Xerox (XRX) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $1.53 billion, down 7.5% year-over-year, with equipment sales declining 12.2% and post-sale revenue down 6.1%.

• GAAP net loss was $1.21 billion, or $(9.71) per share, driven by a $1.0 billion after-tax goodwill impairment and a $161 million tax valuation allowance.

• Adjusted EPS was $0.25, down 46% year-over-year; adjusted net income was $34 million, down from $77 million in Q3 2023.

• Adjusted operating margin improved to 5.2%, up 110 basis points year-over-year, reflecting cost savings and productivity actions.

• Pending acquisition of ITsavvy for $400 million is expected to enhance IT services revenue and support a return to growth in 2025.

Financial highlights

• Gross margin remained flat at 32.4%; equipment gross margin declined to 28.5%, while post-sale gross margin rose to 33.5%.

• Free cash flow for Q3 was $107 million, slightly down year-over-year.

• GAAP loss per share was $(9.71), including a $1 billion goodwill impairment and a $161 million tax valuation allowance.

• Total assets at quarter-end were $8.3 billion, down from $10.0 billion at year-end 2023.

• Research, development & engineering expenses were 2.9% of revenue; selling, administrative & general expenses were 24.2% of revenue.

Outlook and guidance

• 2024 revenue is expected to decline ~10% in constant currency, versus prior guidance of 5–6% decline.

• Full-year adjusted operating income margin guidance reduced to ~5% from at least 6.5%.

• Free cash flow guidance lowered to $450–$500 million from at least $550 million.

• No longer expects to grow adjusted operating income $300 million above 2023 levels by 2026, but targets a return to double-digit adjusted operating margin over time.

• Return to revenue growth and margin expansion expected in 2025, driven by ITsavvy acquisition, new products, and improved sales productivity.