Press release·03/12/2025 02:07:34

Xerox Navigates Challenging Year, Focuses on Reinvention Strategy

In 2024, Xerox faced a difficult year as it continued to execute on its multi-year Reinvention strategy. Total revenue declined 9.7% to $6.2 billion, reflecting lower post-sale and equipment sales revenue. However, the company made significant progress on its key priorities of Geographic Simplification, Operational Simplification, and Commercial Optimization & Growth.

Financial Performance Overview

Xerox’s net loss for 2024 was $1.32 billion, a significant decline from the $1 million net income in 2023. This was primarily due to a $1.06 billion pre-tax non-cash goodwill impairment charge recorded in the third quarter. Adjusted net income, which excludes one-time items, was $135 million, down from $287 million in 2023.

Table: Xerox’s Key Financial Metrics

Metric	2024	2023	2022
Total Revenue	$6.21 billion	$6.89 billion	$7.11 billion
Net (Loss) Income	$(1.32) billion	$1 million	$(322) million
Adjusted Net Income	$135 million	$287 million	$189 million
Operating Cash Flow	$511 million	$686 million	$159 million

The decline in net income was driven by the goodwill impairment charge, lower revenue and gross profit, higher income tax expense, and increased other expenses. These were partially offset by lower operating expenses. On an adjusted basis, the decrease in net income was due to lower revenue and gross profit, as well as higher other expenses.

Segment Performance

Xerox has two reportable segments: Print and Other, and Xerox Financial Services (XFS).

The Print and Other segment, which accounts for 95% of total revenue, saw a 9.7% decline in revenue to $5.94 billion. Equipment sales revenue decreased 16.8% due to unfavorable mix, backlog fluctuations, and the decision to stop manufacturing certain high-end equipment. Post-sale revenue, which includes managed print services, supplies, and financing, declined 7.2%.

The XFS segment, which provides financing solutions, reported a 11.0% revenue decrease to $357 million. This was primarily due to a 20.9% decline in financing revenue as the average finance receivables balance continued to decrease.

Table: Segment Performance

Segment	2024 Revenue	2023 Revenue	2024 Profit	2023 Profit
Print and Other	$5.94 billion	$6.57 billion	$268 million	$360 million
XFS	$357 million	$401 million	$34 million	$29 million

The Print and Other segment margin declined to 4.6% from 5.6% in 2023, while the XFS segment margin increased to 9.5% from 7.2%.

Reinvention Strategy Progress

Xerox’s Reinvention strategy, launched in 2023, aims to transform the company’s operations and position it for long-term, sustainable growth. In 2024, the company made significant progress across its three key priorities:

1. Geographic Simplification: Xerox replaced direct-to-end-customer distribution models with partner-led models in Latin America and parts of Europe.

2. Operational Simplification: The company implemented a business-unit led operating model, established a Global Business Services (GBS) organization, and achieved over $200 million in gross savings.

3. Commercial Optimization & Growth: Xerox stopped manufacturing certain high-end production equipment to focus on higher-growth and higher-return submarkets. It also closed the acquisition of ITsavvy, enhancing its IT Solutions offering, and announced the pending acquisition of Lexmark, which will provide greater exposure to growing print markets.

These actions, while contributing to the revenue and profit declines in 2024, are expected to position Xerox for improved performance in the long run.

Goodwill Impairment and Outlook

During the third quarter of 2024, Xerox recognized a $1.06 billion pre-tax non-cash goodwill impairment charge related to its Print and Other reporting unit. This was due to lower-than-expected operating results, as well as a sustained decline in the company’s stock price and market capitalization.

Looking ahead to 2025, Xerox expects total revenue to grow in the low single digits in constant currency, including the full-year impact of the ITsavvy acquisition. However, this growth will be partially offset by the ongoing Reinvention actions, such as the exit from certain production print manufacturing operations and the sale of the European paper business.

Adjusted operating margin is expected to be at least 5.0% in 2025, reflecting incremental cost savings partially offset by higher product costs. Operating cash flow is projected to be between $420 million and $470 million, with capital expenditures of approximately $70 million.

Key Risks and Challenges

Xerox faces several risks and challenges that could impact its future performance:

1. Macroeconomic Conditions: The company’s business is sensitive to global economic trends, which could affect customer demand and spending.

2. Competitive Landscape: Xerox operates in a highly competitive industry, with pressure on pricing and market share.

3. Technological Changes: The company must continue to innovate and adapt to evolving customer needs and technological advancements.

4. Execution of Reinvention: The successful implementation of the Reinvention strategy is critical to Xerox’s long-term success, but it carries execution risks.

5. Goodwill Impairment: Further declines in Xerox’s performance or market conditions could lead to additional goodwill impairment charges in the future.

Conclusion

Xerox faced a challenging year in 2024 as it continued to execute its Reinvention strategy. While the company’s financial performance declined, it made significant progress on its key strategic priorities, which are expected to position it for improved long-term growth and profitability. However, Xerox must navigate various risks and challenges, including macroeconomic conditions, competitive pressures, and the successful execution of its Reinvention plan, to achieve its goals.