Xerox Holdings recently released its fourth quarter financial results, which missed Wall Street estimates. Despite this setback, Chief Executive Steven Bandrowczak remains optimistic about the company’s future following an internal reorganization.
According to FactSet, Xerox reported fourth quarter earnings of 43 cents per share before the opening bell on Thursday. This figure fell below Wall Street’s expectations of 52 cents per share and marked a significant drop from the previous year’s 89 cents per share. The fourth quarter also included an after-tax restructuring and related costs net charge of $78 million (or $0.62 per share) due to a recently announced workforce reduction. However, the company saw an increase in free cash flow for the quarter, with $379 million, showing a $211 million year-over-year growth.
On the revenue front, Xerox generated $1.77 billion in the fourth quarter, missing the consensus call of $1.79 billion. This figure also reflected a 9.1% decrease compared to the same period last year. Bandrowczak explained in an interview that Xerox had faced supply constraints due to Covid-19, resulting in a large backlog in 2022. As a result, comparing the two years might appear imbalanced.
Looking ahead to fiscal 2024, Xerox anticipates a decline in revenue between 3% and 5%. Despite this projection, the software company expects to achieve a free cash flow of at least $600 million during the same period. However, analysts surveyed by FactSet have slightly higher expectations for 2024 free cash flow at $659 million.
However, Xerox has ambitious plans to reinvent itself as more than just a printing company. The company’s stock has experienced a 90% decline since its peak in 1999. On January 3rd, Xerox introduced a new operating model and structure aimed at focusing on a comprehensive “reinvention” strategy. This initiative will prioritize the development of products and services that assist clients in enhancing productivity in an AI-driven world.
Bandrowczak asserts, “I think the reinvention is really important to get the message out that at the end of it, Xerox is a totally different company.” He further emphasizes that the profit and value resulting from this reinvention will become evident in the company’s financial performance by 2024, 2025, and 2026.
Overall, while Xerox may have fallen short of expectations in its recent financials, the company’s internal reorganization and strategic focus on innovation position it for a promising future.