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Xerox Investor Handout
Xerox Strategy Overview / Quarter 1 2015 Results
Forward-Looking Statements
2
This release 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. Such 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; our ability to successfully develop new products, technologies
and service offerings and to protect our intellectual property rights; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the
contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable
law; the risk that our bids do not accurately estimate the resources and costs required to implement and service very complex, multi-year governmental and commercial
contracts, often in advance of the final determination of the full scope and design of such contracts or as a result of the scope of such contracts being changed during the
life of such contracts; the risk that subcontractors, software vendors and utility and network providers will not perform in a timely, quality manner; service interruptions;
actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; 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 individually identifiable information of customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our
security systems; the risk in the hiring and retention of qualified personnel; the risk that unexpected costs will be incurred; 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; the collectability of our receivables for
unbilled services associated with very large, multi-year contracts; reliance on third parties, including subcontractors, for manufacturing of products and provision of
services; our ability to expand equipment placements; interest rates, cost of borrowing and access to credit markets; the risk that our products may not comply with
applicable worldwide regulatory requirements, particularly environmental regulations and directives; 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 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Xerox 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 announced that it had entered into an agreement to sell its Information Technology Outsourcing (ITO) business to Atos. The transaction
is subject to customary closing conditions and regulatory approval and is expected to close in second quarter of 2015. As a result of the pending sale of the ITO
business and having met applicable accounting requirements, Xerox is reporting 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.
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
Sustainable
Shareholder
Value
>50% FCF Return to
Shareholders
Lead in
Document
Technology
~$1.8B Expected 2015
Xerox Cash
from
Operations
5
10-12%
Services
Target Margin
Document Technology
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 2014 Equipment Sale Revenue Share %
Xerox has been the leader
for 21 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
15
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
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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
Services Strategy…
Manage Our
Portfolio of
Businesses
Grow
Globally
Transform the
Way We Work
Deliver
Operational
Excellence
Use Analytics
to Increase
Value
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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 (primarily Health Enterprise)
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
25+ bps
Target Contribution
100+ bps
75 - 100 bps
(50 - 60) bps
Platform Development 25+ bps
Note: 2015 Services margin guidance is 8.5%- 9% as announced
in the Xerox Q1 2015 earnings release on April 24, 2015.
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
improve over time
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
Government Healthcare Enterprise Implementations NH
• Live April 2013, extended “burn in” period, currently
performing well
• Enterprise enabled subsequent implementation of
managed care and Medicaid expansion programs
AK
• Live October 2013, extended “burn in” period
• Performing well today
CA
• In development, phased “go-live” started Q4’14,
program progressing well overall
ND
• “Go-live” in 2015, testing and operational readiness
activities underway
MT
• Working corrective action plan with the state
• “Go-live” 2017
NY
• Contract finalized April 2015
• Invested ahead of contract to ensure success
21
In Process and Going forward actions:
• Increasing leadership focus and adding external talent
• Revamping governance model for improved control, decreased risk
• Implementing platform approach for increased code reuse
• Increasing software quality and testing and release practices
• Reengineering “tech stack” for better scalability, lower cost
• Streamlining support model, expanding supplier base and increasing
offshore capabilities for higher productivity, lower cost
Note: In the Xerox Q1’15 earnings release on April 24, 2015, adjusted
EPS and Services margin guidance for 2015 were both reduced primarily
as a result of increased costs associated with the Health Enterprise
implementations
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
22
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
23
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
24
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
25
MPS
Office
Workflow
26
Gartner Magic Quadrant for Managed Print and Content Services
Source: Gartner, Inc. “Magic Quadrant for Managed Print and Content Services,
Worldwide” By Ken Weilerstein, Elizabeth Kim, Sharon McNee, November 6, 2014
Xerox has been positioned the furthest for Completeness of Vision and Ability to Execute within the 2014 Leaders quadrant for Managed Print and Content Services.
The Gartner Magic Quadrant is copyrighted 6 November 2014 by Gartner, Inc., and is reused with permission. This graphic was published by Gartner, Inc. as part of a larger research
document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Xerox.
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.
The Magic Quadrant graphic was published by Gartner, Inc. as part of a larger research note and should be evaluated in the context of
the entire report. The Gartner report is available upon request from Xerox.
Approved for External Use by Xerox Only through November 10, 2015 Partners can access materials via http://www.consulting.xerox.com/gartners-magic-quadrant/enus.html
"The Completeness of Vision axis reflects each MPS and MCS
provider's prospects for success by analyzing its view of the
market, service operating model, and strategic plans for growth
and service improvements.“
"The Ability to Execute axis position for each MPS and MCS
provider is based on its success in delivering results today, as
well as its preparation to deliver results in the future."
Xerox
Financial Overview
Note: Xerox announced on 12/18/14 that it entered an
agreement to sell its ITO business to Atos (expected to
close in second quarter 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%
28
• 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
2015 Guidance
2015
Revenue Growth @ CC Down ~1%
Services Up 2 to 4%
Document Technology Down 4 to 5%
Adjusted EPS1 (incl restructuring) $0.95 - $1.01
GAAP EPS2 $0.77 - $0.83
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 Financial Measures 1Adjusted for amortization of intangible assets 2GAAP EPS from Continuing Operations
Adjusting 2015 Guidance
• Expect Total Revenue will be down ~1% CC
– Actuals will reflect 4 pts negative currency impact
– Services revenue at the lower end of the range
• Expect Services margin to be in the range of 8.5 to
9.0%
– Largely driven by higher costs for legacy Health
Enterprise platform implementations
• FY EPS range $0.95 - $1.01
– Decrease of 5 cents from prior guidance
Maintaining $1.7 - $1.9B Operating Cash Flow
guidance
29
(Reflects guidance from Q1 2015 Earnings call on 4/24/15)
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. 3Adjusted EPS drivers updated to reflect guidance announced in Q1’15 earnings release on April 24, 2015.
30
Adjusted (Adj) EPS: see non-GAAP measures
$1.07
$0.95 - $1.01
Tax Rate & Other2
(1) cent
$0.80
$0.90
$1.00
$1.10
$1.20
2014 Adj EPS Margin exclSettlements
Shares Tax Rate/Other PensionSettlements
Currency 2014 Adj EPS
Operating
Profit 3
(excl Settlements
and currency)
(1) - 1 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 2014 2015E
DB Plan Cost DB Settlement Loss DC Plan Cost
$0
$100
$200
$300
$400
$500
2012 2013 2014 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
31
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
32
(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
33
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
34
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
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 second quarter 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
35
First-Quarter 2015 Earnings Presentation
April 24, 2015
Ursula Burns Chairman & CEO Kathy Mikells Chief Financial Officer
Forward-Looking Statements This release 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. Such 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; our ability to successfully develop new products, technologies
and service offerings and to protect our intellectual property rights; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the
contract term and that civil or criminal penalties and administrative sanctions could be imposed on us if we fail to comply with the terms of such contracts and applicable
law; the risk that our bids do not accurately estimate the resources and costs required to implement and service very complex, multi-year governmental and commercial
contracts, often in advance of the final determination of the full scope and design of such contracts or as a result of the scope of such contracts being changed during the
life of such contracts; the risk that subcontractors, software vendors and utility and network providers will not perform in a timely, quality manner; service interruptions;
actions of competitors and our ability to promptly and effectively react to changing technologies and customer expectations; 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 individually identifiable information of customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our
security systems; the risk in the hiring and retention of qualified personnel; the risk that unexpected costs will be incurred; 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; the collectability of our receivables for
unbilled services associated with very large, multi-year contracts; reliance on third parties, including subcontractors, for manufacturing of products and provision of
services; our ability to expand equipment placements; interest rates, cost of borrowing and access to credit markets; the risk that our products may not comply with
applicable worldwide regulatory requirements, particularly environmental regulations and directives; 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 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Xerox 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 announced that it had entered into an agreement to sell its Information Technology Outsourcing (ITO) business to Atos. The transaction
is subject to customary closing conditions and regulatory approval and is expected to close in second quarter of 2015. As a result of the pending sale of the ITO
business and having met applicable accounting requirements, Xerox is reporting 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.
37
Xerox Direction
Annuity 86% of Total Revenue
Services 56% of Total Revenue
38
• 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
First-Quarter Overview Adjusted EPS1 of 21 cents, GAAP EPS2 of 16 cents Total revenue of $4.5B, down 6% or 2% CC1
Services revenue down 3% or up 1% CC1; margin of 7.5%
• Margin up modestly excluding the impact from Health Enterprise platform implementations
Document Technology revenue down 10% or 6% CC1; margin of 11.1%
• Margin in-line with expectations; lower YOY driven by higher pension expense
Operating margin1 of 7.6%, down 110 bps YOY Cash from operations of $113M
• Share repurchase of $216M
• Acquisitions of $28M
1Adjusted EPS, Constant Currency (CC) and Operating Margin: see Non-GAAP Financial Measures
2GAAP EPS from Continuing Operations 39
Earnings (in millions, except per share data) Q1 2015 B/(W) Comments
Revenue $ 4,469 $ (302) Down 2% CC – Services up 1%, Document Technology down 6%
Gross Margin 31.2% (0.3) pts
RD&E $ 141 $ 4
SAG $ 915 $ 30
SAG % of Revenue 20.5% (0.7) pts
Adjusted Operating Income1 $ 338 $ (75) Higher pension expense and higher Health Enterprise platform
implementation costs drove margin decline Operating Income % of Revenue 7.6% (1.1) pts
Adjusted Other, net1 $ 65 $ 5 O(I)D $7M higher YOY; Restructuring $12M lower YOY
Equity Income $ 34 $ (8) Decline driven by translation currency
Adjusted Tax Rate1 24.5% (4) pts Compares to prior year tax rate of 20.4%
Adjusted Net Income – Xerox1 $ 239 $ (75)
Adjusted EPS1 $ 0.21
$ (0.05)
Guidance range $0.20 - $0.22
Amortization of intangible assets 0.05 (0.01)
GAAP EPS2 $ 0.16
$ (0.06)
1Adjusted Operating Income, Adjusted Other, net, Adjusted Tax Rate, Adjusted Net Income – Xerox and Adjusted EPS: see Non-GAAP Financial Measures
2GAAP EPS from Continuing Operations 40
Services Segment Revenue growth of 1% at CC
• Document Outsourcing up 2%, BPO up 1%
Continuing to invest in go-to-market model, ramping
sales and industry resources
Margin up 10 bps YOY excluding higher Health
Enterprise platform implementation costs
Signings
• BPO/DO renewal rate of 91%
• New business signings2 down 26% YOY and 17% TTM
• Q2 signings will benefit from recently approved New York
MMIS and pending Florida Tolling deals
Q1 % B/(W) YOY
(in millions) 2015 Act Cur CC1
Total Revenue $2,514 (3)% 1%
Segment Profit $189 (15)%
Segment Margin 7.5% (1.1) pts
Segment Margin Trend
Revenue Growth Trend (CC1)
41 1Constant currency (CC): see Non-GAAP Financial Measures
2New Business Signings = ARR (Annual Recurring Revenue) + NRR (Non-Recurring Revenue)
Signings (TCV) Q1
Business Process Outsourcing $1.8
Document Outsourcing $0.6
Total $2.4B
YOY Growth (13)%
TTM Growth (10)%
0%
1% 1%
3%
1%
0%
2%
4%
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15
8.6% 8.5% 9.1% 9.8%
7.5%
5%
7%
9%
11%
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15
Health Enterprise Platform Details
42
• Increased losses from Health Enterprise platform accounts impacted Q1 Services margin
– YOY impact was approximately $(30)M or (120) bps to Services margin
– California largest driver – reflects anticipated higher costs to deliver the platform for the state
– New York approved in April – investments intentionally ramped ahead of signing for a strong start
• We continue to improve operationally through significant investments and enhanced process discipline
– California – strong operational delivery
– New Hampshire – improved operational performance and CMS certification for Health Enterprise now underway
– Delivery and execution improving in other states; however, some legacy financial issues remain
• Going forward actions
– Leadership focus and adding external talent
– Enhancements maturing in quality, program management & governance
– Continuing stabilization, standardization and quality improvements to the Health Enterprise platform – will enable
future code, documentation and support efficiencies
– Expanding supplier base to increase capacity, flexibility and improve pricing
– Increasing offshore capabilities to reduce platform development costs
• Over two-thirds of Government Healthcare business generates healthy margins
• Health Enterprise platform accounts expected to pressure Services financial results for the remainder
of 2015; contemplated within revised Services margin guidance of 8.5 to 9.0%
Document Technology Segment
Segment Margin Trend
Revenue Growth Trend (CC1)
Q1 % B/(W) YOY
(in millions) 2015 Act Cur CC1
Total Revenue $1,830 (10)% (6)%
Segment Profit $203 (18)%
Segment Margin 11.1% (1.1) pts
Core operations performing well
Revenue down 6% at CC1; trend consistent
• As expected, actual results pressured by currency
Margin consistent with expectations, lower YOY
driven by higher pension expense
Entry installs impacted by continued weakness in
developing markets
Entry Installs Q1
A4 Mono MFDs (22)%
A4 Color MFDs (30)%
Color Printers 1%
Mid-Range Installs
Mid-Range B&W MFDs (1)%
Mid-Range Color MFDs (1)%
High-End Installs
High-End B&W (5)%
High-End Color2 8%
43 1Constant currency (CC): see Non-GAAP Financial Measures
2High-end color down 26% in Q1 excluding DFE’s
12.2% 14.4% 14.0% 14.4%
11.1%
6%
9%
12%
15%
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15
(5)%
(7)% (6)% (6)% (6)% (8)%
(6)%
(4)%
(2)%
0%Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15
Cash Flow
44
(in millions) Q1 2015
Net Income $ 230
Depreciation and amortization 296
Restructuring and asset impairment charges 14
Restructuring payments (31)
Contributions to defined benefit pension plans (41)
Inventories (126)
Accounts receivable and Billed portion of finance receivables1 (167)
Accounts payable and Accrued compensation (17)
Equipment on operating leases (70)
Finance receivables1 87
Other (62)
Cash from Operations
$ 113
Cash from Investing
$ (98)
Cash from Financing $ (485)
Change in Cash and Cash Equivalents (539)
Ending Cash and Cash Equivalents $ 872
Cash From Ops $113M
Working capital seasonally a use of
cash in Q1
CAPEX $95M
Acquisitions $28M
Share Repurchase of $216M and $70M
of Common Stock Dividends
Maintaining FY Operating Cash Flow
guidance of $1.7 - $1.9B
1Accounts receivable includes collections of deferred proceeds from sales of receivables and finance receivables includes collections on
beneficial interest from sales of finance receivables
Capital Structure
Core debt level managed to
maintain investment grade
Over half of Xerox debt supports
finance assets
Continue to expect ~$7.7B of debt at
year-end
45
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)
Q1 2015
(in billions) Fin. Assets Debt
Financing $ 4.5 $ 3.9
Core - $ 3.7
Total Xerox $ 4.5 $ 7.6
$
0
2,000
4,000
6,000
8,000
10,000
2011 2012 2013 2014 Q1 2015
Finance Debt Core Debt Finance Assets
Capital Allocation Enhances Shareholder Returns
ITO divestiture on track to close by
end of the second quarter
Repurchased $216M shares in Q1;
expect ~$1B FY share repurchase
Continue to expect to invest up to
$900M for acquisitions
• Will roll any excess funds to 2016 M&A
Quarterly common dividend at 7 cents
per share2
Expect ~$300M in FY dividend
payments
46
Share Repurchase Program
Dividend Program
1Ending fully diluted: see Non-GAAP Financial Measures
2Dividend increase effective for common dividend payable on April 30, 2015
Shares Repurchased ($M)
Shares Outstanding (ending fully diluted1, in millions)
Dividend per share (annualized)
1,391 1,271 1,235 1,159 1,146
8001,0001,2001,4001,600
2011 2012 2013 2014 Q1 2015
Q1
$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
$0.20
$0.40
2011 2012 2013 2014 2015
2015 Guidance 2015
Revenue Growth @ CC Down ~1%
Services Up 2 to 4%
Document Technology Down 4 to 5%
Adjusted EPS1 (incl restructuring) $0.95 - $1.01
GAAP EPS2 $0.77 - $0.83
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 Financial Measures 1Adjusted for amortization of intangible assets 2GAAP EPS from Continuing Operations
47
Adjusting 2015 Guidance
• Expect Total Revenue will be down ~1% CC
– Actuals will reflect 4 pts negative currency impact
– Services revenue at the lower end of the range
• Expect Services margin to be in the range of 8.5 to
9.0%
– Largely driven by higher costs for legacy Health
Enterprise platform implementations
• FY EPS range $0.95 - $1.01
– Decrease of 5 cents from prior guidance
Maintaining $1.7 - $1.9B Operating Cash Flow
guidance
Summary Confident in our strategy; continue to work to drive future revenue growth and margin expansion
Second half Services metrics expected to show improvement
• Continuing go-to-market focus and investments
• Productivity benefits ramping in second half
Continued Document Technology focus on operational excellence and leadership in attractive
market segments
• Q1 performance as expected, core business fundamentals remain strong
Solid Q1 Cash Flow; maintaining our full year guidance
EPS guidance
• Q2 Adjusted EPS1 $0.21- $0.23, GAAP EPS2 $0.17 - $0.19
– Includes approximately 2 cents restructuring
• FY Adjusted EPS1 $0.95 - $1.01, GAAP EPS2 $0.77 - $0.83
48 1Guidance - Adjusted EPS: see Non-GAAP Financial Measures
2GAAP EPS from Continuing Operations
Appendix
Revenue Trend
(in millions) FY Q1 Q2 Q3 Q4 FY Q1
Total Revenue $20,006 $4,771 $4,941 $4,795 $5,033 $19,540 $4,469
Growth (2)% (2)% (2)% (2)% (3)% (2)% (6)%
CC1 Growth (3)% (2)% (3)% (2)% (1)% (2)% (2)%
Annuity $16,648 $4,056 $4,160 $4,047 $4,173 $16,436 $3,845
Growth (2)% (2)% (1)% (1)% (2)% (1)% (5)%
CC1 Growth (2)% (2)% (2)% (1)% Flat (1)% (1)%
Annuity % Revenue 83% 85% 84% 84% 83% 84% 86%
Equipment $3,358 $715 $781 $748 $860 $3,104 $624
Growth (3)% (1)% (9)% (8)% (11)% (8)% (13)%
CC1 Growth (4)% (2)% (9)% (8)% (9)% (7)% (8)%
2014
50 1Constant currency: see Non-GAAP Financial Measures
2015 2013
Segment Revenue Trend
(in millions) FY Q1 Q2 Q3 Q4 FY Q1
Services $10,479 $2,585 $2,651 $2,623 $2,725 $10,584 $2,514
Growth 2% Flat 1% 1% 1% 1% (3)%
CC1 Growth 2% Flat 1% 1% 3% 1% 1%
Document Technology $8,908 $2,044 $2,126 $2,029 $2,159 $8,358 $1,830
Growth (6)% (4)% (6)% (6)% (8)% (6)% (10)%
CC1 Growth (6)% (5)% (7)% (6)% (6)% (6)% (6)%
Other $619 $142 $164 $143 $149 $598 $125
Growth (10)% 3% (1)% (1)% (12)% (3)% (12)%
CC1 Growth (10)% 3% (2)% (2)% (11)% (3)% (11)%
2014
51
2015
1Constant currency: see Non-GAAP Financial Measures
2013
Discontinued Operations Summary
52
(in millions) ITO Other Total ITO Other Total
Revenues 311$ -$ 311$ 328$ 22$ 350$
Income (loss) from operations (1) (2)
61$ -$ 61$ 21$ (1)$ 20$
(Loss) gain on disposal (4) - (4) - 2 2
Net income before income taxes 57 - 57 21 1 22
Income tax expense (23) - (23) (7) - (7)
Income from discontinued
operations, net of tax 34$ -$ 34$ 14$ 1$ 15$
(2) ITO Income from operations for f irst quarter 2014 includes intangible amortization and other expenses of approximately $8 million.
Three Months Ended March 31,
2015 2014
(1) ITO Income from operations for f irst quarter 2015 excludes approximately $39 million of depreciation and amortization expenses (including $7
million for intangibles amortization) since the business is held for sale.
Non-GAAP Measures
54
“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 2015 and 2014, 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
55
“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”.
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
56
Q1 GAAP EPS to Adjusted EPS Track
(in millions; except per share amounts) Net Income EPS Net Income EPS
Reported(1)191$ 0.16$ 266$ 0.22$
Adjustments:
Amortization of intangible assets 48 0.05 48 0.04
Adjusted 239$ 0.21$ 314$ 0.26$
Weighted average shares for adjusted EPS(2)1,127 1,225
Fully diluted shares at end of period(3)1,146
__________
Three Months Ended Three Months Ended
March 31, 2015 March 31, 2014
(3) Represents common shares outstanding at March 31, 2015 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 first quarter 2015.
(1) Net Income and EPS from continuing operations attributable to Xerox.
(2) Average shares for the calculation of adjusted EPS for first quarter 2015 exclude 27 million of shares
associated with the Series A convertib le preferred stock as to include these shares would be anti-dilutive and
therefore the related quarterly dividend was included. For first quarter 2014, these shares were included in the
adjusted EPS calculation and therefore the related quarterly dividend was excluded.
57
GAAP EPS to Adjusted EPS Guidance Track
Q2 2015 FY 2015
GAAP EPS from Continuing Operations $0.17 - $0.19 $0.77 - $0.83
Adjustments:
Amortization of intangible assets 0.04 0.18
Adjusted EPS $0.21 - $0.23 $0.95 - $1.01
Note: GAAP and Adjusted EPS guidance includes anticipated restructuring
Earnings Per Share Guidance
58
Q1 Adjusted Operating Income/Margin
(1) Profit and Revenue from continuing operations attributable to Xerox.
(in millions) Profit Revenue Margin Profit Revenue Margin
Reported pre-tax income (1)201$ 4,469$ 4.5% 271$ 4,771$ 5.7%
Adjustments:
Amortization of intangible assets 77 77
Xerox restructuring charge 14 26
Other expenses, net 46 39
Adjusted Operating Income/Margin 338$ 4,469$ 7.6% 413$ 4,771$ 8.7%
Three Months Ended Three Months Ended
March 31, 2015 March 31, 2014
59
Q1 Adjusted Other, net
Three Months Ended Three Months Ended
(in millions) March 31, 2015 March 31, 2014
Other expenses, net - Reported 46$ 39$
Adjustments:
Xerox restructuring charge 14 26
Net income attributable to noncontrolling interests 5 5
Other expenses, net - Adjusted 65$ 70$
60
Q1 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) 201$ 39$ 19.4% 271$ 42$ 15.5%
Adjustments:
Amortization of intangible assets 77 29 77 29
Adjusted 278$ 68$ 24.5% 348$ 71$ 20.4%
Three Months Ended Three Months Ended
March 31, 2015 March 31, 2014
(1) Pre-Tax Income and Income Tax Expense from continuing operations attributable to Xerox.
61
Q1 Services Revenue Breakdown
Note: The above table has been revised to reflect the reclassification of the ITO business to Discontinued Operations
and excludes intercompany revenue.
% CC %
(in millions) 2015 2014 Change Change
Business Processing Outsourcing 1,734$ 1,767$ (2%) 1%
Document Outsourcing 780 818 (5%) 2%
Total Revenue - Services 2,514$ 2,585$ (3%) 1%
Three Months Ended March 31,
62
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.
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