Business Model Fundamentals

Through our annuity-based business model, we deliver significant cash generation and have a strong foundation upon which we can expand earnings.

Annuity Model

The fundamentals of our business are based on an annuity model that drives significant recurring revenue and cash generation. Approximately 83 percent of our 2011 total revenue was annuity-based revenue that includes contracted services, equipment maintenance, consumable supplies and financing, among other elements. Some of the key indicators of annuity revenue growth include:

  • Services signings growth, which reflects the year-over-year increase in estimated future revenues from contracts signed during the period

  • Services pipeline growth, which measures the year-over-year increase in new business opportunities
  • The number of page-producing machines in the field (“MIF”), which is impacted by the number of equipment installations
  • Page volume and the mix of pages printed on color devices, as these pages generate more revenue per page than black-and-white.

Revenue stream chart
83% Annuity

Approximately 83% of our revenue, annuity includes revenues from services, maintenance, supplies, rentals and financing.

17% Equipment Sales

The remaining 17% of our revenue comes from equipment sales, from either lease arrangements that qualify as sales for accounting purposes or outright cash sales.

Cash Generation

The combination of consistent strong cash flow from operations and modest capital investments enabled us in 2011 to provide a return to shareholders through:

  • Repurchasing a significant number of Xerox shares during the year
  • Expanding our Services business and our distribution capabilities through acquisitions – we spent over $200 million on acquisitions in 2011
  • Maintaining our quarterly dividend.

Expanded Earnings per Share

In 2011, we expanded our earnings per share through:

  • Modest revenue growth driven by Services
  • Driving cost efficiencies throughout the company
  • Making accretive acquisitions
  • Repurchasing shares.
We expect to use the same model to expand earnings per share in
the future.