October 23, 2018
North America Operations Colleagues,
Earlier today, CEO John Visentin reported our third-quarter earnings results
and shared the progress we are making against our strategic priorities for rebuilding Xerox into a tech powerhouse. I would like to share highlights of our North America Operations (NAO) third-quarter performance and areas of focus in the fourth-quarter to ensure we meet our financial commitments to the company.
Our third-quarter performance
In NAO our performance fell short of expectations as we experienced softness on revenue and profit challenges. Improving our performance in both areas will be critical to delivering a strong fourth-quarter and year-end close. Here is a summary of our performance:
- Equipment sale revenue (ESR) was flat year-over-year due to pricing pressures in the public sector, channels inventories and deals slipping to the fourth quarter. U.S. Enterprise had a good quarter with 9.0 percent growth.
- Strong install unit activity in entry of 9 percent growth year-over-year and mid-range of 7 percent growth year-over-year.
- Improvement of 6 percent in selling, general and administrative (SG&A) expenses driven by continued and expanded focus on costs improvement and expenses.
- Signed big, exciting deals with Virginia Information Technologies Agency ($34M new business), DowDuPont ($24M global renewal), Prudential ($19M renewal) and Southern Alberta Institute of Technology ($14M renewal) to name a few.
- Profit declined 8.5 percent year-over-year driven by a shortfall in post-sale revenue coupled with lower equipment gross margin. Global Imaging Systems (GIS) had a good quarter with 3.5 percent profit growth.
Our shared services teams continue to contribute to the performance of our go-to-market units:
- The U.S. Production Color Sales team delivered a big quarter in Production Inkjet, 8 orders and 4 installs, and are gaining traction with the multi-unit sales strategy with the Brenva/Rialto. We are expecting every Tiger to be on the leaderboard with iGen or Iridesse orders in the fourth-quarter, supported by pricing actions.
- The NAO Commercial Excellence team contributed to our results through strategic capture center support of key wins; improving our new business win rate to 44 percent, driving programs to enhance office performance and positioning coverage and compensation toward market and profit targets.
o Key launches included Xerox® Managed Print Services for the U.S. Federal Government (FedRAMP) and Iridesse white toner and extra-long sheet upgrade at PRINT 18.
o Completed successful Production Blitz Day series with separate blitzes held for iGen, Iridesse, Versant and Production Inkjet.
o Within the Xerox Digital Sales team, Enterprise installs pushed to 11 percent positioning for an even stronger fourth-quarter with continued development of sales capabilities and telesales as a service.
- The U.S. Delivery team continued aggressive cost management focus, resulting in 7.1 percent lower spend year-over-year, which was driven by several initiatives resulting in lower labor, parts, freight and supplies costs. As seasonal service activity declines and as customer service engineers (CSE’s) productivity increases throughout the fourth-quarter, levels of service are expected to improve. Workstreams established to accelerate the progression towards a One Xerox Service model.
Our Priorities: The path to profitable revenue growth
Improving our top line revenue performance, signings and retention rates, while ensuring a disciplined approach to cost management is imperative for achieving our total revenue and profit commitments in the fourth-quarter. We also need to improve our cash metrics by increasing our focus on accounts receivables, payables and inventory management. Within our organization we will continue to look across our business for ways to improve how we do things today to deliver profitable revenue growth and provide an exceptional customer and partner experience.
The good news is that we have a great product portfolio and robust innovation capabilities that are consistently recognized and well-received by our customers and partners. In fact, we lead the market in A3, we lead the market in production color and we recently earned the leadership position in the ninth consecutive Quocirca Managed Print Services Market Landscape Report. Our new ConnectKey apps are demonstrating once again how we’re driving digital transformation for our customers and partners. And, we had a strong showing at PRINT 18
, North America’s premier event for graphic communications and production print, generating a great pipeline for the fourth-quarter.
As we approach the end of the year, the fourth-quarter is OUR quarter to overachieve and deliver our commitments. We rallied together last year and delivered tremendous results. I know we can do it again this year. We have a lot to be proud of – let’s make sure our customers and partners recognize we are their partner of choice when it comes to helping them connect, communicate and work, so they can be more productive and profitable.
I will share more about our state of the business and answer your questions during our next NAO employee webcast
, which will broadcast live from the Bldg. 334 Cafeteria, which is connected to Bldg. 200, in Webster, New York on Monday, October 29 at 4:00 pm ET.
On behalf of the entire NAO senior leadership team, thank you for your hard work in the third-quarter. I am proud of our accomplishments, especially at a time where we are moving with speed and rebuilding our company.
Regards,
Mike Feldman
President, North America Operations
Xerox Corporation
Office: 212.716.4418
Mobile: 323.470.8828