Xerox has tempered its future outlook after its third-quarter performance was weaker than expected amid restructuring efforts, including local layoffs last summer.
The company posted a net loss of $1.2 billion in the third quarter, a decrease of $1.3 billion from the year prior, according to documents filed with the Securities and Exchange Commission. This quarter included an after-tax, non-cash goodwill impairment charge of $1 billion and a charge to tax expense of $161 million.
Total revenue was about $1.53 billion, down 7.5 percent from last year’s figure of $1.65 billion.
A host of factors explain why the Q3 results fell short of expectations, the company said.
Equipment sales declined 12.2 percent in constant currency over the year, primarily due to the delayed launch of two new products, lower-than-expected improvements in sales force productivity, delays in the timing of installations as a result of Hurricane Helene, an unfavorable sales mix, and a large production equipment sale the prior year.
The performance led the company to drop its 2024 revenue guidance from a 5 percent to 6 percent decline to a drop of around 10 percent in constant currency. The company said the new projection reflects “the incremental effects of intentional reductions in non-strategic revenue and lower equipment revenue” associated with its delayed product launches and “lower-than-expected” sales force productivity improvements.
On the more optimistic side, Xerox’s adjusted operating income and income margins were up over last year, and the company highlighted the fact that the third quarter was its second in a row with moderating revenue declines.
In January, after the company publicized plans to boost operating income by $300 million by 2026 from its level in the third quarter of 2023, CEO Steven Bandrowczak announced Reinvention, the company’s new operating model and organizational structure. The plan came with announced layoffs of 15 percent of the company’s workforce and a reorganization of its executive leadership.
“The evolution of Xerox’s Reinvention aligns our resources in three key areas–improvement and stabilization of our core print business, increased productivity and efficiency through the formation of a new Global Business Services organization, and disciplined execution in revenue diversification,” he said at the time.
As part of the efforts, the company halted its print engine manufacturing operations at its Webster campus in June after it announced the discontinuation of its iGen 5 Press and Nuvera Presses. Workers at the plant were laid off, and Xerox’s local workforce has contracted from more than 1,750 employees at the close of last year to around 1,500, according to Rochester Business Journal figures.
“It is tragic news that these manufacturing jobs in Webster have reached end of production,” said Gary Bonadonna Jr., manager of Workers United’s Rochester Regional Joint Board, after the closure announcement in May. “Our union members of Local 14A have been proud to manufacture the Production Print Engine Systems for many years. Sad to say that the decreased investment in research and development in Webster has contributed to these end-of-life products.”
Xerox’s latest filing said the effects of fluctuations in backlog (the value of unfulfilled sale orders waiting to be installed, including print devices and IT hardware) in recent years “and other Reinvention actions” —which includes geographic and offering simplifications, a company spokesperson explained—drove about 4 percent of its year-over-year decline in equipment sales.
The company also backed off its expectation to boost adjusted operating income by $300 million by 2026, but said operating income still is expected to grow.
Investors reacted negatively to the Q3 earnings release. Early this afternoon, Xerox shares were trading around $8.37, down nearly 19 percent from Monday’s closing price and near the bottom of its 52-week range of $8.02 to $19.78.
“Q3 results demonstrate no single quarter or performance metric in isolation defines our Reinvention,” said Bandrowczak in the latest filing. “Operational improvements and enterprise-wide efficiencies are driving services signings momentum, improved decision-making and a sustainably lower cost base. These gains give us confidence Reinvention will enable long-term profitable growth as we continue this multiyear journey.”
Justin O’Connor is a Rochester Beacon contributing writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].