docufacts: xerox q2 2008 earnings presentation

8/14/2019 Docufacts: Xerox Q2 2008 Earnings Presentation

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Second-Quarter 2008

Earnings Presentation

Anne MulcahyChairman & CEO

Ursula BurnsPresident

Larry ZimmermanExecutive Vice President & CFO July 24, 2008


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Anne Mulcahy


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Earnings of $0.24 per share Includes $0.05 restructuring charge, within guidance of $0.23* to $0.25*

Total revenue up 8%, 4% CC1

Post-sale up 10%, 6%CC1

Color up 11%, Services annuity up 8%

Global Imaging Systems and Developing Markets deliver consistent, strong growth

Cost and expense management

Gross margin 39.2%

SAG percent of revenue 25.8%

Balance sheet and cash flow performance

$442M cash from operationsDelivering shareholder value

$377M in share repurchases

Additional $1B authorized with available authorization at $1.7B

* Includes $0.05 restructuring charge1 Constant currency (CC): see slide 17 for explanation of non-GAAP measures

Second-Quarter Overview


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2007 2008

Q2 Q2 Adjusted1

$ 4,533

5%1%

8%4%

(2%)(5%)

8%4%

$ 3,373

10%6%

$ 1,160

2%(2%)

$ 4,208

6%4%

$ 3,067

7%5%

$ 1,141

3%1%

Adjusted1

1%(1%)

4%2%

(4%)(6%)

(in millions)

Total Revenue

GrowthCC* Growth

Post Sale

GrowthCC* Growth

Equipment

GrowthCC* Growth

*Constant currency: see slide 17 for explanation of non-GAAP measures1Adjusted Q2 2007 & 2008: The percentage point impacts reflect the revenue growth YOY after includingGIS results from second quarter 2006 & 2007. See slide 17 for explanation of non-GAAP measures

Revenue


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Total Color Revenue Color Trends

$1,022

Q2 2007

$1,192

Q2 2008

28% page volume growth continues to fuel post-sale revenue growth

Color 40% of total revenue, 16% of total pages

Equipment revenue impacted by production color

Total Revenue 11%(+5% @ CC)

Q22006

Q22007

Q22008

Color Revenue:% of Post Sale 31% 34% 37%

% of Equipment 44% 48% 50%% of Total Revenue 34% 38% 40%

Color Pages:Growth 40% 30% 28%

% of Total Pages 9% 12% 16%

$509 $508

Post Sale 17%(+11% @ CC)

Equipment Flat(-6% @ CC)

$1,531M $1,700M

Constant currency: see slide 17 for explanation of non-GAAP measuressColor revenue excludes GIS resultsColor pages exclude GIS, DMO and printers

Color Performance


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Production Revenue

Q2 2008 YTD

Production Monochrome (8%) (1%)

Production Color (12%) (3%)

Install Growth1

$939

Q2 2007 Q2 2008

$1,020

Total Revenue 4%(-1% @ CC)

$342 $317


Equipment (7%)(-13% @ CC)

$1,281M $1,337MProduction Overview

Constant currency: see slide 17 for explanation of non-GAAP measuress

DMO results are included in the results of the Production, Office and Other segments1Install growth includes Xerox-branded product shipments to GIS

Production Segment

Positive post-sale trend offsetting equipmentdeclines

Developing Markets equipment revenue up15%; total revenue up 20%

Color activity impacted by U.S. economy andtiming of product launches

New offerings showcased at drupa to providemomentum in 2H 08

Xerox iGen4 Press

Xerox 700 digital color press

Xerox DocuColor 5000AP digital press

Color continuous feed


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Office Revenue

Q2 2007 Q2 2008

$1,589 $1,751

$738 $775

Office B&W Copiers/MFDs 10% 22%

Segments 1-2 (11-30) ppm 11%

8%

34%

12%

Segments 3-5 (31-90) ppm2

26%

11%

37%Office Color MFDs

Color Printers 23%


Equipment 5%(+1% @ CC)

$2,327M $2,526M

Office Overview

Total Revenue 9%(+5% @ CC)

Constant currency: see slide 17 for explanation of non-GAAP measuressDMO results are included in the results of the Production, Office and Other segments1Install growth includes Xerox-branded product shipments to GIS2Segments 3-5 (31-90) ppm includes 95 ppm, segment 6 device with an embedded controller

Q2 2008 YTD

Install Growth1

Global Imaging delivers strong results

Developing Markets equipment revenue

up 16%; total revenue up 14%

SMB portfolio strengthened with Q2launches; more to come

Continue to deliver solid color growth

Expanded distribution through VeenmanB.V. and Saxon Business Systems

acquisitions GIS added third YTD acquisition last

week

Office Segment


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DMO Revenue

Q2 2007 Q2 2008

$366$437

Total Revenue 19%

$165 $194

Post Sale 19%

Equipment 18%

$531M $631M

DMO Overview

Developing Markets Operations

Beginning in 2008, DMO results are not reported as a separate segment, but are included within the resultsof the Production, Office and Other segments

Positive performance across all regions

Post-sale growth driven by supplies and

managed services

Continued equipment revenue growthin both office and production


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Larry Zimmerman


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(in millions, except per share data) Q2 2008 Q2 2007$ 4,533 $ 4,208

40.3%

$ 2235.3%

$ 1,081

25.7%

$ 78

$ (2)

$ 266

$ 2724%

$ 0.28

39.2%

Modest growth driven by post-sale

Margin decline driven by product andchannel mix as well as price

R,D&E $ 223R,D&E % of Revenue 4.9%

Restructuring $ 63 $0.05 per share cost focus

Productivity drives improved expense torevenue

SAG $ 1,170 GIS, currency and continued coverageinvestments

Including $63M restructuring charge

Tax Rate 24% 26%2, excluding restructuring

25.8%

$ 78

$ 215

$ 29

$ 0.241

Revenue

Gross Margin

SAG % of Revenue

Other, Net

Net Income

Equity Income

Diluted EPS

1 Includes $0.05 restructuring charge2Adjusted tax rate : see slide 17 for explanation of non-GAAP measures

Earnings


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2008 YTD

Post Sale Leading Indicators

Digital Revenue 8%

Digital MIF 6%

Digital Pages1 1%

B&W Digital Rev 2%

B&W Digital MIF flat

B&W Digital Pages1 5%

Color Revenue 16%

Color MIF 37%

Color Pages1 29%

MIF (Machines in Field) & page data exclude printers, DMO & GIS. All revenue measures exclude GIS*Services annuity includes managed services and value-added services1 2008 YOY growth is based on updated methodology, applies to US pages

FY 2005 FY 2006 FY 2007 YTD 2008

Color % Revenue 27% 31% 35%

17%

12%

8%

2%

37%

Color % of MIF 10% 13% 21%

Color % of Pages 7% 9% 16%

Services* Annuity Growth 1% 6% 8%

Light Lens % of Revenue 5% 3% 1%

Annuity Scorecard


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Anne Mulcahy


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Summary

Annuity-based model drives revenue growth and cash generation Color, Services, 23 new products to accelerate activity

Global and market diversification offset U.S. economy pressure

Expanded coverage, more products fuel SMB growth

Restructuring drives improvements balance of year

Continued share repurchase

$711M year-to-date

Program-to-date: repurchased $2.8B, 186 million shares

Additional $1B authorized with $1.7B available

Maintain $1.26* $1.30* full year expectations

Q3 EPS $0.28 - $0.30

* Adjusted diluted EPS: see slide 17 for explanation of non-GAAP measures


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Appendix


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19 *See slide 17 for explanation of non-GAAP measure

Revenue As Adjusted adds GIS estimated results for the period from May 9th throughJune 30th 2006 to our 2006 reported revenue

Q2 2007 Non-GAAP Reconciliation

(in millions)

2007 2006 % Change Currency

Equipment Sales Revenue:

As Reported 1,141$ 1,109$ 3% 2% 1%

As Adjusted 1,141$ 1,194$ (4%) 2% (6%)

Post Sale Revenue

As Reported 3,067$ 2,868$ 7% 2% 5%

As Adjusted 3,067$ 2,957$ 4% 2% 2%

Total Revenues:

As Reported 4,208$ 3,977$ 6% 2% 4%

As Adjusted 4,208$ 4,151$ 1% 2% (1%)

Three Months EndedJune 30,

% Change atConstantCurrency*


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Q2 2008 Adjusted Effective Tax Rate Reconciliation

(in millions) As Reported Restructuring As Adjusted

Income (Loss) before Income Taxes and Equity Income 245$ 63$ 308$

Income Taxes 59$ 20$ 79$

Effective Tax Rate 24% 26%

Three Months Ended

June 30, 2008


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Earnings Expectations

Q2 08

Actual

Q3 08 FY 08

Guidance

$0.24* $0.28 - $0.30 $0.72 $0.76*

Litigation $0.54

Adjusted Diluted EPS1 $0.24* $0.28 $0.30 $1.26 $1.30*

GAAP EPS

1Adjusted diluted EPS: see slide 17 for explanation of non-GAAP measures

*Includes $0.05 restructuring charge

docufacts: xerox q2 2008 earnings presentation

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