Partners Say Xerox Has Had Their Back Amid COVID-19-Related Sales Slump

‘They’ve showed a willingness to help us through this. ... We have seen them offer some really great incentives to partners,’ says Josh Justice, president of Accredited Master Elite Xerox partner Just Tech.

Xerox partners said the steep, 34 percent revenue decline the company reported for its second quarter was to be expected after the nation’s office workers fled their steel-and-glass enclosures to work from home, which not only hurt residual business but also damaged equipment sales.

“After the financial crisis in 2008 and 2009, I got really involved in managed print and managed IT because I wanted to build a recession-proof business,” said Josh Justice, president of Just Tech, a Xerox reseller outside Washington, D.C. “But I never imagined there would be an event that would stop people from being in the office for three or four months.”

During Xerox’s second-quarter earnings call this week, CEO John Visentin told investors that he is withholding guidance for now but based on his conversations with fellow CEOs and other decision-makers, the company is banking on office employees returning to work en masse when it is safe to do so.

“We don‘t believe that no one’s returning back to the office. We believe that a lot of employees will be returning back to the office and it’s for all the reasons: Productivity is one of them, security is another one, education and you can go on and on. But more importantly, we believe everyone will be working, going back to the office once it’s considered safe,” he said. “I don’t think anyone believes we’re not going back to the office. It’s really at what rate and pace.”

Throughout the crisis, Xerox has remained committed to helping partners, offering 90-day payment deferrals on equipment leases, and it has lowered prices on slightly older models, which has boosted sales in some categories, Justice said.

“They’ve showed a willingness to help us through this. I don’t think there’s anyone in the partner community who doesn’t know what a serious thing this is that we have went through, and are going through. We have seen them offer some really great incentives to partners to help,” he said.

Visentin described the path to recovery as a “slow and gradual” one that will happen over the next quarters. While April and May were the company’s two worst-performing months of the quarter, June saw equipment sales begin to rise as workers returned to the office.

In addition, Project Own It, the company’s internal effort to cut costs and find efficiencies, is on track to save $450 million this year. Part of those savings rely on cutting jobs, Xerox added in a 10-Q filing with the U.S. Securities and Exchange Commission. The company said Project Own It spent $39 million on severance claims related to 450 job cuts in the first half of the year. That accounts for about half of the total 900 jobs eliminated since the beginning of the year.

The company also stated that it generated about $60 million in benefits through government programs in the U.S., Canada and Europe to offset labor costs during the pandemic.

Xerox said while the recovery continues to ding equipment sales—with new installs down 58 percent last quarter for the company’s costliest color models—it has not yet needed to draw down on a $1.8 billion revolving line of credit.

For partners, success this year has depended on the sectors being served. Those partners that are heavily invested in hospitality, education or retail fared worse than those that served essential jobs.

“We all got hit with the loss of per-impression and new equipment revenue,” said Troy Tafoya, president of Professional Document Solutions in Fort Collins, Colo. “I am fortunate. Three out of my four largest accounts were critical and did not miss a beat. I do believe the fourth quarter will show some improvement, but it would not take much to make it better than the second quarter.”

Xerox reported that for the second quarter ended June 30 the company generated $1.46 billion in revenue, a loss of $798 million from the year-ago quarter. The company’s net income came in at $27 million compared with $181 million in the same period last year for earnings per share of 11 cents.

Visentin did not mention the company’s failed deal with HP Inc. during the call. In the 10-Q filed later, Xerox said it canceled $24 billion in financing with several lenders on March 31 and paid no penalties as a result of terminating that deal.

Justice said while his shop has turned to its MSP business to make up the shortfall in print, he expects the spend to pick up in the last half.

“We’ve picked up 16 new clients through COVID. We’re working as hard as we can to pick up more to help offset the print decline in the short term. It’s been unexpected and a wild ride,” Justice said. “We’re pulling through. We’re having some good equipment months. We’re not where we want to be revenuewise yet, but it’s catching up.”