The company has released its third quarter financial results, delivering growth in profitability and cashflow but revenue declines.
In the third quarter 2023, Xerox reported revenues of $1.65 billion (€1.56 billion), down 5.7%. The company explained that the decline in revenue for the third quarter 2023 reflects declines in certain cyclical, low margin post-sale revenue categories, as well as declines in revenue associated with strategic actions put in place to simplify our business, partially offset by a stable demand for our products and services.
Xerox recorded equipment sales of $386 million (€365 million) in the third quarter 2023, a decline of 1.0%, primarily due to the prior year reduction in backlog.
The company added: “Consistent with recent quarters, revenue trends outpaced equipment installation activity, due to favourable product and geographic mix, as well as higher prices. This was particularly true with our A3 products, which experienced unfavourable geographic mix effects in the prior year due to backlog reductions in EMEA. Entry A4 installations were lower again this quarter, due to the ongoing normalization of work from home trends.”
Post sale revenue was $1,266 million (€1,196 million), down 7.0% year-on-year. Post sale declines were primarily driven by reductions in cyclical transactional items, most notably a significant decline in lower-margin paper sales and IT endpoint devices. Post sale revenue was further impacted by the termination of Fuji royalty income and specific strategic actions, resulting in lower financing and PARC revenue.
“Growth in adjusted profit, EPS and free cash flow reflects solid execution of our strategic priorities amid a challenging macro backdrop,” said Steve Bandrowczak, Chief Executive Officer at Xerox. “As we continue simplifying and focusing our operations, Reinvention will reposition our business to enable sustainable profit improvement and revenue growth through the expansion of services that best serve our clients’ needs.”
Total Revenue is expected to be flat to down low-single-digits in constant currency for the full-year 2023. Xerox explained that there continues to be momentum in demand for its products and services in the Americas, particularly for its faster growing Digital Services. However, during third quarter 2023 there has been a mild softening of demand in its European markets, reflecting weaker macroeconomic conditions. As a result, revenue is expected to come in at the lower end of the expected range.
The Company expects a difficult equipment sales revenue comparison in the fourth quarter 2023 due to the significant prior year reduction in backlog. Further, the headwinds affecting post sale revenue in third quarter 2023 are expected to persist in fourth quarter 2023.
