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Executives

Lynn R. Blodgett - Executive Vice President and President of Services Business

Jennifer Horsley

Connie L. Harvey - Chief Operating Officer of Commercial Services and Corporate Vice President

Analysts

Benjamin A. Reitzes - Barclays Capital, Research Division

Gerald Granovsky - Moody's Corporation, Research Division

Xerox Corporation (XRX) Barclays Global Technology, Media and Telecommunications Conference May 23, 2013 9:00 AM ET

Benjamin A. Reitzes - Barclays Capital, Research Division

Great. Good morning, everyone. I'm Ben Reitzes, the IT hardware and networking analyst here, and we're delighted to have Xerox with us right now. With us today is Lynn Blodgett, President of Xerox Services. He's been with us in many conferences now in a row, and we appreciate you being here; as well as Jennifer Horsley, Investor Relations. Jennifer is going to read the Safe Harbor statement, and then we'll do a fireside chat format. And hopefully have time for your questions. Thank you. Thanks for being here.

Lynn R. Blodgett

Nice to be here, thank you.

Jennifer Horsley

Thanks, Ben. During this meeting, Xerox executives may make comments that contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, that by their nature, address matters that are in the future and are uncertain. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Information concerning these factors is included in the company's most recent annual report on Form 10-K and its subsequent quarterly reports on Form 10-Q filed with the SEC. We do not intend to update these forward-looking statements as a result of new information or future events or developments, except as required by law.

Benjamin A. Reitzes - Barclays Capital, Research Division

Okay, great, thanks. Lynn, why don't we start out with just a little bit of where we are in services. Talk about, maybe we can recap your goals for -- that you've talked about mid to high-single-digit revenue growth for the year and how the margins maybe progressed throughout the year? And maybe we, if there's anything and an overview you wanted to say as well about [indiscernible] work in on those targets and where we are today.

Lynn R. Blodgett

Great, well, thank you, again, for letting us be here. And the -- in terms of overall objectives, as you pointed out, from a revenue perspective, we have said that we expect mid to high-single digit. We expect we'll be able to meet that. Our acquisition revenue that usually contributes 1% to 3% has been a little bit light, and so we expect that we'll be closer to the mid range rather than the high range as far as borrowing, we did some acquisition, quick acquisition revenue, which is not likely. In terms of margins, as you know, we did a pretty significant restructuring in the fourth quarter and we saw some good flow-through to offset price declines in the first quarter, we expect to see that continue. And our expectation is to see sequential margin improvement throughout the year, and be able to finish in our -- in the below 10% range, hopefully and slightly incrementally improved over last year. So we think we're tracking along. We have a number of things that we're trying to do to make sure that happens. One is the restructuring that I spoke about. We expect to do additional restructuring this year and we have a program that we call Project Compete, which is a -- as you know, our offshore headcount is about 65% or 65% domestic. Unfortunately, our labor costs are about 90% domestic. And so we're continuing with this Project Compete to migrate more work in the lower-cost areas, not just offshore, but lower-cost in the U.S. And we expect to see just kind of chew away of that on an ongoing basis, and shift that from a 90% to a few points lower, and then a few points lower. And we think that, that by itself, should help us to be able to improve margins.

Benjamin A. Reitzes - Barclays Capital, Research Division

Got it. And let's just talk about the bookings trends. Many companies we cover have actually seen pretty strong bookings, including yourself, in the first quarter of the year, the March, April, ending regions, time frames. What's going on the bookings, and how does this translate to revenue? You had some challenging quarters and you had a big quarter. In terms of those growth rate, they're pretty lumpy. How does it translate into this revenue growth that we talked about and give you confidence?

Lynn R. Blodgett

Bookings are -- can be lumpy. Last year, we didn't see many megadeals as we commented on the earnings call. We have, I think, 3 versus 8 the year before. So megadeals are -- those are deals that we would qualify as $30 million of ARR or above. And we just didn't see as many last year. And so one of the reasons that the overall bookings number was lower was that the number of megadeals was down. Our overall number of deals was up, about 7%, so we're seeing more signing activity, the deals themselves are a little bit smaller. We still feel comfortable that the amount of bookings that we had for last year, we've seen I think, $2 billion was our target and we exceeded that. So we're comfortable with the bookings. It will give us enough revenue to sustain our mid to high-single-digit growth. And what we're seeing now is that we're actually -- we actually have a number of megadeals that are in the pipeline. They take a little while to close, so we're not suggesting that we're going to see instant signing of megadeals. But we do expect a very -- another really another strong quarter and bookings this quarter and after, be able to sustain the growth that we talked about.

Connie L. Harvey

Your definition of a megadeal?

Lynn R. Blodgett

$30 million of annual recurring revenue. So each year, once we hit full ramp, and typically that's within a year, that contract will contribute $30 million. And the average contract length is 3.5 years. So megadeals would be greater than $100 million in Total Contract Value, and about $30 million in recurring revenue.

Benjamin A. Reitzes - Barclays Capital, Research Division

So from where I sit, I think that your revenue targets -- I think, investors, in my opinion, will be pretty happy with mid-single digits. I know you say it's higher, but the main thing for...

Lynn R. Blodgett

And then as I say, because of the lightness of acquisitions, I think, we'll be closer in the mid, the mid range rather than the high...

Benjamin A. Reitzes - Barclays Capital, Research Division

Okay. The -- so assuming it's in that range, the main issue now is margins. And it's been volatile, it's been volatile over the years a little bit. And it seems like an enormous amount of time on the conference call was taken of your time on these services margin issues. How do we -- what our the -- just, it sounds like labor and Project Compete is something you've already answered the question, we're just delving a little deeper in the services margin. How can we get comfortable that we can get on a steady trajectory, marching forward where it gets a little bit predictable and we can either stay in the range or see a trajectory that we can get comfortable with. The reason I ask is, IBM and other company we cover, when their services margins begin to march, the stock work. So just give a little more on that.

Lynn R. Blodgett

Yes, I think, what your -- your question about margin is right on the money. And it's obviously an area that we're -- we're focused on all of the stuff, revenue, cash flow and so on. But margins are clearly the thing that -- I spend more of my time on margins than anything else. And there are 3 or 4 things that I think we can mitigate that, that hopefully can give you a little more confidence on that. Number one, labor is our largest cost. And so -- and we have a very -- the fact that so much of our labor is in high-cost areas is a negative on the one hand, but it's a positive on the other, and that we have a lot of room. We can move if we were at 50% domestic cost, 50% offshore, that would be different scenario than 90%. So we feel like we have -- there's significant opportunity in just moving more of our work, so that -- and we are on a pretty consistent march to do that. And I think we'll be able to give you, on a quarterly basis, progress reports, and say, "okay, here what we've done." And I think hopefully, as you see that start to flow through, that will raise your confidence. The other is that innovation has to take a very important role. It's -- we're getting more and more integrated into the Xerox R&D sort of model. Now, I was just in a meeting where the head of research and development for Xerox talked about it, and they actually are spending more on services R&D now than in the Technology business, so that's important because we think as we -- as we're able to implement more technology, more innovation, that will help us drive down our cost. And then the final point, we haven't talked a lot about this, but I think you'll going to hear year more and more, is that we have to look at our portfolio. We have a very -- over the years, we've grown, in some cases, pretty opportunistically, where we've said, "hey if it's within the IT services area, and if it does this, and it's accretive, and so on, then that's in our sandbox." And I think what we're doing now is saying, we have 100 companies and we need to focus a little bit. And I think you'll see that by doing a little bit of fine-tuning in the portfolio, we can have a pretty significant impact on margin.

Benjamin A. Reitzes - Barclays Capital, Research Division

Okay, great. I guess, I'd be remiss if we didn't talk about the public sector, but -- and we do this a lot, but we would like to reiterate your mix of what's state and local and federal, and then talk about the trends you're seeing there and the threats and opportunities in the macro situation or the budget situation?

Lynn R. Blodgett

Right. Yes, there's, as you say it, a lot of questions about what's happening at the federal level and sequestration and all of those things. And we are only about 3% in the Services business. About 3% of the overall revenue is tied to the federal market. So we're not -- we don't have a lot of exposure there. And even in those areas, they are typically services that are not subject to those automatic cuts. So we're not particularly concerned about -- well, I was concerned about trying to do a lot more, but we don't see anything directly impacting us there. Our Student Loan business, as you know, is a little back contract in its run off stage. And so you're going to see that impacting our federal -- that's the most significant thing that we had going on, but that has nothing to do with -- that's just the contract that reached its term that is now running down. In the state and local area, we've seen...

Benjamin A. Reitzes - Barclays Capital, Research Division

..

The state and locals, how much of total?

Lynn R. Blodgett

I think state and local, together, is about 10%.

Jennifer Horsley

A little bit higher.

Lynn R. Blodgett

11%, something like that. That's 11%. And it's weighted towards state and local. And in this -- in state governments, we've actually seen not a dramatic shift, but we think a slight improvement in the decisioning cycle and the availability of funds. That isn't to say that it's free and easy, but it's not quite as tight as it was, say, 1.5 years ago, 2 years ago. And in the state and local arena, most of what we do is either revenue-generating for that entity, like toll roads, and we do E-ZPass and the New York E-ZPass, and Georgia's E-ZPass a the real revenue generator for those areas. So they're not going to -- that's not an area they're going to cut because it helps, obviously, the funding. We do other things like parking and speed enforcement, cameras, those are all things that help the municipality or the government raise money. So we're in a pretty good position there. The other areas, Medicaid, for example, which is a very big part of our state government business is federally -- a big part of it is federally funded. And so we feel that's been a pretty standard position that we've taken for a number of years, and it really has not shifted much, so we feel good about it.

Benjamin A. Reitzes - Barclays Capital, Research Division

Now, there's been talk periodically about how you guys can benefit from Obamacare. Can you talk about health care, how big is that vertical? And what is the stimulus that you get?

Lynn R. Blodgett

Our overall Healthcare is about $2 billion of revenue and it covers the provider segment, which is the hospital, the doctors and so on. And the payer segment, and the payer segment is actually broken into 2 areas. There's the private sector, those will be the big insurance companies, and then there's the government sector, which would be Medicaid, primarily. And then, sort of wrapped all through that are these health information exchanges and they do touch all of those areas. And we are actually under contract now with a number of state to put in health information exchanges. So there's one example. The overall emphasis that Obamacare has on increasing the Medicaid rolls, for example, I think there's -- there are different numbers, $17 million, $13 million, but it's a significant number of additional people on the Medicaid rolls, and we're the largest Medicaid processor. So we expect the that has some -- it's one of the things we have to be a little bit careful because there's also a shift right now from fee for service to managed care. And that also has an impact. So that's sort of the algorithm for what's happening with private payers, government payers, Medicaid, increase in enrollment, managed-care shifts, and so on. It's tricky, but all in all, it represents more opportunity for us.

Benjamin A. Reitzes - Barclays Capital, Research Division

And does this vertical grow faster than the services average?

Lynn R. Blodgett

It grows faster and it has above average margin. So we like it and what we're doing now is investing more in data analytics, which will help drive both of those phenomena even better. Data analytics in healthcare, if we can go into Medicaid, the state Medicaid Commissioner or Secretary and say, "look, we can help you with fraud and abuse. We can help you with analytics, as far as outcomes, base, healthcare versus just transactional stuff." Those are things that are really important, they really weigh heavily on the budgets and so as we're able to do things to help with that, that gives us opportunity for a little higher-margin and nice growth.

Benjamin A. Reitzes - Barclays Capital, Research Division

Is analytics getting to be bigger throughout the whole Services business? And is that part of the focus on the R&D side?

Lynn R. Blodgett

It is, and our approach on analytics, I think, it's the next -- really, the next important thing to happen in Services business because -- and our position is that we have some wonderful data analytics engines. We own a company called Midas for example, that does provider hospital-based analytics. We have, I think, 1,700 or 1,800 hospitals and we run analytics against their claim space and have done for many, many years. It's a great engine for us. But the thing that we think really separates us from some of our competitors is that we have so much data that comes through our system. Think about Los Angeles. We won that Los Angeles parking and the primary reason we were able to win that is because we have done the parking work for LA. We have all of that data about their parking spaces. It's kind of boring or as simple as that seems. We have all that data. We are able to take the data, which is unique. We have it, apply an analytics engine that part -- Xerox R&D helped us to develop and create a real-time pricing model for the city that really allows them to do more demand-based pricing and congestion. There's all kinds of things that come out of it, and that's higher-margin. It's unique any, but it's -- the combination of the data and the analytics. Does that make sense?

Benjamin A. Reitzes - Barclays Capital, Research Division

Yes. Now you do a lot of traffic ticket and tolls. Do you own the data that's in the cameras of those locations?

Lynn R. Blodgett

We typically don't own it -- that comes -- right now, it belongs to whichever municipality. But we're able -- because we're the people that are housing it essentially, we obviously work in conjunction with a customer and say, we can -- what if we take this data and analyze it and give you this output? Then they're usually very willing to do that because it helps them to be more efficient, more intelligent in terms of how they run their operation.

Benjamin A. Reitzes - Barclays Capital, Research Division

Okay.

Lynn R. Blodgett

Whether it's -- it might be a bridge, I'm trying to figure out traffic patterns on the tolls for our bridges, which we've done.

Benjamin A. Reitzes - Barclays Capital, Research Division

So like on E-ZPass, you tap -- your service taps into the picture of each car going through, or is it just the process of the payment?

Lynn R. Blodgett

No, we're actually working now on things like high-speed. Right now, you have to have a transponder in your window. And what we're doing is with video towing, instead of having to have a transponder, we can -- and this is where PARC, the imaging technology that comes from Xerox, is really helpful because we can actually do high-speed video of cars coming through and actually look at the license plate, read it and then go check the database instead of having to put a transponder. That saves a lot of money. It also facilitates towing across state line. There are lots of things that are going on.

Benjamin A. Reitzes - Barclays Capital, Research Division

And we're also seeing crime prevention. If a bad guy comes into your area, would you be able to take that out?

Gerald Granovsky - Moody's Corporation, Research Division

Over time -- yes ,we do, right now, in high occupancy lane. We're able to look at the vehicle and say, is that a person? Is that a nonperson? There might be a -- I mean, there's -- it's amazing. The creativity of people.

Benjamin A. Reitzes - Barclays Capital, Research Division

Let's see. I wanted to also kind of talk about -- now, some of this is -- in terms of the trend towards Managed Print Services, how much are you involved in that part of the business?

Lynn R. Blodgett

Well, I'm involved from the point of view that ITO is still -- is directly under my management. The Managed Print is part, because it's really integrated into the technology. There's many of our clients are people who we've provided technology to them for years. And what we're doing is shifting that to a service rather than just selling them equipment. But the ITO business, that is in my world, works closely with Managed Print because many, in most cases, the people buying Managed Print are the same people that to buy ITO, the CIOs have been very involved in that. So our organizations are working closely together and the platforms that are used to do Managed Print run in the ITO space. So we're involved from a support perspective more than we are in terms of the end of the direct sales operations.

Benjamin A. Reitzes - Barclays Capital, Research Division

;

Now in terms of synergy with MPS though, ITO and MPS have a lot of synergies, you're saying. How about on the BPO side and some of these contracts that you're getting, are you finding more synergy now that you're optioned [ph] and ACS is united?

Lynn R. Blodgett

We're finding more. It is not -- I don't want to overstate it. I think that we have a number of opportunities where we've been a Managed Print provider or an ITO provider, and now, those have come together. But it hasn't been like, just I don't know. I don't want to overstate it. But we've gotten some opportunities, but it has not been just an unlimited supply of things.

Benjamin A. Reitzes - Barclays Capital, Research Division

I just want to get back to acquisitions. I think when those acquisitions, first took place, you guys were kind of on a $200 million to $300 million run rate. And it's kind of gone to $300 million to $400 million. And I think we were expecting around $500 million. But you just said the acquisition pace is slow. Can you just reconcile that? What is the appropriate amount of acquisition that we should expect Xerox needs to spend to keep your business growing?

Lynn R. Blodgett

Yes. Acquisitions, over the last couple of years, I think we're at about $260 million, I mean, plus or minus $10 million, so $260 million, $250 million.

Benjamin A. Reitzes - Barclays Capital, Research Division

So it's never gone above $300 million?

Lynn R. Blodgett

I don't think that...

Jennifer Horsley

No.

Lynn R. Blodgett

We're not And we've said -- you're right that we've said our target really is to have the potential and spending up to $500 million. But we're pretty careful about acquisitions. We've never -- we've always tried not to do acquisitions simply to make a number or to sort of check a box. We do acquisitions if we think we find a well-run company that has a strong management, that fits within our strategic objectives, either of geographic improvement or capability improvement. And over the last couple of years, we just have not seen the opportunities that we have felt want an investment there. You asked about what's the right level. Acquisitions -- we like the growth that comes from acquisition. As I said, if we can target 1% to 3% in growth, that helps us. But the reason for doing acquisitions has a lot less to do with growth and more to do with capability. If we can buy a company that already has a platform, a technology platform and it's an accretive deal, and it adds capability to one of our existing line of service, I'd love rather do that and try to build the thing. And it's always the build versus buy kind of judgment call. But acquisitions, we pick up management talent through acquisitions, we pick up technology through acquisitions. A lot of our R&D people -- when we were -- when ACS was down in one company, you guys don't have a direct R&D budget, and we say, that's right. We don't have a bucket that we unidentify that way. But acquisitions were one of the methods that we use to get technology. So R&D, new capability, management and increased coverage, those would be the main thing -- main benefits that we see coming out of the acquisitions. And so I wouldn't expect that there's going to be a point where we say, you know what, we're sort of there, we don't need -- maybe, but our strategy is not to say, we're going to eliminate acquisitions eventually. We think we can continue to expand our capabilities through acquisitions over the long-haul.

Benjamin A. Reitzes - Barclays Capital, Research Division

Okay. And let's just say, you had budgeted some higher number and there's a couple hundred million, maybe Jennifer, you're the right one with this, does this mean, more goes to share repo or is it debt pay down?

Jennifer Horsley

When you look at the capital allocation guidance for this year, we've got $400 million as kind of a minimum for share repurchase, as well as debt repayment, $400 million. So I think as we move through the year, depending on where acquisitions are trending, I think that you could see more, definitely, being allocated to share repurchase and potentially, to debt repayment. But obviously...

Lynn R. Blodgett

The debt, is not necessary, I guess, at this point, to go much above $400 million.

Jennifer Horsley

That's right.

Benjamin A. Reitzes - Barclays Capital, Research Division

All right. Well. let's take some questions from the room. We do have some time. And we're going to have a breakout session also in room 403. Any questions? Right over there.

Question-and-Answer Session

Unknown Analyst

Could you just help us quantify the cost hit from some [indiscernible] delivered to India and offshore regions? Exactly, what is the timeframe you're looking at? And in terms of dollar or EBIT, percentage into your overall cost structure?

Lynn R. Blodgett

Yes. The timeframe. First of all, we -- I think we have about around 40,000 people that are already in low-cost areas. So we're not neophytes in terms of the process. But our cost base is, right now, as I said, was about 90% in high-cost areas and about 10%, which is kind of stunning, actually, in low-cost area. So our objective is to move that from 90% down a few points. And by a few points, 3 points, 4 points, greater -- able to accomplish that this year. We'd feel like we reached our goals. And you don't see -- you don't see a -- it's not 100% drop. I mean, but they typically will fall through -- it's about a 30% overall reduction in your labor cost. And labor represents the majority of our cost. So you can see that if we can accomplish that, that can have a meaningful impact on margin. Now the thing that we caution you is that if we move something offshore, we typically have to do something with the customer. Now they'll expect to get some benefits from that as well. So it's not -- you can't just do the math and say, oh good, that should fall through the 2 point [ph] of the margin. I wish we could do it that way. But it will have -- it helps that it's a really good tailwind.

Unknown Analyst

You've mentioned 3 buckets in terms of improving applicability of margins. With the one related to the overall portfolio, fine-tuning it, can you be a little bit more granular in terms of what specifically you're looking at in the portfolio? Timing, dollar and time and expenses associated with?

Lynn R. Blodgett

Yes. We have -- as far as the specific dollars, I believe we haven't said much publicly about that, but I can give you some sense of the magnitude of it. I mean, we have 100 plus or minus, a couple of businesses looking at the portfolio. And so, when we look at it, what we're doing now is going through and looking at those areas that are -- where we are stronger out of 100 businesses, you're going to have some that are performing really well and some that are underperforming. And it's a -- you can see that -- look at the kind of turtle shell, if you're going to talk to [indiscernible] or whatever [indiscernible, you have your high performance, your low performance, and so on. And what we're doing right now is going through on a very methodical basis, looking at each one of those businesses, looking at their return on invested capital, just doing kind of the basic analysis to say, this one is below our -- it's really below the return rates that we feel like we need to have. And it's not -- it doesn't have a real long-term strategic debt and we don't see a way that we can significantly improve those margins, then that should be something that we look seriously at. And we haven't -- there's a couple of businesse right now, that we have to be real careful because we don't want damage the business, and in the Services business, it's very people oriented, and you have to be pretty careful about it. But there are some businesses right now that we know, that they don't meet the criteria that I just described. And so we think we can divest to them without having a real serious impact on the long-term strategy and yet, have a pretty good list on margins.

Unknown Analyst

[indiscernible] how far are the old business [indiscernible]?

Lynn R. Blodgett

We have some. If you go into the portfolio, some of our businesses are pretty small and we have some that are well below the margin -- the target, and we have some that are slightly below, the ones that we're going to target -- that we're going to go after, and will typically be the ones on the lower end, and it could be multiple points below what we've -- what our target rate is.

Benjamin A. Reitzes - Barclays Capital, Research Division

I think it works now, okay. I have 3 questions I was hoping you could address. One, are there capabilities that you guys seem to be lacking as the world has evolved, that you need to adopt to or get to reignite your growth? And the second has to do with foreign growth opportunities and the third is foreign exchange headwinds with the strong dollar.

Lynn R. Blodgett

The -- as far as capability, we're very focused now on -- if you take our lines of business like healthcare, healthcare is a really, really broad field. So we kind of have to narrow it down and say, in the payor space, the insurance, the ethnos and the big insurance companies. In that space, what is the thing that we're missing? And if you look at the claims, we narrow dow even further. And we say, "Okay. we're special in claims processing."And within claims processing, there's 30 different steps and we're doing 20 of them and do we want to do those other 10? Some of them yes, some no. So you're going to find us, obviously, this little acquisition because we might find a business that does claims pricing. It can be that, it's very specific of a function. It fits well in our workflow and we just pop that in as an additional service. So across the portfolio, there are little pieces like that and really, in all of our businesses. So we're going to continue to do that. The bigger bucket things would be in the area of analytics. If there is a business, we just acquired a company called W -- just about a year ago, WDS, which is a U.K.-based customer care business. So on the surface, you think it's part of our customer care, more call center agents and so on. The reality is they have very, very sophisticated data analytics that apply to the wireless industry. And we are -- we have a million of phone calls, well in excess of 1 million calls ,a day in our customer care business. By acquiring that company, we're able to now have a very legitimate data analytics capability that we can go to the big wireless, the Verizons and the Sprints of the world and say, look what we can do, we not only answer the phone calls and help on that side, but we can give you a lot of intelligence back about what's coming from those calls. So the big bucket would be data analytics. On the foreign exchange. The, international growth thank you. International growth, one of the key things that we hoped to gain from being from ACS becoming part of Xerox was the fact that Xerox has an international footprint. And we've seen good growth in the European market, which is kind of our first area of focus and that's continuing. And it's in -- it's across our services, financing, accounting, HR, customer care. We haven't seen a lot in the area of Healthcare, for example. Our healthcare tends to be more of a U.S.-centric kind of an offering. But in these other verticals that I just -- or these other areas I just mentioned, seems good growth there. In Latin America, in the developing markets, that has also been an area of good opportunity for us. We haven't seen much, and I think, primarily, because Xerox has the Fuji Xerox relationship in Asia. So we haven't seen as much growth there. That doesn't limit us in terms of what we can do with services, but the fact is we've put more emphasis on Europe than on the DMO areas. As far as foreign exchange, obviously, the technology story is significantly impacted because so much of manufacturing is done in Japan and the yen has such an impact. On the services side, it has an impact. Our transportation business is pretty global. And so, we see some headwinds from that, but overall, the impact has been manageable. We don't call it out. We do on the technology side. On the services side, we really don't make much. It sometimes can be good, sometimes bad, and we try to recognize this is part of the cost of doing business and we generally don't make that -- we don't call it out.

Unknown Analyst

Do you have a target for how much you want internationally? How much of your growth would be international? Can you just sort of quantify how much CapEx risk there is?

Lynn R. Blodgett

Yes. On the FX risk, I'm going to ask Jennifer if we have any analysis on that. But our overall growth internationally, when we were a standalone entity, 94% of our business was from the United States. We would obviously like to see that increase with -- right now, out -- the additional revenue that we picked out through the Xerox affiliation, I'm just doing kind of some monkey math, but it's about 105 [ph] points, I think, it about right. So we've seen a pretty good increase for us and were going to continue to push that. But it's not going -- a point, another point, it won't be that we'll see a 20% swing in our base. It will take us some time. As far as the CapEx.

Jennifer Horsley

Yes, in terms of quantifying the foreign exchange risk for services, to Lynn's point, it is small because still largely, most of our revenues our domestic on the revenue side, so there's not a lot of impact from a strong dollar. On the cost side, I think we're fairly diversified in terms of locations, where we do working, and we haven't had any real material change there that would call it out, so it's something that we just manage within our overall comp space.

Lynn R. Blodgett

On the areas like wages, where we know we have a wage exposure, we've been pretty good at hedging and it just hasn't been a good swinger for us.

Benjamin A. Reitzes - Barclays Capital, Research Division

There's time for about one more question. Okay. Well, we're going to head to room 403. And I'd like to thank you Lynn. And Jennifer, thank you for being with us and all your support. And thank you, all. And we'll see you in the break room.

Lynn R. Blodgett

Right, thank you.

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Source: Xerox's Management Presents at Barclays Global Technology, Media and Telecommunications Conference (Transcript)
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