the company returned $488 million or 75 percent of its free cash flow to shareholders during the first three quarters of the year
more detail at: https://www.news.xerox.com/internal_redirect/cms.ipressroom.com.s3.amazonaws.com/84/files/20189/NR-Oct-23-2018-Xerox-Third-Quarter-2018-Results.pdf

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