Xerox Investor Handout. Xerox Strategy Overview / Quarter Results

Transcription

1 Xerox Investor Handout Xerox Strategy Overview / Quarter Results

2 Forward-Looking Statements This presentation contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 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 Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 and 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 October 26, 2015, Xerox announced that its Board of Directors had authorized a review of the Company s business portfolio and capital allocation options, with the goal of enhancing shareholder value. No assurance can be given as to the outcome or timing of completion of the review. Xerox does not intend to make any further public comment regarding the review prior to its completion. The forward looking statements in this presentation are subject to the risk that the Company s business portfolio and/or capital allocation could change as a result of the review. 2

3 Our Message to You: Xerox is Well-positioned and investing to grow in attractive services markets Applying innovation to lead transition of BPO to automated, analytics-driven outsourcing Focusing 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 3

4 Xerox Strategy Apply technology and innovation to transform the way people work and live Leverage Brand Strength and Market Position Profitably Grow Services in Attractive Markets Lead in Document Technology Innovate to Differentiate Our Offerings Drive Operational Excellence Across Our Businesses Engage, Develop and Support Our People 4

5 2015 Guidance (Reflects guidance from Q Earnings call on 10/26/15) Adjusted Revenue CC 1 Down ~3% Adjusted EPS 1 (incl restructuring) $ $1.01 (low-end) GAAP EPS 2 $ $0.52 Q4 Adjusted EPS 1 (incl restructuring) $ $0.30 Q4 GAAP EPS 2 $ $0.25 Cash From Ops $1.6 - $1.7B CAPEX ~$0.3B Services 1 FY Revenue: Flat to up 1% CC 1 FY Margin: ~8% (Q4: ~9%) Document Technology FY Revenue: Down 6 to 7% CC 1 FY Margin: Middle of 11 to 13% range Free Cash Flow 1 Share Repurchase Acquisitions $1.3 - $1.4B $1.3B ~$200M 5 Dividend ~$300M Note: Revenue growth guidance excluding potential divestitures 1 Constant Currency (CC), Adjusted Revenue, Adjusted margin Adjusted EPS and Free Cash Flow: see Non-GAAP Financial Measures 2 GAAP EPS from Continuing Operations

6 Capital Allocation Plan Acquisitions $155M $434M Debt Repayment Acquisitions $340M Debt Repayment ~$200M $300M Dividend Acquisitions ~$200M ~$300M Dividend ~$350M Debt Repayment Share Repurchase $696M $296M Dividend $1.07B Share Repurchase ~$1.3B Share Repurchase 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: ~$200M, focused on Services Share Repurchase: ~$1.3B Debt Repayment: ~$350M in

7 Document Technology

8 Document Technology Strategy Market focused strategy underpinned by operational excellence and talented workforce Lead in Graphic Communications Lead in Managed Print Services Channel Expansion and Market Reach Grow in Developing Markets Innovate in All We Do Operational Excellence, Global Delivery and Economy of Scale Engage, Develop and Support Our People 8

9 Market Dynamics Overall Print Market 2014 $ Billions, CAGR Total Market $91B (1)% Office (non-do) Total DO 1 Prod / GC $66 $19 $6 (4)% 7% 3% Market Components - % of Market 2 SMB 71% Enterprise 29% (1)% (4)% NA 38% EU 34% DMO 28% (3)% (3)% 1% 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 9 Source: internal Xerox estimates; excludes Asia-Pacific FX territories 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.

10 Technology Advances Sustain Industry Leadership Sustained Market Share Leadership Industry Recognition Gold Ink Awards Europe Digital Press Award Xerox Corporation 2014 Document Imaging Solutions Line of the Year Xerox [ Competitors ] WW 2014 Equipment Sale Revenue Share % 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 has been the leader for 23 consecutive quarters Xerox Corporation Mobile Print Solution 2 Outstanding Enterprise Mobile Print Solution 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. 10

11 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 ConnectKey Workflow Integration for Mobile and Cloud ConnectKey Industry Leading Security Cost Control and Sustainability IT Enablers ConnectKey Xerox WorkCentre 6655 ConnectKey Xerox WorkCentre 7220/7225 ConnectKey Xerox WorkCentre 7845/7855 Xerox WorkCentre 7970 ConnectKey Xerox WorkCentre 5945/5955 Xerox Color C60/70 ConnectKey Xerox WorkCentre 5865/5875/5890 Xerox WorkCentre

12 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 Xerox igen 5 Digital Press Xerox Reference Variable Data Web-to-print Cross Media Xerox Versant 2100 Press Xerox 8250 Production Printer Xerox CiPress 500 Xerox Color 800/1000i Presses Xerox Rialto 900 Pre-press Automation Color Management Xerox Color J75 Press Xerox Compact Xerox CiPress

13 Demonstrated Operational Excellence Across Value Chain Over $9B of Addressable Spend 1 % of Total Global Reach Direct Sales Capability Global Service Remote Connectivity and Diagnostics Global Delivery Manufacturing Productivity Global Sourcing 45% Post Sale & Managed Services SAG 31% 4% RD&E 20% Equipment Extensive Channels and Partnerships Broad Customer Relationships Sales Excellence and Productivity Global Delivery Center Automation Offering Innovation Offshoring and Right-shoring Product Cost and Portfolio Simplification RD&E Efficiency and Alignment Infrastructure Optimization drives sustained market share and strong operating margin. Note 1: Includes operating expenses for Document Technology and Document Outsourcing. 13

14 Services

15 Services Strategy Manage Our Portfolio of Businesses Grow Globally Transform the Way We Work Deliver Operational Excellence Use Analytics to Increase Value Engage, Develop and Support Our People...will drive revenue growth and margin improvement. 15

16 Attractive Market Opportunity $ Billions Document Outsourcing Industry Specific BPO Multi-Industry BPO $310B $19 $119 $172 +7% CAGR +7% CAGR +6% CAGR $371B $23 $145 $203 Total BPO $348B 6% CAGR 2017 Multi-Industry BPO Customer Care Human Resources Transaction Processing Finance & Accounting $30 6% $26 7% $67 4% $65 8% 2017 Industry-Specific BPO Government BPO (excl. health) Insurance (Life, P&C) Transportation Health Payer $16 7% $15 5% $11 7% $21 9% 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).

17 Services Evolution Progressing Transition Optimize Realize Margin Focus Transition from decentralized business unit structure to a global operating model with industry go-tomarket 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. Growth Focus...will drive margin expansion and revenue growth. 17

18 Industry Verticals and Global Capabilities Alignment High Tech & Comms 16% of Revenue Financial Services 13% 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 Business Process Outsourcing Customer Care / Communication & Marketing / Human Resources / Transaction Processing / Finance & Accounting Document Outsourcing Managed Print Services / Centralized Print Services Professional Services 18 Note: Graphic has been updated to exclude the ITO business which was moved to discontinued operations following announcement of planned sale to Atos

19 Margin Expansion Levers Portfolio Management / Contract Management Global Capability Model Implementation Workforce and Non-Labor Cost Optimization / Structural Optimization Platform Development GHS Recovery Plan (primarily Health Enterprise) Investments: Sales, Leadership, Training, Tools, Offerings will drive margin improvement 19

20 Revenue Growth Acceleration Levers Acquisitions Industry Verticals / Cross Selling / Signings Acceleration More Rapid Growth Outside the U.S. New Large Contract Yield Reduced Large Contract Run-offs...will drive revenue growth back to target model. 20

21 Government Healthcare Overview US healthcare spending is >15% of GDP and growing, US government funding is >50%: XRX revenue nearly $1B, operating margin will improve over time 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 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: Analytics fraud, waste & abuse (Metal Detector), managed care Leveraging new technologies (mobile, social) to improve health outcomes to new Medicaid consumer 21

22 Government Healthcare Enterprise Implementations Strategic changes within Government Healthcare business: Strategy change announced in July 2015 Focusing on existing operations and NY implementation Update announced in October 2015 regarding CA and MT implementations NH Live April 2013, extended burn in period, currently performing well Enterprise enabled subsequent implementation of managed care and Medicaid expansion programs CMS certification received June, 2015 AK Live October 2013, extended burn in period Performing well today ND Live October 2015 Progressing as expected NY Contract finalized April 2015 Invested ahead of contract to ensure success Go-live end 2016 CA, MT Announced in October 2015 in discussions to not fully complete HE implementations in CA and MT Expect to continue fiscal agent on existing systems 22

23 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 Patient Becoming key decision maker 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 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 Q3 acquisitions of RSA Medical and ipas expand offerings and capabilities 23

24 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 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 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 24

25 Human Resources Outsourcing and Consulting 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 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 25

26 Document Outsourcing Overview 26 Automate and Simplify Secure and Integrate Assess and Optimize Workflow CPS Production MPS Office Market Sizing and Growth $19.3B CAGR +7% $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

27 Third-Quarter 2015 Earnings Presentation Ursula Burns Chairman & CEO Kathy Mikells Chief Financial Officer October 26, 2015

28 Xerox Priorities 28 Lead in attractive business services segments Strengthen and differentiate our portfolio Focus on operational excellence with world-class capabilities Improve revenue and profitability Lead in Document Technology Invest in attractive market segments Maintain strong profitability and cash flow Support our customers and our people Enhance shareholder value Repurchased $1.3B of shares through September Divested ITO business Reviewing structural options for the portfolio

29 Third-Quarter Overview Reported revenue of $4.3B, down 10% or 6% CC 1, EPS 2 of (4) cents Services revenue down 8% or 4% CC 1, Services margin of (7.6)% Adjusted revenue of $4.4B, down 7% or 4% CC 1 ; Adjusted EPS 1 of 24 cents Adjusted results exclude previously announced Health Enterprise related charge Adjusted Services revenue down 3% or flat CC 1 ; margin of 8.1% Doc Outsourcing revenue up 3%, BPO revenue down 1% CC 1 Margin improved sequentially consistent with guidance Document Technology revenue down 12% or 9% CC 1 ; margin of 12.8% Developing markets pressures increased; revenue down 6% CC 1 excluding these markets Margin remains strong Adjusted operating margin 1 of 8.7%, down 90 bps YOY Cash from operations of $271M Share repurchase of $691M Q3, $1.3B Sept YTD 1 Adjusted EPS, Adjusted revenue, Adjusted Services revenue, Adjusted Services margin, Constant Currency (CC) and Adjusted 29 operating margin: see Non-GAAP Financial Measures 2 GAAP EPS from Continuing Operations

30 Earnings (in millions, except per share data) Q B/(W) YOY Comments Revenue $ 4,333 $ (462) Adjusted Revenue $ 4,449 $ (346) Decline driven by Document Technology and currency Gross Margin 22.8% (9.4) pts Adjusted Gross Margin 30.9% (1.3) pts RD&E $ 135 $ 4 SAG $ 855 $ 87 Adjusted Operating Income 1 $ 386 $ (75) Operating margin improved sequentially in Services and Operating Income % of Revenue 8.7% (0.9) pts Document Technology Adjusted Other, net 1 $ 96 $ 8 Equity Income $ 40 $ (4) Driven by translation currency Adjusted Tax Rate % 1.6 pts Guidance range 25 to 27% Adjusted Net Income Xerox 1 $ 258 $ (48) Adjusted EPS 1 $ 0.24 $ (0.02) Guidance range $ $0.24 Health Enterprise Charge (0.23) (0.23) Amortization of intangible assets (0.05) (0.00) GAAP EPS 2 $ (0.04) $ (0.25) 1 Adjusted Operating Income, Adjusted Other, net, Adjusted Tax Rate, Adjusted Net Income Xerox and Adjusted EPS: see Non-GAAP 30 Financial Measures 2 GAAP EPS from Continuing Operations

31 Services Segment Q3 Adj Q3 Adj % B/(W) YOY (in millions) Act Cur CC 1 Total Revenue $ 2,416 $ 2,532 (3)% Flat Segment Profit $ (184) $ 205 (15)% Segment Margin (7.6)% 8.1% (1.0) pt Revenue Growth Trend (CC 1 ) 4% 3% 2% 1% 1% 1% 1% 0% 0% 0% 3 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Segment Margin Trend 12% 8.6% 8.5% 9.1% 9.8% 10% 8% 7.5% 7.5% 8.1% 3 6% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Adjusted 3 Revenue Flat at CC 1 Document Outsourcing up 3%, BPO down 1% Adjusted 3 Margin of 8.1% up sequentially and in line with guidance Work continues to accelerate growth and efficiencies from new operating model Signings BPO/DO renewal rate of 89% New business signings 2 down 9% YOY, down 14% TTM Q3 does not include pending Florida Tolling deal Signings (TCV) Q3 Sept YTD Business Process Outsourcing $1.3 $5.5 Document Outsourcing $0.6 $2.0 Total $1.9B $7.5B YOY Growth (7)% - TTM Growth 5% 5% 31 1 Constant currency (CC): see Non-GAAP Financial Measures 2 New Business Signings = ARR (Annual Recurring Revenue) + NRR (Non-Recurring Revenue) 3 Adjusted for the HE charge: see Non-GAAP Financial Measures

32 Document Technology Segment Q3 % B/(W) YOY (in millions) 2015 Act Cur CC 1 Total Revenue $1,778 (12)% (9)% Segment Profit $227 (20)% Segment Margin 12.8% (1.2) pts Revenue down 9% at CC 1 Revenue pressures from developing markets increased significantly Including Document Outsourcing, printing revenue decline stable, down 5% CC 1 0% Revenue Growth Trend (CC 1 ) Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Margin strong at 12.8% Within FY guidance range of 11 to 13% Managing cost base to ensure ongoing strong profitability (5)% (10)% 18% 14% 10% 6% (5)% (6)% (6)% (6)% (7)% (7)% (9)% Segment Margin Trend 14.4% 14.0% 14.4% 12.2% 11.1% 12.1% 12.8% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Entry Installs Q3 Sept YTD A4 Mono MFDs (13)% (16)% A4 Color MFDs 94% 17% Color Printers (36)% (20)% Mid-Range Installs Mid-Range B&W MFDs (8)% (4)% Mid-Range Color MFDs 1% 1% High-End Installs High-End B&W (28)% (10)% High-End Color 2 (2)% 7% 32 1 Constant currency (CC): see Non-GAAP Financial Measures 2 High-end color Flat in Q3 and down 4% Sep YTD excluding DFE s

33 Cash Flow (in millions) Q Sept YTD 2015 Net Income $ (31) $ 216 HE Charge add back (after-tax) Depreciation and amortization Restructuring and asset impairment charges Restructuring payments (20) (81) Contributions to defined benefit pension plans (50) (148) Inventories (61) (254) Accounts receivable and Billed portion of finance receivables 1,2 57 (54) Accounts payable and Accrued compensation (67) (105) Equipment on operating leases (71) (210) Finance receivables 1 (20) 85 Other (9) (23) Cash from Operations $ 271 $ 733 Cash From Ops $271M in Q3, $733M Sept YTD HE charge, negligible cash impact in Q3 Expect cash outflows of ~$225M in future quarters CAPEX $65M Acquisitions $153M Share Repurchase of $691M and $84M of Common Stock Dividends Cash from Investing $ (206) $ 527 Cash from Financing $ (888) $ (1,796) Change in Cash and Cash Equivalents (837) (607) Ending Cash and Cash Equivalents $ 804 $ Accounts receivable includes collections of deferred proceeds from sales of receivables and finance receivables includes collections on beneficial interest from sales of finance receivables 2 Adjusted to exclude impact of HE charge

34 Capital Structure Debt and Finance Asset Trend (in millions) $ 10,000 8,000 6,000 4,000 2, Q Finance Debt Core Debt Finance Assets Core debt level managed to maintain investment grade rating Over half of Xerox debt supports finance assets 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 Now expect ~$7.4B of debt at yearend Q (in billions) Fin. Assets Debt Financing $ 4.5 $ 3.9 Core Total Xerox $ 4.5 $

35 Capital Allocation Enhances Shareholder Returns Share Repurchase Program Shares Outstanding (ending fully diluted 1, in millions) 1,600 1, $1,600 $800 1,391 1,271 1,235 1,159 1, Q Shares Repurchased ($M) $1,052 $1,071 ~$1.3B $701 $696 Share Repurchase of $691M in Q3, $1.3B YTD Acquisitions of $153M in Q3, $201M YTD Quarterly common dividend at 7 cents per share 2 $ Sep YTD '15 Dividend Program Dividend per share (annualized) $0.40 $0.23 $0.25 $0.28 $0.17 $0.17 $0.20 Expect ~$300M in FY dividend payments Unallocated capital to be deployed primarily toward debt reduction $ Ending fully diluted: see Non-GAAP Financial Measures 2 Dividend effective for common dividend payable on April 30, 2015

36 2015 Guidance Adjusted Revenue CC 1 Down ~3% Adjusted EPS 1 (incl restructuring) $ $1.01 (low-end) GAAP EPS 2 $ $0.52 Services 1 FY Revenue: Flat to up 1% CC 1 FY Margin: ~8% (Q4: ~9%) Q4 Adjusted EPS 1 (incl restructuring) $ $0.30 Q4 GAAP EPS 2 $ $0.25 Document Technology Cash From Ops CAPEX Free Cash Flow 1 $1.6 - $1.7B ~$0.3B $1.3 - $1.4B FY Revenue: Down 6 to 7% CC 1 FY Margin: Middle of 11 to 13% range Share Repurchase Acquisitions Dividend $1.3B ~$200M ~$300M 36 Note: Revenue growth guidance excluding potential divestitures 1 Constant Currency (CC), Adjusted Revenue, Adjusted margin Adjusted EPS and Free Cash Flow: see Non-GAAP Financial Measures 2 GAAP EPS from Continuing Operations

37 Summary Implemented significant actions during past year to improve Services performance Recent Health Enterprise announcement reduces financial pressure and volatility Continued strong execution in Document Technology despite revenue pressures Remain focused on leadership in attractive market segments and operational excellence Annuity-based cash flow drives strong return of capital Evaluating business portfolio and capital allocation options; focused on driving longterm shareholder value 37

38 Appendix

39 Revenue Trend (in millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3* YTD** Total Revenue $20,006 $4,771 $4,941 $4,795 $5,033 $19,540 $4,469 $4,590 $4,449 $13,508 Growth (2)% (2)% (2)% (2)% (3)% (2)% (6)% (7)% (7)% (7)% CC 1 Growth (3)% (2)% (3)% (2)% (1)% (2)% (2)% (3)% (4)% (3)% Annuity $16,648 $4,056 $4,160 $4,047 $4,173 $16,436 $3,845 $3,871 $3,781 $11,497 Growth (2)% (2)% (1)% (1)% (2)% (1)% (5)% (7)% (7)% (6)% CC 1 Growth (2)% (2)% (2)% (1)% Flat (1)% (1)% (3)% (3)% (2)% Annuity % Revenue 83% 85% 84% 84% 83% 84% 86% 84% 85% 85% Equipment $3,358 $715 $781 $748 $860 $3,104 $624 $719 $668 $2,011 Growth (3)% (1)% (9)% (8)% (11)% (8)% (13)% (8)% (11)% (10)% CC 1 Growth (4)% (2)% (9)% (8)% (9)% (7)% (8)% (3)% (7)% (6)% *Q3 reported total revenue of $4,333 down 10% or 6% CC; reported annuity revenue of $3,665 down 9% or 6% CC ** YTD reported total revenue of $13,392 down 8% or 4% CC; reported annuity revenue $11,381 down 7% or 3% CC 39 1 Constant currency: see Non-GAAP Financial Measures

40 Segment Revenue Trend (in millions) FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3* YTD** Services $10,479 $2,585 $2,651 $2,623 $2,725 $10,584 $2,514 $2,569 $2,532 $7,615 Growth 2% Flat 1% 1% 1% 1% (3)% (3)% (3)% (3)% CC 1 Growth 2% Flat 1% 1% 3% 1% 1% 1% Flat 1% Document Technology $8,908 $2,044 $2,126 $2,029 $2,159 $8,358 $1,830 $1,880 $1,778 $5,488 Growth (6)% (4)% (6)% (6)% (8)% (6)% (10)% (12)% (12)% (11)% CC 1 Growth (6)% (5)% (7)% (6)% (6)% (6)% (6)% (7)% (9)% (7)% Other $619 $142 $164 $143 $149 $598 $125 $141 $139 $405 Growth (10)% 3% (1)% (1)% (12)% (3)% (12)% (14)% (3)% (10)% CC 1 Growth (10)% 3% (2)% (2)% (11)% (3)% (11)% (14)% (2)% (9)% *Q3 reported Services revenue of $2,416 down 8% or 4% CC **YTD reported Services revenue of $7,499 down 5% or 1% CC 40 1 Constant currency: see Non-GAAP Financial Measures

41 Discontinued Operations Summary Three Months Ended September 30, (in millions) ITO Other Total ITO Other Total Revenues $ - $ - $ - $ 325 $ 6 $ 331 Income (loss) from operations (1) $ - $ - $ - $ 15 $ (1) $ 14 (Loss) on disposal (5) - (5) - (1) (1) Net (loss) income before income taxes (5) - (5) 15 (2) 13 Income tax benefit (expense) 2-2 (6) 1 (5) (Loss) income from discontinued operations, net of tax $ (3) $ - $ (3) $ 9 $ (1) $ 8 Nine Months Ended September 30, (in millions) ITO Other Total ITO Other Total Revenues $ 619 $ - $ 619 $ 993 $ 45 $ 1,038 Income (loss) from operations (1) (2) $ 104 $ - $ 104 $ 58 $ (1) $ 57 (Loss) on disposal (77) - (77) - (1) (1) Net income (loss) before income taxes (2) 56 Income tax expense (91) - (91) (21) (1) (22) (Loss) income from discontinued operations, net of tax $ (64) $ - $ (64) $ 37 $ (3) $ 34 (1) ITO Income from operations for the third quarter 2014 and nine months ended September 30, 2014 includes approximately $41 million and $121 million, respectively of depreciation and amortization expense (including intangible amortization of approximately $7 million and $21 million, respectively). 41 (2) ITO Income from operations for nine months ended September 30, 2015 excludes approximately $80 million of depreciation and amortization expenses (including $14 million for intangible amortization) since the business was held for sale.

42 Segment Business Dynamics Document Technology (~43% of Total Revenue) Revenue Growth Mid-term Target 2 Mid-single digit decline Segment Margin 10 12% Product mix: ~57% Mid-Range, ~23% High-End, ~20% Entry Geographic mix: ~62% N. America, ~26% Europe, ~12% developing markets Office 1 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 Macroeconomic sensitivity especially on hardware and unbundled supplies sales Revenue Growth Services (~54% of Total Revenue) Mid-term Target 2 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 Limited macroeconomic sensitivity given largely recurring revenue and diversity of business 42 1 Office includes both Mid-Range and Entry products 2 Mid-term Target reflects target communicated at November 2014 Investor Conference Notes: Percentages reflect Year-end 2014 amounts restated for ITO divestiture. Expect Other segment revenue to decline mid-single digits

43 Pension Expectations* Low interest rate environment impacts funding requirements and settlement loss volatility All major defined benefit (DB) pension plans frozen reduces burden over time Expense 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 DB Pension Funding Local law / regulatory requirements U.S. legislation lowered near term requirements Increasing funding to gradually address liabilities $400 $363M $363M $192M ~$335M $500 $494M $230M $284M ~$340M $300 $200 $100 $0 $300M $267M ~$82M E ~$226M $400 $300 $200 $100 $ E DB Plan Cost DB Settlement Loss DC Plan Cost DB Cash Contribution DB Stock Contribution 43 *As disclosed in Xerox s 2014 Annual Report on For 10-K

44 Xerox Performance Based Incentive System (2014) Short Term Stock Ownership Guidelines Metric Weight Adjusted EPS 50% Operating Cash Flow 20% Annual Cash Pay-out Role Named Officers All Other Officers Multiple of Base Salary 3x 2x Revenue Growth CC* 30% Long Term 3yr Cumulative Targets Metric Weight Adjusted EPS 50% Adjusted Operating Cash Flow 20% Equity performance shares 3 year vesting from grant date Revenue Growth CC* 30% 44 *Constant Currency (CC): see non-gaap measures

45 Non-GAAP Measures

46 Non-GAAP Financial Measures Adjusted Revenue, Costs and Expenses, and Margin : During third quarter 2015, we recorded a pre-tax charge (HE charge) of $389 million ($241 million after-tax or 23 cents per share), which included a $116 million reduction to revenues. As a result of the significant impact of the HE charge on our reported revenues, costs and expenses as well as key metrics for the period, we also discussed our results using non-gaap measures which excluded the impact of the HE charge. In addition to the magnitude of the charge and its impact on our reported results, we excluded the HE charge due to the fact that it was primarily a unique charge associated with the conclusion, after a series of discussions, that fully completing our HE platform implementations in California and Montana was no longer considered probable. 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 addition to the HE charge, the above items were also 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. 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. Operating Income/Margin : We also calculate and utilize operating income and margin earnings measures by adjusting our pre-tax income and margin amounts to exclude certain items. In addition to the HE charge and the amortization of intangible assets, operating income and margin also excludes 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 charges consist of costs primarily related to severance and benefits paid to employees pursuant to formal restructuring and workforce reduction plans. Asset impairment charges include costs incurred for those assets sold, abandoned or made obsolete as a result of our restructuring actions, exiting from a business or other strategic business changes. 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. 46

47 Non-GAAP Financial Measures 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. Free Cash Flow : To better understand 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 is also 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 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, 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. 47

48 Q3 GAAP EPS to Adjusted EPS Track (in millions; except per share amounts) Net (Loss) Income EPS Net Income EPS Reported (1) $ (31) $ (0.04) $ 258 $ 0.21 Adjustments: Three Months Ended Three Months Ended September 30, 2015 September 30, 2014 Amortization of Intangibles HE Charge Adjusted $ 258 $ 0.24 $ 306 $ 0.26 Weighted average shares for adjusted EPS (2) 1,078 1,192 Fully diluted shares at end of period (3) 1,046 1,185 (1) Net (loss) income and EPS from continuing operations attributable to Xerox. (2) Average shares for the calculation of adjusted EPS include 27 million of shares associated with the Series A convertible preferred stock and therefore the related quarterly dividend was excluded. (3) Represents common shares outstanding at September 30, 2015 as well as shares associated with our Series A convertible preferred stock plus dilutive potential common shares as used for the calculation of diluted earnings per share in third quarter

49 GAAP EPS to Adjusted EPS Guidance Track Earnings Per Share Q FY 2015 GAAP EPS from Continuing Operations $ $0.25 $ $0.52 Adjustments: Amortization of intangible assets Software impairment HE Charge Adjusted EPS $ $0.30 $ $1.01 Note: GAAP and Adjusted EPS guidance includes anticipated restructuring 49

50 Q3 Adjusted Operating Income/Margin (in millions) Profit (Loss) Revenue Margin Profit Revenue Margin Reported Pre-Tax (Loss) Income (1) $ (173) $ 4,333 (4.0)% $ 286 $ 4, % Adjustments: Three Months Ended Three Months Ended September 30, 2015 September 30, 2014 Amortization of intangible assets Restructuring and asset impairment charges HE charge Other expenses, net Adjusted Operating $ 386 $ 4, % $ 461 $ 4, % (1) Profit (Loss) and Revenue from continuing operations 50

51 Q3 Adjusted Other, Net Three Months Ended Three Months Ended (in millions) September 30, 2015 September 30, 2014 Other Expenses, Net - Reported $ 73 $ 71 Adjustments: Restructuring and asset impairment charges Net income attributable to noncontrolling interests 3 6 Other Expenses, Net - Adjusted $ 96 $

52 Q3 Adjusted Effective Tax Rate (in millions) Pre-Tax (Loss) Income Three Months Ended Three Months Ended September 30, 2015 September 30, 2014 Income Tax (Benefit) Expense Effective Tax Rate Pre-Tax Income Income Tax Expense Effective Tax Rate Reported (1) $ (173) $ (105) 60.7% $ 286 $ % Adjustments: Amortization of intangible assets HE charge Adjusted $ 293 $ % $ 363 $ % (1) Pre-Tax (Loss) Income and Income Tax (Benefit) Expense from continuing operations 52

53 Q3 Services Revenue Breakdown Three Months Ended September 30, CC % (in millions) % Change Change Business Processing Outsourcing $ 1,616 $ 1,797 (10%) (8%) Document Outsourcing (3%) 3% Total Revenue - Services $ 2,416 $ 2,623 (8%) (4%) As Adjusted: Business Processing Outsourcing $ 1,732 $ 1,797 (4%) (1%) Total Revenue - Services $ 2,532 $ 2,623 (3%) - % Note: The above table has been revised to reflect the reclassification of the ITO business to Discontinued Operations and excludes intercompany revenue. 53

54 Q3 Adjusted Total Revenue/Margin (in millions) Total Revenue Three Months Ended September 30, 2015 Outsourcing, Annuity Revenue Maintenance and Rentals Revenue Total Segment Profit (Loss) Total Segment Margin Reported (1) $ 4,333 $ 3,665 $ 3,098 $ (33) (0.8%) Adjustment: HE charge Adjusted $ 4,449 $ 3,781 $ 3,214 $ % (1) Revenue from continuing operations. 54

55 Q3 Adjusted Services Segment (in millions) Annuity Revenue BPO Revenue Three Months Ended September 30, 2015 Segment % of Total Revenue Revenue Segment Profit (Loss) Segment Margin Reported (1) $ 2,299 $ 1,616 $ 2,416 56% $ (184) (7.6)% Adjustment: HE charge Adjusted $ 2,415 $ 1,732 $ 2,532 57% $ % (1) Revenue from continuing operations. 55

56 Q3 Adjusted Key Financial Ratios (in millions) Gross Margin Three Months Ended September 30, 2015 RD&E as % of Revenue SAG as % of Revenue Reported (1) 22.8% 3.1% 19.7% Adjustment: HE charge 8.1% (0.1%) (0.5%) Adjusted 30.9% 3.0% 19.2% (1) Revenue from continuing operations. 56

57 2014 Xerox Corporation. All rights reserved. Xerox and Xerox Design are trademarks of Xerox Corporation in the United States and/or other countries.