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), boosted 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, a decrease of $0.09 year-over-year; adjusted loss per share was $0.43, down $0.37 from the previous year.
• Free Cash Flow: A use of $165 million for the quarter, consistent with seasonal expectations, with expectations for substantial cash flow generation in the latter half of the year.
• Debt: Total debt stood at $4.4 billion, with gross leverage at 7x trailing 12 months EBITDA.

2. Strategic Updates and Business Highlights

• Leadership Transition: Louie Pastor emphasized a disciplined approach to leadership, focusing on operational efficiency and accountability.
• Strategic Focus: The company is prioritizing three main objectives: stabilizing revenue, increasing profitability, and reducing leverage.
• Market Positioning: Xerox is shifting its focus towards entry-level and production markets while acknowledging ongoing challenges in the midrange segment.
• Partnerships: A new partnership with Toshiba Americas to sell Xerox-branded devices was highlighted as a validation of Xerox's product strength.
• IT Solutions Growth: Bookings grew 32% and billings grew 21%, indicating strong demand for managed services contracts.

3. Forward Guidance and Outlook

• 2026 Financial Guidance: Xerox reaffirmed its revenue guidance of over $7.5 billion and adjusted operating income expectations of $450 million to $500 million, driven by integration synergies and transformation savings.
• Cash Flow Expectations: Anticipated free cash flow of approximately $250 million, with expectations for significant cash flow generation in the latter half of the year.

4. Bad News, Challenges, or Points of Concern

• Memory Costs: Extended lead times and higher prices for memory components are expected to compress margins, particularly in IT Solutions.
• Market Headwinds: The company continues to face secular challenges in the print market, particularly in the midrange segment, which remains soft.
• Tariff Impacts: While a recent Supreme Court ruling on tariffs is seen as beneficial, rising memory and oil prices may offset these gains.
• Free Cash Flow Usage: The first quarter traditionally sees a cash use, which may impact liquidity in the short term.

5. Notable Q&A Insights

• Focus on Strategy: Pastor reiterated that the existing strategy remains unchanged, emphasizing rigorous execution on the three priorities.
• Midrange Market: The midrange segment is acknowledged as a challenge, with the focus shifting to entry and production areas for growth.
• Cost Management: The leadership is actively managing costs and shaping customer demand in response to memory price increases.
• Revenue Seasonality: Revenue is expected to follow a seasonal pattern, with the fourth quarter typically being the strongest due to increased sales.

Overall, Xerox is showing signs of improvement in its financial performance and strategic direction, but it faces ongoing challenges in certain market segments and cost pressures. The leadership's focus on disciplined execution and operational efficiency is aimed at stabilizing revenue and enhancing profitability moving forward.