Executive Summary

Q1 2025 revenue was $1.46B, down 3.0% year over year (1.1% constant currency), with adjusted operating margin at 1.5% and adjusted EPS of $(0.06); GAAP EPS was $(0.75) driven by a $59M tax valuation allowance and $14M financing charges .
Guidance maintained: FY25 low-single-digit revenue growth (CC), adjusted operating margin ≥5.0%, and free cash flow $350–$400M; management expects minimal tariff impact in Q2 while noting potential ~$50M operating income headwind from current tariffs, subject to mitigation .
Segment mix shift accelerated: IT Solutions revenue more than doubled to $164M (+121.6% YoY) on ITsavvy integration; Print & Other fell 9.4% YoY; total segment profit declined to $46M from $57M .
Capital allocation pivot: quarterly dividend cut to $0.025 (annualized $0.10) to prioritize deleveraging ahead of Lexmark close; company reiterates FY25 guidance and >$1/share accretion expected post-Lexmark with >$238M synergies over two years .

What Went Well and What Went Wrong

What Went Well

Equipment installations +24% YoY, with entry devices +33% and mid-range improving on PrimeLink launch; sales force productivity +13% YoY aided by AI-enabled pricing tools and process simplification .
ITsavvy integration ahead of plan: IT Solutions revenue +121.6% YoY to $164M; pro-forma gross bookings +30%, pipeline +26%; majority of >$15M run-rate synergies implemented .
Operating expense discipline: excluding one-time Reinvention costs and ITsavvy, OpEx fell ~$46M (10%) YoY; improved working capital supported cash conversion despite seasonality .

What Went Wrong

Adjusted gross margin fell 220 bps YoY to 29.7% and adjusted operating margin fell 70 bps to 1.5%, reflecting higher product costs, IT Solutions mix, lower Print volumes and initial tariff costs .
Print & Other post-sale revenue down 11.2% YoY (9.2% CC); core post-sale decline ~4% when excluding backlog, Reinvention, and intentional non-strategic reductions; supplies/page volumes under pressure .
Free cash flow used $(109)M vs $(89)M prior year on lower operating cash flow; EBITDA proxy from estimates and OI&E pressures suggest higher interest burden; management guided Q2 adjusted op margin 4–4.5% due to tariff cost phasing .

Financial Results

Headline Results vs Prior Periods and vs Consensus

Metric	Q3 2024	Q4 2024	Q1 2025	YoY Change (Q1)	QoQ Change (vs Q4)	Consensus (Q1 2025)	Beat/Miss
Revenue ($USD Billions)	$1.528	$1.613	$1.457	(3.0%)	(9.7%)	$1.442*	Beat by ~$0.015B*
GAAP Diluted EPS ($)	$(9.71)	$(0.20)	$(0.75)	+$0.19 YoY	$(0.55) vs Q4	n/a	n/a
Adjusted EPS ($)	$0.25	$0.36	$(0.06)	$(0.12) YoY	$(0.42) vs Q4	$(0.04)*	Miss by $0.02*
Adjusted Operating Margin (%)	5.2%	6.4%	1.5%	(70) bps	(490) bps	n/a	n/a
Adjusted Gross Margin (%)	—	31.6%	29.7%	(220) bps	(190) bps	n/a	n/a

Note: Consensus values marked with * are Values retrieved from S&P Global.

Segment Performance

Segment ($USD Millions)	Q1 2025 Revenue	Q1 2024 Revenue	YoY	Q1 2025 Profit	Q1 2024 Profit	YoY
Print & Other	$1,294	$1,428	(9.4%)	$41	$58	(29.3%)
IT Solutions	$164	$74	+121.6%	$5	$(1)	+$6
Total	$1,457	$1,502	(3.0%)	$46	$57	(19.3%)

Mix and KPIs

KPI	Q1 2025	Q1 2024	Commentary
Equipment Sales ($USD Millions)	$284	$290	Declined 2.1% AC / 0.7% CC; backlog normalization and high-end exit impact .
Entry Equipment Installations	+33% YoY	—	Strategy to gain A4 share; lower upfront margins, higher supplies tail .
Total Equipment Installations	+24% YoY	—	Driven by entry and modest mid-range growth; supports future post-sale .
Post-Sale Revenue ($USD Millions)	$1,173	$1,212	Down 3.2% AC / 1.2% CC; excluding ITsavvy benefit, decline 11.4% AC .
Adjusted Gross Margin (%)	29.7%	31.9%	Down 220 bps on product costs, IT mix, lower Print volumes, tariffs .
Free Cash Flow ($USD Millions)	$(109)	$(89)	Seasonal Q1 use; improving ex-finance receivables >$60M YoY .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth (CC)	FY 2025	Low single-digit (Jan 28)	Low single-digit (May 1)	Maintained
Adjusted Operating Margin (%)	FY 2025	≥5.0%	≥5.0%	Maintained
Free Cash Flow ($USD Millions)	FY 2025	$350–$400	$350–$400	Maintained
Adjusted Operating Margin (%)	Q2 2025	—	4.0–4.5% (call)	New near-term outlook
Tariff Impact (Operating Income)	FY 2025	—	~$(50)M at current rates; mitigation plan described	New disclosure
Dividend per Common Share	Ongoing	$0.125 in Q1 2025 (historic)	$0.025 quarterly from July 31, 2025	Lowered

Earnings Call Themes & Trends

Topic	Q3 2024 (10/29)	Q4 2024 (1/28)	Q1 2025 (5/1)	Trend
Reinvention execution	Cost reductions >$50M; productivity programs; equipment shortfalls due to launches and sales productivity	Structural model changes; 2025 focus on tactical initiatives; pipeline of >$400M gross savings	100+ initiatives progressing; double-digit OpEx declines; productivity +13%	Improving execution; benefits cumulative
IT Solutions/ITsavvy	Announced pending ITsavvy; accretive to FCF/EPS	Closed ITsavvy; integration to complete before Lexmark	Integration ahead of plan; bookings +30%, pipeline +26%	Positive momentum
Tariffs/macro	Macro impact minimal; execution issues dominant	Planning for 2025; no major macro disruption noted	~$50M OI impact at current tariffs; minimal Q2 effect; mitigation via pricing/supply chain	Risk disclosure increased; mitigation underway
Product performance	Launch delays; A4 entry/mid-range mix evolving	A4 growth; margin pressure expected near term	Entry installations +33%; PrimeLink launch; high-end reduced	Shift to entry/mid-range; supplies tail to follow
Capital structure/dividends	FCF strong; forward flow expansion	Deleveraging priority; plan $0.50 annual dividend	Dividend reduced to $0.025 quarterly; maintain FY guidance	Deeper deleveraging focus pre-Lexmark

Management Commentary

“Improved sales productivity, the successful integration of ITsavvy and other Reinvention-enabled operating efficiencies drove momentum in revenue and positive adjusted operating income in our seasonally lowest quarter.” — Steve Bandrowczak, CEO .
“The vast majority of the expected run rate synergies totaling more than $15 million have been implemented and are expected to contribute to improved IT Solutions and total company profit in future periods.” — Management (prepared remarks) .
“Based on tariffs in place on May 1, the expected reduction in operating income... would be around $50 million in 2025. If China tariffs are reduced from 145% to 60%, we expect to be able to offset the impact... through price increases, surcharges... and Reinvention-related savings.” — John Bruno, President & COO .
“We maintained the guidance until the tariffs are final... we felt that a change in the guidance now, while tariffs are so fluid, wasn’t very helpful.” — Mirlanda Gecaj, CFO .

Q&A Highlights

Guidance posture: Management chose to maintain FY25 targets despite fluid tariff backdrop; investors given ~$50M OI impact context and Q2 margin range for modeling .
ITsavvy integration and cross-sell: Early signs of strong cross-sell to Print base and vice versa; pipeline/bookings momentum and operating leverage expected to drive double-digit operating profit over time .
Post-sale trajectory: Core Print post-sale decline ~4% excluding Reinvention/backlog/non-strategic reductions; management expects stabilization as recent installations pull through supplies/services in 6–9 months .
Free cash flow resilience: FCF more resilient than OI given working capital levers and finance receivable programs; FY25 FCF guide held at $350–$400M .

Estimates Context

Metric	Q1 2025 Consensus	Q1 2025 Actual	Surprise
Revenue ($USD Billions)	$1.442*	$1.457	Beat by ~$0.015B*
Primary EPS ($)	$(0.04)*	$(0.06)	Miss by $0.02*
EBITDA ($USD Millions)	$165.8*	$39.0*	Miss by ~$127M*
# of EPS Estimates	3*	—	—
# of Revenue Estimates	2*	—	—

Note: Consensus values and EBITDA actual marked with * are Values retrieved from S&P Global.

Implications: modest revenue beat but EPS/EBITDA underperformed consensus, largely due to margin compression from product costs, mix, and OI&E/tax headwinds; estimate revisions may trend lower near term given Q2 margin guide and tariff cost phasing .

Key Takeaways for Investors

Near-term margin pressure likely persists into Q2 (4–4.5% adjusted operating margin) as tariff cost phasing precedes price/surcharge offsets; watch for mitigation updates and CC growth trajectory in IT Solutions .
Strategic mix shift is working: IT Solutions scaling with strong bookings/pipeline; expect OpEx leverage and synergy capture to improve consolidated profitability through 2H25 .
Print stabilization depends on supplies/services pull-through; recent entry and mid-range installation growth is a positive leading indicator for post-sale recovery in 2H25/2026 .
Capital discipline intensified: dividend cut signals prioritization of deleveraging pre-Lexmark; combined run-rate cash flows and >$238M synergies support target ~3x gross leverage over time .
Lexmark is a potential catalyst: management reiterates >$1/share accretion and limited tariff exposure due to Mexico manufacturing; regulatory approvals progressing with remaining votes expected soon .
Estimate dispersion may widen: with fluid tariff policy and cost phasing, expect cautious Street models; monitor Q2 margin delivery and tariff policy changes for re-rating triggers .
Watch operating expense execution: double-digit OpEx reductions and AI-enabled pricing/process tools underpin margin recovery potential as mix normalizes .

Sources: All figures and commentary sourced from Xerox’s Q1 2025 8-K earnings release, Q1 2025 press release, Q1 2025 earnings call transcript, Q4 2024 8-K, and related May 2025 capital allocation press releases. Consensus estimates from S&P Global as noted.

Xerox Holdings Corp (XRX)·Q1 2025 Earnings Summary