Lexmark Reports Hardware Revenue Down 2%，Laser Supplies Revenue Declined 10%

Lexmark International, Inc. announced financial results for the second quarter of 2015 (2Q2015). The GAAP revenue was US$879.3 million in 2Q2015, down 1.4% from US$891.8 million in the same period last year, however it grew 7% year-to-year (YTY) in constant currency.

Core revenue from the laser and enterprise software segments grew 3%, and grew 11% in constant currency. The GAAP gross profit margin was 41.2% in the second quarter of 2015, increasing 300 bps YTY driven by Enterprise Software. The operating income margin dropped 0.3% to10.6% in the second quarter.

Despite the offset by laser supplies channel optimization particularly in EMEA, Enterprise Software delivered a strong performance with a 136% revenue growth YTY at US$86 million and a US$32 million increase in operating income. Meanwhile, the higher value solution segments combined grew 37% or 46% at constant currency with Managed Print Services growing 4% or 12% at constant currency.

Paul Rooke, Chairman and CEO of Lexmark, commented on the second quarter as being “a slightly increase year-to-year and better than expected with Laser and Perceptive Software revenue growth offsetting the Inkjet Exit decline.”

In the imaging system service (ISS) segment, the managed print services (MPS) continued to show a strong demand, with revenue growing 12% YTY in constant currency, driven by double-digit growth in the U.S. David Reeder, VP and CFO of Lexmark, pointed out, “Hardware revenue declined 2% year-to-year but grew 4% in constant currency. Total laser units declined 7% year-to-year, while average unit revenue increased 4%, driven by growth in color and MFP units. With respect to large workgroup, color units grew 6% and MFP units grew 4%, contributing to a 3% year-to-year average unit revenue increase. Small workgroup unit decreased 12% year-to-year due to ongoing price competition in the transactional channel. Laser supplies revenue declined 10% year-to-year and 3% in constant currency.”

“Geographically, we saw solid year-to-year revenue growth of 10% in United States, a 7% decline in EMEA and a 9% decline in the rest of the world. Excluding Inkjet Exit and currency impacts revenue grew 16% in U.S., 8% in EMEA and 5% in the rest of the world.”

After analyzing the financial results, David Reeder further shared Lexmark’s outlook for the third quarter, “we expect total third quarter revenue to be approximately flat year-to-year with a range of down 1% to up 1%. Core revenue is expected to grow 9% to 11% on a year-over-year basis offset by currency headwinds of approximately 6% and the ongoing Inkjet Exit. Third quarter 2015 higher value solutions revenue is expected to grow more than 30% year-to-year with Kofax representing approximately two-thirds of the growth. For the third quarter, we expect gross profit margin as a% of revenue to be up year-to-year driven primarily by the mix of Enterprise Software revenue. Operating expenses are expected to be up sequentially primarily due to the inclusion of a full quarter of Kofax expenses. Operating income as 1% of revenue is expected to be down year-to-year, primarily due to supplies channel optimization.”

In order to increase profitability and operational efficiency, Lexmark announced its 2015 Restructuring Program, which would result in the elimination of approximately 500 positions worldwide over the next 18 months, with about one third of the positions being shifted to low cost countries. The program is expected to generate $2 million savings in 2015, and annualized savings of $65 million beginning in 2017.

Source:

http://investor.lexmark.com/

http://seekingalpha.com/

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