Xerox Corporation announced today second-quarter 2010 results that include adjusted earnings per share of 24 cents and $678 million in operating cash flow. Adjusted EPS excludes 8 cents from restructuring charges and amortization of intangibles as well as acquisition-related and litigation costs, resulting in GAAP EPS of 16 cents.
"Our second-quarter results reflect strong across-the-board performance in driving revenue growth, generating cash and expanding earnings," said Ursula Burns, Xerox chairman and chief executive officer. "Through the first half of the year, we've made excellent progress in scaling our services business and strengthening our leadership in the marketplace. We expect this progress will continue, positioning us well to increase our earnings expectations for the full year."
Second-quarter revenue of $5.5 billion was up 48 percent including a 1 point negative impact from currency. On a pro-forma basis, with ACS in the company's 2009 results, total revenue grew 2 percent or 3 percent in constant currency. Revenue from technology, which represents the sale of document systems as well as the supplies, technical service and financing of products, was up 3 percent or 4 percent in constant currency. Total install activity for Xerox equipment was up 45 percent, reflecting strong demand across all segments including a 56 percent increase in entry-level printers and multifunction devices. Revenue from services was up 1 percent on a pro-forma basis, and represents the company's business process, IT and document outsourcing offerings.
"We're seeing consistent trends that indicate the benefit of our broad product line and expanded services as well as modest economic improvements," added Burns. "Demand continues to improve for Xerox technology, especially in developing markets and from small and mid-sized businesses. With annuity revenue representing 83 percent of total revenue and signings for Xerox services up 12 percent, our business is strengthened by multi-year contracts for business process and document management."
In February, Xerox closed on its acquisition of business process and IT outsourcing firm, Affiliated Computer Services (ACS). The resulting joint sales activities between Xerox and ACS as well as increased interest in the company's diverse portfolio of outsourcing offerings led to a significant second-quarter increase in the pipeline for services contracts.
Second-quarter gross margin was 34.8 percent, and selling, administrative and general expenses were 21.1 percent of revenue. On a pro-forma basis, operating margin of 10.1 percent was up nearly one point, driven by improvements in both gross margin and SAG as a percent of revenue.
The $678 million in second-quarter operating cash flow contributed to $1.1 billion in cash flow for the first half of the year. The company reiterated its expectations to deliver $2.6 billion in operating cash for the full year.
For the third quarter, Xerox expects GAAP earnings in the range of 14 to 16 cents per share. Third-quarter adjusted EPS is expected to be 19 to 21 cents per share. Full-year GAAP earnings are expected to be 47 to 51 cents per share. Full-year adjusted EPS is expected to be 88 to 92 cents, an increase from the company's previous guidance of 75 to 85 cents per share.