Friday Dec 02, 2022

Xerox CEO: Robotic Process Automation, Managed Security Driving IT Services Business Growth – CRN

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A growth in services revenue for Xerox’s first fiscal quarter 2022 proved to be a bright spot in an otherwise down quarter for the print and digital services provider as supply chain issues hurt product sales.

However, a large backlog in shipments, as well as increased print volume as employees started stepping back from working at home to return to the office as the pandemic subsides, is providing some optimism for the future.

Norwalk, Conn.-based Xerox Thursday also used its first fiscal quarter 2022 financial analyst conference call to update analysts on its position in regard to Russia’s war in Ukraine.

[Related: Xerox’s M&A Strategy Is ‘Really, Really Simple’: CEO John Visentin]

John Visentin, vice chairman and CEO of Xerox, started his prepared remarks acknowledging what he called the “humanitarian tragedy taking place in Ukraine.”

“Our thoughts are with all those who have been affected,” Visentin said. “As the situation began to unfold in late February, we took swift and decisive actions to ensure the safety and security of our people. We suspended all but emergency support operations in Ukraine, and provided emergency cash grants to the Ukrainian employees through our Employee Relief Fund. Shipments to Russia were halted as soon as the conflict started. We continue to evaluate the situation in this region, and we’ll adapt our response, hoping for the restoration of peace as soon as possible.”

Only a small, single-digit percentage of Xerox’s revenue is exposed to the Eurasian region, Visentin said.

Xerox also faced a challenging operating environment in its first fiscal quarter and expects that to be the same in the second quarter, Visentin said. He cited the resurgence of COVID-19 in the form of the Omicron variant for causing some customers in large markets to close, as well as supply chain disruptions caused by COVID-related factory closures in parts of Asia.

“Inflationary pressure is building across our cost base, including cost of goods sold, labor and logistics,” he said. “At this point, we continue to expect supply chain conditions to ease beginning in the second half of the year, albeit at a slower pace than originally anticipated.”

However, as people return to the office, Xerox is seeing increased page printing volumes, with March being one of the highest months for post-sale revenue since the pandemic began, Visentin said.

“The continued correlation between in-office work and print activity, and strong demand for equipment and consumables, confirms that employees are using our equipment and services when they return to the office,” he said. “Third-party data points to momentum and increasing office attendance, and we continue to expect a gradual return of workers to the office in Q2, with momentum building in the second half of the year barring another variant outbreak.”

While Xerox knew going into the quarter that supply chain constraints would weigh on margins, the company was surprised by the magnitude and intensity of inflationary pressure across its cost base and its supply chain costs, Visentin said.

“We expect the margin dilutive effects of supply chain costs and new business investments to subside as constraints ease and our new businesses scale,” he said. “The effect of inflationary pressure is more difficult to predict, but we plan to offset most inflation-related cost growth with price adjustments and additional Project Own It savings. Price adjustments are being implemented, but it will take time to realize, given most of our revenue is contractual.”

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Source: https://www.crn.com/news/managed-services/xerox-ceo-robotic-process-automation-managed-security-driving-it-services-business-growth

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