Xerox Shares Plunge 25%

Xerox Shares Plunge 25%

Xerox Holdings Inc‘s shares plunged almost 25% to 13-year lows on October 25, 2022. The inventor of the copier and print technologies slashed its annual revenue and cash flow forecasts, blaming a stronger dollar and a slower-than-expected recovery in global supply chains.

The company, whose largest shareholder is activist investor Carl Icahn, cut its annual free cash flow (FCF) forecast to at least $125 million from about $400 million.

“The global macroeconomic outlook has become increasingly somber over the past 3 months,” Chief Executive Steven Bandrowczak said in a call with analysts.

Finance chief Xavier Heiss, however, said he expects a quarter-on-quarter improvement in margin on FCF due to price increases to counter higher costs and better supply.

Key points include:

• Q3 2022 revenue of US$1.75B missed consensus by $10M.
• Gross margin contracted to 31.8% from 32.4% in prior year quarter.
• Adjusted operating margin stood at 3.7% down 50 basis points year-over-year.
• The company reported free cash flow use of US$18 million, lower by US $99 million year-over-year. Operating cash flow use was US$8 million, lower by US$108 million year-over-year.
• Free cash flow outlook cut significantly from at least US $400 million to at least US$125 million, citing slower-than-expected supply chain improvements and persistently high rates of inflation which has “negatively affected operating profit and a greater-than-expected use of working capital to fund the growth of originations and operating leases at FITTLE and inventories.”
• Return at least 50% of free cash flow to shareholders.

According to Bloomberg,  JP Morgan said the outlook reflects a “combination of worsening FX headwinds, slower-than-expected supply chain recovery, higher-than-expected inflationary pressures, greater working capital use to fund growth.”

Related:

• Xerox Trains its Global Workforce on Climate Change
• Xerox Appoints New VP
• Xerox Appoints New CEO
• Xerox Reports Declines in Q2

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