The report released on Tuesday (25 July) for the three months to 30 June revealed that the manufacturer’s sales climbed by 0.4% to $1.754 (£1.35bn) or by 0.5% in constant currency terms.
But it made a Q2 pre-tax loss of $89m, up from $5m a year ago. Xerox said this was driven by a net pre-tax charge of $132m related to the donation of its Palo Alto Research Center (PARC), partially offset by continued cost reduction actions, supply chain-related cost improvements, and higher revenues.
The company’s adjusted operating income, however, jumped to $107m, from $35m a year ago. This metric, which excludes the PARC donation, was also higher as a result of the impacts listed above. Xerox said these benefits were partially offset by currency, the cessation of Fuji royalty income, higher bad debt, and employee compensation expenses.
Xerox’s share price accordingly jumped to $16.99 on Tuesday following the release of the results, up by nearly 10% on Monday, but had settled down slightly to $16.66 at yesterday’s close.
Steve Bandrowczak, CEO at Xerox, said: “Over the last 12 months, Xerox has taken significant steps to strengthen its operating and financial discipline, leading to another quarter of profitable growth amid a dynamic macroeconomic backdrop.
“I’m proud of the part all Xerox employees and partners have played in our continued success. An improved operating system leaves us well positioned to pursue growth opportunities as we focus on meeting clients’ evolving needs in today’s hybrid workplace.”
Xerox said recent improvements in its financial performance were driven by “an intense focus on our three strategic priorities, which includes a focus on delivering client success through products and services that address the productivity challenges of today’s hybrid workplace”.
Equipment sales revenue of $420m in Q2 was up by 14.8% in actual currency and 14.3% in constant currency year-on-year, which Xerox said reflected stable demand and improved product availability, particularly in the Americas, and for its higher margin A3 devices.
Xerox said it is continuing to expect to deliver “low to mid-single digit gross operating cost efficiencies for the year”.
Total revenue is expected to be flat to down low-single-digits in constant currency in 2023 while it is expecting free cash flow for 2023 to increase from “at least $500m” to “at least $600m”, reflecting an improvement in expected operating income and incremental sales of finance receivables.
