Xerox (XRX)

Q4 2011 Earnings Call

January 25, 2012 10:00 am ET


Luca Maestri - Chief Financial Officer and Executive Vice President

Ursula M. Burns - Chairman and Chief Executive Officer


Richard Gardner - Citigroup Inc, Research Division

Keith F. Bachman - BMO Capital Markets U.S.

Benjamin A. Reitzes - Barclays Capital, Research Division

Mark A Moskowitz - JP Morgan Chase & Co, Research Division

Shannon S. Cross - Cross Research LLC

Chris Whitmore - Deutsche Bank AG, Research Division

Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division

Deepak Sitaraman - Crédit Suisse AG, Research Division

Bill C. Shope - Goldman Sachs Group Inc., Research Division



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Good morning, and welcome to the Xerox Corporation Fourth Quarter 2011 Earnings Release Conference Call hosted by Ursula Burns, Chairman of the Board and Chief Executive Officer. She is joined by Luca Maestri, Executive Vice President and Chief Financial Officer.

During this call, Xerox executives will refer to slides that are available on the web at At the request of Xerox Corporation, today's conference call is being recorded. Other recording and/or re-broadcasting of this call are prohibited without expressed permission of Xerox. [Operator Instructions]

During this conference call, Xerox executives will make comments that contain forward-looking statements, which by their nature, address matters that are in the future and are uncertain. Actual future financial results may be materially different than those expressed herein.

At this time, I would like to turn the meeting over to Ms. Burns. Ms. Burns, you may begin.

Ursula M. Burns

Good morning, and thanks for joining us today. We'll get started on Slide 3. We began 2011 with a clear articulation of our priorities. You see them listed here. While the statements themselves seem relatively simple, the complexity was in the implementations, especially during a year of unexpected external challenges. Here's a report card on how well we did.

First, accelerating our Services business, growing it faster by diversifying our offerings and expanding globally. More of our total revenue now comes from Services than Technology. In 2011, revenue from Services grew 6%, which reflects an impressive 8% growth in Business Process Outsourcing and 9% growth in Document Outsourcing.

Our IT Outsourcing business declined 4% during the year, but we're encouraged by our recent uplift in ITO signings. In total, our integrated sales activity resulted in a stronger pipeline and a 14% increase in new business signings.

Second, maintaining our leadership in document technology. We not only continue to hold our #1 equipment revenue share position, but we also grew share in 2011. We did this by offering a more extensive and affordable portfolio of color products and by expanding our distribution to serve more small and midsized businesses around the world.

Third, we are very good at managing our business with a disciplined focus on operational excellence. This gives us the financial flexibility to help offset pressures on the business whether it's economic uncertainty or necessary investments that drive growth. Either way, our focus is on delivering strong bottom line results.

And by executing well on the first 3 priorities, we delivered on the fourth, expanding earnings and returning cash to shareholders. Full-year 2011 adjusted earnings per share grew 15%. We generated $2 billion in operating cash and bought back $700 million in Xerox shares during the year, asset buyback of 88 million shares or 71 million net of the pension contribution, which is more than we initially expected.

So during the year where we faced our share of headwinds, I'm pleased with our progress and confident in our position to build more value for our business, for our clients and for our shareholders in 2012. I often say that some companies talk about transformation, but we're actually doing it. You're seeing the results of the company's strategic shift in our financial performance.

But to understand how we are achieving these results, it's important to understand the breadth of our business. The Xerox brand is now in places that may seem unexpected, but the link between our well-regarded technology and our diverse services is one more common objective, which is simplifying for clients the way that work gets done so that they can operate more efficiently and more effectively. And as you would expect from Xerox, innovation remains core to what we do and how we strengthen our competitive advantage.

Turn to Slide 4 for some examples of what I mean. Radical changes to managing information and healthcare are now being more embraced by healthcare providers and payers. We continue to advance our offerings and be recognized as a valuable player in the industry through our cloud-based technology, our advanced security protocols and deep expertise in the complexities of building and managing digital health systems.

2 examples, 2 very good examples: one, with our recent acquisition of the Breakaway Group, which provides electronic medical record simulation technology, and our contract with the State of Iowa to run its health information exchange. Xerox innovation is also changing the status quo in some of the more basic ways that we live, like using public transportations. Through large-scale contracts with transport authorities, we're developing easy ways for communities to pay with smartphones and debit cards, doing away with the inefficient token and ticket systems.

And no matter where you work, where you work takes you, in the office, on the road or at home, we help ensure that printing is accessible and affordable. We do that through continuously extending and refreshing our product portfolio, especially in color and by broadening our Managed Services -- Managed Print Services. Our MPS offerings continue to win the praise of industry analysts. More important, they win new business with clients like British Airways that recently tapped Xerox for a 5-year enterprise print services contract. In all 3 areas, we've developed repeatable, scalable and integrated solutions. This is our approach to real business, improving our clients' productivity by simplifying the way that they serve their clients. Our results in the fourth quarter reflect progress in these and other areas.

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