Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Debt Investor Presentation (March 2019)
45 slides from Xerox's debt investor presentation, Mar 18, 2019
Slide 1: Xerox Presentation March 2019
Xerox Presentation March 2019 Exhibit 99.1
Slide 2: Forward-looking statements and offering notice
The company has filed a shelf registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (the “SEC”). Any offering of securities will be made only by means of a prospectus supplement, which will be filed with the SEC. In the event that the company proceeds with
Slide 3: Today's Presenters
Today’s Presenters John Visentin Vice Chairman and Chief Executive Officer Bill Osbourn, Jr. Executive Vice President and Chief Financial Officer
Slide 4: Agenda
Agenda Company Overview Recent Updates Credit Highlights Key Financial Highlights Appendix Non-GAAP Financial Measures
Slide 5: Company Overview
Company Overview xerox”
Slide 6: Xerox: A Global Leader with a Strong, Diverse Business Profile
Xerox: A Global Leader with a Strong, Diverse Business Profile Note: all figures represent 2018 results unless noted. 1 Adj measures: see Non-GAAP Financial Measures; 2 Share data (CY2017, Worldwide) from IDC’s Worldwide and U.S. Managed Print and Document Services and Basic Print Services Market Sh
Slide 7: Strategic Initiatives to Position Xerox for Success
Strategic Initiatives to Position Xerox for Success Re-energize Innovation Flatten organization for better accountability and ownership Leverage our growing customer base to deliver end-to-end solutions Invest in emerging technologies with attractive addressable markets Expand earnings and cash flow
Slide 8: What's Different?
What’s Different? Accountability One Senior Owner Experience Brought in key players with experience driving major transformations Identified, promoted and broadened roles of existing talent Execution Designing for end-to-end operational efficiency Increased rigor and discipline Executing with greate
Slide 9: Transformation Roadmap
SIMPLIFY TRANSFORM PORTFOLIO & ACCELERATE SALES STABILIZE ROAD TO GROWTH Deep analysis of market and revenue trends Identification of the “hidden technical gems” Reinforcement of selected growth strategies and expansion into new areas Expand our technology solutions Broaden services & software portf
Slide 10: Project Own It Expected to Drive Gross Savings of at Least $640M in 2019
Project Own It Expected to Drive Gross Savings of at Least $640M in 2019* and $1.5B by 2021* *See “Forward-Looking Statements” at the front of this document. Source: Investor Day … with Additional Savings Upside Beyond 2019 $640M of Gross Savings in 2019… 2019 Flow Thru Achieved Synergies In Executi
Slide 11: Drive Innovation & New Growth Businesses
Drive Innovation & New Growth Businesses Capitalize on the opportunity in SMB Expand Services & Software Improve our Core Technology Business Transform client Digital Experience Our Revenue Roadmap is Focused on Five Major Strategies Source: Investor Day
Slide 12: Near-Term Revenue Roadmap
Near-Term Revenue Roadmap Improve our Core Technology Business Continue to grow overall market share in workplace from our ConnectKey® platform enabled devices (A3 & A4) Creating a new category of workplace assistant: leverage new technologies in cloud, security, automation, AI and personalization U
Slide 13: Drive Innovation and New Growth Businesses
Drive Innovation and New Growth Businesses Note: Market data (CY2018, CAGR ‘18-’20, Worldwide) are from Xerox analysis based on market sources *See “Forward-Looking Statements” at the front of this document Source: Investor Day Digital Packaging and Print TAM: $5B 11% CAGR* 3D Printing / Digital Man
Slide 14: Recent Updates
Recent Updates xerox”
Slide 15: Xerox's Arrangement with HCL Technologies
Xerox’s Arrangement with HCL Technologies In March 2019, as part of Project Own It, Xerox entered into a shared services arrangement with HCL Technologies ("HCL") pursuant to which we will outsource (subject to compliance with European works council consultation and employment regulatory requirement
Slide 16: Xerox Customer Financing
Xerox Customer Financing In connection with the Company’s initiative to simplify and optimize its operations, the Company is currently exploring the possibility and feasibility of a strategic transaction involving its customer financing business and/or related assets That process includes discussion
Slide 17: Corporate Reorganization
Corporate Reorganization On March 6, 2019, the Xerox Board of Directors approved a reorganization (the “Reorganization”) of the Company’s corporate structure into a holding company structure, pursuant to which Xerox Corporation will become a direct, wholly-owned subsidiary of a new holding company T
Slide 18: Credit Highlights
Credit Highlights xerox”
Slide 19: Key Credit Highlights
Key Credit Highlights 5 Large core market with opportunity to expand 4 Significant track record of successful cost structure optimization 1 Leading position in core markets 6 Long-term, broad and diverse blue chip customer base 2 3 7 Stable, recurring cash flow from long-term contracts and post sale
Slide 20: Xerox Leadership Positions in our Core Markets
Xerox Leadership Positions in our Core Markets A3 multifunction printers, $19B,▼6% #1, 20% share1 Differentiating through ConnectKey software and security Defending our market share leadership, with growth in SMB A4 multifunction printers, $14B, ▲2% 6% share2 Opportunity to grow presence in the SMB
Slide 21: Xerox Leadership Positions in our Core Markets (cont'd)
Xerox Leadership Positions in our Core Markets (cont’d) Mid-Range High-End Entry Products & Services Note: Metrics for FY2018 Equipment 22% of revenue Gross Margin: 33% $237M up 2% $1,493M up 1.1% $424M down 10.5% $3,457M up 0.5% $5,590M down 5.4% $1,772M down 2.6% $268M down 10.0% Revenue Gaining s
Slide 22: Xerox Leadership Positions in our Core Markets (cont'd)
Xerox Leadership Positions in our Core Markets (cont’d) Unbundled supplies, paper and other sales Services / Maintenance / Rentals Financing Products & Services Post sale 78% of revenue Gross Margin: 42% Select Competitors $237M up 2% $1,493M up 1.1% $424M down 10.5% $3,457M up 0.5% $5,590M down 5.4
Slide 23: Long-Term Broad and Diverse, Blue Chip Customer Base
Long-Term Broad and Diverse, Blue Chip Customer Base 8/10 Top Global Banks1 6/10 Top Global Telecom Companies1 10/10 Top Payers and Providers2 7/10 Top Auto & Truck Manufacturers1 50 State Governments 10/10 Largest Universities2 Enterprise SMB 70% 30% Channel Mix Direct Indirect 70% 30% Direct / Ent
Slide 24: Opportunities to Expand Our Market by $54B
Opportunities to Expand Our Market by $54B* Managed Services, ▲ 3% $27B A3 Multifunction Printers, ▼ 6% $19B High-end / Production, Flat, (Color ▲2%, Mono ▼13%) $7B A4 Multifunction Printers, ▲2% $14B Core Market Size $67B Software, ▲6% $6B Digital Services, ▲ 7% $25B Adjacent Market Size $31B* AI W
Slide 25: Track Record of Successful Cost Improvement
Track Record of Successful Cost Improvement Strong margin trends reflecting history of pro-active management of costs and expenses that offset impact of revenue declines Stable gross margin results from price discipline and favorable post sale mix dynamics Operating margin expansion enabled by the o
Slide 26: Sustainable, Recurring Business Model Drives Significant Cash Flow
Sustainable, Recurring Business Model Drives Significant Cash Flow ~85% of revenues from multi-year contractual arrangements historically Contracts are 4+ years on average Bundled lease arrangements are fixed monthly payment contracts with a variable component attached Customer base is diverse acros
Slide 27: Ample Liquidity and Balanced Debt Facilities
Ample Liquidity and Balanced Debt Facilities 6 x FCF2 Total Debt $5.2 5.0x - Finance debt1 3.4 Core Debt $1.8 1.7x - Ending Cash 1.1 Net Core Debt $0.7 0.7x Debt and Cash As of 12/31/2018 ($B) Ample liquidity with $1.1B cash on hand and $1.8B undrawn committed credit facility Majority of debt alloca
Slide 28: Executive Team with a Balanced Mix of New and Tenured Leaders
Executive Team with a Balanced Mix of New and Tenured Leaders New leadership role Steve Bandrowczak President, Chief Operating Officer Business Transformation John Visentin Vice Chairman and Chief Executive Officer Joanne Collins Smee Chief Commercial Officer Services and Software Growth Courtney Ha
Slide 29: Key Financial Highlights
Key Financial Highlights xerox”
Slide 30: Financing for customers and debt allocation
Xerox’s go to market strategy includes providing financing for customers, primarily under bundled lease agreements (bundle includes equipment, financing, service, supplies) Approximately $3.4B of Xerox’s total $5.2B debt as of December 31, 2018, is allocated to Financing and the remaining $1.8B is a
Slide 31: Recent Revenue Performance
Recent Revenue Performance (in millions) 1 Other total revenue includes OEM business, sales to Fuji Xerox and licensing; 2 Entry revenue excludes OEM business, which is included in Other equipment revenue; 3 Entry installations exclude OEM sales; Mid-Range and High-End color installations exclude Fu
Slide 32: Cash Flow and 2019 Capital Allocation
Operating cash flow (OCF)5: •$1.14B FY, up $168M YOY Q1 historically weakest and Q4 historically strongest Free cash flow (FCF)5: •$1.05B FY, up $183M YOY Working Capital, net2 use of $65M for full year driven by accrued compensation CAPEX: $90M FY Share Repurchase: $700M FY No share repurchase prog
Slide 33: Appendix
Appendix xerox”
Slide 34: Project Own It Expected to Drive Gross Savings of at Least $640M in 2019
Project Own It Expected to Drive Gross Savings of at Least $640M in 2019* and $1.5B by 2021* Shared Services Centers Partnering with Top Tier Provider Optimize Workforce Process Simplification using Robotics & Automation Procurement Supplier Rationalization / Rate Reduction Initiating Global Spend C
Slide 35: Current Capital Structure
Current Capital Structure Note: Core Debt not net of balance sheet adjustments (unamortized discount, debt issuance costs, and terminated and current swaps totaling $51M total) Note: The Company is exploring the possibility of a strategic transaction involving its customer financing business and/or
Slide 36: Global Pensions Overview
FY2016 FY2017 FY2018 ▲16’ -18’ Total Fair Value of Pension Plan Assets $8,158 $9,532 $8,087 Pension Benefit Obligations 10,321 10,883 9,241 Net Funded Status (2,163) (1,351) (1,154) $1,009 U.S. Underfunded (1,046) (606) (560) Unfunded (341) (350) (316) Subtotal (1,387) (956) (876) 511 Non U.S. Under
Slide 37: Fuji Xerox Agreements Overview
Fuji Xerox Agreements Overview Joint Enterprise Contract (JEC) Agreement between Fujifilm and Xerox, as the 2 shareholders of Fuji Xerox (FX) where Xerox has a 25% ownership stake Grants Xerox approval rights over certain FX matters and the right to designate 3 of 12 FX board members Requires FX to
Slide 38: Non-GAAP Financial Measures
Non-GAAP Financial Measures
Slide 39: Non-GAAP Financial Measures
We have reported our financial results in accordance with generally accepted accounting principles (GAAP). In addition, we have discussed our financial results using the Non-GAAP measures described below. We believe these Non-GAAP measures allow investors to better understand the trends in our busin
Slide 40: Restructuring and related costs
Restructuring and related costs: Restructuring and related costs include restructuring and asset impairment charges as well as costs associated with our transformation programs beyond those normally included in restructuring and asset impairment charges. Restructuring consists of costs primarily rel
Slide 41: Transaction and related costs, net
Transaction and related costs, net: Transaction and related costs, net are expenses incurred in connection with Xerox's planned combination transaction with Fuji Xerox, which was terminated in May 2018, as well as costs and expenses related to the previously disclosed settlement agreement reached wi
Slide 42: Free Cash Flow
Free Cash Flow To better understand trends in our business, we believe that it is helpful to adjust operating cash flows from continuing operations by subtracting amounts related to capital expenditures. Management believes this measure gives investors an additional perspective on cash flow from ope
Slide 43: Summary
Summary: Management believes that all of these Non-GAAP financial measures provide an additional means of analyzing the current period’s results against the corresponding prior period’s results. However, these Non-GAAP financial measures should be viewed in addition to, and not as a substitute for,
Slide 44: Adjusted operating margin reconciliation
(in millions) Profit Revenue Margin Profit Revenue Margin Profit Revenue Margin Reported (1) 598 $ 9,830 $ 6.1% 570 $ 10,265 $ 5.6% 568 $ 10,771 $ 5.3% Adjustments: Restructuring and related costs 158 216 259 Amortization of intangible assets 48 53 58 Transaction and related costs, net 68 9 - Equity
Slide 45: Free Cash Flow reconciliation
Free Cash Flow reconciliation