Xerox Holdings Corporation · NASDAQ:XRX
Xerox — Investor Day (December 2016)
62 slides from Xerox's investor day presentation, Dec 7, 2016
Slide 1: Xerox: A New Beginning
Xerox: A New Beginning Exhibit 99.2
Slide 2: Introduction and Strategic Overview
Introduction and Strategic Overview Jeff Jacobson
Slide 3: The New Xerox – Well Positioned for the Future
The New Xerox – Well Positioned for the Future Attractive Business Model Laser Focus on Cost and Productivity Well Positioned to Capitalize on Areas of Growth Balanced Shareholder Return Significant market opportunity of ~$85B Bundled contracts model creates “stickiness” with >75% annuity revenue an
Slide 4: Xerox at a Glance
Xerox at a Glance 1 FY 2015 revenue on a post-separation basis. Other revenue is included in Document Technology. Digital Production & Workflow Full range of Multi-Function Printers ConnectKey Productivity Solutions Broad Portfolio Managed Print Services Workflow Automation Centralized Print Service
Slide 5: Leading Positions in Large Markets with Opportunities for Growth
Leading Positions in Large Markets with Opportunities for Growth 1 Estimated 2016 total market size excluding Fuji Xerox territories. Source: IDC and Xerox internal analysis. 2 A3 MFP and Production positioning based on equipment revenue market share. 3 As recognized by Buyers Laboratory in 2014, 20
Slide 6: Track Record of Strong Margins
Track Record of Strong Margins $300 – $350M Annual productivity savings (last 3 years) ~230 bps Total margin expansion (last 5 years) Operational Excellence Strong, Consistent Margin Improvement1 (Document Technology + Document Outsourcing) 1 Reflects the combined historical segment margins for Docu
Slide 7: Clear Path to Achieving Transformation Program
Clear Path to Achieving Transformation Program Supply Chain & Procurement Delivery Cost of Production Cumulative Gross Productivity & Cost Savings ($M) Full transformation benefits recognized in 2018 and beyond, as productivity continues and flow through of new product introductions are realized Sou
Slide 8: Strategy to Improve Revenue Trajectory
Strategy to Improve Revenue Trajectory Document Outsourcing Graphic Communications & High-End Production Connected Office Solutions Increase share with strengthened product portfolio and expanded distribution capacity Gain share in SMB through channel partner recruitment Increase dedicated new logo
Slide 9: Shifting Revenue Mix Towards Growth
Shifting Revenue Mix Towards Growth Note: CAGRs reflect 2016E – 2019E growth. DO = Document Outsourcing; MFP = Multifunction Printer; MPS = Managed Print Services; SMB = Small & Medium Business A4 Share Gain with strengthened portfolio and increased distribution capacity Expanding Leadership in DO w
Slide 10: Proven Growth Model with Distribution Acquisitions
Proven Growth Model with Distribution Acquisitions In 2007, Xerox acquired Global Imaging Systems (GIS), a leading U.S. distributor of business technology solutions GIS companies sell and service a full range of document management solutions Founded in 1994, GIS has expanded by acquiring strong loca
Slide 11: Balanced Shareholder Return: Target Financial Model
1 Operating Margin and Free Cash Flow: see Non-GAAP Financial Measures. Balanced Shareholder Return D Target Financial Model Revenue Outlook Operating Margin1 Leverage Profile Trajectory to outperform market trend Expanding to 12.5% - 14.5% target Maintain investment grade rating Dividend Policy Cap
Slide 12: Today's Discussion
Innovation and Portfolio Strength Document Outsourcing Opportunity Today’s Discussion Mike Feldman President, North America Jeff Jacobson Chief Executive Officer Introduction and Strategic Overview Kevin Warren Chief Commercial Officer Leslie Varon Chief Financial Officer Financial Overview
Slide 13: Innovation and Portfolio Strength
Innovation and Portfolio Strength Kevin Warren
Slide 14: Four Strategic Growth Planks
Growing in Graphic Communications and High-End Production Four Strategic Growth Planks Strengthening our Connected Office Portfolio Increasing Participation in SMB and the Mid-Market Expanding Market Leadership in Document Outsourcing 1 4 2 3
Slide 15: Major Shifts in the Office Workplace
Major Shifts in the Office Workplace Work is moving from a physical location to a virtual and multi-dimensional workplace Xerox Vision The Connected and Intelligent Workplace Mobile access and remote collaboration Secure interaction to and from the cloud User experience consistent with consumer devi
Slide 16: Xerox Connected Office for The Intelligent Workplace
Xerox Connected Office for The Intelligent Workplace One family of products and solutions 29 new products Xerox® ConnectKey® Technology Aggressive focus on expanded routes to market with robust portfolio Unified platform Mobility MPS ready Tablet-like interface Improved cost structure Secure Workflo
Slide 17: Strengthening Xerox's Position in the Connected Office
Strengthening Xerox’s Position in the Connected Office $23B maturing market -5% CAGR ‘16-19 22% rank # 1 Source: 2016 CSI market forecast, IDC and Internal Xerox estimates. 2015 market share is based on equipment revenue share. Platform Driven Portfolio & MPS Ready Technology Benchmark Cost Competit
Slide 18: Independent Multi-brand Dealer Market Opportunity
Independent Multi-brand Dealer Market Opportunity Untapped Dealer Pool Total Dealer Pool Playbook ~300 dealers with $5M-$10M rev. ~200 dealers with >$10M rev. Rapid Recruitment Continue targeted acquisitions Capture share of wallet ~2,500 independent office equipment dealers across the country U.S.
Slide 19: Increasing Participation in SMB and the Mid-Market
$34B (9)% $10B 7% $7B 7% SMB Office Market Size and Growth Non-Services Basic Print Services Managed Print Services $12B 3% A4* Increasing Participation in SMB and the Mid-Market SMB-focused portfolio and MPS support and demand generation Become preferred channel partner through investment in talent
Slide 20: Xerox Value Proposition Attracts Strong Multi-Brand Dealers
“We chose to engage Xerox for three reasons: the power of their brand, the breadth of their product line, and their increasing commitment to the channel approach.” Lou Usherwood CEO, Usherwood Office Technology “As a top tier dealership, we have access to any number of manufacturers and we wanted to
Slide 21: Growing in Graphic Communications & High-End Production Color
Growing in Graphic Communications & High-End Production Color Note: CF = Continuous Feed Source: Internal Xerox CSI estimates; Smithers-Pira 2016. 2015 market share is based on equipment revenue share. Capture new markets Rialto 900 Roll to Cut Sheet Trivor 2400 SED Continuous Feed CF inkjet: captur
Slide 22: Innovation at Xerox: RD&E and Patents
~$1B across Xerox and Fuji Xerox RD&E Spending >1,500 U.S. Xerox and Fuji Xerox 2015 Patent Awards World-Class including Palo Alto Research Centre Research Talent >40% were software, solutions and analytics 2015 Patent Filings Improving the productivity of work High-end digital printing for document
Slide 23: An Example of Xerox Innovation
An Example of Xerox Innovation More can be viewed during the Innovation Solutions Exhibit
Slide 24: Four Strategic Growth Planks
Growing in Graphic Communications and High-End Production Four Strategic Growth Planks Strengthening our Connected Office Portfolio Increasing Participation in SMB and the Mid-Market Expanding Market Leadership in Document Outsourcing 1 4 2 3
Slide 25: Document Outsourcing Opportunity
Document Outsourcing Opportunity Mike Feldman
Slide 26: Introduction to Document Outsourcing
Introduction to Document Outsourcing Industry Leader with Unparalleled Capabilities #1 Player in a $21B Market Next-generation Managed Print Services strategy: Continuous improvement Innovative Next Generation Strategy Broadest Range of Solutions Workplace Solutions Business Process Solutions Commun
Slide 27: The Most Comprehensive Portfolio for Digital Transformation
The Most Comprehensive Portfolio for Digital Transformation Assessments and Consulting Technology Xerox ConnectKey Devices Xerox Production Devices Non-Xerox Devices Capture and ECM Software Production Workflow Software Digital Alternatives Software Cross-Media Publishing Software FreeFlow® Capabili
Slide 28: Expanding Market Leadership in Document Outsourcing
Expanding Market Leadership in Document Outsourcing Market Opportunity Document Outsourcing 24% Next closest competitor at 14% Rated by IDC, Gartner, Quocirca & Infotrends #1 Market Size Industry Recognition MPS Market Share Leader $21B SMBs Market Size Growth MPS $7B +7% Large Enterprises Market Si
Slide 29: Strengthening Leadership in Large Enterprise MPS and CPS
96B+ Pages managed annually ~1,800 Direct Sales Reps MPS $6B CPS $5B Large Enterprise Market Customer Base Strengthening Leadership in Large Enterprise MPS and CPS Clear leader in large enterprise with differentiated solutions and unmatched global delivery capabilities Best-in-class sales management
Slide 30: Client Security is at the Core of Our Strategy
Client Security is at the Core of Our Strategy Comprehensive suite of security solutions which we integrate into our client’s security infrastructure Information Content Application Infrastructure End Point Network Secure Device Access (Xerox Secure Print Manager Suite Systems) Secure Document Colla
Slide 31: Xerox Wins USDA Contract
Xerox Wins USDA Contract for Estimated $110M over 10 Years Managed Print Services deployment across 3,000+ USDA sites globally Installation of up to 16,000 ConnectKey-enabled secure printers and multifunction devices Ongoing service and support including help desks, maintenance, analytics and report
Slide 32: Channel Partners will Drive Xerox Growth in SMB MPS
~1M SMB companies in our target markets $7B SMB Market Growth Enablers Channel Partners will Drive Xerox Growth in SMB MPS Market Differentiated Service Offerings Delivering Growth, Creating Value Market Size Served by Partners Potential Customers 75% of SMB market is served by indirect channels Unp
Slide 33: Xerox Equips Partners to Offer a Complete Service to SMB Customers
Xerox Equips Partners to Offer a Complete Service to SMB Customers
Slide 34: Broad Range of Workflow Solutions
Help knowledge workers automate and simplify their personal and office work experience Help organizations automate and simplify key industry specialized business processes Help enterprises automate and simplify the flow of information into high volume business processes Personal & Office Productivit
Slide 35: Xerox is Well-Positioned to Grow in Document Outsourcing
Xerox is Well-Positioned to Grow in Document Outsourcing Attractive market with material growth opportunities Leading position in the market by a substantial margin Broadest portfolio of solutions, addressing the full set of customer and partner needs Next generation strategy to capitalize on digita
Slide 36: Financial Overview
Financial Overview Leslie Varon
Slide 37: Xerox Investment Proposition
Strong global brand #1 share in key segments Global Market Leader Positioned for growth in DO, SMB, A4 and High-End color Largest ever product launch starting in 2017, supporting channel expansion Attractive Market Opportunities Xerox Investment Proposition Strong free cash flow1 Attractive return t
Slide 38: Global Leader with a Strong, Diverse Business Profile
Global Leader with a Strong, Diverse Business Profile $11.5B Revenue 12.7% Operating Margin1 Financial Profile (FY’15) Annuity-Based Model >75% of revenue annuity-based Strategic Growth Mix 37% Strategic Growth Areas Offering Mix2 Document Outsourcing Entry (A4) Mid-Range (A3) High-End Production Ge
Slide 39: Strong Annuity Driven Business Model
Strong Annuity Driven Business Model Signings and install growth drive MIF and market share Historic 5% equipment price declines comprehended/offset by productivity Page volumes – stable decline Increasing portion of revenues in Strategic Growth Areas will improve revenue trajectory Majority of supp
Slide 40: Historical Performance
13.3% 12.7% 11.9% Transaction Currency 1.1 pts (0.1) pts (0.5) pts Historical Performance Revenue Operating Profit1 Free Cash Flow1 % Y-o-Y Decline at CC1 (3.7%) (4.6%) (3.9%) % Operating Margin1 Free Cash Flow1 % Net Income 113% 110% 116% Moderating revenue declines Strong dollar has pressured reve
Slide 41: Growing Portion of Revenues in Strategic Growth Areas
2% Growing Portion of Revenues in Strategic Growth Areas Will Improve Revenue Trajectory Document Outsourcing focus areas Large Enterprise MPS+2% SMB MPS+7% Workflow Automation +13% Technology focus areas Production Color +5% (includes Inkjet growing at +10%) A4 MFPs +3% Shifted YOY +2 pts 2016 Perf
Slide 42: Strategic Transformation Will Drive Profit Growth
Strategic Transformation Will Drive Profit Growth Post Sale & Managed Services SAG Equipment RD&E $1.5B+ cumulative gross productivity by 2018 Delivery (~$450M) Cost of Production (~$250M) Sales & Contracting (~$300M) G&A (~$300M) Supply Chain & Procurement (~$200M) Contracting Discipline Consolidat
Slide 43: We Are Off To a Fast Start
We Are Off To a Fast Start Actions to Transform Our Business Shifting primary organizational axis to geography (North America, International) Maintaining local customer focus while reducing matrix management Optimizing sales incentives and performance management Consolidating back-office support fun
Slide 44: Strategic Transformation Enables Operating Margin Expansion
Strategic Transformation Enables Operating Margin1 Expansion 1 Operating Margin: see Non-GAAP Financial Measures. Business as Usual Productivity Revenue/Price Declines
Slide 45: Investment Grade Capital Structure
Investment Grade Capital Structure Illustrative Debt2 ($B) 2 Reflects use of proceeds from Conduent distribution and some cash on hand to repay $2B of debt ($1B term loan and $1B public bonds due Q1 2017). 2015 Actual 2016 Pro Forma Manage balance sheet to maintain an investment grade profile; optim
Slide 46: Attractive Captive Financing Business
Attractive Captive Financing Business Customer Financing is a Business Strength 2016 Pro forma (in billions) Finance Assets Debt Financing $ 4.3 $ 3.8 Core - 1.5 Total Xerox $ 4.3 ~$ 5.3 Maintain 7:1 debt to equity leverage ratio on our finance assets Finance Assets and Debt Differentiates and enhan
Slide 47: Strong and Sustainable Cash Flow Generation
Strong and Sustainable Cash Flow Generation Profit expansion over time from margin expansion and improving revenue trajectory Transformation efficiencies provide modest benefit to working capital Near-term restructuring payments higher to facilitate strategic transformation / normalize after 2018 Pe
Slide 48: Capital Allocation Priorities
Capital Allocation Priorities Leverage Committed to maintaining investment grade credit rating Return of Capital Initial dividend of $0.25 per share on an annualized basis Modest share repurchase (after 2017) based on relative returns evaluation Targeted Investments Continue capital-light business m
Slide 49: Track Record of Attractive and Increasing Dividends
Xerox has a track record of attractive and increasing dividends 16% CAGR over last 4 years Xerox Dividend Policy Post-split dividend of 6.25 cents per share ($0.25 annualized) is anticipated beginning with the dividend payable April 2017 Expect future dividend increases driven by EPS and free cash f
Slide 50: Future Performance Expectations
Note: Operating margin assumes neutral transaction currency in 2018 and 2019. Normalized operating cash flow assumes ~$100M restructuring payments and ~$250M pension contributions. 2018 2019+ 2017 Revenue Trajectory (at CC1) Improves driven by new products & Strategic Growth Areas acceleration In-li
Slide 51: Xerox Investment Proposition
Strong global brand #1 share in key segments Global Market Leader Positioned for growth in DO, SMB, A4 and High-End color Largest ever product launch starting in 2017, supporting channel expansion Attractive Market Opportunities Xerox Investment Proposition Strong free cash flow1 Attractive return t
Slide 52: Q&A Session
Q&A Session Jeff Jacobson Kevin Warren Mike Feldman Leslie Varon
Slide 53: The New Xerox – Well Positioned for the Future
The New Xerox – Well Positioned for the Future Attractive Business Model Laser Focus on Cost and Productivity Well Positioned to Capitalize on Areas of Growth Balanced Shareholder Return Significant market opportunity of ~$85B Bundled contracts model creates “stickiness” with >75% annuity revenue an
Slide 54: Xerox: A New Beginning
Xerox: A New Beginning
Slide 55: Non-GAAP Financial Measures
Non-GAAP Financial Measures
Slide 56: Operating Income/Margin Definition
“Operating Income/Margin”: We calculate and utilize operating income and margin earnings measures by adjusting our pre-tax income and margin amounts to include equity in net income of unconsolidated affiliates and exclude the items noted below: Non-service retirement related costs: Our defined benef
Slide 57: Constant Currency Definition
“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.” In 2016 we revised our calculation
Slide 58: Segment / Margin Pro Forma Reconciliation
Non-GAAP Financial Measures Segment / Margin Pro Forma Reconciliation: Year Ended Year Ended Year Ended Nine Months Ended December 31, 2013 December 31, 2014 December 31, 2015 September 30, 2016 (in millions) Revenue Profit Margin Revenue Profit Margin Revenue Profit Margin Revenue Profit Margin Doc
Slide 59: Operating Income / Margin Reconciliation
Non-GAAP Financial Measures Operating Income / Margin Reconciliation: Year Ended Year Ended Nine Months Ended December 31, 2014 December 31, 2015 September 30, 2016 (in millions) Pre-tax Income Revenue Margin Pre-tax Income Revenue Margin Pre-tax Income Revenue Margin Reported(1) $ 1,090 $ 12,679 8.
Slide 60: Free Cash Flow
Non-GAAP Financial Measures Free Cash Flow Year Ended Year Ended Nine Months Ended (in millions) December 31, 2014 December 31, 2015 September 30, 2016 Cash Flow from Operations(1) $ 1,291 $ 1,055 $ 545 Less: CAPEX (includes internal use software) (176) (148) (99) Free Cash Flow $ 1,115 $ 907 $ 446
Slide 61: Forward Looking Statement
Forward Looking Statement 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 ide
Slide 62: Xerox
Xerox @,)