other relevant factors. the company‟s practice regarding ......business process outsourcing $250...

The declaration and payment of future dividends is subject to the determination of the Company‟s Board of Directors,

in its sole discretion, after considering various factors, including the Company‟s financial condition, historical and

forecast operating results, and available cash flow, as well as any applicable laws and contractual covenants and any

other relevant factors. The Company‟s practice regarding payment of dividends may be modified at any time and from

time to time.

This presentation contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of

1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they

relate to us, are intended to identify forward-looking statements. These statements reflect management‟s current

beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ

materially. These factors include but are not limited to: changes in economic conditions, political conditions, trade

protection measures, licensing requirements and tax matters in the United States and in the foreign countries in which

we do business; changes in foreign currency exchange rates; actions of competitors; our ability to obtain adequate

pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from

restructuring actions; the risk that unexpected costs will be incurred; our ability to expand equipment placements; the

risk that subcontractors, software vendors and utility and network providers will not perform in a timely, quality manner;

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; our ability to recover capital investments; development of new

products and services; our ability to protect our intellectual property rights; interest rates, cost of borrowing and access

to credit markets; the risk that multi-year contracts with governmental entities could be terminated prior to the end of

the contract term; reliance on third parties for manufacturing of products and provision of services; our ability to drive

the expanded use of color in printing and copying; the outcome of litigation and regulatory proceedings to which we

may be a party; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the

“Management‟s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections

of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012 and our 2011

Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Company assumes no

obligation to update any forward-looking statements as a result of new information or future events or developments,

except as required by law.

Why Xerox?

3

• Shifted to a Services-led growth portfolio

• Maintaining Document Technology leadership

• Steady-state earnings expansion of 10%+

• Strong cash generation growing in line with earnings

• Committed to a balanced capital allocation strategy

Services-Led…

4

Building a business portfolio to generate

consistent, solid earnings growth

Services: Top-line growth and improving profitability

• Diversified BPO

• Managed Print Services

• Vertically-focused ITO

Document Technology: Bottom-line stability

• Consistent profitability through an annuity-based model

• Strong cash generation

• Sharp focus on operational efficiencies

…Innovation-Driven

Shifting to a Growth Portfolio

5

• Secular decline areas becoming smaller share of total revenue

• Approximately 2/3 of revenue will be Services-based by 2017, driving

Consistent revenue growth

Consistent earnings expansion

2009 2012 2017

Total Revenue $15.2B ~$22B+ ~$25B+

Services/Color: Growth

Office: Flat

High end B/W & Other:

Decline

Market growth based on projected 5-year CAGR from current year market projections.

Revenue % of total

Presence in more

than 160 countries

with an unrivaled

global delivery

model

Global Presence Our Brand

Worldwide

awareness and

ranked in top 100

global brands

Operational Excellence

Apply consistent

business practices,

scale platforms/

processes across

operations and

client accounts

Innovation

Invention and

innovation advance

process automation,

personalization and

data/image analytics

Our Core Strengths Enable Differentiation

6

Strategy for Growth and Shareholder Value

7

Create Sustained

Shareholder Value • EPS growth

• Strong cash flow

We apply our innovation and operational excellence while leveraging our global presence and our brand.

Expand globally Invest in new Services

Capitalize on

advantaged

verticals

Leverage Document

Technology leadership

Disciplined

management

of portfolio

Expand customer

relationships

Segment Characteristics

Revenue (2013) Mid-single digit

decline

Annuity % of Revenue ~70%

Segment Margin 9 – 11%

Revenue (2013) Mid-to-high single

digit growth

Annuity % of Revenue >90%

Segment Margin 10 – 12%

• Broad and diverse portfolio

– Differing growth and profitability profiles by line of

business

• Long-term contracts with high renewal rates

– Target renewal rate 85 to 90%

• Signings volatility driven by mega deals

– Varying contract lengths and “time to revenue/profit”

• Relatively modest CAPEX, around 3% of revenue

– ITO and Transportation more capital intensive

Services (~55% of Total Revenue) Document Technology (~40% of Total Revenue)

Secular Dynamics

Decline in B&W high-end <9%

of Tech Revenue

Migration to Services ~(2)% pts

impact on Tech Revenue

Growth in developing markets 3%

market CAGR thru „15

Offset to digital transition only 2%

of pages are digital

Moderate macro sensitivity especially on hardware

and unbundled supplies sales

Portfolio Dynamics

Limited macro sensitivity given largely recurring

revenue and diversity of business

8

Note: Expect “Other” segment revenue decline of mid-to-high single digits

Long-Term Revenue Growth Drivers

by 2017

Mix to

Services

~2/3rds

of revenue

• Markets growing > 5%

• Services as a % of total

expanding

• Portfolio management

and acquisitions

Growth areas offset areas of secular decline in printing

in 2012

Advantaged Verticals

~$2B healthcare

revenue

• Deep verticals focus in

Services

• Leader in emerging

areas, i.e. HIX

• Applying research and

innovation

in 2012

Global Expansion

<25% of Services

outside U.S.

• Services growth

internationally: focus on

Transportation, HRO and

Customer Care

• Emerging markets and

SMB opportunity in Doc.

Technology

9

SG&A

Long-Term Cost Opportunity Areas

• Shared services

• Legacy IT infrastructure

• Leveraging partners

$4B+

Supply Chain and Product Cost

• Supply chain optimization

• Direct and indirect purchasing

• Product simplification

~$4B

Cost Base

Services Delivery

• Remote device management

• Process automation

• Contract management

~$9B

Savings to enable Services investments; offset price and mix pressures

10

Q4 Restructuring Initiative

Services Workforce Optimization

• Reduction in management layers

• Better utilization of partner, at-home and off-shore

resources

• Process automation

Focus Area

~$80M

11

~$55M

~$50M ~$45M

Savings offsetting contract mix and market dynamics, drive margin improvement

Document Technology Infrastructure

• Across all areas, from supply chain to back-office support

• Capturing benefits of productivity and automation

• Leveraging partnerships with Fuji Xerox and others

Pension Expectations

Expense Funding

• Recognizes long term nature of pensions,

allows for smoothing effect

• Shift to defined contribution plans will

reduce burden over time

2011 2012 2013

$284M ~$310M1 Flat2 YOY

2011 2012 2013

$556M ~$500M1

• Local law / regulatory requirements

• Recent U.S. legislation lowers in short term

• No stock contribution planned in 2013

1Estimate for 2012

22013 estimate based on expectations as of 10/31/12

Stock contribution

• Low interest rate environment greatly impacted 2011 and 2012

• Expect further discount rate reduction to impact 2013

• Freezing of all major defined benefit plans already announced

2010

2010

$304M $237M

2009

$232M

2009

$122M Cash down2

>$100M YOY

12

2012 Forecast

Revenue

• Services growth in line with original expectations

• Document Technology impacted by macro environment, especially Europe

EPS

• Margin decline due to Services

• Adjusted EPS range updated to reflect previously announced restructuring

- ~$100M Restructuring in Q4 (~ 5 cents)

- ~$160M for FY 2012

Cash Flow and Capital Allocation

• In line with 2012 guidance, closer to high-end of range

• Shares outstanding on track for over 7% reduction vs. 2011 YE

FY 2012

Revenue Growth % Flat @ CC

Adjusted EPS (incl restructuring) $1.02 - $1.04

Cash From Operations $ 2.0 - $2.3B

CAPEX $ 0.5B

Free Cash Flow $ 1.5 - $1.8B

Share Repurchase $ 0.9 - $1.1B

Acquisitions $ 0.3 - $0.4B

Dividend $ 0.3B

Q4 2012

Restructuring Charge ~$100M

Adjusted EPS (incl restructuring) $0.28 - $0.30

13

Note: Q4 GAAP EPS range of $0.24 - $0.26 and FY 2012 of $0.87 to $0.89

Constant Currency (CC): see non-GAAP measures

Cash Flow

2013 Guidance

(in billions)

Operating Cash Flow $2.1 - $2.4

CAPEX $(0.5)

Free Cash Flow $1.6 - $1.9

Income Statement

Revenue Growth @ CC* Flat to up 2%

Services Up mid-to-high

single digits

Technology Down mid-single digits

Adjusted EPS1 $1.09 - $1.15

GAAP EPS $0.94 - $1.00

• Continued weak macro and low interest rate environment

• Services growth offsets Document Technology

revenue declines

• Modest operating margin improvement

• Share repurchase and restructuring support EPS

expansion

• Steady State goal: grow EPS 10%+

EPS Drivers

• Working capital flat

• Pension funding benefit YOY

• Restructuring payments flat YOY

• Finance Receivable sales consistent with 2012

• Steady State goal: grow cash flow in line with

earnings expansion

Cash Flow Drivers

14

*Revenue growth guidance excluding potential divestitures

1Adjusted for amortization of intangible assets


Capital Structure

• Investment Grade balance sheet

• Expect $8.6B of debt by 2012 year-

end, majority of debt associated with

financing

• Balanced debt maturity ladder

- ~$1B of debt coming due in 2013

• Maintain 7:1 leverage ratio of debt to equity on

finance assets

0

400

800

1,200

1,600

$ m

illio

ns

Expected Q4 2012

(in billions) Fin. Assets Debt

Financing

$5.9 $ 5.2

Core - $ 3.4

Total Xerox $ 5.9 $ 8.6

Debt Maturity Ladder

Core vs. Implied Financing Debt

15

• Xerox Financing business is at or

above benchmark with respect to

penetration rates, portfolio quality and

loss rates

• Opportunity to optimize Financing debt

cost and diversify funding structures

- Will employ modest amount of finance

receivable sales/securitizations

Capital Allocation

2012

Dividend Acquisitions

Share Repurchase

2013 balanced to deliver shareholder returns while maintaining investment grade leverage

• Dividend1: ~$300M, increasing 35% to 5.75 cents per share quarterly

• Acquisitions: up to $500M, focused on Services

• Share Repurchase: at least $400M, increasing authorization by $1B

• Debt Repayment: at least $400M

2013 Plan

Dividend

Acquisitions

Share Repurchase

Debt

Repayment

Opportunistic

2011

Dividend

Acquisitions

Debt

Repayment

Share Repurchase

16

~40%

~10%

~20%

~30% ~20% ~20%

~60%

1All dividends, including the planned increased dividend, are subject to declaration by the Xerox Board of Directors, in its sole

discretion. Dividend increase to be effective on dividend to be declared in February 2013 and payable on April 30, 2013

Business Process Outsourcing

$250 billion market

2011-2015 CAGR: 7%

A Leader in Growth Markets

18

Market leader in key growth areas:

• Health care services

• Transportation services

• Human resource services

Document Outsourcing

$48 billion market

2011-2015 CAGR: 7%

Created the MPS industry

• Continue as market share

leader today

• Broadened MPS portfolio for

channel partners

Information Technology

Outsourcing

$250 billion market

2011-2015 CAGR: 4%

• Expanding provider of

enterprise cloud services

• Leader in Help Desk &

Desktop Outsourcing

Source: Internal market size analysis

Our Differentiated Advantage

• Diverse business portfolio and customer base

• Deep vertical expertise

• Customer-focused innovation

• Operational excellence and global delivery

• Successful acquisition strategy

19

• F&A: A/P, A/R, close process, procurement, cash mgmt., expense reimbursement

• Student loan servicing, student financial aid, enrollment mgmt.

• Financial Services: data processing services to auto finance & leasing

Commercial IT

(~12%)

State Government

(~12%)

Diversified Services Offerings

• Data center outsourcing

• Network management services

• Desktop management

• Help desk

• Remote infrastructure management

• Application services

• Enterprise cloud services

HR Services

(~10%)

• Consulting: retirement, health, comp

• Outsourcing: Employee service center, data management, payroll

• Benefits Outsourcing: 401(k), pension, health self-service portal

• Learning: technology services, content development, administration

• Medicaid administrative solutions

• Health Information Exchange

• Child support payment processing

• Eligibility determination & case management

• Electronic benefits transfer

• IT services

• Pharmacy benefits management services

Financial Services

(~6%)

Healthcare Payer &

Pharma (~6%)

Customer Care

(~7%)

• Healthcare payer claim processing, billing, payment, reconciliation

• Healthcare payer customer care, Web-based self service

• Cost recovery, audit, cost avoidance

• Wireless customer care: customer acquisitions, device support, loyalty plans & collections

• Travel: back office processing, on-line check-in support, customer care

• Tech support and services

Document Outsourcing

(~30%)

• Electronic toll collection

• Fare payment & collection

• Commercial carrier solutions

• Traffic photo enforcement

• Traffic & parking mgmt.

• IT Services

• Government records mgmt.

Transportation & Local

Government (~8%)

Percentages represent percent of total Services revenue

Communication & Marketing Services (~4%)

• Creating personalized, multi-channel marketing communications

Managed Print Services (~26%)

• Optimizing, managing and rationalizing the operations of Xerox and non-Xerox devices

Central Government (~3%)

• Student loan servicing, healthcare claims processing, electronic payment cards

Retail, Travel &

Insurance (~3%)

• Transactional services for retail, travel and non-healthcare insurance companies

• Data entry, mailroom, imaging input and hosting, call centers, help desk

• Increased industry focus

Healthcare Provider

(~3%)

• Consulting solutions

• Revenue cycle management

• Analytical care management & workflow solutions

20

Services Metrics and Trends

Key Messages

• Pipeline continues to grow, partially due

to clients delaying decisions

• Improved renewal rate offsets lower

new business signings

• Margin pressured, reset range in near

term to 10 – 12%

Segment Margin Trend

New Business Signings Trend1 (TTM Annual Revenue)

Renewal Rate Trend

Other Drivers

• Line of business mix

• Contract ramp timing

• Renewal potential

• Price concessions

• Acquisition cadence

Pipeline Trend

21

87% 80%

87%

70%

85%

100%

23%

5% 9%

0%

20%

40%

2010 2011 Q3 '12

7%

15%

(3)% (1)

0

1

2

3

-5%

0%

5%

10%

15%

2010 2011 Q3 '12

in b

illio

ns

Total TTM %G TTM

1New Business Signings = ARR (Annual Recurring Revenue) + NRR (Non-Recurring Revenue)

11.4%2 11.1% 9.8%

2Pro-forma: see non-GAAP measures

Services – Portfolio Dynamics

Note: The graphic above is a relative representation of the Services lines of business in 2013

Human Resources

Financial Services

Healthcare Payer

Retail, Travel & Ins.

Customer Care

Commercial IT

Health- care

Provider

Central Gov’t

State Government

Transportation

Managed Print

Services

Comm. and Mktg. Services

Op

era

tin

g M

arg

in %

Revenue Growth

Focused on ongoing portfolio management

• Invest in areas of differentiation and scale

• Divest of non-core businesses

22

Growth Impact: (2) - (3)% (3) - (4)% 8 - 10% 3 - 4% 1 - 3%Mid to High

Single Digits

Beginning of Year85 - 90%

Renewal Rate

Price

Declines

Revenue

Ramp Pr Yrs

New Signings

Revenue

Ramp Cr Yr

New Signings

Acquisition

GrowthEnd of Year

7

8

1

Recurring

Revenue

Recurring

Revenue

~91% of Total ~91% of Total

0

2

3

4

5

6

Non-recurring

13

9

10

Non-recurring11

12

Services - Recurring Revenue Model

Good visibility to Services revenue growth, large portion of revenue under contract

23

(in

bill

ions)

We are Executing a Series of Initiatives to Expand

Margins

24

• We have a cost issue, not a revenue issue

− Productivity gains not sufficient to offset: • Intensity of new contract ramp

• Previous loss of high margin contracts

• Typical price erosion

• To move margins into the target range, we are: − Restructuring to streamline the organization

− Increasing the use of lower cost labor (off-shoring and at-home

working)

− Accelerating innovation • “Business Re-invention Center” leverages Xerox R&D and

improves the pace of technology adoption

Customer-Focused Innovation

25

Business analytics

Process automation

IT convergence

• Patient scheduling/outcomes analysis

• Parking price optimization

• Customer & product wireless analytics

• Cost containment

• Fraud protection

• Vector (EZ-Pass)

• Health Enterprise: Medicaid processing

• Content Management

• Call Simplicity

• Asset DB

• In Home Worker

Market Trends Innovation

Operational Excellence and Global Delivery

26

Customer accountability & empowerment

Global production resources

State of the art technology/platforms

Speed and flexibility

Healthcare: software & adjacencies

Acquisitions Enhance Market Position

HRO – adjacencies

Customer Care – analytics and geographic expansion

Other Services – software, geographic expansion & adjacencies

HRO

Pharma Services

Transportation Netherlands

Clinical Surveillance

Benefits

websites Pharmacy Audit

E-Discovery

Customer Care Data

Analytics - UK

• Well-run businesses with strong and committed management

• EPS and margin accretive in year one

• Requires disciplined portfolio management

Managed Print Italy

EMR Adoption

Student Enrollment Services

27

http://www.bcmscorporate.com/case-study/pharmdur-inc

Vertical Expertise: Healthcare

A $2 billion business in a rapidly growing market

provider of commercial transaction processing

#1 U.S. states supported by government health services

percent of the top ten BCBS organizations are clients

100 of U.S. insured patients are touched by our services

billion dollars in drug expenditures managed per year

13

of the top 20 U.S. managed health plans are Xerox clients

U.S. states supported by MMIS services

13 years government health program experience

million people

served by

government health

services

36 34

19

2/3

40+

Broad and Deep Healthcare Offerings and Expertise

Providers Payers Pharma / Life

Sciences Government Employers

Broad process-based expertise

• Eligibility

• Customer care

• Analytics

• Claims processing

• Records management

Targeted focus areas

• Medicaid fiscal agent/MMIS

• Health Insurance Exchanges

• Pharmacy benefits management

• Revenue cycle management

$17B

Printing Market: Focus on Attractive Segments

Consumer Office Environment Production

Inkjet

Laser Printers

Workgroup MFPs

High-End Devices

Market Size & Growth1

Declining (5%)

12011 – 2015 CAGR


Xerox Position

Do not participate

Less than 7% share

Technology &

Services leader

Technology &

Services leader

Decline in

low-value

pages

color affordability (price per page decline)

mass personalization

distribute & view

mobile workforce (smartphones/tablets)

from desktops to MFPs

in-house printing

move to services

Growth in

high-value

pages

Consolidation

of devices

Ind

us

try T

ren

ds

-- -

+ ++/-

+

+/- ++

Xerox Impact

Xerox print markets in slow contraction, down low single digits;

current economic environment amplifies contraction

$23B $33B $44B

$6B

Declining (1%)

eligible offset

Declining (1%) Growing 3%

[Color 11%, B&W (11%)]

31

Strengthening Market Leadership

billion in R&D together with Fuji Xerox

$1.5 MPS Global Services delivery centers across the globe

10

percent high end equipment revenue market share

40 most extensive multifunction printer portfolio

#1

of Partner Print Services wins are new business

2/3 thousand active U.S. patents >10 percent MPS

Partner growth in 2012

50

year leader in

Gartner MPS

Magic Quadrant 5

equipment revenue market share leader worldwide

#1

32

22%

58%

20%

Entry Mid High-End

Document Technology Dynamics

• North America

largest and most

profitable geography

• Europe revenue and

margin under

pressure

• Developing markets

highest growth with

improving margins

• Mid-range largest

product segment,

most impacted by

migration to services

• High-end most

sensitive to economy

• Entry growth driven

by developing markets

• Majority of annuity

tied to contracted

revenue

• Equipment impacted

by 5 to 10% price

erosion, most sensitive

to economy

• Unbundled supplies

primarily sold through

indirect channels

33

52%

18%

30%

Annuity tied to contracts

Annuity from unbundled supplies

Equipment

61% 26%

13%

N. America Europe DMO

Document Technology Metrics and Trends

Revenue Trend (G% @ CC)

Document Technology Margin Trend

Install Growth

Key Messages

• Continued install growth, drives future

annuity

• Maintaining overall equipment revenue

market share leadership

• Margin at high-end of 9 – 11% range,

reflects cost initiatives

Other Drivers

• Product and color mix

• Pace of migration to Xerox Services

• Developing markets growth

• Equipment price erosion

• Unbundled supplies sales

34

1% 0% (3)%

3%

(3)% (5)%

(10)%

(5)%

0%

5%

2010 2011 Sep YTD '12

DO + Tech Tech

10.5%

11.1% 10.9%

0%

4%

8%

12%

2010 2011 Sep YTD '12

Note: Install Growth excludes single-function mono printers; DO = Document Outsourcing

21%

0%

11% 13%

6% 8%

0%

10%

20%

30%

2010 2011 Sep YTD '12

Total Color


Customer aligned Organization Models

Focus on Simplification and Cost Reduction

Leveraging Shared Services

• Large Enterprises

– Services-led

• Channel Partner

– Low SG&A

• Graphic Communications

– Focused coverage

• Expand and leverage

partnerships

• Scaling remote device

management

• IT enablement for back

office and partner

management

• Product engineering and

sourcing

• Supply chain and

distribution

• Technical service and

supplies management

• Managed print services

delivery and support

Profitability and Cash Flow

Proactively streamlining infrastructure to align with market trends and

evolving customer requirements

35

Competitively Advantaged

$0

$20

$40

$60

$80

$100

2011 2012 2013 2014 2015

($B

)

Unmanaged Managed (MPS)

Superior ability to coordinate multi-

site delivery from local to global

Through MPS, manage any vendors

products, technical service and

supplies

Best in class remote device

management, help desk, technical

service, supplies management and

reporting

Success with Global Imaging

Systems, nearly 20% of Document

Technology with industry-leading

margins

Expanding in developing markets,

focus on BRIM1 countries

Providing greater value for partners

through expanded MPS, and most

extensive product line

WW Production Print

0%

100%

Pages Retail Value

Packaging

Offset

Digital

Market leader with world class

capabilities in productivity, digital

workflow and automation

Broadest product portfolio to

support Graphic Communications

Participating and investing in

inkjet-driven market expansion

Lead in Large Enterprises

Capture the SMB Opportunity

Digitize Production Printing

50 trillion pages, digital only 2%

36

SMB market more

than twice the size of

Large Enterprise 2x

Percent projected

SMB MPS CAGR

through 2015 17

Office Market Revenue


1BRIM – Brazil, Russia, India and Mexico

Third-Quarter 2012 Earnings Presentation

Ursula Burns

Chairman & CEO

Luca Maestri

Chief Financial Officer

October 23, 2012

Forward-Looking Statements

This presentation contains "forward-looking statements" as defined in the Private Securities Litigation Reform

Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar

expressions, as they relate to us, are intended to identify forward-looking statements. These statements

reflect management‟s current beliefs, assumptions and expectations and are subject to a number of factors

that may cause actual results to differ materially. These factors include but are not limited to: changes in

economic conditions, political conditions, trade protection measures, licensing requirements and tax matters

in the United States and in the foreign countries in which we do business; changes in foreign currency

exchange rates; actions of competitors; our ability to obtain adequate pricing for our products and services

and to maintain and improve cost efficiency of operations, including savings from restructuring actions; the

risk that unexpected costs will be incurred; our ability to expand equipment placements; the risk that

subcontractors, software vendors and utility and network providers will not perform in a timely, quality

manner; 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; our ability to recover capital

investments; development of new products and services; our ability to protect our intellectual property rights;

interest rates, cost of borrowing and access to credit markets; the risk that multi-year contracts with

governmental entities could be terminated prior to the end of the contract term; reliance on third parties for

manufacturing of products and provision of services; our ability to drive the expanded use of color in printing

and copying; the outcome of litigation and regulatory proceedings to which we may be a party; and other

factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management‟s

Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of our

Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012 and our 2011

Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Company assumes no

obligation to update any forward-looking statements as a result of new information or future events or

developments, except as required by law.

38

Global Perspective

39

Observations

• U.S. fiscal concerns create greater economic uncertainty

• Europe economies remain weak

• Developing markets relatively stable

Implications

• Government budget constraints: less funding for infrastructure advancements,

related services

• Increasing conservatism in large enterprises; delayed decision making

• Proactive management of cost; aligning resources with market conditions

Healthy annuity - 85% of revenue - and diversified portfolio

mitigate macro challenges

1Adjusted EPS, operating margin:

Third-Quarter Overview

Revenue down 3% or 1% CC and GAAP EPS of $0.21, Adj EPS1 of $0.25

Services revenue up 5%, 6% CC; margins remained pressured

• Services margin of 9.4% was below expectations, driven by:

Pressure on government contracts

Lower volumes in some areas of the business

Technology revenue down 10%, 7% CC; margins solid

• Revenue declines driven by lower equipment sales

• Annuity remains stable

EPS in line with expectations

• Continued strong Services revenue and Technology margin performance

• Good expense management

Cash flow from operations of $594M

• Cash from operations $228M higher YOY

• Share repurchase of $361M in Q3, $718M Sept YTD

40

Constant currency (CC):

41

Executing on our Strategy

• Providing IT service desk support for McDonald's restaurants in several key markets;

making Xerox one of the world's largest providers of restaurant support services.

• Consolidating and managing the North American IT infrastructure and data centers for

global energy company.

• Handling extensive call center services to support Medicare administration for large

healthcare payers.

• Providing consulting services to help healthcare providers meet government standards

for “Meaningful Use” of electronic health records.

Advancing IT infrastructures

Simplifying business in emerging markets

• Implementing MPS solution for invoicing and payroll integrated with devices and print

centers for Brazilian aircraft manufacturer.

• Managing retail account opening process in 9,000 branches of Latin American bank.

• Developing an advanced invoicing system for large Russian retailer.

Transforming the business of healthcare

(in millions) Q3

Total Revenue $5,423

Growth (3)%

CC Growth (1)%

Annuity $ 4,618

Growth (1)%

CC Growth 2%

Annuity % of Revenue 85%

Equipment $ 805

Growth (14)%

CC Growth (12)%


Revenue

2012

Annuity revenue represents service, outsourcing and rentals, supplies, paper and other sales and finance income

Segment Revenue

Contribution

42

48%

Technology

Services

Other

42%

52%

6%

(in millions, except per share data)

Q3 2012 B/(W) 2011 Comments

Revenue $ 5,423 $ (160) Down $48M at Constant Currency

Gross Margin 31% (1.7) pts Impacted by mix and Services pressure

RD&E $ 161 Continue to see benefits from restructuring and productivity actions SAG $ 1,050

SAG % of Revenue 19.4% 0.5 pts

Adjusted Operating Income1 $ 469 $ (67)

Operating Income % of Revenue 8.6% (1.0) pts Decline driven by Services

Adjusted Other, net1 $ 76 Restructuring $18M higher YOY

Equity Income $ 34

Adjusted Tax Rate1 24%

Adjusted Net Income – Xerox1 $ 333 $ (41)

Adjusted EPS1 $ 0.25

$(0.01)

Amortization of intangible assets 0.04

GAAP EPS $ 0.21

$(0.01)

Earnings

1Adjusted Operating Income, Adjusted Other, net, Adjusted Tax Rate, Adjusted Net Income – Xerox and Adjusted EPS:

43

• Consistent solid revenue growth

BPO up 9% CC

DO up 4% CC

ITO up 6% CC

• Revenue mix: 57% BPO,

31% DO and 12% ITO

• Segment margin remains

pressured

Sequential decline of 120 bps

driven by Government and lower

volume

YOY continue to see contract ramp

impacts

• BPO/ITO renewal rate of 86%,

within target range

Services Segment

Q3 % B/(W) YOY

(in millions) 2012 Act Cur CC

Total Revenue $2,847 5% 6%

Segment Profit $269 (17)%

Segment Margin 9.4% (2.5) pts


* Q1 „11 revenue growth is on a pro forma basis, 44

Revenue Growth Trend (CC)


5% 4%

5% 6%

10%

7% 6%

Q1 '11* Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

10.3%

12.1% 11.9%

10.3%

9.3%

10.6%

9.4%

Technology Segment


Q3 % B/(W) YOY

(in millions) 2012 Act Cur CC

Total Revenue $2,259 (10)% (7)%

Segment Profit $245 (5)%

Segment Margin 10.8% 0.5 pts

• Total Revenue decline of 7%

Annuity revenue down 3% CC

Equipment sales impacted by a

tough market environment and

difficult YOY compare

• Revenue mix: 59% Mid-Range,

21% Entry and 20% High-End

• Including document outsourcing,

revenue declined 4% CC

• SMB including developing

markets relatively strong and

showing solid install growth

• Segment margin improves YOY

Includes gain of $23M associated

with finance receivables sale

45

Revenue Growth Trend (CC)


0%

(4)%

(1)%

(4)% (5)%

(4)%

(7)% (8)%

(6)%

(4)%

(2)%

0%

10.7%

11.8%

10.3%

11.7%

10.5%

11.3%

10.8%

Key Metrics

Constant currency (CC): Installs, color revenue, pages and MIF include both the Technology and Services segments. Color revenue and color pages

reflect revenue and pages from color capable devices.

Entry Installs Q3 YTD

A4 Mono MFDs 38% 23%

A4 Color MFDs 46% 42%

Color Printers 10% 3%

Mid-Range Installs

Mid-Range B&W MFDs (7)% (6)%

Mid-Range Color MFDs (14)% 4%

High-End Installs

High-End B&W (31)% (21)%

High-End Color 32% 46%

46

Q3

Business Process Outsourcing $2.0

Information Technology Outsourcing $0.4

Document Outsourcing $0.7

Total $3.1B

Signings Growth TTM (15)%

Signings Sequential growth 19%

Q3 YTD

Digital MIF 4% 3%

Color MIF 15% 14%

Digital Pages (3)% (2)%

Color Pages 9% 10%

Color Revenue (CC) (6)% (3)%

Install, MIF and Page Growth Signings and Renewal Rate

Q3

Renewal Rate (BPO and ITO) 86%

Total signings impacted by fewer mega deals, shorter

contract length and customer decision delays

Cash Flow

47

Cash Flow Analysis (in millions) Q3 2012

Net Income $ 288

Depreciation and amortization 339

Restructuring and asset impairment charges 14

Restructuring payments (30)

Contributions to defined benefit pension plans (73)

Inventories (44)

Accounts receivable and Billed portion of finance receivables*

(319)

Accounts payable and Accrued compensation 7

Equipment on operating leases (65)

Finance Receivables 412

Other 65

Cash from Operations

$ 594

Cash from Investing

$ (289)

Cash from Financing $ (230)

Change in Cash and Cash Equivalents 68

Ending Cash and Cash Equivalents $ 882

*Accounts Receivables includes collections of deferred proceeds from sales of receivables 1Working capital includes accounts receivable, accounts payable and inventory

• Cash flow driven by Net Income

• Working Capital1 and Finance Assets

essentially flat

• Lower YOY pension contributions

driven by calendarization

- Sep YTD $310M, $38M lower YOY

• Share repurchase of $361M and

Dividends of $69M

• Continue to expect Cash from

Operations between $2.0 and $2.3B

for FY 2012

Balance Sheet and Capital Allocation 2012 Debt Trend

Financing

• Xerox‟s value proposition includes leasing of

Xerox equipment

• Maintain 7:1 leverage ratio of debt to equity on

these finance assets

Q3 2012

(in billions) Fin. Assets Debt

Financing

$6.2 $ 5.41

Core - $ 3.94

Total Xerox $ 6.2 $ 9.35

Key Messages

• Majority of debt related to financing of

customer equipment

• Capital allocation strategy on track

Repurchased $718M YTD, 65M net reduction in

common shares outstanding

Q3 acquisitions $156M, $243M YTD

• Expect year-end debt levels flat to 2011

48

$ b

illio

ns 8.6

9.6 9.2 9.4 8.6

(in billions) Guidance Progress

Cash from Ops $2.0 - $2.3 √

CAPEX $(0.5) √

Free Cash Flow1 $1.5 - $1.8 √

Share Repurchase $0.9 - $1.1 √

Acquisitions $0.3 - $0.4 √

Dividends $0.3 √

Capital Allocation Status

1Free Cash Flow:

Summary

*Guidance - Adjusted EPS and Constant currency (CC): 49

Annuity-based business model provides stability

• 85% of total revenue

• Up 2% CC, driven by Services

Diverse portfolio provides differentiated advantage

• Continued strong Services growth

• Maintaining market-leading position in Document Technology

Margin pressure in Services

• Focusing on broader operational efficiencies

Cash flow on track for $2.0 to $2.3B FY

• Continue to expect to repurchase $0.9 to $1.1B of shares

EPS guidance excluding restructuring

• Q4 Adj EPS $0.33 - $0.35, Q4 GAAP EPS $0.29 - $0.31

• FY Adj EPS $1.07 - $1.09, FY GAAP EPS $0.92 - $0.94

Appendix

51

(in millions) FY FY Pro -forma FY

Pro -forma Q1 Q2 Q3

Total Revenue $ 15,179 $ 21,633 $ 22,626 $5,503 $5,541 $5,423

Growth (14%) 43% 3% 5% 2% 1% (1)% (3)%

CC Growth (11%) 43% 3% 3% Flat 2% 1% (1)%

Annuity $ 11,629 $ 17,776 $ 18,770 $ 4,692 $ 4,695 $ 4,618

Growth (10%) 53% 1% 6% 2% 1% Flat (1)%

CC Growth (7%) 54% 2% 4% 1% 2% 2% 2%

Annuity % Revenue

77% 82% 83% 85% 85% 85%

Equipment $ 3,550 $ 3,857 $ 3,856 $ 811 $ 846 $ 805

Growth (24%) 9% 9% Flat Flat (2)% (9)% (14)%

CC Growth (23%) 10% 10% (1)% (1)% (1)% (6)% (12)%

Constant currency:

Revenue

2009 2010 2011

Note: Pro-forma revenue growth adjusts 2009 and 2010 results to include ACS historical results for the comparable periods.

2012

52

(in millions) FY Pro -forma FY

Pro -forma Q1 Q2 Q3

Services $ 9,637 $10,837 $2,821 $2,806 $2,847

Growth nm 3% 12% 6% 9% 5% 5%

CC Growth nm 3% 11% 5% 10% 7% 6%

Technology $ 10,349 $ 10,259 $ 2,338 $2,370 $2,259

Growth 3% 3% (1)% (1)% (6)% (7)% (10)%

CC Growth 3% 3% (3)% (3)% (5)% (4)% (7)%

Other $ 1,647 $ 1,530 $ 344 $365 $317

Growth 1% 1% (7)% (7)% (11)% (6)% (13)%

CC Growth 1% 1% (9)% (9)% (10)% (4)% (11)%

Constant currency:

Segment Revenue Trend

2010 2011 2012

Note: Pro-forma revenue growth adjusts 2009 and 2010 results to include ACS historical results for the comparable periods.

“Adjusted Earnings Measures”: To better understand the trends in our business and the impact of the ACS acquisition, we believe it is

necessary to adjust the following amounts determined in accordance with GAAP to exclude the effects of the certain items as well as their

related income tax effects.

• Net income and Earnings per share (“EPS”)

• Effective tax rate

In 2012 and 2011 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 expenses. In addition to the amortization of intangibles, operating income and margin also exclude Other expenses, net

as well as Restructuring and asset impairment charges. Other expenses, net is primarily composed of non-financing interest expense and

also includes 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

54

“Pro-forma Basis”: Reported 2010 services segment margin was 11.7%, reported 2010 constant currency revenue growth was 177%

and reported 2011 constant currency revenue growth was 12%. To better understand the trends in our business, we discuss our 2011

and 2010 operating results by comparing them against adjusted prior-period results which include ACS historical results for the

comparable period. We acquired ACS on February 5, 2010 and ACS‟s results subsequent to that date are included in our reported results.

Accordingly, for the comparison of our reported 2011 results to 2010, we included ACS‟s 2010 estimated results for the period January 1

through February 5, 2010 in our reported 2010 results (pro-forma 2010). For the comparison of our reported 2010 results to 2009, we

included ACS‟s 2009 estimated results for the period February 6 through December 31 in our reported 2009 results (pro-forma 2009). We

refer to these comparisons against adjusted results as “pro-forma” basis comparisons. ACS‟s historical results for these periods have been

adjusted to reflect fair value adjustments related to property, equipment and computer software as well as customer contract costs. In

addition, adjustments were made for deferred revenue, exited businesses and other material non-recurring costs associated with the

acquisition. We believe comparisons on a pro-forma basis provide a more enhanced assessment than the actual comparisons, given the

size and nature of the ACS acquisition.

“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.

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.

Non-GAAP Financial Measures

55

GAAP EPS to Adjusted EPS Guidance Track

Q4 2012 FY 2012

GAAP EPS $0.24 - $0.26 $0.87 - $0.89

Adjustments:

Amortization of intangible assets 0.04 0.15

Adjusted EPS $0.28 - $0.30 $1.02 - $1.04

Earnings Per Share guidance

56

57

Q3 GAAP EPS to Adjusted EPS Track

(2) Represents common shares outstanding at September 30, 2012 as well as shares associated with our

Series A convertible preferred stock plus dilutive potential common shares as used in the calculation of

earnings per share for the three months ended September 30, 2012.

(1) Average shares for the calculation of adjusted EPS for the three months ended September 30, 2012 and 2011 include 27 million of

shares associated with the Series A convertible preferred stock and therefore the related quarterly dividends of $6 million are excluded.

We evaluate the dilutive effect of the Series A convertible preferred stock on an "if-converted" basis.

(in millions; except per share amounts) Net Income EPS Net Income EPS

Reported 282$ 0.21$ 320$ 0.22$

Adjustments:

Amortization of intangible assets 51 0.04 54 0.04

Adjusted 333$ 0.25$ 374$ 0.26$

Weighted average shares for adjusted EPS(1) 1,346 1,453

Fully diluted shares at September 30, 2012(2) 1,325

Three Months Ended

September 30, 2012

Three Months Ended

September 30, 2011

58

Q3 Adjusted Operating Income/Margin

(in millions) Profit Revenue Margin Profit Revenue Margin

Reported pre-tax income 317$ 5,423$ 5.8% 367$ 5,583$ 6.6%

Adjustments:

Amortization of intangible assets 82 87

Xerox restructuring charge (credit) 14 (4)

Other expenses, net 56 86

Adjusted Operating 469$ 5,423$ 8.6% 536$ 5,583$ 9.6%

Equity in net income of unconsolidated

affiliates 34 43

Fuji Xerox restructuring charge 5 1

Other expenses, net* (56) (85)

Segment Profit/Revenue 452$ 5,423$ 8.3% 495$ 5,583$ 8.9%

* Includes rounding adjustments.

Three Months Ended Three Months Ended

September 30, 2012 September 30, 2011

59

Q3 Adjusted Other, net

Three Months Ended

(in millions) September 30, 2012

Other expenses, net - Reported 56$

Adjustments:

Xerox restructuring charge 14

Net income attributable to noncontrolling interests 6

Other expenses, net - Adjusted 76$

60

Q3 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 317$ 63$ 19.9% 367$ 81$ 22.1%

Adjustments:

Amortization of intangible assets 82 31 87 33

Adjusted 399$ 94$ 23.6% 454$ 114$ 25.1%

Three Months Ended Three Months Ended

September 30, 2012 September 30, 2011

61

Q3 Services Revenue Breakdown

Note: ITO growth includes 3 pts of growth from intercompany services which is eliminated in total services

(in millions) 2012 2011 Change

Revenue

CC

Change

Business Processing Outsourcing 1,633$ 1,520$ 7% 9%

Document Outsourcing 897 885 1% 4%

Information Technology Outsourcing 361 342 6% 6%

Less: Intra-Segment Eliminations (44) (30) * *

Total Revenue - Services 2,847$ 2,717$ 5% 6%

* Percent change not meaningful.

Three Months Ended September 30,

62

Sep YTD Services Revenue Breakdown

Note: ITO growth includes 3 pts of growth from intercompany services which is eliminated in total services

(in millions) 2012 2011 Change

Revenue

CC

Change

Business Processing Outsourcing 4,876$ 4,467$ 9% 10%

Document Outsourcing 2,684 2,591 4% 6%

Information Technology Outsourcing 1,037 989 5% 5%

Less: Intra-Segment Eliminations (123) (74) * *

Total Revenue - Services 8,474$ 7,973$ 6% 8%

* Percent change not meaningful.

Nine Months Ended September 30,

63

Pro forma Revenue Breakdown

other relevant factors. the company‟s practice regarding ......business process outsourcing $250...

Documents