Xerox Corporation Debt decreased on 5.2% and Revenue decreased on 4.2%
01/29/2019 • About Xerox Corporation (
$XRX) • By InTwits
Xerox Corporation reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Xerox Corporation is a company in decline: 2018 revenue growth was -4.2%, 5 years revenue CAGR was -13.2%
- Xerox Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
- In the last 5 years the company invested considerably less than D&A: $491m vs. $2,845m. In 2018 this situation was still the same: CAPEX was 90 while D&A was 526
- The company has business model with low profitability: ROIC is 8.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.0x while industry average is -2.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Xerox Corporation's Revenue decreased on 4.2%. Revenue decline showed acceleration in 18Q4 - it was 7.8% YoY. Revenue followed a growing trend in the last 5 years. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 5.7 pp from 30.8% to 25.1% in FY2018. During 2014-2018 EBITDA Margin bottomed in 2016 at 12.4% and was growing since that time.
Gross Margin showed almost no change in 2018. SG&A as a % of Revenue showed almost no change in 2018. During the last 5 years SG&A as a % of Revenue topped in 2016 at 25.0% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During 2014-2018 SBC as a % of Revenue bottomed in 2015 at 0.24% and was growing since that time.
Net Income margin increased slightly on 1.8 pp from 1.9% to 3.7% in 2018. During 2014-2018 Net Income margin bottomed in 2016 at -4.4% and was growing since that time. The efficient tax rate was 41.6% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.92% in 2018. The company showed almost no change in CAPEX/Revenue from 2015 to 2018. For the last three years the average CAPEX/Revenue was 0.93%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Inventories as a % of Revenue decreased slightly on 0.59 pp from 8.9% to 8.3% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
Return on investment
The company operates at low ROIC (8.0%) and ROE (6.7%). ROIC showed almost no change in 2018. ROE increased on 3.1 pp from 3.7% to 6.7% in 2018. During the last 5 years ROE bottomed in 2016 at -6.9% and was growing since that time.
Leverage (Debt)
Debt level is 3.0x Net Debt / EBITDA and 3.8x Debt / EBITDA. Net Debt / EBITDA increased slightly on 0.016x from 3.0x to 3.0x in 2018. Debt decreased on 5.2% while cash dropped on 16.2%. Net Debt/EBITDA followed a declining trend at -0.2x per annum in 2014-2018.
Xerox Corporation has good short term financial stability: Interest coverage ratio (ICR) is 3.5x. Xerox Corporation has no short term refinancing risk: cash is higher than short term debt (112.8%).
Average interest expence charged on company's debt was 4.7% in 2018.
Valuation and dividends
Xerox Corporation's trades at EV/EBITDA 7.9x and P/E 19.1x.
The company paid 74.5% of Net Income as dividends in 2018. Dividends grew on average at -3.0% per annum in the last 5 years).
Management team
Giovanni Visentin "John" is a the company's CEO. Giovanni Visentin "John" is a founder and has spent 1 year with the company. CEO total compensation was
$30,247,600 in 2018 which included
$1,122,464 salary and
$2,000,000 annual bonus. The company's CFO is William F Osbourn Jr "Bill". William F Osbourn Jr "Bill" has 2 years tenure at the company.
The company has 4.9% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 32,400 employees. The number of employees decreased on 8.2%. Average revenue per employee in 2018 was
$303,395 and it increased on 4.3%.
Financial and operational results
FY ended 12/31/2018
Xerox Corporation ($XRX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 12,679 | 11,465 | 10,771 | 10,265 | 9,830 | -4.2% |
| Gross Profit | 5,110 | 4,582 | 4,261 | 4,127 | 3,927 | -4.8% |
| SG&A | 3,133 | 2,865 | 2,695 | 2,526 | 2,390 | -5.4% |
| EBITDA | 1,914 | 1,709 | 1,331 | 1,426 | 1,392 | -2.4% |
| EBIT | 1,275 | 1,119 | 768 | 899 | 866 | -3.7% |
| Interest expence | 366 | 346 | 309 | 252 | 244 | -3.2% |
| Tax | 198 | 193 | 62 | 481 | 257 | -46.6% |
| Net Income | 1,013 | 448 | -471 | 195 | 361 | 85.1% |
| Stock Based Compensation | 63 | 27 | 50 | 52 | 57 | 9.6% |
Balance Sheet
|
|---|
| Cash | 1,411 | 1,228 | 2,223 | 1,293 | 1,084 | -16.2% |
| Accounts Receivable | 2,652 | 1,068 | 961 | 1,357 | 1,276 | -6.0% |
| Inventory | 934 | 901 | 841 | 915 | 818 | -10.6% |
| Accounts Payable | 1,584 | 1,342 | 1,126 | 1,108 | 1,091 | -1.5% |
| Short Term Debt | 1,427 | 962 | 1,011 | 282 | 961 | 240.8% |
| Long Term Debt | 6,663 | 6,317 | 5,305 | 5,235 | 4,269 | -18.5% |
Cash flow
|
|---|
| Capex | 119 | 84 | 93 | 105 | 90 | -14.3% |
| Dividends | 313 | 326 | 331 | 291 | 269 | -7.6% |
| Acquisitions | 24 | 13 | 30 | 66 | | |
Ratios
|
|---|
| Revenue growth | -36.6% | -9.6% | -6.1% | -4.7% | -4.2% | |
| EBITDA growth | -30.3% | -10.7% | -22.1% | 7.1% | -2.4% | |
|
|---|
| Gross Margin | 40.3% | 40.0% | 39.6% | 40.2% | 39.9% | -0.3% |
| EBITDA Margin | 15.1% | 14.9% | 12.4% | 13.9% | 14.2% | 0.3% |
| EBIT Margin | 10.1% | 9.8% | 7.1% | 8.8% | 8.8% | 0.1% |
| SG&A, % of revenue | 24.7% | 25.0% | 25.0% | 24.6% | 24.3% | -0.3% |
| SBC, % of revenue | 0.5% | 0.2% | 0.5% | 0.5% | 0.6% | 0.1% |
| Net Income Margin | 8.0% | 3.9% | -4.4% | 1.9% | 3.7% | 1.8% |
| CAPEX, % of revenue | 0.9% | 0.7% | 0.9% | 1.0% | 0.9% | -0.1% |
|
|---|
| ROIC | 6.4% | 6.3% | 5.5% | 8.1% | 8.0% | -0.0% |
| ROE | 8.9% | 4.6% | -6.9% | 3.7% | 6.7% | 3.1% |
| Net Debt/EBITDA | 3.5x | 3.5x | 3.1x | 3.0x | 3.0x | 0.0x |
| Interest coverage ratio (ICR) | 3.5x | 3.2x | 2.5x | 3.6x | 3.5x | -0.0x |
| Interest expence / Average debt | 4.5% | 4.5% | 4.5% | 4.3% | 4.7% | 0.4% |
People
|
|---|
| Insider ownership | 4.9% | 4.9% | 4.9% | 4.9% | 4.9% | 0.0% |
| Employees | 143,600 | 143,600 | 37,600 | 35,300 | 32,400 | -8.2% |
| Revenue/Employee, th. $ | 88 | 80 | 286 | 291 | 303 | 4.3% |
Xerox Corporation ($XRX) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 2,435 | 2,510 | 2,352 | 2,533 | | -0.8% | -2.2% | -5.8% | -7.8% |
| EBITDA | 302 | 311 | 369 | 409 | | 30.7% | -21.5% | 5.4% | -8.9% |
| Net Income | 23 | 112 | 89 | 137 | | -42.5% | -32.5% | -50.3% | |
Balance Sheet
|
|---|
| Cash | 1,398 | 1,263 | 1,157 | 1,084 | | 33.8% | 1.4% | -35.0% | -16.2% |
| Short Term Debt | 678 | 412 | 410 | 961 | | 5,115.4% | -46.1% | -46.3% | 240.8% |
| Long Term Debt | 4,811 | 4,813 | 4,815 | 4,269 | | -3.5% | 8.2% | -8.0% | -18.5% |
Ratios
|
|---|
| Gross Margin | 39.8% | 39.9% | 40.1% | 40.0% | | 0.1% | -0.8% | -0.0% | -0.3% |
| EBITDA Margin | 12.4% | 12.4% | 15.7% | 16.1% | | 3.0% | -3.0% | 1.7% | -0.2% |
| Net Income Margin | 0.9% | 4.5% | 3.8% | 5.4% | | -0.7% | -2.0% | -3.4% | 12.3% |
Peers in Technology Hardware, Storage &
Below we provide Xerox Corporation benchmarking against other companies in Technology Hardware, Storage & industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crossroads Systems Inc ($CRSS) | | -90.6% | -35.5% | -89.5% | 39,959.5% |
| Immersion Corporation ($IMMR) | | 19.8% | -9.9% | -38.7% | 217.0% |
| Veritec Inc ($VRTC) | | -42.2% | -28.0% | -52.2% | 53.1% |
| Boxlight Corporation ($BOXL) | | -88.5% | 503.2% | 26.4% | 47.0% |
| Pure Storage, Inc. ($PSTG) | | 308.2% | 152.4% | 67.9% | 38.6% |
| |
|---|
| Median (30 companies) | -16.9% | -3.2% | -4.3% | 2.1% | 5.6% |
|---|
| Xerox Corporation ($XRX) | | -9.6% | -6.1% | -4.7% | -4.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Immersion Corporation ($IMMR) | 99.1% | 99.3% | 99.7% | 99.4% | 99.8% |
| Pure Storage, Inc. ($PSTG) | 43.5% | 55.5% | 61.9% | 65.9% | 65.5% |
| NetApp, Inc. ($NTAP) | 62.0% | 62.6% | 60.8% | 61.3% | 62.7% |
| Avid Technology, Inc. ($AVID) | 61.4% | 60.9% | 65.0% | 57.8% | 57.9% |
| Datasea Inc ($DTSS) | | | | 39.3% | 54.4% |
| |
|---|
| Median (29 companies) | 35.6% | 35.0% | 38.5% | 38.9% | 38.3% |
|---|
| Xerox Corporation ($XRX) | 40.3% | 40.0% | 39.6% | 40.2% | 39.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Immersion Corporation ($IMMR) | 12.3% | 9.0% | -25.1% | -127.0% | 48.6% |
| Apple Inc. ($AAPL) | 33.1% | 35.3% | 32.7% | 31.2% | 30.8% |
| Western Digital Corporation ($WDC) | 20.1% | 18.7% | 12.5% | 21.4% | 27.5% |
| NetApp, Inc. ($NTAP) | 16.9% | 16.7% | 11.3% | 15.4% | 22.9% |
| Seagate Technology PLC ($STX) | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% |
| |
|---|
| Median (29 companies) | 7.1% | 6.2% | 3.8% | 3.5% | 7.9% |
|---|
| Xerox Corporation ($XRX) | 15.1% | 14.9% | 12.4% | 13.9% | 14.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 6.6% | 6.4% | 10.8% | 10.9% | 9.6% |
| Pure Storage, Inc. ($PSTG) | 28.7% | 24.2% | 8.9% | 10.4% | 6.3% |
| 3D Systems Corporation ($DDD) | 3.5% | 3.4% | 2.6% | 4.8% | 5.9% |
| Apple Inc. ($AAPL) | 5.2% | 4.8% | 5.9% | 5.4% | 5.0% |
| Western Digital Corporation ($WDC) | 4.2% | 4.2% | 4.5% | 3.0% | 4.0% |
| |
|---|
| Median (29 companies) | 2.7% | 3.0% | 2.0% | 1.9% | 2.4% |
|---|
| Xerox Corporation ($XRX) | 0.9% | 0.7% | 0.9% | 1.0% | 0.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Avid Technology, Inc. ($AVID) | | | | | 252.4% |
| Ionix Technology Inc ($IINX) | | | | 23.9% | 204.5% |
| Immersion Corporation ($IMMR) | 7.6% | 5.8% | -21.5% | -138.9% | 96.8% |
| HP Inc. ($HPQ) | 8.0% | 8.7% | 15.8% | 60.8% | 72.9% |
| NetApp, Inc. ($NTAP) | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% |
| |
|---|
| Median (37 companies) | 5.9% | 5.0% | -2.6% | 0.2% | 2.2% |
|---|
| Xerox Corporation ($XRX) | 6.4% | 6.3% | 5.5% | 8.1% | 8.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CPI Card Group Inc. ($PMTS) | 3.4x | 3.5x | 5.8x | | 12.4x |
| NCR Corporation ($NCR) | 4.9x | 6.6x | 2.7x | 2.3x | 5.2x |
| Avid Technology, Inc. ($AVID) | -0.7x | 3.1x | 1.7x | 5.6x | 4.8x |
| Electronics for Imaging, Inc. ($EFII) | -0.2x | 1.4x | 1.3x | 1.6x | 1.7x |
| Hewlett Packard Enterprise Company ($HPE) | -0.1x | 1.1x | 0.4x | 1.2x | 1.6x |
| |
|---|
| Median (19 companies) | -0.4x | 0.3x | 0.1x | 0.2x | 0.2x |
|---|
| Xerox Corporation ($XRX) | 3.5x | 3.5x | 3.1x | 3.0x | 3.0x |
