Xerox Corporation announced today third-quarter 2011 results that include adjusted earnings per share of 26 cents, up 18 percent from third-quarter 2010. Adjusted EPS excludes 4 cents related to the amortization of intangibles, resulting in GAAP EPS of 22 cents.
"We delivered steady revenue growth this quarter along with earnings and cash in line with our expectations," said Ursula Burns, Xerox chairman and chief executive officer. "Our consistent performance positions us well to grow full-year adjusted EPS by 15 to 18 percent, reflecting our global strengths in business process and document management and the efficiencies we're driving across our enterprise."
Third-quarter revenue of $5.6 billion was up 3 percent or 1 percent in constant currency. Revenue from technology, representing the sale of document systems, supplies, technical service and financing of products, was up 1 percent or down 1 percent in constant currency. "Supply constraints due to the natural disaster in Japan have eased considerably," noted Burns. "As we continue to meet new demand, all while reducing our backlog, we're confident these challenges are entirely behind us."
Revenue from services was up 6 percent or 5 percent in constant currency, reflecting growth in business process and document outsourcing, while revenue from IT outsourcing was flat. Signings for Xerox's services were very strong, totaling $3.9 billion in the third quarter – an increase of 33 percent from third quarter 2010, and down 9 percent on a trailing 12-month basis due to the cyclicality of large deals.
"Our services-led, technology-driven approach gives us a competitive advantage in the many markets we serve, especially as businesses and governments seek more efficient ways to run their operations and turn to Xerox for the long term benefits of our outsourcing expertise," said Burns.
"Backed by a growing pipeline, our increasing services signings boost our annuity stream and contribute to a strong revenue base. Notable in the quarter was 12 percent revenue growth in our document outsourcing business as we continue to lead the industry with our broad-based managed print services, and 6 percent growth in business process outsourcing.
"As demand increased for services, we did see an impact on gross margin, which we continued to offset with cost reductions and operational improvements that helped deliver solid bottom-line results," she added.
Third-quarter gross margin was 32.7 percent, and selling, administrative and general expenses were 19.9 percent of revenue. Operating margin of 9.6 percent was up 0.4 points from third-quarter 2010.
Xerox generated $366 million in operating cash flow during the third quarter. As planned, the company resumed its stock buyback program during the third quarter, repurchasing $309 million in Xerox shares with approximately $400 million more expected in the fourth quarter.
Xerox expects fourth-quarter 2011 GAAP earnings per share of 28 cents to 31cents, resulting in full-year GAAP earnings per share of 92 cents to 95 cents. Fourth-quarter adjusted EPS is expected to be 32 cents to 35 cents per share, delivering full-year adjusted EPS of $1.08 to $1.11.