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13Xerox 2010 Annual Report
Business Model Fundamentals
Throughourannuity-basedbusinessmodel,wedeliversignicantcash
generation and have a strong foundation upon which we can expand
earnings.
Annuity Model
The fundamentals of our business rest upon an annuity model that
drivessignicantrecurringrevenueandcashgeneration.Over80%
of our 2010 total revenue was annuity-based revenue that includes
contracted services, equipment maintenance and consumable supplies,
among other elements. Some of the key indicators of annuity revenue
growth include:
• Thenumberofpage-producingmachinesintheeld(“MIF”),whichis
impacted by the number of equipment installations
• Page volume and the mix of color pages, as color pages generate more
revenue per page than black-and-white
• Services signings growth, which reflects the year-over-year increase in
estimated future revenues from contracts signed during the period as
measured on a trailing 12-month basis
• Services pipeline growth, which measures the year-over-year increase
in new business opportunities
• Expanding the digital production printing market, as this is key to
increasing pages.
Cash Generation
The combination of consistently strong cash flow from operations
and modest capital investments enabled us in 2010 to pay down a
signicantamountofthedebtassociatedwiththeACSacquisition.
Cash generation in the future will continue to provide a return to
shareholders through:
• Buying back shares under our share repurchase program once debt
leverage targets are met
• Expanding our distribution and business process outsourcing
capabilities through acquisitions
• Maintaining and, over time, increasing our quarterly dividend.
Expanded Earnings
We will expand our operating margin and future earnings through:
• Modest revenue growth
• Drivingcostefcienciestobalancegrossprotandexpense
• Repurchasing shares
• Making accretive acquisitions.
Revenue Stream
• 82% Annuity
Approximately 82% of our revenue, annuity includes
revenues from services, maintenance, supplies, rentals
andnancing.
• 18% Equipment Sales
The remaining 18% of our revenue comes from
equipment sales, from either lease arrangements that
qualify as sales for accounting purposes or outright
cash sales.
18%
82%
Our annuity-based business model yields
strong and stable cash generation and
earnings growth.