Xerox 2018 Annual Report
2018 Annual Report
Making a Better Future
2018 HIGHLIGHTSS $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 Award from Keypoint Intelligence--Buyers Lab
TABLE OF CONTENTS
Letter to Shareholders
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Board of Directors
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Officers
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FYI
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2018 Form 10-K Insert
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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 longterm, 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. OPTIMIZE OPERATIONS 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. DRIVE REVENUE 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 valueenhancing 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 IridesseTM 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 IridesseTM 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. RE-ENERGIZE INNOVATION 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 PAC K AGIN G AND PRINT
3D PRINTING AND DIGITAL M A N U FAC T U R IN G
AI WORKFLOW ASSISTANTS FOR
KNOWLEDGE WORKERS
SENSORS AND SERVICES FOR THE INTERNET OF THINGS (IoT)
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. FOCUS ON CASH FLOW AND INCREASING CAPITAL RETURNS 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.
MOMENTUM GAINED IN 2018 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 Chairman of the Board
John Visentin Vice Chairman and Chief Executive Officer
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BOARD OF DIRECTORS
Keith Cozza, Chairman
President and Chief Executive Officer, Icahn Enterprises LP
Giovanni (John) Visentin
Vice Chairman and Chief Executive Officer, Xerox Corporation
Gregory Q. Brown
Chairman and Chief Executive Officer, Motorola Solutions, Inc.
Joseph J. Echevarria Former Chief Executive Officer, Deloitte LLP
Nicholas Graziano Portfolio Manager, Icahn Capital
not pictured
Cheryl Gordon Krongard
Private investor and Former Chief Executive Officer, Rothschild Asset Management
A. Scott Letier
Managing Director, Deason Capital Services, LLC
Sara Martinez Tucker
Retired Chief Executive Officer, National Math and Science Initiative; Former Under Secretary of Education in the U.S. Department of Education
Jonathan Christodoro Partner, Patriot Global Management LP
OFFICERS
Giovanni (John) Visentin Vice Chairman and Chief Executive Officer
Steven J. Bandrowczak President and Chief Operations Officer
Michael D. Feldman Executive Vice President and President, Americas Operations
Suzan Morno-Wade Executive Vice President and Chief Human Resources Officer
William F. Osbourn, Jr. Executive Vice President and Chief Financial Officer
Louis J. Pastor Executive Vice President and General Counsel
Herv? N. Tessler Executive Vice President and President, EMEA Operations
Joanne Collins Smee Senior Vice President and Chief Commercial Officer
Stephen P. Hoover Senior Vice President and Chief Technology Officer
Mary L. McHugh Senior Vice President and Chief Delivery Officer
Robert Birkenholz Vice President and Treasurer
Kathleen S. Fanning Vice President, Worldwide Tax
Xavier Heiss Vice President, Xerox Controller and Chief Financial Officer, Americas Operations
Joseph H. Mancini, Jr. Vice President and Chief Accounting Officer
Douglas H. Marshall Secretary
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