Post on 11-May-2018
transcript
Forward-Looking Statements This presentation contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-
looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of
factors that may cause actual results to differ materially. These factors include but are not limited to: changes in economic conditions, political
conditions, trade protection measures, licensing requirements and tax matters in the United States and in the foreign countries in which we do
business; changes in foreign currency exchange rates; actions of competitors; our ability to obtain adequate pricing for our products and services
and to maintain and improve cost efficiency of operations, including savings from restructuring actions and the relocation of our service delivery
centers; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term; the risk in the hiring
and retention of qualified personnel; the risk that unexpected costs will be incurred; the risk that subcontractors, software vendors and utility and
network providers will not perform in a timely, quality manner; our ability to recover capital investments; the risk that our Services business could
be adversely affected if we are unsuccessful in managing the start-up of new contracts; development of new products and services; our ability to
protect our intellectual property rights; our ability to expand equipment placements; the risk that individually identifiable information of customers,
clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security; service interruptions; interest rates,
cost of borrowing and access to credit markets; reliance on third parties, including subcontractors, for manufacturing of products and provision of
services; our ability to drive the expanded use of color in printing and copying; the outcome of litigation and regulatory proceedings to which we
may be a party; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” section and other sections of our Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2014, June 30, 2014, and September 30, 2014 and our 2013 Annual Report on Form 10-K filed with the Securities
and Exchange Commission. The Company assumes no obligation to update any forward-looking statements as a result of new information or
future events or developments, except as required by law.
On December 18, 2014, Xerox Corporation announced that it had entered into an agreement to sell its Information Technology Outsourcing
(ITO) business to Atos S.E. The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the
first half of 2015. As a result of the pending sale of the ITO business, and having met applicable accounting requirements, Xerox will report the
ITO business as a discontinued operation. The forward looking statements contained in this presentation are subject to the risk that the sale of
the ITO business may not occur on the terms, within the time and/or in the manner as previously disclosed, if at all.
2
Our Message to You: Xerox is…
3
• Well-positioned and investing to grow in attractive services markets
• Applying innovation to lead transition of BPO to automated, analytics-driven outsourcing
• Executing to improve Services performance and consistency
• Leading in attractive areas of document technology while delivering strong
profitability and cash flow
• Disciplined in our capital allocation with focus on delivering shareholder value
• On a journey to be the most sought after customer partner and place to work
in our industry
Xerox Strategy
Apply technology and innovation to transform the way people work and live
Drive Operational Excellence Across Our Businesses
Innovate to
Differentiate Our
Offerings
Leverage Brand
Strength and Market
Position
Profitably Grow
Services in Attractive
Markets
Lead in Document
Technology
Engage, Develop and Support Our People
4
Xerox Value Proposition…
…targeting earnings per share expansion of 5 to 10%
Mix to
Services
~2/3rds
of Revenue
by 2017
Attractive
Markets
5%+ Services
Market
CAGR
Margin
Opportunity
~50 bps Expected 2015
Services
Margin
Improvement
Sustainable
Shareholder
Value
>50% FCF Return to
Shareholders
Lead in
Document
Technology
~$1.8B Expected 2015
Xerox Cash
from
Operations
5
Document Technology Strategy
7
Grow in
Developing
Markets
Innovate in All
We Do
Market focused strategy underpinned by operational excellence and talented workforce
Operational Excellence, Global Delivery and Economy of Scale
Engage, Develop and Support Our People
Lead in
Managed Print
Services
Channel
Expansion and
Market Reach
Lead in Graphic
Communications
Market Dynamics
8
Overall print market at one percent decline;
underlying dynamics offer opportunities
• Shift from traditional office printing to
Document Outsourcing
• Graphic Communications market is growing
– Driven by expanding digital and inkjet
capabilities
• Significant SMB market
– Also shifting to Print Services via direct
and indirect sales
• Growth in Developing Markets
– Enhanced by MPS and Production
markets
Source: internal Xerox estimates; excludes Asia-Pacific FX territories
Overall Print Market 2014 $ Billions, ‘14 – ’17 CAGR
Office (non-DO)
Total DO1
Prod / GC
(4)%
7%
3%
$66
$19
Total Market $91B (1)%
SMB – 71% Enterprise – 29%
(1)% (4)%
$6
NA – 38% DMO – 28%
(3)% 1%
EU – 34%
(3)%
Note 1: DO includes MPS, CPS and Workflow market estimates.
Note 2: SMB/LE and NA/EU/DMO only include Office non-DO and MPS.
Market Components - % of Market2
WW 1H14 Equipment Sale Revenue Share %
Xerox has been the leader
for 19 consecutive quarters
Technology Advances Sustain Industry Leadership
Sustained Market Share Leadership
Industry Recognition
Gold Ink Awards Europe Digital Press Award
Magic Quadrant for Managed Print Services,
Worldwide
IDC MarketScape WW MPS & Document
Services Hardcopy Vendor Analysis
2014 Quocirca MPS Landscape
A leader in The Forrester Wave™:
Managed Print Services
Xerox Corporation Mobile Print Solution 2
Outstanding Enterprise Mobile Print Solution
Xerox Corporation 2014 Document Imaging Solutions
Line of the Year
9
IDC: Published September 2014
Forrester: Published Q2 2012, Forrester Research, Inc.
Gartner: Published October 21, 2013 by Ken Weilerstein, Sharon McNee, Elizabeth Kim. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise
technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed
as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
Xerox
21 17
14
11
[------- Competitors -------]
Market Leading Portfolio – SMB and Large Enterprise Broadest Portfolio of Print and Document Outsourcing Capabilities will enable MPS growth with the market and increased share of SMB market
15 New Workflow Offerings in 2014
Workflow Integration for Mobile and Cloud
Industry Leading Security
Cost Control and Sustainability
IT Enablers
ConnectKey®
Xerox® WorkCentre®
7845/7855
Xerox® WorkCentre®
5945/5955
Xerox® Color
C60/70
Xerox®
WorkCentre®
6655
Xerox® WorkCentre®
7220/7225
Xerox® WorkCentre®
7970
Xerox® WorkCentre® 3655
Xerox® WorkCentre®
5865/5875/5890
19 New Technology Offerings in 2014
ConnectKey®
ConnectKey®
ConnectKey®
ConnectKey®
ConnectKey®
ConnectKey®
10
Market Leading Portfolio – Graphic Communications Broadest Portfolio of Graphic Communications Offerings
to capture increased share of color growth and inkjet opportunity within the 50 trillion total production pages
Web-to-print
Variable Data Cross Media
Pre-press Color Management
Automation
7 New Workflow Offerings in 2014
Xerox® 8250 Production Printer
Xerox® Color J75 Press
Xerox® Color 800/1000 Presses
Xerox ® Versant 2100 Press
Xerox® Reference®
Xerox® CiPress® 500
Xerox® CiPress® 325
Xerox® eVolution® 150 /250
Xerox® iGen® 150 Digital Press
Xerox® Compact®
4 New Technology Offerings in 2014
11
Demonstrated Operational Excellence Across Value Chain…
Global Reach
Direct Sales Capability
Extensive Channels and
Partnerships
Broad Customer Relationships Sales Excellence and Productivity
Global Service
Remote Connectivity and Diagnostics
Global Delivery Center
Automation
Offering Innovation
Offshoring and Right-shoring
…drives sustained market share and strong operating margin.
Global Delivery
Manufacturing Productivity
Global Sourcing
Product Cost and Portfolio Simplification
RD&E Efficiency and Alignment
Infrastructure Optimization 20%
45%
31%
4%
SAG
Equipment
Post Sale
& Managed
Services
Over $9B of
Addressable Spend1
% of Total
RD&E
Note 1: Includes operating expenses for Document Technology and Document Outsourcing.
12
Services Strategy…
Manage Our
Portfolio of
Businesses
Grow
Globally
Transform the
Way We Work
Deliver
Operational
Excellence
Use Analytics
to Increase
Value
14
Engage, Develop and Support Our People
...will drive revenue growth and margin improvement.
$250 $290
$172
$203
$119
$145 $19
$23
2014 2017
Attractive Market Opportunity
$26 7%
$30 6%
$65 8%
$67 4%
Finance &Accounting
TransactionProcessing
HumanResources
CustomerCare
2017 Multi-Industry BPO
Notes: Market sizing based upon external sources and Xerox internal analysis. Document Outsourcing includes Managed Print
Services, Centralized Print Services and Workflow Solutions. Transaction processing includes outbound print management (non-DO).
Xerox announced on 12/18/14 that it has entered an agreement to sell its ITO business to Atos (expected close H1 2015).
$ Billions
$560B
$660B
IT Outsourcing (excl. apps)
Industry
Specific BPO
Multi-Industry
BPO
Document
Outsourcing
+4%
CAGR
+7%
CAGR
+6%
CAGR
+7%
CAGR
$11 7%
$15 5%
$16 7%
$21 9%
Health Payer
Transportation
Insurance(Life, P&C)
Government BPO(excl. health)
2017 Industry-Specific BPO
Total BPO
$348B
6% CAGR
15
Services Evolution Progressing…
Optimize Realize
Transition
16
Transition from decentralized
business unit structure to a global
operating model with industry go-to-
market and service delivery via
capabilities
Optimize performance through
platform consolidation, organizational
alignment, cost transformation and
industry driven solution sales.
Realize and enhance market
leading positions through industry
insight, innovative offerings and
delivery excellence.
Margin Focus
Growth Focus
...will drive margin expansion and revenue growth.
Industry Verticals and Global Capabilities Alignment
Financial
Services 13% of
Revenue
High Tech &
Comms 16% of
Revenue
Industrial,
Retail &
Hospitality 15% of
Revenue
Commercial
Healthcare 15% of
Revenue
Government
Healthcare 13% of
Revenue
Public
Sector (including
Transportation)
28% of
Revenue
17
Document Outsourcing
Managed Print Services / Centralized Print Services
Business Process Outsourcing
Customer Care / Communication & Marketing / Human Resources / Transaction Processing / Finance & Accounting
Professional Services
Note: Graphic has been updated to exclude the ITO business which was moved to discontinued operations following
announcement of planned sale to Atos
Margin Expansion Roadmap
GHS Recovery Plan
Global Capability Model Implementation Workforce and Non-Labor Cost Optimization /
Structural Optimization
Portfolio Management / Contract Management
18
2014 Margin 9.0%
Target Margin
10 - 12%
Investments: Sales, Leadership, Training, Tools, Offerings
10 - 15 bps
2015 Margin
9 - 10%
25+ bps
2015 Contribution Target Contribution
50 - 75 bps 100+ bps
25 - 50 bps 75 - 100 bps
(50 - 60) bps (50 - 60) bps
Platform Development 0 - 5 bps 25+ bps
Revenue Growth Acceleration Levers…
Acquisitions More Rapid
Growth Outside
the U.S.
Industry
Verticals /
Cross Selling /
Signings
Acceleration
New Large
Contract Yield
Reduced
Large Contract
Run-offs
...will drive revenue growth back to target model.
19
Government Healthcare Overview
Xerox Government Healthcare Facts:
• 36 states and DC supported by our solutions and services
• Almost 500 million claims processed annually
• Manage more than $59 billion in annual provider payments
• Largest provider of MMIS solutions
US healthcare spending is >15% of GDP and
growing, US government funding is >50%:
• XRX revenue nearly $1B, operating margin will show
considerable improvement in 2015
Growth Opportunities:
• Medicaid expansion and continued implementation
of ACA mandates, shift to managed care
• New states and broader participation with existing
clients
We are evolving our offerings and innovating to
address market changes:
• Enterprise – exclusively and specifically for Medicaid
• Analytics – fraud, waste & abuse (Metal Detector),
managed care
• Leveraging new technologies (mobile, social) to
improve health outcomes to new Medicaid consumer
20
Commercial Healthcare Overview
The global healthcare market is ~$48 billion, 7%
CAGR
• XRX revenue in excess of $1B, operating margin
and annual growth above target model
Healthcare Mega Trends:
Shift to consumer model, changing payment and risk
model, increasing care and quality measurement
Our Growth Strategy:
• Leverage core scale-based services
• Accelerate growth in vertical specific services
• Build and acquire new capabilities
We are evolving our offerings and innovating to
address market changes:
• Analytics – Juvo, Digital Assistant, managed care
and fraud, waste & abuse
• Technology – Atrial Fibrillation Image Processing
Patient Becoming key
decision maker
21
Xerox Commercial Healthcare Facts:
• 2/3 of US insured patients are touched by XRX
• 1,900+ hospitals served
• 100% of top 20 US managed healthcare plans are clients
• Industry leader in size/capability across a number of key categories
Transportation Overview
The global transportation market is ~$13 billion,
5% CAGR
• XRX revenue nearly $1B, operating margin above
target model
Global Transportation Mega Trends:
Urbanization, changing demographics, always
connected, new business models
Our Growth Strategy – Urban Mobility: Series of
interrelated solutions designed to satisfy mobility
needs of mega cities, businesses and their citizens
today and in the future
We are evolving our offerings and innovating to
address market changes:
• Parking – Merge® A smart grid for parking
• Electronic Tolling – Xerox Vehicle Passenger
Detection System™
Xerox Transportation Facts:
• US Industry leader across several offerings, also high global ranking
and industry recognition for leadership in excellence and innovation
• 35 countries host our transportation solutions worldwide
• $5 billion in electronic toll payments processed annually
• 37 billion public transit transactions managed annually
22
Human Resources Outsourcing and Consulting
The global HRS BPO market is ~$65 billion, 8% CAGR
• XRX revenue over $1B, operating margin and growth
varies by business area
Global HRS Mega Trends:
Private exchanges, focus on employee productivity, shift
to defined contribution versus defined benefit, employee
engagement, Business/Learner centric solutions
HRS and Professional Services Capabilities:
• Learning
• Buck Consulting
• Total Benefits and HR Outsourcing
We are evolving our offerings and innovations to
address market changes:
• Private Healthcare Exchange – RightOpt®
• BPaaS solutions – fully integrated SaaS applications
• Data Analytics – diagnostic, prescriptive and
predictive
• Learning Hub – integrated learning platform
23
Xerox HR Services Facts:
• Over 2,000 clients with 9M+ employees and retirees served
• Global footprint across 72 countries; addressing 23 languages
• 5M+ Learners supported globally
• Highly ranked by industry analysts across all major offerings
Document Outsourcing Overview
11.4 13.7
5.4
5.6 2.4
4.1
2014 2017
CAGR
+7%
$19.3B
$23.4B
Xerox Document Outsourcing
• Industry leader in market share and offerings as recognized by
several leading industry analyst firms
• Manage greater than:
– 1.5 million devices, Xerox and multi-vendor
– 5 billion printed pages per month
– 4 thousand sites
The global document outsourcing market is ~$19
billion, 7% CAGR
• XRX revenue exceeds $3B, operating margin above
Services average
Global Document Outsourcing Mega Trends:
Mobility, workflow automation, vertical applications
Our Global Growth Strategy:
• Lead with Next Gen MPS and CPS offerings
• Capture SMB share through channels
• Invest in and grow workflow automation
We are evolving our offerings and innovating to
address market changes:
• Document Analytics – CompleteView Pro and Asset
DB, unique printing data assessment
• Secure Print Manager and Mobile Print Solution –
improved security and mobility
• Ignite Educator Support – efficiency and customized
approach in education
• Digital Alternatives – paperless workflow
Automate
and
Simplify
Secure
and
Integrate
Assess
and
Optimize
Market Sizing and Growth
CPS
Production
24
MPS
Office
Workflow
Financial Overview
Note: Xerox announced on 12/18/14 that it has
entered an agreement to sell its ITO business to Atos
(expected close H1 2015) and began reporting ITO as a
discontinued operation in Q4 2014 earnings. As a
result ITO is excluded from our results and guidance
unless otherwise noted.
Segment Business Dynamics
Target
Revenue Growth Mid-to-High single digit growth
Segment Margin 10 – 12%
• Services mix: 68% BPO, 32% DO
• Geographic mix: ~75% U.S., ~25% International
• Attractive market growth: BPO 6%+, DO 7%
• Broad and diverse BPO portfolio
– Over 60% of BPO portfolio with margins ≥10%
– Long-term contracts with high renewal rates
• Relatively modest CAPEX, < 3% of revenue
Services (~54% of Total Revenue) Document Technology (~43% of Total Revenue)
Macroeconomic sensitivity especially on hardware and
unbundled supplies sales
Limited macroeconomic sensitivity given largely
recurring revenue and diversity of business
1Office includes both Mid-Range and Entry products
Note: Expect “Other” segment revenue to decline mid-single digits
Target
Revenue Growth Mid-single digit decline
Segment Margin 10 – 12%
26
• Product mix: 57% Mid-Range, 23% High-End, 20% Entry
• Geographic mix: 62% N. America, 26% Europe, 12%
developing markets
• Office1 market declining 4%, High-End market growing 3%
driven by Color growth of 8%
– Migration to Doc Outsourcing impacts Office
– Area of highest secular decline, High-End B&W represents
<8% of Doc Tech business
• Ongoing restructuring and productivity actions support
continued strong margin
ITO Divestiture Summary
Announced planned sale of ITO business to Atos on December 18, 2014
• Cash consideration of $1.05B prior to closing adjustments, potential for incremental $50M at closing
• Transaction expected to close in the first half of 2015
• Worldwide strategic collaboration between Xerox and Atos - mutually beneficial to Xerox, Atos, our employees and our
customers
Significant milestone in Xerox’s ongoing portfolio management strategy
• Enables greater focus on expanding BPO and DO businesses where we have scale and differentiation
• Supports objective to grow our BPO business internationally
Impact to Earnings and use of Proceeds
• ITO moved to discontinued operations - ITO net revenue of $1.3B and operating profit of $107M in 2014
• Expect after-tax proceeds of approximately $850M, as a result, expect ~$1B in share repurchase and up to $900M in
acquisitions in 2015
• As previously communicated, expect ~6 cents of dilution in 2015 and neutral by 2016, reflecting timing of use of proceeds
27
2015 Guidance
2015
Revenue Growth @ CC Flat
Services Up 2 to 4%
Document Technology Down 4 to 5%
Adjusted EPS1 (incl restructuring) $1.00 - $1.06
GAAP EPS2 $0.83 - $0.89
Cash From Operations $1.7 - $1.9B
CAPEX $ 0.4B
Free Cash Flow $1.3 - $1.5B
Share Repurchase ~$1B
Acquisitions <$900M
Dividend ~$300M
Note: Revenue growth guidance excluding potential divestitures
Constant Currency (CC), Adjusted EPS and Free Cash Flow: see non-GAAP measures 1Adjusted for amortization of intangible assets 2GAAP EPS from Continuing Operations
Revenue
• Services revenue growth driven by BPO
• Document Tech CC declines moderate – Lower impact from prior Finance Receivable sales
• Expect (3) to (4) pts negative currency impact
Earnings
• FY EPS range $1.00 - $1.06, reflects a 5 cent
negative impact from recent currency shifts
• YOY Earnings Drivers
– Improving margin in Services
– Continued strong Doc Tech margin but lower YOY from
higher pension expense and currency
– FY Tax Rate of 25% to 27%
– Fewer shares
Cash flow guidance of $1.7 - $1.9B – Reflects expected timing of the sale of the ITO business
and currency impact
– Expect to offset the impact of ITO sale by 2016
28
(Reflects guidance from Q4 2014 Earnings call on 1/30/15)
13.7% 11 – 13%
Revenue / Price
Productivity (incl Restructuring) Currency
Pension Settlements
All Other*
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
2014 Productivity inclRestructuring
Pension Settlement 2015
29
2015 Document Technology Margin Bridge
2015 2014
*All Other includes higher benefits expense and investments in growth areas
2015 Services Margin Bridge
1Normal Business Dynamics: range for net impact of price declines, contract losses, new contract ramp and normal productivity 30
1
~9%
9% - 10% Normal
Business Dynamics
Investments
Capability Model / Cost Optimization
Government Healthcare
Improvement
Portfolio / Contract
Management
5%
6%
7%
8%
9%
10%
11%
2014 Normal businessdynamics
Investments Cost Optimization Govt HealthcareImprovement
PortfolioManagement
20152015 2014
2015 EPS Bridge
1Reflects a ~(7) cent impact from the announced ITO divestiture and subsequent move of our ITO business to discontinued operations 2Other includes YOY impact of less asset sales, higher benefits expense and a higher tax rate
31 Adjusted (Adj) EPS: see non-GAAP measures
$1.07 $1.00 - $1.06
Tax Rate & Other2
(1) cent
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
2014 Adj EPS Margin exclSettlements
Shares Tax Rate/Other PensionSettlements
Currency 2014 Adj EPS
Margin
Improvement (exclSettlements and
currency)
4 - 6 cents Currency
(5) - (6) cents
Pension
Settlement
~(6) cents Shares
4 - 5 cents
2014 Adj
EPS1
2015 Adj
EPS
$0
$100
$200
$300
$400
2012 2013 2014E 2015E
DB Plan Cost DB Settlement Loss DC Plan Cost
$0
$100
$200
$300
$400
$500
2012 2013 2014E 2015E
DB Cash Contribution DB Stock Contribution
Pension Expectations
Expense DB Pension Funding
• DB plan cost has declined with pension plan freezes
• U.S. plan lump sum (settlement) option creates volatility
− 2012/2014 lower; 2015 expect higher settlements similar to 2013
$230M
• Local law / regulatory requirements
• U.S. legislation lowered near term requirements
• Increasing funding to gradually address liabilities
• Low interest rate environment impacts funding requirements and settlement loss volatility
• All major defined benefit (DB) pension plans frozen – reduces burden over time
~$340M $284M $363M $192M ~$335M $363M
$300M
$267M
~$82M ~$226M
$494M
32
Cash Flow Dynamics
Continued strong cash flow
2015 reflects moderating impact from
previous Finance Receivable sales
• Partially offset by higher pension
funding, ITO divestiture timing and
negative currency
• Expect to offset the impact of ITO sale
by 2016
No Finance Receivable sales planned
in 2015
2015 Cash From Ops guidance of $1.7
to $1.9B, FCF of $1.3 to $1.5B
33
(in billions) 2012 2013 2014 2015 Est.
Operating Cash Flow (OCF) $2.6 $2.4 $2.1 $1.7 - $1.9
Adjustments:
Cash from F/R Sales $(0.6) $(0.6) - -
Impact from prior F/R Sales - $0.3 ~$0.4 ~$0.3
Underlying OCF* $2.0 $2.1 $2.5 $2.0 - $2.2
Operating Cash Flow Trend
*Underlying OCF is reported OCF adjusted for the impacts of Finance Receivable sales. See non-GAAP measures.
Note: 2012 thru 2014 Operating Cash Flow includes a full-year of ITO contribution
$0
$1
$2
$3
2012 2013 2014 2015E
OCF Underlying OCF
(in
bill
ion
s)
Capital Allocation
2013
2015 balanced to deliver shareholder returns while continuing to invest in the business
• Dividend: ~$300M, ability to grow modestly in-line with share reduction and cash flow
• Acquisitions: up to $900M, focused on Services, reflects $400M increase due to expected ITO sale proceeds
• Share Repurchase: ~$1B, reflects $500M increase due to expected ITO sale proceeds
• Debt Repayment: none anticipated in 2015
2015 Plan
Opportunistic Acquisitions
Share Repurchase
Dividend Acquisitions
Dividend
Debt
Repayment
Share
Repurchase
$696M $296M
$434M
$155M
34
Share
Repurchase
Dividend
Debt
Repayment
Acquisitions
2014 Outlook
$1.07B
$340M
$300M ~$200M
~$1B
<$100M
<$900M
~$300M
Xerox Performance Based Incentive System (2014)
Short Term
Metric Weight
Adjusted EPS 50%
Operating Cash Flow 20%
Revenue Growth CC* 30%
Stock Ownership Guidelines
Annual
Cash
Pay-out
Role
Multiple of
Base Salary
Named Officers 3x
All Other Officers 2x
35
Long Term – Annual / 3yr Cumulative Targets
Metric Weight
Adjusted EPS 50%
Adjusted Operating Cash Flow 20%
Revenue Growth CC* 30%
Equity performance shares
3 year vesting from grant date
*Constant Currency (CC): see non-GAAP measures
Fourth-Quarter 2014
Earnings Presentation Ursula Burns Chairman & CEO
Kathy Mikells Chief Financial Officer
January 30, 2015
Xerox Direction
Annuity 83% of Total Revenue
Services 54% of Total Revenue
• Grow revenue
• Generate profits in line with industry’s best
• Strengthen and differentiate the portfolio
• Lead in Document Technology
• Support customers and our people
• Allocate capital to enhance shareholder returns
37
Fourth-Quarter Overview
Adjusted EPS1 of 31 cents, GAAP EPS2 of 26 cents Total revenue of $5.0B, down 3% or down 1% CC1
Services revenue up 1% or up 3% CC1; margin of 9.8% • Revenue growth driven by BPO; demonstrating progress on margin
Document Technology revenue down 8% or down 6% CC1; margin of 14.4% • Profit expansion driven by continued productivity and currency benefits as well as lower bad debt and pension
expense
Operating margin1 of 10.4%, up 100 bps YOY Cash from operations of $857M in Q4, $2.06B FY • Share repurchase of $341M in Q4, $1.07B FY
• Acquisitions of $34M in Q4, $340M FY
1Adjusted EPS, Constant Currency (CC) and Operating Margin: see non-GAAP measures
2GAAP EPS from Continuing Operations 38
(in millions, except per share data) Q4 2014 FY 2014 Comments
Revenue $ 5,033 $ 19,540 Translation currency impact: (2) pts on Q4, neutral for the full-year
CC1 Growth (1)% (2)%
Gross Margin 32.1% 32.0%
RD&E $ 150 $ 577
SAG $ 942 $ 3,788
SAG % of Revenue 18.7% 19.4%
Adjusted Operating Income1 $ 524 $ 1,881 Q4 operating profit grew in both Services and Document Technology
B/(W) YOY $ 34 $ 72
Operating Income % of Revenue 10.4% 9.6%
B/(W) YOY 1.0 pt 0.6 pts
Adjusted Other, net1 $ 99 $ 383 Adjusted Other $6M unfavorable YOY in Q4 and $102M unfavorable
YOY for the full-year
Equity Income $ 41 $ 160
Adjusted Tax Rate1 25.3% 24.9% Above 2013 tax rate of 23.9% in Q4 and 23.8% full-year
Adjusted Net Income – Xerox1 $ 357 $ 1,280
Adjusted EPS1 $ 0.31
$ 1.07 Q4 guidance of 28 to 30 cents,
2013 actual: 27 cents in Q4 and $1.04 full-year
Amortization of intangible assets 0.05 0.17
GAAP EPS2 $ 0.26
$ 0.90
Earnings
1Constant currency (CC), Adjusted Operating Income, Adjusted Other, net, Adjusted Tax Rate, Adjusted Net Income – Xerox and Adjusted
EPS: see non-GAAP measures. 2GAAP EPS from Continuing Operations
39
Services Segment1 BPO revenue up 4% and DO up 1% at CC
• BPO driving Services growth improvement
Margin of 9.8%, improvement driven by BPO with
continued strong DO margin
• Sequential improvement across most BPO lines of
business including Government Healthcare
Signings
• Strong renewal quarter, BPO renewal rate of 93%
• New business signings4 (27)% in Q4 and (13)% TTM
• Significant new business deals awarded, not yet signed
Segment Margin Trend
Revenue Growth Trend (CC2,3)
Signings (TCV) Q4
Business Process Outsourcing $2.2
Document Outsourcing $1.0
Total $3.2B
YOY Growth 20%
TTM Growth (13)%
40
1Services results and historical data exclude ITO which was moved to discontinued operations following announcement of planned sale to Atos 2Constant currency (CC): see non-GAAP measures 32013 growth rates reflect reported growth as revised growth rates excluding ITO are not available at this time 4New Business Signings = ARR (Annual Recurring Revenue) + NRR (Non-Recurring Revenue)
Q4 % B/(W) YOY FY % B/(W) YOY
(in millions) 2014 Act Cur CC2 2014 Act Cur CC2
Total Revenue $2,725 1% 3% $10,584 1% 1%
Segment Profit $268 3% $956 (9)%
Segment Margin 9.8% 0.1 pt 9.0% (1.1) pt
9.7% 10.6% 10.3% 9.7%
8.6% 8.5% 9.1%
9.8%
5%
7%
9%
11%
Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14
4% 6%
3%
(2)% 0% 1% 1% 3%
(4)%
0%
4%
8%
Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14
Document Technology Segment
Segment Margin Trend
Revenue Growth Trend (CC1)
Strong segment profit growth and margin
• Continue to benefit from significant productivity actions,
favorable bad debt, pension and currency
Consistent overall revenue trend
• Currency and Eurasia weakness pressured growth
• Prior year finance receivable sale impacted revenue decline
by almost one point
Announced 20 new products in second half
• Good market reception for new products; well positioned
entering 2015
Entry Installs Q4
A4 Mono MFDs (25)%
A4 Color MFDs (9)%
Color Printers 9%
Mid-Range Installs
Mid-Range B&W MFDs (8)%
Mid-Range Color MFDs (1)%
High-End Installs
High-End B&W (19)%
High-End Color2 12%
41 1Constant currency (CC): see slide non-GAAP measures 2High-end color install growth impacted by digital front end (DFE) sales to Fuji Xerox, High-end up 7% in Q4 excluding DFE’s.
Q4 % B/(W) YOY FY % B/(W) YOY
(in millions) 2014 Act Cur CC1 2014 Act Cur CC1
Total Revenue $2,159 (8)% (6)% $8,358 (6)% (6)%
Segment Profit $310 14% $1,149 19%
Segment Margin 14.4% 2.8 pts 13.7% 2.9 pts
8.7%
10.8%
12.0%
11.6%
12.2% 14.4% 14.0% 14.4%
5%
10%
15%
Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14
(9)%
(5)% (5)% (6)%
(5)%
(7)% (6)% (6)%
(10)%
(5)%
0%Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14
Cash Flow
42
(in millions) Q4 2014 FY 2014
Net Income $ 162 $ 992
Depreciation and amortization 356 1,426
Restructuring and asset impairment charges 37 130
Restructuring payments (30) (133)
Contributions to defined benefit pension plans (78) (284)
Inventories 115 (22)
Accounts receivable and Billed portion of finance receivables1 151 (2)
Accounts payable and Accrued compensation 90 128
Net loss on sales of businesses and assets 172 134
Equipment on operating leases (79) (283)
Finance receivables1 (75) 69
Other 36 (92)
Cash from Operations
$ 857 $ 2,063
Cash from Investing
$ (129) $ (703)
Cash from Financing $ (297) $ (1,624)
Change in Cash and Cash Equivalents 396 (353)
Ending Cash and Cash Equivalents $ 1,411 $ 1,411
Cash From Ops $857M, $2.06B FY
• Underlying Cash from Ops2 $953M in Q4,
$2.5B FY
Net income includes non-cash loss on
pending sale of ITO business
Working capital seasonally a source in Q4,
modestly positive FY
CAPEX $114M, $452M FY
Acquisitions $34M, $340M FY
FY Share Repurchase of $1.07B and $289M of
Common Stock Dividends
2015 Cash From Ops guidance of $1.7 to
$1.9B, FCF3 of $1.3 to $1.5B
• Reflects ITO divestiture timing and negative
currency
1Accounts receivable includes collections of deferred proceeds from sales of receivables and finance receivables includes collections on
beneficial interest from sales of finance receivables
2See Underlying Cash Flow slide in Appendix 3Free Cash Flow (FCF): see non-GAAP measures
Capital Structure
Core debt level managed to
maintain investment grade
Over half of Xerox debt supports
finance assets
$1B of debt due in February and
$250M in June 2015
– Expect to re-finance during the year
and end 2015 with ~$7.7B of debt
43
Financing and Leverage • Xerox’s value proposition includes leasing of Xerox equipment
• Maintain 7:1 leverage ratio of debt to equity on these finance assets
Debt and Finance Asset Trend (in millions)
Q4 2014
(in billions) Fin. Assets Debt1
Financing $4.8 $ 4.2
Core - $ 3.5
Total Xerox $ 4.8 $ 7.7
$
0
2,000
4,000
6,000
8,000
10,000
2011 2012 2013 2014
Finance Debt Core Debt Finance Assets
1Debt excludes $75M in Capital Leases related to our ITO business, which were reclassified to a discontinued operations liability
account as a result of the move of ITO to discontinued operations
Repurchased $1.07B FY
Expect ~$1B in share repurchase in 2015
Announcing a 12% increase in quarterly
common dividend to 7 cents per share2
Expect ~$300M in dividend payments in
2015
Expect up to $900M in acquisitions in 2015
Capital Allocation Enhances Shareholder Returns
44
Share Repurchase Program
Dividend Program
1Ending fully diluted: see non-GAAP measures
2Dividend increase effective for common dividend payable on April 30, 2015
Shares Repurchased ($M)
Shares Outstanding (ending fully diluted1, in millions)
Dividend per share (annualized)
$701
$1,052
$696
$1,071 ~ $1B
$0
$300
$600
$900
$1,200
2011 2012 2013 2014 2015
$0.17 $0.17 $0.23 $0.25 $0.28
$0.00
$0.50
2011 2012 2013 2014 2015
1,391 1,271 1,235 1,159
1,000
1,200
1,400
2011 2012 2013 2014
2015 Guidance
2015
Revenue Growth @ CC Flat
Services Up 2 to 4%
Document Technology Down 4 to 5%
Adjusted EPS1 (incl restructuring) $1.00 - $1.06
GAAP EPS2 $0.83 - $0.89
Cash From Operations $1.7 - $1.9B
CAPEX $ 0.4B
Free Cash Flow $1.3 - $1.5B
Share Repurchase ~$1B
Acquisitions <$900M
Dividend ~$300M
Note: Revenue growth guidance excluding potential divestitures
Constant Currency (CC), Adjusted EPS and Free Cash Flow: see non-GAAP measures 1Adjusted for amortization of intangible assets 2GAAP EPS from Continuing Operations 3 Excludes ITO which was moved to discontinued operations following announcement of planned sale to Atos
Revenue
• Services revenue growth driven by BPO
• Document Tech CC declines moderate – Lower impact from prior Finance Receivable sales
• Expect (3) to (4) pts negative currency impact
Earnings3
• FY EPS range $1.00 - $1.06, reflects a 5 cent
negative impact from recent currency shifts
• YOY Earnings Drivers
– Improving margin in Services
– Continued strong Doc Tech margin but lower YOY from
higher pension expense and currency
– FY Tax Rate of 25% to 27%
– Fewer shares
Cash flow guidance of $1.7 - $1.9B – Reflects expected timing of the sale of the ITO business
and currency impact
– Expect to offset the impact of ITO sale by 2016
45
Summary Progressing on Services profitability and growth initiatives
• Positive BPO revenue trend; managing portfolio and investments to drive better growth
• Made progress on Services margin in Q4, continuing to execute on margin expansion initiatives for sustainable margin
improvement
Continued strong profitability and execution in Document Technology
• Leader in attractive segments; well positioned entering 2015
• Focused on maintaining strong profitability through ongoing productivity initiatives
Strong annuity driven Cash Flow supports share repurchase, acquisitions and dividend expansion
• Announcing a 12% increase in the quarterly common dividend
Q1 and FY EPS guidance
• Q1 Adjusted EPS1 $0.20 - $0.22, GAAP EPS2 $0.16 - $0.18
– Includes approximately 2 cents restructuring
• FY Adjusted EPS1 revised to $1.00 - $1.06, GAAP EPS2 to $0.83 - $0.89
– Reflects approximately 5 cents of negative currency
46 1Guidance - Adjusted EPS: see non-GAAP measures
2GAAP EPS from Continuing Operations
ITO Divestiture Summary Announced planned sale of ITO business to Atos on December 18, 2014
• Cash consideration of $1.05B prior to closing adjustments, potential for incremental $50M at closing
• Transaction expected to close in the first half of 2015
• Worldwide strategic collaboration between Xerox and Atos - mutually beneficial to Xerox, Atos, our employees and our
customers
Significant milestone in Xerox’s ongoing portfolio management strategy
• Enables greater focus on expanding BPO and DO businesses where we have scale and differentiation
• Supports objective to grow our BPO business internationally
Impact to Earnings and use of Proceeds
• ITO moved to discontinued operations - ITO net revenue of $1.3B and operating profit of $107M in 2014
• Expect after-tax proceeds of approximately $850M, as a result, expect ~$1B in share repurchase and up to $900M in
acquisitions in 2015
• As previously communicated, expect ~6 cents of dilution in 2015 and neutral by 2016, reflecting timing of use of proceeds
48
Metrics Reference – FY 2014
Entry Installs FY
A4 Mono MFDs (23)%
A4 Color MFDs (7)%
Color Printers Flat
Mid-Range Installs
Mid-Range B&W MFDs (13)%
Mid-Range Color MFDs 1%
High-End Installs
High-End B&W (13)%
High-End Color1 (7)%
FY
Business Process Outsourcing $7.6
Document Outsourcing $3.0
Total $10.6B
Signings Growth TTM (13)%
FY
Digital MIF 2%
Color MIF 12%
Digital Pages (4)%
Color Pages 4%
Color Revenue (CC2) (2)%
FY
Renewal Rate (BPO) 82%
Signings and Renewal Rate Install, MIF and Page Growth
Installs, color revenue, pages and MIF include both the Document Technology and Services segments. Color revenue and color pages reflect
revenue and pages from color capable devices. 1High-end color install growth impacted by digital front end (DFE) sales to Fuji Xerox, High-end up 6% FY excluding DFE’s. 49 2Constant currency: see non-GAAP measures
Revenue Trend
(in millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Total Revenue $4,857 $5,042 $4,900 $5,207 $20,006 $4,771 $4,941 $4,795 $5,033 $19,540
Growth (2)% (2)% (2)% (3)% (2)%
CC1 Growth (2)% (3)% (2)% (1)% (2)%
Annuity $ 4,133 $4,187 $4,090 $4,238 $16,648 $4,056 $4,160 $4,047 $4,173 $16,436
Growth (2)% (1)% (1)% (2)% (1)%
CC1 Growth (2)% (2)% (1)% Flat (1)%
Annuity % Revenue
85% 83% 83% 81% 83% 85% 84% 84% 83% 84%
Equipment $724 $855 $810 $969 $3,358 $715 $781 $748 $860 $3,104
Growth (1)% (9)% (8)% (11)% (8)%
CC1 Growth (2)% (9)% (8)% (9)% (7)%
2013
50 1Constant currency: see non-GAAP measures
2014
Note: 2013, Q1 2014, Q2 2014 and Q3 2014 are revised to remove business revenues that were reclassified to discontinued operations.
2013 quarterly growth are figures not available on a revised basis at this time.
Segment Revenue Trend
(in millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Services $2,584 $2,613 $2,596 $2,686 $10,479 $2,585 $2,651 $2,623 $2,725 $10,584
Growth Flat 1% 1% 1% 1%
CC1 Growth Flat 1% 1% 3% 1%
Document Technology $2,135 $2,263 $2,159 $2,351 $8,908 $2,044 $2,126 $2,029 $2,159 $8,358
Growth (4)% (6)% (6)% (8)% (6)%
CC1 Growth (5)% (7)% (6)% (6)% (6)%
Other $138 $166 $145 $170 $619 $142 $164 $143 $149 $598
Growth 3% (1)% (1)% (12)% (3)%
CC1 Growth 3% (2)% (2)% (11)% (3)%
2013
51
2014
1Constant currency: see non-GAAP measures
Note: 2013, Q1 2014, Q2 2014 and Q3 2014 are revised to remove business revenues that were reclassified to discontinued operations.
2013 quarterly growth are figures not available on a revised basis at this time.
Underlying Cash Flow
52
1Represents cash that would have been collected had we not sold finance receivables. Net of collections on beneficial interest.
2Underlying OCF is reported OCF adjusted for the impacts of Finance Receivable sales: see non-GAAP measures
(in millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Operating Cash Flow (OCF) $286 $325 $595 $857 $2,063 ($87) $533 $961 $968 $2,375
Adjustments:
Cash From F/R Sales - - - - - - - ($384) ($247) ($631)
Impact from prior F/R Sales1 $123 $112 $102 $96 $433 $89 $58 $68 $119 $334
Underlying OCF2$409 $437 $697 $953 $2,496 $2 $591 $645 $840 $2,078
2014 2013
Discontinued Operations Summary – Q4
53
1ITO Income from operations for both the 2014 and 2013 fourth quarters includes intangible amortization and other expenses of
approximately $9 million.
(in millions) ITO Other Total ITO Other Total
Revenues 327$ -$ 327$ 341$ 55$ 396$
Income (loss) from operations (1) 16$ -$ 16$ 21$ (2)$ 19$
Loss on disposal (181) - (181) - (2) (2)
Net (loss) income before income
taxes (165) - (165) 21 (4) 17
Income tax benefit (expense) 16 - 16 (7) (1) (8)
(Loss) income from discontinued
operations, net of tax (149)$ -$ (149)$ 14$ (5)$ 9$
Diluted (loss) earnings per share
from discontinued operations (0.13)$ 0.01$
Total diluted earnings per share,
inclusive of discontinued operations 0.13$ 0.24$
Three Months Ended December 31,
2014 2013
Discontinued Operations Summary – FY
54
1ITO Income from operations for the full-year 2014 and 2013 includes intangible amortization and other expenses of
approximately $33 million and $31 million, respectively.
(in millions) ITO Other Total ITO Other Total
Revenues 1,320$ 45$ 1,365$ 1,335$ 496$ 1,831$
Income (loss) from operations (2) 74$ (1)$ 73$ 70$ 3$ 73$
Loss on disposal (181) (1) (182) - (25) (25)
Net (loss) / income before income
taxes (107) (2) (109) 70 (22) 48
Income tax benefit / (expense) (5) (1) (6) (24) (4) (28)
(Loss) / income from discontinued
operations, net of tax (112)$ (3)$ (115)$ 46$ (26)$ 20$
Diluted (loss) earnings per share
from discontinued operations (0.09)$ 0.02$
Total diluted earnings per share,
inclusive of discontinued operations 0.81$ 0.91$
Year Ended December 31,
2014 2013
Discontinued Operations Revision Summary
55
Revised for the reclassification of the ITO business from Services segment to discontinued operations. Segment
profit for our other segments, Document Technology and Other, were impacted by minor reallocation of expenses
as well as rounding.
(in millions)
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q3 YTD
Revenues
Services 2,584$ 2,613$ 2,596$ 2,686$ 10,479$ 2,585$ 2,651$ 2,623$ 7,859$
Document Technology 2,135 2,263 2,159 2,351 8,908 2,044 2,126 2,029 6,199
Other 138 166 145 170 619 142 164 143 449
Total Revenues 4,857$ 5,042$ 4,900$ 5,207$ 20,006$ 4,771$ 4,941$ 4,795$ 14,507$
Segment Profit (Loss)
Services 250$ 276$ 268$ 261$ 1,055$ 222$ 226$ 240$ 688$
Document Technology 186 245 260 273 964 249 306 284 839
Other (68) (61) (54) (34) (217) (50) (75) (82) (207)
Segment Profit (Loss) 368$ 460$ 474$ 500$ 1,802$ 421$ 457$ 442$ 1,320$
Segment Margin
Services 9.7% 10.6% 10.3% 9.7% 10.1% 8.6% 8.5% 9.1% 8.8%
Document Technology 8.7% 10.8% 12.0% 11.6% 10.8% 12.2% 14.4% 14.0% 13.5%
Other (49.3%) (36.7%) (37.2%) (20.0%) (35.1%) (35.2%) (45.7%) (57.3%) (46.1%)
Segment Margin 7.6% 9.1% 9.7% 9.6% 9.0% 8.8% 9.2% 9.2% 9.1%
2013 2014
57
“Adjusted Earnings Measures”: To better understand the trends in our business, we believe it is necessary to adjust the following amounts determined in
accordance with GAAP to exclude the effects of certain items as well as their related income tax effects.
• Net income and Earnings per share (“EPS”)
• Effective tax rate
In 2014 and 2013, we adjusted for the amortization of intangible assets. The amortization of intangible assets is driven by our acquisition activity which can vary
in size, nature and timing as compared to other companies within our industry and from period to period. Accordingly, due to the incomparability of acquisition
activity among companies and from period to period, we believe exclusion of the amortization associated with intangible assets acquired through our acquisitions
allows investors to better compare and understand our results. The use of intangible assets contributed to our revenues earned during the periods presented and
will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.
We also calculate and utilize an Operating income and margin earnings measure by adjusting our pre-tax income and margin amounts to exclude certain items.
In addition to the amortization of intangible assets, operating income and margin also exclude Other expenses, net as well as Restructuring and asset
impairment charges. Other expenses, net is primarily comprised of non-financing interest expense and also includes certain other non-operating costs and
expenses. Restructuring and asset impairment charges consist of costs primarily related to severance and benefits for employees pursuant to formal
restructuring and workforce reduction plans. Such charges are expected to yield future benefits and savings with respect to our operational performance. We
exclude these amounts in order to evaluate our current and past operating performance and to better understand the expected future trends in our business.
“Constant Currency”: To better understand trends in our business, we believe that it is helpful to adjust revenue to exclude the impact of changes in the
translation of foreign currencies into U.S. dollars. We refer to this adjusted revenue as “constant currency.” Currencies for developing market countries (Latin
America, Brazil, Middle East, India, Eurasia and Central-Eastern Europe) that we operate in are reported at actual exchange rates for both actual and constant
revenue growth rates because (1) these countries historically have had volatile currency and inflationary environments and (2) our subsidiaries in these countries
have historically taken pricing actions to mitigate the impact of inflation and devaluation. Management believes the constant currency measure provides
investors an additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency
growth rates.
Non-GAAP Financial Measures
58
“Free Cash Flow”: To better understand the trends in our business, we believe that it is helpful to adjust cash flows from operations to exclude amounts for
capital expenditures including internal use software. Management believes this measure gives investors an additional perspective on cash flow from operating
activities in excess of amounts required for reinvestment. It provides a measure of our ability to fund acquisitions, dividends and share repurchase. It also is
used to measure our yield on market capitalization. A reconciliation of this non-GAAP financial measure and the most directly comparable measure calculated
and presented in accordance with GAAP is set forth in the slide entitled “2015 Guidance”.
“Underlying Cash Flow”: To better understand the trends in our business, we believe that it is helpful to adjust cash flows from operations for the cash flow
impacts from our sales of finance receivables. The sale of finance receivables has a significant impact on operating cash flows in the period of sale as well as on
collections in subsequent periods due to the long term nature of these receivables. In addition to providing a better understanding of the underlying trends in cash
flows from operations, management believes this measure gives investors an additional perspective on comparing and analyzing the year-over-year changes in
our cash flows as well as the impacts of these sales on cash flows in the period. A reconciliation of this non-GAAP financial measure and the most directly
comparable measure calculated and presented in accordance with GAAP is set forth in the slide entitled “Underlying Cash Flows”.
Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods’ results against the corresponding
prior periods’ results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results
prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP
measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly
uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-
GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in
part on the performance of our business based on these non-GAAP measures.
Unless otherwise noted, reconciliations of these non-GAAP financial measures and the most directly comparable measures calculated and presented in
accordance with GAAP are set forth on the following slides.
Non-GAAP Financial Measures
59
Q4 GAAP EPS to Adjusted EPS Track
(in millions; except per share amounts) Net Income EPS Net Income EPS
Reported(1)305$ 0.26$ 297$ 0.23$
Adjustments:
Amortization of intangible assets 52 0.05 47 0.04
Adjusted 357$ 0.31$ 344$ 0.27$
Weighted average shares for adjusted EPS(2) 1,171 1,261
Fully diluted shares at end of period(3) 1,159
Three Months Ended
December 31, 2014
Three Months Ended
December 31, 2013
(2) Average shares for the calculation of adjusted EPS include 27 million of shares associated with the Series A
convertib le preferred stock and therefore the related quarterly dividend was excluded.
(3) Represents common shares outstanding at December 31, 2014 as well as shares associated with our
Series A convertib le preferred stock plus dilutive potential common shares as used for the calculation of diluted
earnings per share in the fourth quarter 2014.
(1) Net Income and EPS from continuing operations attributable to Xerox.
60
FY GAAP EPS to Adjusted EPS Track
(in millions; except per share amounts) Net Income EPS Net Income EPS
Reported(1)1,084$ 0.90$ 1,139$ 0.89$
Adjustments:
Amortization of intangible assets 196 0.17 189 0.15
Adjusted 1,280$ 1.07$ 1,328$ 1.04$
Weighted average shares for adjusted EPS(2) 1,199 1,274
Fully diluted shares at end of period(3) 1,159__________
December 31, 2014
Year Ended Year Ended
(2) Average shares for the calculation of adjusted EPS include 27 million of shares associated with the Series A
convertib le preferred stock and therefore the related quarterly dividend was excluded.
(3) Represents common shares outstanding at December 31, 2014 as well as shares associated with our
Series A convertib le preferred stock plus dilutive potential common shares as used for the calculation of diluted
earnings per share in the fourth quarter 2014.
December 31, 2013
(1) Net Income and EPS from continuing operations attributable to Xerox.
61
GAAP EPS to Adjusted EPS Guidance Track
Q1 2015 FY 2015
GAAP EPS from Continuing Operations $0.16 - $0.18 $0.83 - $0.89
Adjustments:
Amortization of intangible assets 0.04 0.17
Adjusted EPS $0.20 - $0.22 $1.00 - $1.06
Note: GAAP and Adjusted EPS guidance includes anticipated restructuring
Earnings Per Share Guidance
62
Q4 Adjusted Operating Income/Margin
(in millions) Profit Revenue Margin Profit Revenue Margin
Reported pre-tax income (1)348$ 5,033$ 6.9% 326$ 5,207$ 6.3%
Adjustments:
Amortization of intangible assets 83 76
Xerox restructuring charge 36 55
Other expenses, net 57 33
Adjusted Operating 524$ 5,033$ 10.4% 490$ 5,207$ 9.4%
Three Months Ended Three Months Ended
December 31, 2014 December 31, 2013
(1) Profit and Revenue from continuing operations attributable to Xerox.
63
FY Adjusted Operating Income/Margin
(in millions) Profit Revenue Margin Profit Revenue Margin
Reported pre-tax income (1)1,206$ 19,540$ 6.2% 1,243$ 20,006$ 6.2%
Adjustments:
Amortization of intangible assets 315 305
Xerox restructuring charge 128 115
Other expenses, net 232 146
Adjusted Operating 1,881$ 19,540$ 9.6% 1,809$ 20,006$ 9.0%
December 31, 2014 December 31, 2013
Year Ended Year Ended
(1) Profit and Revenue from continuing operations attributable to Xerox.
64
Q4 and FY Adjusted Other, net
Three Months Ended Three Months Ended
(in millions) December 31, 2014 December 31, 2013
Other expenses, net - Reported 57$ 33$
Adjustments:
Xerox restructuring charge 36 55
Net income attributable to noncontrolling interests 6 5
Other expenses, net - Adjusted 99$ 93$
Year Ended Year Ended
(in millions) December 31, 2014 December 31, 2013
Other expenses, net - Reported 232$ 146$
Adjustments:
Xerox restructuring charge 128 115
Net income attributable to noncontrolling interests 23 20
Other expenses, net - Adjusted 383$ 281$
65
Q4 and FY Adjusted Effective Tax Rate
(in millions)
Pre-Tax
Income
Income
Tax
Expense
Effective
Tax
Rate
Pre-Tax
Income
Income
Tax
Expense
Effective
Tax Rate
Reported(1) 348$ 78$ 22.4% 326$ 67$ 20.6%
Adjustments:
Amortization of intangible assets 83 31 76 29
Adjusted 431$ 109$ 25.3% 402$ 96$ 23.9%
(in millions)
Pre-Tax
Income
Income
Tax
Expense
Effective
Tax
Rate
Pre-Tax
Income
Income
Tax
Expense
Effective
Tax Rate
Reported(1) 1,206$ 259$ 21.5% 1,243$ 253$ 20.4%
Adjustments:
Amortization of intangible assets 315 119 305 116
Adjusted 1,521$ 378$ 24.9% 1,548$ 369$ 23.8%
(1) Pre-Tax Income and Income Tax Expense from continuing operations attributable to Xerox.
Three Months Ended Three Months Ended
December 31, 2014 December 31, 2013
Year Ended Year Ended
December 31, 2014 December 31, 2013
66
Q4 and FY Services Revenue Breakdown
Note: The above table has been revised to reflect the reclassification of the ITO business to discontinued operations. Additionally,
2013 Business Process Outsourcing (BPO) revenues have been revised to conform to the 2014 presentation of revenues.
(in millions) 2014 2013 Change
Revenue
CC
Change 2014 2013 Change
Revenue
CC
Change
Business Processing Outsourcing 1,877$ 1,824$ 3% 4% 7,304$ 7,244$ 1% 1%
Document Outsourcing 874 889 (2%) 1% 3,388 3,337 2% 2%
Less: Intra-Segment Eliminations (26) (27) (4%) (4%) (108) (102) 6% 6%
Total Revenue - Services 2,725$ 2,686$ 1% 3% 10,584$ 10,479$ 1% 1%
2,725 2,686 10,584 10,479
Three Months Ended December 31, Year Ended December 31,