Xerox : Annual Report 2020

2020Annual Report

Making Every Day Work Better

Table of Contents

Letter to the Shareholders	I
Board of Directors	IV
Officers	IV
2020 Form 10-K Insert	V
FYI	VI

Fellow Shareholder,

This past year demonstrated the importance of turning setbacks into opportunities. Despite the impact of the pandemic, we looked beyond our existing portfolio of offerings to identify new ways to help our clients, employees, partners and communities. For instance, our experts quickly developed methods to manufacture hand sanitizer and single-use,low-cost ventilators to support frontline workers and those fighting the COVID-19 virus. And we launched new tools and technologies to ensure our employees and clients maintained a safe and secure environment given the overnight shift to remote work.

I couldn't be prouder of the team.

The strategic initiatives we set in 2018 guided us through 2020 and continue to keep us focused on creating value for all stakeholders. By optimizing our operations for simplicity and investing in our innovation engine, we are positioned to increase revenue and cash flow and generate greater returns. The progress we've made across our strategic initiatives also gives us the confidence to stand up three separate

businesses-Software, Xerox Financial Services (XFS) and PARC Innovation. By operating separately, they will have greater flexibility and focus in responding to the demands of the market, growing their business and increasing profit. In turn, we expect these businesses and the investments we've made will help return Xerox to growth starting in 2021.

In software, we expanded our portfolio with the acquisition of CareAR, an enterprise augmented reality business, in late 2020. This market is expected to grow six-fold to $60 billion by 2023. We plan to sell CareAR's proprietary technology together with our robotics, artificial intelligence, analytics and cloud-based content management system, DocuShare, to reinvent the service experience. We are already using this technology within parts of our print business and deploying it as a service

to our first customer.

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XFS is another area in which we plan to leverage our strong foothold in print to grow. We are transforming XFS into a global payments business that provides white-label financing for third-party office equipment, software and IT services. Building on decades of experience, XFS will bring fintech-like speed, simplicity and automation to the process. Having recently signed our first original equipment manufacturer partner, there's more potential to expand this business beyond our traditional customer base.

The trust we've earned with our customers has allowed us to expand our relationships, providing IT services and integrated workflow solutions in addition to print. With greater coverage in the U.S., the U.K. and Canada, many small and medium-sized business customers have turned to us to provide managed IT services and information security management while shifting to a hybrid work environment. Enterprise customers seek our integrated workflow solutions to speed their digital transformation.

In print, we are identifying new ways to grow our business. We plan to increase cooperative competition with other print companies where and when it makes sense. There's a collective opportunity to drive efficiencies in service, supply chain logistics and manufacturing as well as financing. The other component of our strategy includes building on our leadership positions to gain market share in higher value growth areas such as embellishments and inkjet. In 2020, we maintained the top spot in total equipment sales revenue in the Americas and in production in both the Americas and EMEA.

In our continuous pursuit of innovation, we have made strong progress in additive manufacturing, industrial Internet of things (IoT) and cleantech. Through the Company's recently created $250 million corporate venture capital fund, we

will enhance our innovation ecosystem, accelerating the development of these technologies by investing in start-ups and early- and mid-stage growth companies aligned with these areas as well as targeted adjacencies. We expect to deploy funds over the next five years, which is dependent on the identification of investment targets.

These technologies address major secular challenges such as climate change, aging infrastructure, supply chain risk and logistics. For instance, 3D printing is poised to transform the $5 trillion manufacturing industry and improve global supply chains, decreasing complexities, reducing costs and improving time-to-market. Our technology has the potential to disrupt how manufacturers create, prototype and produce complex, high-value metal parts. In 2020, we reached a milestone with the launch

of the Xerox ElemX 3D liquid-metal printer that uses off-the-shelf wire that's safer, more cost effective and faster than metal powders. Powder-based 3D printers are the technology predominately used today. In late 2020, we embarked on a strategic product development collaboration with the U.S. Naval Postgraduate School to help push the adoption of 3D printing throughout the Navy and gain actionable data to deliver increased supply chain flexibility and continuously improve ElemX for future customers.

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Events in 2020 highlighted the need to strengthen our commitments to diversity, inclusion and belonging (DIB) as well as sustainability. We created a new DIB roadmap and identified tangible steps we can take to foster a more diverse and inclusive business and world. Our roadmap includes partnering with organizations such as A Better Chance, a non-profit dedicated to increasing education, access and opportunity for young people of color, and accelerating the careers of high-potential employees who come from a diversity of backgrounds, among other things. This past year, we increased the percentage of underrepresented professionals across Xerox, but we know we must continue to focus on mirroring the markets we serve.

Recognizing there's more opportunity for us to reduce our carbon footprint, we have committed to achieving carbon neutrality no later than 2040 and reducing greenhouse gas emissions by at least 60% by 2030. This is on top of the cleantech innovations we are incubating now that have potential to help reduce emissions globally.

Today, we are more innovative and resilient than a year ago, and we have the technology and expertise to solve customer needs now and into the future. This will not only return Xerox to growth and create value for shareholders, but it will help make every day work better for our customers, communities and employees.

We look forward to sharing more on this journey and thank you for being an integral part of it.

Regards,

Keith Cozza	John Visentin
Chairman of the Board	Vice Chairman and CEO

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