Research Update: Xerox Holdings Corp. Downgraded To 'B+' From 'BB-' On Transformation Plan Execution Challenges; Outlook Negative

Xerox Holdings Corp. experienced weaker-than-expected performance in the third quarter and revised its 2024 guidance downwards for a second time due to several factors including a slower improvement in sales productivity. We now expect negative core free operating cash flow (FOCF) of about $100 million this year, excluding inflows from a strategic run-off of its finance receivables portfolio. We also now expect a steeper 10% decline in reported revenues and lower EBITDA margins of 8% in 2024 resulting in S&P Global Ratings-adjusted leverage of about 6x pro forma the acquisition of ITsavvy and no longer netting available cash. With continued secular print market challenges and a series of issues executing its Reinvention transformation plan, we take a less favorable view

...- Xerox Holdings Corp. experienced weaker-than-expected performance in the third quarter and revised its 2024 guidance downwards for a second time due to several factors including a slower improvement in sales productivity. We now expect negative core free operating cash flow (FOCF) of about $100 million this year, excluding inflows from a strategic run-off of its finance receivables portfolio. - We also now expect a steeper 10% decline in reported revenues and lower EBITDA margins of 8% in 2024 resulting in S&P Global Ratings-adjusted leverage of about 6x pro forma the acquisition of ITsavvy and no longer netting available cash. With continued secular print market challenges and a series of issues executing its Reinvention transformation plan, we take a less favorable view on the business's credit profile. - We therefore lowered our issuer credit rating on Xerox to 'B+' from '##-'. We also lowered our issue-level ratings on its senior secured term loan to '##' from '##+' and on its senior...

Research Update