Norwalk, Conn. – Xerox Corporation announced today first-quarter 2011 results that include adjusted earnings per share of 23 cents. Adjusted EPS excludes 4 cents related to amortization of intangibles, resulting in GAAP EPS of 19 cents.
"Our results in the quarter reflect solid progress in scaling our services business while maintaining our leadership in document technology," said Ursula Burns, chairman and chief executive officer, Xerox Corporation. "Steady revenue growth and our continued sharp focus on operational improvements resulted in a 28 percent increase in adjusted earnings. It's a good start to the year."
First-quarter revenue of nearly $5.5 billion was up 2 percent on a pro-forma basis with ACS in the company's results. Revenue from technology, representing the sale of document systems, supplies, technical service and financing of products, was flat. Revenue from services was up 5 percent on a pro-forma basis, and represents the company's business process, IT and document outsourcing offerings. Signings for Xerox's services totaled $3 billion in the first quarter and were up 3 percent on a trailing 12-month basis.
"In the past year, we transformed not only our business into a leading player in the services space, but also our business model with growth largely driven from an increasing annuity stream," added Burns. "Multi-year, multimillion dollar services contracts generate long-term revenue. And, we fueled this annuity in the first quarter through growth in both services revenue and signings while building a strong pipeline for future business.
"We continue to hold the number-one revenue market share position for document technology, and strengthened this position during the first quarter with a 27 percent increase in installs of our mid-range color systems and 19 percent growth in high-end color systems," said Burns. "This positive performance – in technology and services – is the result of our differentiation in the marketplace, the benefits of our diverse portfolio, and the increasing trust our clients place in us so they can focus more time and resources on their core business."
First-quarter gross margin was 33 percent, and selling, administrative and general expenses were 20.5 percent of revenue. On a pro-forma basis, operating margin of 9.1 percent was up nearly one point from first-quarter 2010.
The company used $30 million in operating cash during the first quarter primarily due to the seasonality of working capital. Xerox reiterated its expectations to deliver $2.5 billion in full-year operating cash and $1.9 billion of free cash flow. The company expects $1 billion to $1.2 billion in available cash for 2011.
Xerox also commented on the business impact from the earthquake in Japan. "We are focused intently on minimizing any disruption in providing products and supplies to our customers," said Burns. "Due to increasing costs and uncertainties in supply chain issues along with the pressure on Fuji Xerox's business in Japan, we're taking the prudent approach to provide a broader range than usual for our second-quarter earnings expectations. We remain committed to delivering on our full-year guidance."
Xerox expects second-quarter 2011 GAAP earnings of 18 to 21 cents per share. Second-quarter adjusted EPS is expected to be 23 to 26 cents per share.
Full-year 2011 GAAP earnings are expected to be 89 to 94 cents per share. Full-year adjusted earnings are expected to be $1.05 to $1.10 per share.