Research Update: Xerox Ratings Affirmed On Expectation For Margin Improvement And Low Adjusted Leverage In 2022

While Xerox Holdings Corp. faces supply chain constraints and slower print volume recovery, S&P Global Ratings expects gradual office reopenings to support steady more profitable post-sale revenues and margin improvements over the next few quarters. We forecast adjusted EBITDA margin of 7.2%-7.5%, annual free cash flow of about $350 million-$400 million and adjusted leverage in the 1.00x-1.25x range in 2022, remaining below our 2.5x downside trigger. Separately, Xerox provided additional disclosures for its customer financing operations, FITTLE. This information does not materially affect our captive finance adjustments in calculating the company's adjusted financials and credit metrics. We affirmed all our ratings on Xerox, including our 'BB' issuer credit rating on the company. The stable outlook reflects our expectation for steady

...- While Xerox Holdings Corp. faces supply chain constraints and slower print volume recovery, S&P Global Ratings expects gradual office reopenings to support steady more profitable post-sale revenues and margin improvements over the next few quarters. - We forecast adjusted EBITDA margin of 7.2%-7.5%, annual free cash flow of about $350 million-$400 million and adjusted leverage in the 1.00x-1.25x range in 2022, remaining below our 2.5x downside trigger. - Separately, Xerox provided additional disclosures for its customer financing operations, FITTLE. This information does not materially affect our captive finance adjustments in calculating the company's adjusted financials and credit metrics. - We affirmed all our ratings on Xerox, including our '##' issuer credit rating on the company. - The stable outlook reflects our expectation for steady margin recovery over the next year, maintenance of low adjusted leverage below 1.5x, and ample liquidity, allowing some cushion for shareholder returns...

Research Update