Xerox : Annual Report 2018

2018 Annual Report

Making a Better Future

2 0 18 H IG H L IG H T S S

$9.8 billion of revenue

$1.14 billion of operating cash flow

10,307 active U.S. patents

Thomson Reuters Top 100 Global Technology Leader

Named a Leader in Document Services by IDC

Document Imaging Software Line of the Year from Keypoint Intelligence-Buyers Lab

TA B L E O F C O N T E N T S
Letter to Shareholders	i
Board of Directors	iii
Officers	iii
FYI	iv
2018 Form 10-K Insert	v

Fellow Shareholder,

Since joining Xerox in May 2018, we have met with investors, customers, partners and employees to discuss reinventing Xerox and positioning the company for long- term, sustainable growth. We consistently heard from our stakeholders that the Xerox brand is synonymous with quality and reliability, but that we had work to do around leveraging our innovation and transforming our business for sustainable success.

To guide our transformation, we are embracing the era of intelligent work to make a better future. We identified the following four strategic initiatives that unite our employees to a common purpose and enable you to measure our success and performance.

1 . O P T I M I Z E O P E R AT I O N S

In mid-2018, we established Project Own It, an enterprise-wide transformation program designed to create a simpler, more agile and effective organization, enhance our focus on our customers and partners, instill a culture of continuous improvement and improve our financial results. We identified a range of opportunities as part of Project Own It, including rationalizing our IT infrastructure, consolidating our real estate footprint, unlocking greater productivity in our supplier base and establishing more effective shared service centers. We believe Project Own It will not only make Xerox a more productive, efficient and profitable organization, it will also enable the Company to reinvest in the business to drive revenue and develop innovation.

2 . D R I V E R E V E N U E

To improve our revenue trajectory, we developed a three-year revenue roadmap that builds on our legacy of technology and services excellence and focuses on deepening the integration of our software, services and technology to provide a value- enhancing end-to-end solution for our customers. While revenue decreased in 2018, which was in line with expectations, we started to see some progress.

In our Core Markets, our Workplace Solutions saw positive results from our ConnectKey® products. We maintained our No. 1 position in worldwide equipment sales revenue. Within high-end products, we brought the Iridesse™ production press to market in the first half of 2018, and its success has enabled us to retain our No. 1 market share in production color and expand our customer base, with more than 40 percent of Iridesse™ sales being new business. There is still more opportunity for us to capture market share across our core product areas.

Continuing our focus on integration and security, we introduced new software to AltaLink®, our flagship A3 multifunction printer family, to allow companies to monitor critical security settings and automatically remediate unauthorized changes without having to reboot the device. We also became the only Managed Print Services provider to be pre-vetted and approved by the U.S. government's Federal Risk and Authorization Management Program (FedRAMP).

Lastly, we realigned portions of our business to support our revenue roadmap. We created a business unit to focus on driving end-to-end solutions further into our customer base. We also transitioned over 28,000 of our small and mid-sized accounts to Xerox Business Solutions (XBS)-formerly known as Global Imaging Systems-to better serve those customers at a local level and to capitalize on the successful mid-market growth model of XBS.

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3 . R E - E N E R G I Z E I N N O VAT I O N

To move into adjacent and new markets that go beyond our Core Markets, we need to innovate and bring new software, services and products to market. We are taking a disciplined "startup-like" approach to ideating, developing and bringing new technologies to market with speed.

We have prioritized four areas of innovation:

D I G I TA L	3 D P R I N T I N G	A I W O R K F L O W	S E N S O R S A N D
		A S S I S TA N T S F O R	S E R V I C E S F O R
PA C K A G I N G	A N D D I G I TA L
		K N O W L E D G E	T H E I N T E R N E T O F
A N D P R I N T	M A N U FA C T U R I N G
		W O R K E R S	T H I N G S ( I oT )

We have designed a "Powered by Xerox®" business model and approach, where we don't always have to build and own the end product in order to benefit commercially from it and to maximize our participation in these markets.

4 . F O C U S O N C A S H F L O W A N D I N C R E A S I N G C A P I TA L R E T U R N S

With a large portion of revenues under multi-year contractual arrangements, low annual capital expenditures and ongoing productivity initiatives, we have a business model that drives stable gross margins and operating margins as well as strong and sustainable cash flow generation. This provides us with a significant source of capital and enables us to be strategic with where and how we put our cash to work to maximize our internal rate of return, whether it is reinvestment in our business, acquisitions or share repurchases. With our transformation plan, we also have heightened our focus on cash by adding increased executive oversight and more direct accountability across the organization, and it is reflected in our results. Everything we do revolves around sustaining our strong cash generative business to deliver growing shareholder returns.

M O M E N T U M G A I N E D I N 2 0 18

Guided by our four strategic initiatives, we started to see improvement across several key measures in 2018. We are pleased with our early progress, but we know that we have more work to do-and we need to do it with speed-to accelerate our transformation. With the foundation we established in 2018, we have everything we need to make a better future-not only for Xerox, but for the world.

Regards,

Keith Cozza	John Visentin
Chairman of the Board	Vice Chairman and Chief Executive Officer

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B O A R D O F D I R E C T O R S

Keith Cozza, Chairman		Giovanni (John) Visentin	Gregory Q. Brown			Joseph J. Echevarria	Nicholas Graziano
President and Chief		Vice Chairman and	Chairman and Chief			Former Chief Executive	Portfolio Manager,
Executive Officer,		Chief Executive Officer,	Executive Officer,			Officer, Deloitte LLP	Icahn Capital
Icahn Enterprises LP		Xerox Corporation	Motorola Solutions, Inc.

not pictured

Cheryl Gordon Krongard	A. Scott Letier			Sara Martinez Tucker	Jonathan Christodoro
Private investor and Former	Managing Director,			Retired Chief Executive	Partner, Patriot Global
Chief Executive Officer,	Deason Capital			Officer, National Math	Management LP
Rothschild Asset	Services, LLC			and Science Initiative;
Management				Former Under Secretary
				of Education in the U.S.
				Department of Education

O F F I C E R S
Giovanni (John) Visentin		William F. Osbourn, Jr.		Stephen P. Hoover		Xavier Heiss
Vice Chairman and Chief		Executive Vice President		Senior Vice President and		Vice President, Xerox
Executive Officer		and Chief Financial Officer		Chief Technology Officer		Controller and Chief
Steven J. Bandrowczak		Louis J. Pastor		Mary L. McHugh		Financial Officer, Americas
						Operations
President and Chief		Executive Vice President		Senior Vice President and
Operations Officer		and General Counsel		Chief Delivery Officer		Joseph H. Mancini, Jr.
Michael D. Feldman		Hervé N. Tessler		Robert Birkenholz		Vice President and Chief
						Accounting Officer
Executive Vice President		Executive Vice President		Vice President and Treasurer
and President, Americas		and President, EMEA		Kathleen S. Fanning		Douglas H. Marshall
Operations		Operations				Secretary
				Vice President,
Suzan Morno-Wade		Joanne Collins Smee		Worldwide Tax
Executive Vice President		Senior Vice President
and Chief Human Resources		and Chief Commercial
Officer		Officer

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