Xerox : Q1 2020 Financial Model

Xerox Holdings Financial Model (unaudited)

(in $ millions, except per-share data)			2018						2019			2020
		Q1	Q2	Q3	Q4	FY		Q1	Q2	Q3	Q4	FY		Q1
Sales	792	886	818	958	3,454	724	800	784	919	3,227	565
Services, maintenance and rentals	1,518	1,515	1,431	1,476	5,940	1,393	1,402	1,335	1,465	5,595	1,236
Financing		71	68	65	64	268		63	61	60	60	244		59
Total Revenues		2,381	2,469	2,314	2,498	9,662		2,180	2,263	2,179	2,444	9,066		1,860
Cost of Revenue
Cost of sales	490	567	518	613	2,188	450	539	503	605	2,097	387
Cost of services, maintenance, and rentals	898	882	838	855	3,473	821	806	771	790	3,188	731
Cost of financing		34	33	33	32	132		32	33	33	33	131		30
Total Cost of Revenue		1,422	1,482	1,389	1,500	5,793		1,303	1,378	1,307	1,428	5,416		1,148
Gross Profit
Sales gross profit	302	319	300	345	1,266	274	261	281	314	1,130	178
Services, maintenance and rentals gross profit	620	633	593	621	2,467	572	596	564	675	2,407	505
Financing gross profit		37	35	32	32	136		31	28	27	27	113		29
Gross Profit		959	987	925	998	3,869		877	885	872	1,016	3,650		712
Research, development & engineering		100	101	102	94	397		92	88	100	93	373		84
Bad Debt Expense	13	12	10	1	36	13	12	13	8	46	74
Selling, administrative and general exp. (Excl Bad Debts)		612	609	571	551	2,343		533	505	497	504	2,039		467
Total Selling, administrative and general exp.		625	621	581	552	2,379		546	517	510	512	2,085		541
Non-financing interest expense	29	28	28	29	114	28	26	27	24	105	21
Aggregate Exchange losses / (gains)	(2)	1	3	3	5	2	-	4	1	7	2
All other, net		3	11	26	112	152		9	12	(32)	(17)	(28)		-
Total Other, net		30	40	57	144	271		39	38	(1)	8	84		23
Restructuring and related costs	28	33	29	67	157	112	37	27	53	229	41
Amortization of intangible assets	12	12	12	12	48	15	11	9	10	45	11
Transaction and related costs		38	58	(33)	5	68		-	4	4	4	12		17
Total Costs and Expenses		2,255	2,347	2,137	2,374	9,113		2,107	2,073	1,956	2,108	8,244		1,865
Income before Income Taxes & Equity Income	126	122	177	124	549	73	190	223	336	822	(5)
Income Taxes	39	35	139	34	247	(10)	50	66	73	179	(1)
Equity in net income of unconsolidated affiliates		2	2	2	2	8		2	2	1	3	8		2
Income from Continuing Operations	89	89	40	92	310	85	142	158	266	651	(2)
Income (loss) from discontinued operations, net of tax	(63)	25	53	49	64	51	42	64	553	710	-
Net Income	26	114	93	141	374	136	184	222	819	1,361	(2)
Less: Income from continuing operations attributable to noncontrolling interests	1	1	1	1	4	1	1	1	-	3	-
Less: Income from discontinued operations attributable to noncontrolling interests		2	1	3	3	9		2	2	0	1	5		-
Net Income Attributable to Xerox Holdings		23	112	89	137	361		133	181	221	818	1,353		(2)
Amounts Attributable to Xerox Holdings
Continuing operations	88	88	39	91	306	84	141	157	266	648	(2)
Discontinued operations		(65)	24	50	46	55		49	40	64	552	705		-
Net Income Attributable to Xerox Holdings		23	112	89	137	361		133	181	221	818	1,353		(2)

Xerox Holdings Financial Model (unaudited)

(in $ millions, except per-share data)			2018						2019			2020
			Q1	Q2	Q3	Q4	FY		Q1	Q2	Q3	Q4	FY		Q1
Preferred Dividends/	- Basic	4	3	4	3	14	4	3	4	3	14	4
Other	- Diluted **	4	3	4	3	14	4	-	-	-	-	4
Weighted Average Shares	- Basic	255	255	251	236	249	229	224	220	215	222	213
	- Diluted **	257	258	254	239	252	233	235	231	227	233	213
Earnings Per Share	- Basic:
	Continuing operations	0.33	0.33	0.14	0.37	1.17	0.35	0.62	0.70	1.22	2.86	(0.03)
	Discontinued operations	(0.25)	0.09	0.20	0.19	0.23	0.22	0.17	0.29	2.56	3.17	-
	Total Basic Earnings (Loss) per Share		0.08	0.42	0.34	0.56	1.40		0.57	0.79	0.99	3.78	6.03		(0.03)
	- Diluted:
	Continuing operations	0.33	0.33	0.14	0.37	1.16	0.34	0.60	0.68	1.17	2.78	(0.03)
	Discontinued operations		(0.25)	0.09	0.20	0.19	0.22		0.21	0.17	0.28	2.44	3.02		-
	Total Diluted Earnings (Loss) per Share	0.08	0.42	0.34	0.56	1.38	0.55	0.77	0.96	3.61	5.80	(0.03)
Key Ratios - GAAP:
Gross Margins	- Sales	38.1%	36.0%	36.7%	36.0%	36.7%	37.8%	32.6%	35.8%	34.2%	35.0%	31.5%
	- Services/Maintenance/Rentals	40.8%	41.8%	41.4%	42.1%	41.5%	41.1%	42.5%	42.2%	46.1%	43.0%	40.9%
	- Financing	52.1%	51.5%	49.2%	50.0%	50.7%	49.2%	45.9%	45.0%	45.0%	46.3%	49.2%
	- Total	40.3%	40.0%	40.0%	40.0%	40.0%	40.2%	39.1%	40.0%	41.6%	40.3%	38.3%
SAG as a % of Revenue			26.2%	25.2%	25.1%	22.1%	24.6%	25.0%	22.8%	23.4%	20.9%	23.0%	29.1%
Tax Rate			31.0%	28.7%	78.5%	27.4%	45.0%	-13.7%	26.3%	29.6%	21.7%	21.8%	20.0%
Ending Xerox Employment			35,000	34,300	33,200	32,400	32,400	30,900	27,900	27,600	27,000	27,000	26,300

*Amounts have been revised to reflect discontinued operations reporting for FX and XIP.

**For those periods that exclude the preferred stock dividend the average shares for the calculations of diluted EPS include 7 million shares associated with our Series A or Series B convertible preferred stock.

Xerox Holdings Financial Model - Non-GAAP basis (unaudited)

		Non-GAAP basis is adjusted to exclude restructuring and related costs, amortization of intangible assets,
		transaction and related costs, non-serviceretirement-related costs as well as other discrete, unusual or infrequent
		items as described in our Non-GAAP Financial Measures section of our Quarterly Reports on Form 10-Q and our
							Annual Report on Form 10-K
(in $ millions, except per-share data)			2018							2019			2020
		Q1 *	Q2 *	Q3 *	Q4	FY			Q1 *	Q2 *	Q3 *	Q4	FY		Q1
Revenues
Sales	792	886	818	958	3,454	724	800	784	919	3,227	565
Services, maintenance and rentals	1,518	1,515	1,431	1,476	5,940	1,393	1,402	1,335	1,465	5,595	1,236
Financing	71	68	65	64	268	63	61	60	60	244	59
Total Revenues	2,381	2,469	2,314	2,498	9,662	2,180	2,263	2,179	2,444	9,066	1,860
Cost of Revenue
Cost of sales	490	567	518	613	2,188	450	539	503	605	2,097	387
Cost of services, maintenance and rentals	898	882	838	855	3,473	821	806	771	790	3,188	731
Cost of financing		34	33	33	32	132			32	33	33	33	131		30
Total Cost of Revenue		1,422	1,482	1,389	1,500	5,793			1,303	1,378	1,307	1,428	5,416		1,148
Gross Profit
Sales gross profit	302	319	300	345	1,266	274	261	281	314	1,130	178
Services, maintenance and rentals gross profit	620	633	593	621	2,467	572	596	564	675	2,407	505
Financing gross profit	37	35	32	32	136	31	28	27	27	113	29
Gross Profit	959	987	925	998	3,869	877	885	872	1,016	3,650	712
Research, development & engineering	100	101	102	94	397	92	88	100	93	373	84
Bad Debt Expense	13	12	10	1	36	13	12	13	8	46	74
Selling, administrative and general exp. (Excl Bad Debts)	612	609	571	551	2,343	533	505	497	504	2,039	467
Total Selling, administrative and general exp.	625	621	581	552	2,379	546	517	510	512	2,085	541
Non-financing interest expense	29	28	28	29	114	28	26	27	24	105	21
Aggregate Exchange losses / (gains)	(2)	1	3	3	5	2	-	4	1	7	2
All other, net		(22)	(14)	(7)	2	(41)			(4)	2	(22)	(10)	(34)		(4)
Total Other, net		5	15	24	34	78			26	28	9	15	78		19
Total Costs and Expenses		2,152	2,219	2,096	2,180	8,647			1,967	2,011	1,926	2,048	7,952		1,792
Income before Income Taxes & Equity Income	229	250	218	318	1,015	213	252	253	396	1,114	68
Income Taxes	65	67	54	88	274	56	67	69	99	291	20
Equity in Net Income of Unconsol. Affil.	2	2	2	2	8	2	2	1	3	8	2
Income from Continuing Operations	166	185	166	232	749	159	187	185	300	831	50
Less: Net Income attributable to Noncontrolling Interests	1	1	1	1	4	1	1	1	-	3	-
Net Income from Continuing Operations Attributable to Xerox Holdings	165	184	165	231	745	158	186	184	300	828	50

Xerox Holdings Financial Model - Non-GAAP basis (unaudited)

			Non-GAAP basis is adjusted to exclude restructuring and related costs, amortization of intangible assets,
			transaction and related costs, non-serviceretirement-related costs as well as other discrete, unusual or infrequent
			items as described in our Non-GAAP Financial Measures section of our Quarterly Reports on Form 10-Q and our
								Annual Report on Form 10-K
(in $ millions, except per-share data)			2018							2019			2020
			Q1 *	Q2 *	Q3 *	Q4	FY			Q1 *	Q2 *	Q3 *	Q4	FY		Q1
Earnings Per Share
	Continuing Operations:	0.62	0.69	0.64	0.94	2.88	0.66	0.79	0.80	1.33	3.55	0.21
	Preferred Dividends - Adjusted EPS **	-	-	-	-	-	-	-	-	-	-	4
	Adjusted Earnings per Share	0.62	0.69	0.64	0.94	2.88	0.66	0.79	0.80	1.33	3.55	0.21
	Adjusted Weighted Average Shares **	264	265	261	246	258	240	235	231	227	233	216
Key Ratios - Adjusted:
Gross Margins	- Sales	38.1%	36.0%	36.7%	36.0%	36.7%	37.8%	32.6%	35.8%	34.2%	35.0%	31.5%
	- Services/Maintenance/Rentals	40.8%	41.8%	41.4%	42.1%	41.5%	41.1%	42.5%	42.2%	46.1%	43.0%	40.9%
	- Financing	52.1%	51.5%	49.2%	50.0%	50.7%	49.2%	45.9%	45.0%	45.0%	46.3%	49.2%
	- Total	40.3%	40.0%	40.0%	40.0%	40.0%	40.2%	39.1%	40.0%	41.6%	40.3%	38.3%
Adjusted Operating Margin			9.8%	10.7%	10.5%	14.1%	11.3%	11.0%	12.4%	12.0%	16.8%	13.1%	11.0%
SAG as a % of Revenue			26.2%	25.2%	25.1%	22.1%	24.6%	25.0%	22.8%	23.4%	20.9%	23.0%	29.1%
Adjusted Effective Tax Rate	28.4%	26.8%	24.8%	27.7%	27.0%	26.3%	26.6%	27.3%	25.0%	26.1%	29.4%
Non-GAAP Adjustments:
Restructuring and related costs	28	33	29	67	157	112	37	27	53	229	41
Amortization of intangible assets	12	12	12	12	48	15	11	9	10	45	11
Non-serviceretirement-related costs	25	25	33	67	150	13	10	(2)	(3)	18	1
Contract termination costs - IT service provider	-	-	-	43	43	-	-	(8)	(4)	(12)	3
Transaction and related costs	38	58	(33)	5	68	-	4	4	4	12	17
Tax on adjusted items			(26)	(32)	(10)	(48)	(116)	(31)	(17)	(7)	(22)	(77)	(21)
US Tax Act			-	-	95	(6)	89	(35)	-	4	(4)	(35)	-
Total Non-GAAP Adjustments	77	96	126	140	439	74	45	27	34	180	52

*Amounts have been revised to reflect discontinued operations reporting for FX and XIP.

**For those periods that exclude the preferred stock dividend the average shares for the calculations of diluted EPS include 7 million shares associated with our Series A or Series B convertible preferred stock.

Xerox Holdings Financial Model (unaudited)

														2020 YOY
														CC %
(in $ millions)			2018						2019			2020	Change
	Q1	Q2	Q3	Q4	FY		Q1	Q2	Q3	Q4	FY		Q1	Q1
Revenue
Entry	53	62	56	66	237	53	52	49	63	217	40	(24.5)%
Mid-range	334	390	351	418	1,493	302	350	344	408	1,404	218	(27.3)%
High-end	92	100	94	137	423	89	97	96	139	421	64	(27.5)%
Other	5	4	8	8	25		4	5	5	6	20		3	(25.0)%
Total Equipment Revenue	484	556	509	629	2,178	448	504	494	616	2,062	325	(27.0)%
Americas	1,535	1,612	1,545	1,616	6,308	1,410	1,504	1,487	1,562	5,963	1,239	(12.1)%
EMEA	795	799	713	830	3,137	712	708	641	756	2,817	575	(19.2)%
Other	51	58	56	52	217	58	51	51	126	286	46	(20.7)%
Total Revenue	2,381	2,469	2,314	2,498	9,662	2,180	2,263	2,179	2,444	9,066	1,860	(14.7)%
Installs (1)
Entry A4 MFPs
Color	4%	21%	(8)%	11%	12%	10%	(12)%	10%	(2)%	0.3%	0.3%	(20)%
B&W	18%	21%	21%	9%	17%	(2)%	1%	(6)%	(9)%	(4)%	(4)%	2%
Mid-range
Color	16%	29%	8%	3%	10%	(7)%	(12)%	2%	(8)%	(7)%	(7)%	(26)%
B&W	11%	13%	19%	1%	8%	(19)%	(9)%	(20)%	(19)%	(17)%	(17)%	(14)%
High-end
Color	6%	(9)%	(17)%	(12)%	(9)%	(14)%	1%	12%	(12)%	(4)%	(4)%	(52)%
B&W	(9)%	(12)%	(3)%	(34)%	(18)%	(12)%	(33)%	(22)%	8%	(14)%	(14)%	(31)%

Notes:

(1) Entry installations exclude OEM sales; Mid-range and High-end color installations exclude Fuji Xerox digital front-end sales.

CC = Constant Currency