Lexmark International released its Q3 earnings after market close on October 27th. The company posted a 6% decline (flat in constant currency) in revenues to $868 million, even as its high-value managed printer services and Perceptive software businesses (including the recently acquired Kofax) delivered 28% growth (37% in constant currency). The most encouraging news in the announcement was that the higher value business revenue exceeded an annualized $1.5 billion and makes up 43% of total revenues. It’s imaging solutions and services revenues declined by 16%. Within the ISS division, managed print services revenue grew by 1% year over year to $207 million; non-MPS revenue declined by 18% to $465 million as softness in laser hardware and supplies persisted in Q3. Additionally, Lexmark’s Perceptive software division continued to post growth as revenues grew by 92% to $165 million.
However, Lexmark shares fell 12% to $30.92 at the close in New York as its gross profit margins declined by over 290 basis points sequentially due to currency headwinds and lower margins for its printer hardware and supplies. Furthermore, the guidance for Q4 suggests that demand for printers will continue to lag. This dampened investor sentiments further. In this note, we review Lexmark’s earnings. read more here