Print giant Xerox reported $US1.78 billion of revenue in the fourth quarter, down 7.9% or $US153 million year-over-year. Full year 2021 revenue was up 0.2% year over year (down 1.4% in constant currency) to $US7.04 billion.
| "Ongoing challenges":
Xerox CEO John Visentin
"Our team’s focus and dedication drove improved results in 2021 despite ongoing challenges caused by the pandemic and global supply chain disruptions," said Xerox CEO John Visentin.
"Our ability to increase free cash flow, while investing for sustainable, long-term growth and improving our operations, highlights the quality of our team and strategy.
“We stood up Xerox Financial Services, CareAR and Innovation (PARC), while laying the foundation for growth in print, digital solutions and IT services. We look forward to sharing more detail about our long-term plans and strategies for monetizing our investments in growth at our Investor Day in February."
Xerox said in a statement: “Despite continued uncertainty associated with supply chain conditions and the pandemic, we are confident in our ability to deliver at least $7.1 billion of revenue in actual currency, and at least $400 million of free cash flow in 2022.
“Our confidence stems from strong demand for our products and services, and continued strength in correlations between in-office work and post-sale revenue. We expect growth will be weighted to the back half of the year, with revenue improving as supply chain conditions normalize and workers return to the office.
“We maintain our policy of returning at least 50% of annual free cash flow to shareholders. In recent years, we have delivered well in excess of that goal, but our current policy gives us the flexibility to pursue value accretive M&A and additional investments in innovation.”
Xerox added replies to ‘frequently asked questions’:
Do you expect supply chain conditions to improve in 2022?
Supply chain conditions did not materially improve in Q421, and we believe conditions will remain challenging for the first half of 2022. We are seeing improvement in certain freight and logistics-related costs, but product shortages continue to inhibit our ability to install ordered equipment, as evidenced by the growth of our backlog in Q4, to nearly $350 million. Supply chain visibility remains limited beyond one quarter due to the unpredictable nature of the pandemic. We expect supply chain disruptions to delay installations of higher margin mid and high-end equipment through the first half of 2022, with improvements beginning in the second half as more product becomes available.
Has the Omicron variant affected your outlook for return-to-office in 2022?
The Omicron variant has again delayed the return of workers to offices, and delays appear likely to extend into the first half of 2022. We continue to believe that a broader return of workers to the office in 2022 is a matter of when, not if. And for Xerox, the correlation between return-to-work trends, page volumes and post sale revenues remains strong, which suggests employees print when they return to the office and clients continue to value printing services. Our breadth of product offerings, suite of digital document workflow solutions and externally recognized security capabilities position us well to address evolving workplace requirements. For 2022, we expect workplace attendance and post sale revenue to begin improving in the second half of 2022.
How much progress have you made standing up XFS, Software and Innovation?
In 2021, we stood up Xerox Financial Services (XFS), CareAR and Innovation (PARC). Based on our efforts this year, we are positioned to begin reporting separate financial and non-financial information for each business in 2022, and the outlook for each is positive. At our investor day on February 23, we will share more detail about each business’s strategy and their respective pathways to monetization. We will also provide sufficient detail about these businesses to allow analysts and investors to value each component separately.
What assumptions underpin your 2022 guidance?
We expect supply chain and pandemic-related disruptions to continue affecting results through the first half of 2022. However, underlying demand for our print and services offerings remains healthy, page volumes are demonstrating positive momentum, and investments in new businesses are delivering results. Therefore, we expect revenue to grow to at least $7.1 billion in actual currency and free cash flow of at least $400 million in 2022. Our free cash flow guidance reflects the absence of non-recurring FUJIFULM Business royalty payments we received in 2021 and cash investments in our new businesses of approximately $200 million, an increase of about 50% over 2021 levels.