‘We experienced disruption across our organization this quarter as our team acclimated to the changes, which primarily impacted equipment sales. I make no excuses for that underperformance and was disappointed with our results, as we did not meet our internal expectations,’ says John Bruno, Xerox president and COO.

In the wake of a company restructuring, employee layoffs and corporate “reinvention,” Xerox reported a revenue decline of 12.4 percent in its fiscal 2024 first quarter.

“This past quarter, our organization implemented one of its most intense periods of structural change in recent history,” Xerox CEO Steve Bandrowczak said on the Norwalk, Conn.-based company’s first-quarter earnings call Tuesday. “As part of [our] reinvention, we redesigned and restructured our organization from top to bottom, letting a lot of good people go in the process. This work was hard but necessary to position Xerox for long-term success as we navigate the secular challenges associated with print and repositioning our business for long-term sustainable growth.”

Under the new operating model, Xerox said it will be focusing on three priorities: its core print business, a partner-enabled go-to-market model and improved costs to enhance profitability.

“When we talk about the reinvention, it’s a balanced execution between what we’re doing to drive operational efficiencies and investing in our growth businesses, whether it’s organic or inorganic growth,” Bandrowczak said on the call.

The CEO said first quarter results were “below expectations” but not representative of the operating improvements that are being observed following the organizational redesign.

“We experienced a short period of disruption associated with the reorganization, particularly as it relates to sales of equipment,” he said.

For the first quarter (ended March 31) the company reported revenue of $1.50 billion, down 12.4 percent from $1.72 billion in the same quarter one year before. The company reported a GAAP net loss of $113 million compared to net income of $71 million one year earlier.

John Bruno, Xerox president and COO, said in Q1 the company implemented a top to bottom realignment of the organization, operating model alignment, and a workforce reduction/realignment.

“We simplified organizational spans, layers, administrative reporting and supporting infrastructure formerly needed to run the business,” he said. “Bold changes of this magnitude designed to deliver global operating model simplification come with a high degree of disruption and we were no exception. We experienced disruption across our organization this quarter as our team acclimated to the changes, which primarily impacted equipment sales. I make no excuses for that underperformance and was disappointed with our results, as we did not meet our internal expectations.”

In January, the company said it planned to cut 15 percent of its workforce, a little more than 3,000 employees, throughout the first quarter, with the first round of cuts seen in February.

The financial benefit of the headcount reductions will build throughout the year with carryover benefits expected in 2025, Bandrowczak said.

A Xerox spokesperson told CRN Wednesday that they were, “Unable to confirm specific information regarding impacted employees, but I can tell you that we are working closely with the union representatives. We are committed to providing support for affected employees and treating all employees with dignity, respect, and appreciation.”

Two Press Products Discontinued

To help reduce costs, Xerox took actions this quarter to simplify its product lineup and global routes to market.

“We are exploring strategic options for our production, print manufacturing operations, and sold or signed agreements to sell our direct operations in four Latin American countries,” Bandrowczak said. “These and future simplification actions will be key to unlock operational savings throughout our reinvention journey.”

In a separate statement Tuesday, Xerox said that it was preparing to discontinue manufacturing of the Xerox iGen 5 Press and the Xerox Nuvera Presses. Order fulfillment for iGen and Nuvera was expected to continue through 2024 or while inventory lasts and the company will provide support for those platforms throughout the life of their contracts.

The Xerox Iridesse Production Press, Xerox Versant Press and the Xerox PrimeLink digital printers, enabled by the recent multi-year contract signed with Fujifilm Business Innovation Inc., will continue serving client needs, according to the statement.

“We implemented a comprehensive and complex organizational redesign this quarter focused on building a stronger, more stable business aligned to the evolving needs of our clients,” Bruno said during the earnings call.

In Q1 Xerox sold or signed agreements to sell its direct operations in Argentina, Chile, Ecuador and Peru, shifting to a partner-led distribution model in each country with negotiations to enact similar changes to its distribution model in parts of Europe.

“Collectively, these arrangements will allow us greater focus on improving the print and digital services capabilities we offer channel partners who are best positioned to serve our clients in these regions,” he said.

‘We Will Continue To Build On Early Momentum’

Despite the disruption and underperformance in the first quarter, Bruno said the company is seeing early indications and “positive results” from its go-to-market teams in supporting functions.

“After a slow start in January and early February, equipment orders were up double digits year-over-year in late February and March, growing at an expanded rate as we exited the quarter,” he said. “Enhanced operating visibility and speed of decisioning suggests the structural changes implemented this quarter can deliver the improved in-year revenue trajectory, operating margins, and free cash flow required to achieve our full-year guidance. I have more confidence than ever that we have the right team and the right strategy in place to execute Xerox reinvention and deliver our three-year adjusted operating income improvement target.”

One positive change this quarter was the creation of Global Business Services (GBS), which will drive continuous enterprise-wide efficiencies and productivity gains by centrally coordinating internal processes through shared capabilities and platforms.

In the quarter Xerox strengthened its core business by deploying a business unit, rather than a geographic-led, operating model, which Bandrowczak said will help navigate the risks and opportunities associated with the evolving hybrid workplace.

“We will continue to build on early momentum following the reorganization, guided by a clear focus on the strategic priorities we established to start the year,” the CEO said. “Starting with a stronger core, a strong stable print business provides the financial foundation for investments in new digital and IT services capabilities and the strategic platform from which new services can be deployed.”

The organizational changes will improve product and marketing decisions as well as enhancing opportunities to expand client spending by enabling greater coordination in the sales of digital and IT services to print clients, he added.

“We expect the new operating model will provide incremental tailwinds to the momentum currently observed in our services business,” he said.