Research Update: Xerox Holdings Corp. Outlook Revised To Stable From Negative On Improved Margins And Cash Flows; 'BB' Rating Affirmed

U.S.-based printer technology and services company Xerox Holdings Corp.'s profit margins and free operating cash flow (FOCF) generation have improved, and the company raised its 2023 guidance after second quarter earnings. The improvements over recent quarters and the updated guidance, helped by steady operating performance and execution on cost efficiencies, are better than we previously expected. We therefore expect EBITDA margins to improve to about 10% in 2023, while reported revenue growth remains flat. Despite a recent $555 million bridge term loan to fund the repurchase of shares held by Carl Icahn and his affiliates, we expect S&P Global Ratings-adjusted debt to EBITDA to be around 2x by year-end, which is well below our downgrade trigger of about 3x. We

...- U.S.-based printer technology and services company Xerox Holdings Corp.'s profit margins and free operating cash flow (FOCF) generation have improved, and the company raised its 2023 guidance after second quarter earnings. The improvements over recent quarters and the updated guidance, helped by steady operating performance and execution on cost efficiencies, are better than we previously expected. - We therefore expect EBITDA margins to improve to about 10% in 2023, while reported revenue growth remains flat. Despite a recent $555 million bridge term loan to fund the repurchase of shares held by Carl Icahn and his affiliates, we expect S&P Global Ratings-adjusted debt to EBITDA to be around 2x by year-end, which is well below our downgrade trigger of about 3x. We also expect full-year core FOCF generation (excluding the receivables funding agreement benefit) of at least $400 million. - We revised our outlook on Xerox to stable from negative and affirmed our '##' issuer credit rating....

Research Update