XRX — Xerox Holdings Corporation

Summary of Xerox Holdings Corporation Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Revenue: $1.85 billion, a 27% increase year-over-year (24% in constant currency), primarily driven by the Lexmark acquisition. On a pro forma basis, revenue declined 4%, an improvement from a 9% decline in Q4 2025.
• Adjusted Operating Margin: 3.9%, up 240 basis points year-over-year, marking the first increase in five quarters.
• GAAP Loss Per Share: $0.84, down $0.09 year-over-year; adjusted loss per share was $0.43, better than the consensus estimate of negative $0.27.
• Free Cash Flow: A use of $165 million, consistent with seasonal expectations, with a forecast of approximately $250 million for the year.
• Total Debt: $4.4 billion, with gross leverage at 7x trailing 12 months EBITDA.

2. Strategic Updates and Business Highlights:

• Leadership Transition: Louie Pastor has taken over as CEO, emphasizing a disciplined approach focused on stabilizing revenue, increasing profitability, and reducing leverage.
• Market Strategy: Xerox is shifting focus to entry-level and production segments while acknowledging ongoing challenges in the midrange market.
• IT Solutions Growth: Bookings grew 32% and billings increased 21%, indicating strong demand for managed services contracts.
• Partnerships: A new partnership with Toshiba Americas to sell Xerox-branded devices is expected to enhance distribution reach.
• Operational Changes: A unified go-to-market strategy has been implemented to streamline operations and improve accountability.

3. Forward Guidance and Outlook:

• 2026 Financial Guidance: Revenue expected to exceed $7.5 billion, with adjusted operating income projected between $450 million and $500 million, driven by integration synergies from Lexmark.
• Leverage Reduction: Expected to decrease gross and net leverage by approximately 1.5x by year-end 2026, targeting 5.6x and 4.5x trailing 12 months EBITDA, respectively.

4. Challenges and Points of Concern:

• Memory Costs: Extended lead times and rising prices are impacting margins, particularly in IT Solutions, although the company is managing customer demand accordingly.
• Market Headwinds: Despite improvements, the print market faces secular declines, and the midrange segment remains soft.
• Cash Flow Pressure: Operating cash flow was a use of $144 million, reflecting typical seasonal patterns, with expectations for stronger cash generation in the latter half of the year.

5. Notable Q&A Insights:

• Strategic Focus: Pastor reiterated that the strategy remains unchanged but will be executed with greater rigor and focus on the three priorities.
• Midrange Market: While still a profitable segment, the midrange market is less emphasized compared to entry and production, which are seen as growth areas.
• Cost Management: The company is working to pass on increased memory costs to customers but is also shaping demand to mitigate impacts on buying patterns.
• Seasonality in Revenue: Revenue is expected to be stronger in the second half of the year, particularly in IT Solutions, aligning with historical trends.

Overall, Xerox's Q1 2026 results indicate a positive trajectory with improved financial metrics and strategic focus, although challenges remain in certain market segments and cost pressures.