Business Model Fundamentals
Through our annuity-based business model, we drive significant cash generation and have a strong foundation upon which we can expand earnings.
77% Post Sale
Approximately 77% of our revenue, post sale includes annuity-based revenue from maintenance, services, supplies and financing, as well as revenue from rentals and operating lease arrangements.
23% Equipment Sales
The remaining 23% of our revenue comes from equipment sales, from either lease arrangements that qualify as sales for accounting purposes or outright cash sales.
The fundamentals of our business rest upon an annuity model that drives significant post sale revenue and cash generation. Over 75 percent of our 2009 total revenue was post sale revenue that includes equipment maintenance and consumable supplies, among other elements. With the acquisition of ACS, our annuity model is further enhanced, and recurring revenue will represent over 80 percent of total revenue. Some of the key indicators of post sale revenue growth include:
- The number of page-producing machines in the field (“MIF”), which is impacted by the number of equipment installations and removals;
- Expanding the document management services we offer our customers;
- The mix of color pages, as color pages use more consumables per page than black-and-white; and
- Expanding our market, particularly within the digital production printing, is key to increasing pages and we have developed tools and resources to be the leader in this large market opportunity.
Our consistent strong cash flow from operations is driven by recurring revenues; this, along with modest capital investments, will enable us to pay down the debt associated with the ACS acquisition and continue to provide a return to shareholders through:
- Expanding through acquisitions our distribution and business process outsourcing capabilities;
- Buying back shares under our share repurchase program once debt leverage targets are met; and
- Maintaining our quarterly dividend.
We anticipate expanding our future earnings through:
- Modest revenue growth;
- Driving cost efficiencies to balance gross profit and expense;
- Leveraging share repurchase; and
- Making accretive acquisitions.