Xerox Corporation reports 85.8% Net Income decline in 2020 and 5.7 pp EBITDA Margin decline from 15.2% to 9.5%
01/26/2021 • About Xerox Corporation (
$XRX) • By InTwits
Xerox Corporation reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Xerox Corporation is a company in decline: FY2020 revenue growth was -22.5%, 5 years revenue CAGR was -9.3%
- 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: $427m vs. $1,616m
- The company has potentially unprofitable business model: ROIC is 2.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.7x while industry average is -0.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 22.5%. Annual revenue decline showed slowdown in FY20Q4 - revenue dropped on 21.0%. During FY2016-FY2020 Revenue growth topped in FY2018 at -4.2% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 5.7 pp from 15.2% to 9.5% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2019 at 15.2%.
Gross Margin decreased on 2.9 pp from 40.3% to 37.4% in FY2020. SG&A as a % of Revenue increased on 3.4 pp from 23.0% to 26.4% in FY2020. During the last 5 years SG&A as a % of Revenue bottomed in FY2019 at 23.0%.
Net Income margin dropped on 12.2 pp from 14.9% to 2.7% in FY2020. During the last 5 years Net Income margin topped in FY2019 at 14.9%.
Investments (CAPEX, working capital and M&A)
In FY2020 Xerox Corporation had CAPEX/Revenue of 1.1%. CAPEX/Revenue showed almost no change from FY2017 to FY2020. Average CAPEX/Revenue for the last three years was 0.90%.
Return on investment
The company operates at low ROIC (2.9%) and ROE (3.2%). ROIC decreased on 5.1 pp from 8.0% to 2.9% in FY2020. ROE dropped on 21.8 pp from 25.0% to 3.2% in FY2020. During the last 5 years ROIC topped in FY2017 at 8.1% and was declining since that time. During the last 5 years ROE topped in FY2019 at 25.0%.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.7x and Debt / EBITDA is 6.7x. Net Debt / EBITDA jumped on 1.4x from 1.4x to 2.7x in FY2020. Debt decreased on 4.0% while cash decreased on 4.2%.
Xerox Corporation has no short term refinancing risk: cash is higher than short term debt (666.2%).
Valuation and dividends
The company's trades at EV/EBITDA 9.0x and P/E 21.7x.
Management team
The company's CEO is Giovanni Visentin "John". Giovanni Visentin "John" has 1 year tenure with the company. Xerox Corporation's CFO Xavier Heiss has spent 2 months years with the company.
Financial and operational results
Xerox Corporation ($XRX) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 10,771 | 10,265 | 9,830 | 9,066 | 7,022 | -22.5% |
| Gross Profit | 4,261 | 4,127 | 3,927 | 3,650 | 2,626 | -28.1% |
| SG&A | 2,695 | 2,526 | 2,390 | 2,085 | 1,851 | -11.2% |
| EBITDA | 1,331 | 1,426 | 1,392 | 1,376 | 665 | -51.7% |
| EBIT | 768 | 899 | 866 | | | |
| Interest expence | 309 | 252 | 244 | | | |
| Tax | 62 | 481 | 257 | | | |
| Net Income | -471 | 195 | 361 | 1,353 | 192 | -85.8% |
| Stock Based Compensation | 50 | 52 | 57 | | | |
Balance Sheet
|
|---|
| Cash | 2,223 | 1,293 | 1,084 | 2,740 | 2,625 | -4.2% |
| Accounts Receivable | 961 | 1,357 | 1,276 | | | |
| Inventory | 841 | 915 | 818 | | | |
| Accounts Payable | 1,126 | 1,108 | 1,091 | | | |
| Short Term Debt | 1,011 | 282 | 961 | 1,136 | 394 | -65.3% |
| Long Term Debt | 5,305 | 5,235 | 4,269 | 3,493 | 4,050 | 15.9% |
Cash flow
|
|---|
| Capex | 93 | 105 | 90 | 65 | 74 | 13.8% |
| Dividends | 331 | 291 | 269 | | | |
| Acquisitions | 30 | 66 | | | | |
Ratios
|
|---|
| Revenue growth | -6.1% | -4.7% | -4.2% | -7.8% | -22.5% | |
| EBITDA growth | -22.1% | 7.1% | -2.4% | -1.1% | -51.7% | |
|
|---|
| Gross Margin | 39.6% | 40.2% | 39.9% | 40.3% | 37.4% | -2.9% |
| EBITDA Margin | 12.4% | 13.9% | 14.2% | 15.2% | 9.5% | -5.7% |
| EBIT Margin | 7.1% | 8.8% | 8.8% | | |
| SG&A, % of revenue | 25.0% | 24.6% | 24.3% | 23.0% | 26.4% | 3.4% |
| SBC, % of revenue | 0.5% | 0.5% | 0.6% | | |
| Net Income Margin | -4.4% | 1.9% | 3.7% | 14.9% | 2.7% | -12.2% |
| CAPEX, % of revenue | 0.9% | 1.0% | 0.9% | 0.7% | 1.1% | 0.3% |
|
|---|
| ROIC | 5.5% | 8.1% | 8.0% | 8.0% | 2.9% | -5.1% |
| ROE | -6.9% | 3.7% | 6.7% | 25.0% | 3.2% | -21.8% |
| Net Debt/EBITDA | 3.1x | 3.0x | 3.0x | 1.4x | 2.7x | 1.4x |
| Interest coverage ratio (ICR) | 2.5x | 3.6x | 3.5x | | |
| Interest expence / Average debt | 4.9% | 4.3% | 4.5% | | | |
People
|
|---|
| Insider ownership | 4.9% | 4.9% | 4.9% | | | |
| Employees | 37,600 | 35,300 | 32,400 | | | |
| Revenue/Employee, th. $ | 286 | 291 | 303 | | | |
Xerox Corporation ($XRX) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,860 | 1,465 | 1,767 | 1,930 | | -14.7% | -35.3% | -19.7% | -21.0% |
| EBITDA | 140 | 150 | 194 | 229 | | -46.8% | -54.8% | -46.4% | -51.3% |
| Net Income | -2 | 27 | 90 | 77 | | -101.5% | -85.1% | -59.3% | -90.6% |
Balance Sheet
|
|---|
| Cash | 2,622 | 2,272 | 3,242 | 2,625 | | 262.7% | 219.1% | 251.6% | -4.2% |
| Short Term Debt | 1,136 | 1,879 | 1,304 | 394 | | 74.2% | 96.1% | -22.8% | -65.3% |
| Long Term Debt | 3,500 | 2,454 | 4,100 | 4,050 | | -22.8% | -41.8% | 18.3% | 15.9% |
Ratios
|
|---|
| Gross Margin | 38.3% | 38.5% | 36.8% | 36.2% | | -1.9% | -0.6% | -3.2% | -5.4% |
| EBITDA Margin | 7.5% | 10.2% | 11.0% | 11.9% | | -4.5% | -4.4% | -5.5% | -7.4% |
| Net Income Margin | -0.1% | 1.8% | 5.1% | 4.0% | | -6.2% | -6.2% | -5.0% | -29.5% |
Peers in Technology Hardware, Storage & Peripherals
Below we provide Xerox Corporation benchmarking against other companies in Technology Hardware, Storage & Peripherals 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Ionix Technology Inc ($IINX) | - | 246.0% | -5.8% | 92.3% | 66.8% |
| Veritec Inc ($VRTC) | - | -52.2% | 53.1% | -38.5% | 42.9% |
| Pure Storage, Inc. ($PSTG) | - | 67.9% | 38.6% | 32.7% | 20.9% |
| USA Technologies, Inc. ($USAT) | - | 34.5% | - | - | 12.9% |
| CPI Card Group Inc. ($PMTS) | - | -17.4% | 0.4% | 8.7% | 12.3% |
| |
|---|
| Median (20 companies) | 1.4% | 2.1% | 5.6% | -2.0% | -8.8% |
|---|
| Xerox Corporation ($XRX) | - | -4.7% | -4.2% | -7.8% | -22.5% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Immersion Corporation ($IMMR) | 99.7% | 99.4% | 99.8% | 99.5% | 99.4% |
| Datasea Inc ($DTSS) | - | 39.3% | 54.4% | - | 89.7% |
| Pure Storage, Inc. ($PSTG) | 61.9% | 65.9% | 65.5% | 66.4% | 69.0% |
| Avid Technology, Inc. ($AVID) | 65.0% | 57.8% | 57.9% | 60.5% | 63.3% |
| Socket Mobile, Inc. ($SCKT) | 50.2% | 53.5% | 51.4% | 52.5% | 53.1% |
| |
|---|
| Median (21 companies) | 38.5% | 38.9% | 38.3% | 32.7% | 38.2% |
|---|
| Xerox Corporation ($XRX) | 39.6% | 40.2% | 39.9% | 40.3% | 37.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Apple Inc. ($AAPL) | 32.7% | 31.2% | 30.8% | 29.4% | 28.7% |
| CPI Card Group Inc. ($PMTS) | 14.9% | -0.0% | 9.0% | 15.2% | 17.9% |
| Immersion Corporation ($IMMR) | -25.1% | -127.0% | 48.6% | -50.4% | 17.4% |
| Avid Technology, Inc. ($AVID) | 17.5% | 6.6% | 8.4% | 13.5% | 13.6% |
| Western Digital Corporation ($WDC) | 12.5% | 21.4% | 27.5% | 11.5% | 11.7% |
| |
|---|
| Median (19 companies) | 3.8% | 3.5% | 7.9% | 7.7% | 7.6% |
|---|
| Xerox Corporation ($XRX) | 12.4% | 13.9% | 14.2% | 15.2% | 9.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Datasea Inc ($DTSS) | - | 0.0% | 0.0% | - | 20.9% |
| Hewlett Packard Enterprise Company ($HPE) | 10.8% | 10.9% | 9.6% | 9.8% | 8.8% |
| Pure Storage, Inc. ($PSTG) | 8.9% | 10.4% | 6.3% | 7.4% | 5.3% |
| Stratasys, Ltd. ($SSYS) | 6.7% | 3.3% | 3.5% | 3.5% | 5.2% |
| Western Digital Corporation ($WDC) | 4.5% | 3.0% | 4.0% | 5.3% | 3.9% |
| |
|---|
| Median (19 companies) | 2.0% | 1.9% | 2.4% | 2.3% | 2.3% |
|---|
| Xerox Corporation ($XRX) | 0.9% | 1.0% | 0.9% | 0.7% | 1.1% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| HP Inc. ($HPQ) | 15.8% | 60.8% | 72.9% | 116.0% | 109.2% |
| Apple Inc. ($AAPL) | 27.0% | 23.8% | 28.0% | 29.5% | 33.0% |
| Avid Technology, Inc. ($AVID) | - | - | 252.4% | 42.1% | 30.0% |
| CPI Card Group Inc. ($PMTS) | 12.8% | -9.3% | 2.7% | 15.4% | 20.5% |
| NCR Corporation ($NCR) | 13.9% | 16.3% | 4.6% | 14.3% | 5.5% |
| |
|---|
| Median (21 companies) | -2.6% | 0.2% | 2.2% | 2.9% | 2.0% |
|---|
| Xerox Corporation ($XRX) | 5.5% | 8.1% | 8.0% | 8.0% | 2.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Diebold Nixdorf Incorporated ($DBD) | - | 8.3x | - | 6.6x | 7.3x |
| CPI Card Group Inc. ($PMTS) | 5.8x | - | 12.4x | 7.2x | 5.2x |
| Hewlett Packard Enterprise Company ($HPE) | 0.4x | 1.2x | 1.6x | 2.6x | 5.2x |
| NCR Corporation ($NCR) | 2.7x | 2.3x | 5.2x | 3.3x | 4.8x |
| Western Digital Corporation ($WDC) | 5.5x | 1.7x | 1.1x | 3.7x | 3.5x |
| |
|---|
| Median (11 companies) | 0.1x | 0.2x | 0.2x | 1.7x | 3.3x |
|---|
| Xerox Corporation ($XRX) | 3.1x | 3.0x | 3.0x | 1.4x | 2.7x |
