Xerox Releases First-Quarter Results

Reinvention drives momentum in Print and IT Solutions growth following ITsavvy acquisition

Financial Summary

Q1 2025

• Revenue of $1.46 billion, down 3.0 percent, and 1.1 percent in constant currency.
• GAAP net (loss) of $(90) million, or $(0.75) per share, improved by $23 million or $0.19 per share, year-over-year, respectively.
• Adjusted net (loss) of $(4) million, or $(0.06) per share, declined by $15 million or $0.12 per share, year-over-year, respectively.
• Adjusted operating margin of 1.5 percent, 70 basis points lower year-over-year.
• Operating cash flow of $(89) million, lower by $10 million year-over-year.
• Free cash flow of $(109) million, lower by $20 million year-over-year.

NORWALK, Conn.–(BUSINESS WIRE)–Xerox Holdings Corporation (NASDAQ: XRX) today announced its 2025 first-quarter results.

“In a quarter marked by increasing levels of macroeconomic and trade policy uncertainty, our team remained focused on what we can control: the balanced execution of our Reinvention and delivering client success,” said Steve Bandrowczak, chief executive officer at Xerox. “Improved sales productivity, the successful integration of ITsavvy and other Reinvention-enabled operating efficiencies drove momentum in revenue and positive adjusted operating income in our seasonally lowest quarter. Reinvention is delivering improved operating predictability and sales momentum, positioning Xerox well for long-term growth in revenue and adjusted operating income.”

First-Quarter Key Financial Results

First-Quarter Segment Results

2025 Guidance

• Revenue: low single-digit growth in constant currency¹
• Adjusted¹ Operating Margin: at least 5.0%
• Free cash flow¹: $350 million to $400 million

Guidance does not include any impact from the pending acquisition of Lexmark. Guidance further excludes potential adverse effects of tariff and trade policy, and the resultant impact on the macroeconomic outlook for the second half of the year, as tariff rates and trade policy remain fluid and unpredictable. We currently expect minimal tariff-related impacts to our financial results in Q2.

We are working with supplier partners to minimize tariff-related cost increases and will monitor client sentiment and demand in response to price increases or surcharges used to mitigate the financial impact of future tariffs.

Non-GAAP Measures

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

• Adjusted¹ Gross Profit and Margin, which exclude the inventory impact related to the exit of certain Production Print manufacturing operations, included in Cost of services, maintenance and rentals.
• Adjusted¹ EPS, which excludes Restructuring and related costs, net, Amortization of intangible assets, non-service retirement-related costs, and other discrete adjustments from GAAP EPS, as applicable.
• Adjusted¹ operating income and margin, which exclude the EPS adjustments noted above as well as the remainder of Other expenses, net from pre-tax loss and margin.
• Constant currency (CC)¹ revenue change, which excludes the effects of currency translation.
• Free cash flow¹, which is operating cash flow less capital expenditures.

Forward Looking Statements

This release and other written or oral statements made from time to time by management contain “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “should”, “targeting”, “projecting”, “driving” and similar expressions, as they relate to us, our performance and/or our technology, are intended to identify forward-looking 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: Global macroeconomic conditions, including inflation, slower growth or recession, delays or disruptions in the global supply chain, higher interest rates, and wars and other conflicts, including the current conflict between Russia and Ukraine; our ability to succeed in a competitive environment, including by developing new products and service offerings and preserving our existing products and market share as well as repositioning our business in the face of customer preference, technological, and other change, such as evolving return-to-office and hybrid working trends; failure of our customers, vendors, and logistics partners to perform their contractual obligations to us; our ability to attract, train, and retain key personnel; execution risks around our Reinvention; the risk of breaches of our security systems due to cyber, malware, or other intentional attacks that could expose us to liability, litigation, regulatory action or damage our reputation; our ability to obtain adequate pricing for our products and services and to maintain and improve our cost structure; changes in economic and political conditions, trade protection measures, licensing requirements, and tax laws in the United States and in the foreign countries in which we do business; 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; interest rates, cost of borrowing, and access to credit markets; risks related to our indebtedness; the imposition of new or incremental trade protection measures such as tariffs and import or export restrictions; funding requirements associated with our employee pension and retiree health benefit plans; changes in foreign currency exchange rates; the risk that our operations and products may not comply with applicable worldwide regulatory requirements, particularly environmental regulations and directives and anti-corruption laws; the outcome of litigation and regulatory proceedings to which we may be a party; laws, regulations, international agreements and other initiatives to limit greenhouse gas emissions or relating to climate change, as well as the physical effects of climate change; and other factors as set forth from time to time in the Company’s Securities and Exchange Commission filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company intends these forward-looking statements to speak only as of the date of this release and does not undertake to update or revise them as more information becomes available, except as required by law.

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First Quarter 2025 Overview

In the first quarter balanced execution, the benefits of last year’s Reinvention-related organizational changes and ongoing Reinvention initiatives resulted in an improved revenue trajectory and another quarter of double-digit declines in operating expenses, excluding one-time Reinvention costs and the impact from the recent acquisition of ITsavvy. Sales productivity and services metrics improved year-over-year, and the ITsavvy integration and cost reduction programs are running ahead of Plan, placing us firmly on a near-term path for revenue stabilization and growth in adjusted¹ operating income.

Equipment sales of $284 million in the first quarter 2025 declined 2.1% in actual currency, or 0.7% in constant currency¹, as compared to the first quarter 2024, an improvement in the pace of decline compared to recent quarters. The decline primarily reflects product mix and reductions in high-end installations, due to exit of certain production print manufacturing operations in the prior year. Total equipment installations increased approximately 24.0% year-over-year, due primarily to growth in entry level equipment and modest growth in mid-range equipment.

Post-sale revenue of $1.2 billion declined 3.2% in actual currency, or 1.2% in constant currency¹, as compared to first quarter 2024. First quarter 2025 post-sale revenue included an 8.2-percentage point benefit from the recent acquisition of ITsavvy. Excluding ITsavvy, post-sale revenue declined 11.4% in actual currency. The decline was primarily due to lower managed print services² revenue. Reinvention-related actions and lower financing revenue also contributed to the decline. Excluding these effects and including growth in legacy IT Solutions’ backlog³, post-sale revenue declined low single digits.

Pre-tax loss of $67 million for the first quarter 2025 improved by approximately $83 million as compared to a pre-tax loss of $150 million in the first quarter 2024. Pre-tax loss margin improved 5.4% for the first quarter 2025 as compared to the first quarter 2024 and included a 0.6-percentage point benefit from the recent acquisition of ITsavvy. Further benefiting the first quarter 2025 was the exit of certain production print manufacturing operations in the prior year period and sales of certain direct business operations in Latin America, which resulted in a net disposal loss of $54 million in the first quarter 2024, lower Restructuring and related costs, net, as well as lower Selling, administrative and general expenses associated with productivity and cost savings related to the Company’s Reinvention. These benefits were partially offset by higher Other expenses, net, primarily reflecting fees associated with the recently completed debt offering, and lower revenue and associated gross profit.

Adjusted¹ operating income of $22 million decreased by $11 million as compared to first quarter 2024, reflecting lower revenue and gross profit, as well as higher advertising expense, partially offset by productivity and cost savings related to the Company’s Reinvention, lower bad debt expense and favorable currency.

Given the evolving and fluid nature of proposed tariff policies, and the uncertain impact of future policy outcomes on macroeconomic conditions, we have not adjusted our full-year outlook. For the year, we expect Revenue to grow low single-digits in constant currency¹, inclusive of a full year of revenue associated with the recent ITsavvy acquisition, adjusted¹ operating margin of at least 5.0%, and free cash flow¹ to be in a range of $350 to $400 million in 2025. Guidance does not include any impact from the pending acquisition of Lexmark. Guidance further excludes potential adverse effects of tariff and trade policy, and the resultant impact on the macroeconomic outlook for the second half of the year, as tariff rates and trade policy remain fluid and unpredictable. We currently expect minimal tariff-related impacts to our financial results in the second quarter of 2025.

Tariffs

Xerox’s current exposure to purchases subject to reciprocal tariffs in the U.S., excluding China, is less than 10% of total company cost of sales. Following ongoing adjustments in manufacturing capacity, product purchases imported to the U.S. and subject to China tariffs is expected to be limited to a low single digit percentage of cost of sales by the end of 2025, impacting only select equipment, parts, and supplies. Plans are in place today to shift most China-produced goods to countries with lower tariffs. Revenues from Print Services and Financing, which is more than 60% of total Print revenue, has minimal reliance on imported products. In IT Solutions, tariff exposure varies by OEM partner, and we expect associated costs to be fully passed through to end users.

Based on tariffs in place on May 1, the expected reduction in operating income, net of price and supply chain mitigation measures already in place or planned, associated with incremental tariff costs, would be around $50 million in 2025. If China tariffs are reduced from 145% to 60%, we expect to be able to offset the impact of tariffs through a comprehensive set of price increases, surcharges, geographic rebalancing and supply chain-related mitigation efforts, as well as incremental Reinvention-related savings.

We are working with supplier partners to minimize tariff-related cost increases and will monitor client sentiment and demand in response to price increases or surcharges used to mitigate the financial impact of future tariffs.

Lexmark Acquisition

We continue to make progress toward the closing of Lexmark. We received several key regulatory approvals in the past few months, including clearance of HSR in the US, anti-trust clearance in the UK and Canada and the clearance of most major EU countries’ Foreign Direct Investment regulatory processes. Remaining approvals are expected in the second quarter 2025. Outside of country-specific approvals, the last significant condition to close is the Ninestar shareholder vote and Chinese securities exchange approval, which is expected to take place in the coming months. We have secured 32% of the required shareholder vote as part of the acquisition agreement.

We continue to expect over $1/share of accretion associated with the Lexmark transaction, despite a slightly higher than expected cost of funding and the potential for incremental tariff expenses. Importantly, based on U.S. tariffs currently proposed, we expect no impact from tariffs on Lexmark’s branded business within a few quarters of acquisition close. Lexmark has a large manufacturing facility in Juarez, Mexico that can support all expected imports of branded product into the U.S. market on a USMCA compliant basis.

Reportable Segment Change

Beginning in the first quarter of 2025, the Company made a change to its reportable segments – Print and Other, and IT Solutions to align with a change in how the Chief Operating Decision Maker, our Chief Executive Officer, allocates resources and assesses performance against the Company’s key growth strategies. Prior to this change, the company had two reportable segments – Print and Other, and XFS. As a result of this change, prior period reportable segment results have been conformed to reflect the Company’s current reportable segments. See Reportable Segments – 2024 Segment Review, and APPENDIX II – Reportable Segments.

Contacts

Media Contact:
Callie Ferrari, Xerox, +1-203-615-3363, [email protected]

Investor Contact:
David Beckel, Xerox, +1-203-849-2318, [email protected]

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