Dxc Technology Company · NYSE:DXC
Dxc Technology — Q1 2024 Earnings Presentation
47 slides from Dxc Technology's earnings presentation, Aug 2, 2023
Slide 1: 1st Quarter FY 2024 Earnings Presentation
1st Quarter FY 2024 Earnings Presentation August 2, 2023
Slide 2: Non-GAAP Financial Measures
Non-GAAP Financial Measures We present Non-GAAP financial measures which are derived from the statements of operations, cash flow and balance sheets of DXC. These Non-GAAP financial measures include earnings before interest and taxes ("EBIT"), adjusted EBIT, adjusted EBIT excluding pension income, a
Slide 3: Forward-Looking Statements
Forward-Looking Statements All statements and assumptions contained in this earnings presentation that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” Forward-looking statements often include words such as “anticipates,” “believes,” “estimates,” “e
Slide 4: Agenda for Today
Agenda for Today 1 Update on Our Overall Business Performance 2 Performance of Our GBS and GIS Businesses 3 Q1 FY24 Financial Results and Guidance 4 Closing Remarks and Questions 4
Slide 5: Q1 FY24 Context
Q1 FY24 Context • We are taking the right steps to shape DXC into a company that consistently delivers revenue growth and expanded adjusted EBIT margin, Non-GAAP EPS, and free cash flow • Focusing on our high-value growth business of GBS and fixing the historical challenges of our GIS business, alon
Slide 6: Q1 FY24 Results
Q1 FY24 Results • Organic revenue growth was -3.6% – about $75 million lower than the midpoint of our guidance range • Adjusted EBIT margin was 6.5% • Free cash flow better than expected – strong execution on working capital management • Non-GAAP diluted EPS was $0.63 Q1 Results • Delivered a BtB of
Slide 7: GBS – High-Margin/Quality Growing Business
GBS – High-Margin/Quality Growing Business • GBS grew 3.3% – the flywheel that provides sustainable growth at double- digit margins – 9th consecutive quarter of organic revenue growth • GBS is now 49.4% of revenue – expect it will be the majority of DXC revenue very soon • Consistent growth – Analyt
Slide 8: GIS – Taking the Right Steps to Improve This Business
GIS – Taking the Right Steps to Improve This Business • GIS revenue declined 9.9% in Q1 FY24 • Security – Provide security strategies and resources to help customers protect themselves • We did not make the progress we intended with the Cloud/ITO and Modern Workplace offerings ‒ Cloud/ITO – Weaker r
Slide 9: AI Products and Teams in Both Our GBS and GIS Businesses
AI Products and Teams in Both Our GBS and GIS Businesses • AI has been a passion for me before I joined DXC: – Launched and was initial Executive Chairman of an AI startup – Author of AI articles for Chief Executive Magazine • Brought this passion to DXC, and we have made focused investments in AI e
Slide 10: Transformation Journey Continues
Financial Update Transformation Journey Continues Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin FY23 Q1 Q2 Q3 Q4 FY24 Q1 8.7% 8.9% 7.0% 7.5% 6.5% (1.5%) (2.6%) (2.9%) (3.8%) (3.6%) FY23 Q1 Q2 Q3 Q4 FY24 Q1 Non-GAAP Diluted EPS Free Cash Flow ($M) $1.02 $0.95 463 $0.75 $0.75 $0.63 269 17 (
Slide 11: Q1 Key Financial Metrics
Q1 Key Financial Metrics (in $M, except EPS and shares) Q1 FY24 Q1 FY23 Change Revenue 3,446 3,707 (7.0%) Non-GAAP Gross Profit 727 777 (6.4%) As % of sales 21.1% 21.0% 10 bps Non-GAAP SG&A Expenses (315) (337) (6.5%) As % of sales (9.1%) (9.1%) 0 bps Non-GAAP Depreciation & Amortization (255) (285)
Slide 12: GBS/GIS Results
GBS/GIS Results GBS Organic Revenue Growth (YoY) GIS Organic Revenue Growth (YoY) FY23 Q1 Q2 Q3 Q4 FY24 Q1 FY23 Q1 Q2 Q3 Q4 FY24 Q1 3.4% 3.3% 3.3% (5.8%) 2.8% (7.2%) (7.4%) (8.5%) 0.2% (9.9%) GBS Segment Profit Margin GIS Segment Profit Margin 14.0% 13.7% 11.9% 12.7% 11.3% 7.8% 6.5% 6.2% 6.7% 5.2% F
Slide 13: GBS/GIS Offerings
GBS/GIS Offerings Q1 FY24 YoY Organic Revenue ($M) Book-to-Bill Growth* Analytics & Engineering 546 8.8% 1.03x Applications 770 (0.7%) 0.83x GBS Insurance Software & BPS 382 5.1% 0.59x Mergers, Acquisitions & Divestitures 5 - - GBS Total 1,703 3.3% 0.84x Security 111 6.8% 0.82x Cloud Infrastructure
Slide 14: Continuing Progress on Our Financial Foundation
Continuing Progress on Our Financial Foundation Total Debt ($M) Net Interest Expense ($M) 4,778 4,723 4,585 4,529 17 16 15 17 17 4,400 FY23 Q1 Q2 Q3 Q4 FY24 Q1 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Restructuring/Transaction, Separation & Integration ($M) Cash Payments for Operating Leases ($M) Transaction, Separ
Slide 15: Continuing Progress on Our Financial Foundation
Continuing Progress on Our Financial Foundation Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 195 202 159 175 162 131 146 115 125 112 FY23 Q1 Q2 Q3 Q4 FY24 Q1 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Capital Expenditures & Finance Lease Originations Finance Lease & Asset Financing Originat
Slide 16: Repurchased >20% of Shares Outstanding Since Start of FY22
Repurchased >20% of Shares Outstanding Since Start of FY22 $900 50 Share Repurchases $800 9.5% Shares O/S* 45 7.3% Shares O/S* $700 $679M 40 $634M 35 $600 30 $500 25 $400 4.3% Shares O/S* 24.4M 20 $300 $280M 18.8M 15 $200 10 11.0M $100 5 $- 0 FY22 FY23 FY24 Q1 • Since the start of FY22, DXC has repu
Slide 17: Q2 FY24 Outlook
Q2 FY24 Outlook YoY Organic Adjusted Non-GAAP Revenue Growth EBIT Margin Diluted EPS (5.5%) – (4.5%) 6.5% – 7.0% $0.65 – $0.70 Note: Fx rates for guidance: Euro $1.11, Sterling $1.28, and AUD $0.68. 17
Slide 18: Updated FY24 Outlook
Updated FY24 Outlook YoY Organic Adjusted Non-GAAP Free Cash Flow Revenue Growth EBIT Margin Diluted EPS (4.0%) – (3.0%) 7.0% – 7.5% $3.15 – $3.40 $800M Note: Fx rates for guidance: Euro $1.11, Sterling $1.28, and AUD $0.68. 18
Slide 19: Key Takeaways: GBS Growth, GIS, Capital Deployment
1 GBS: A high-quality growth business and will change overall revenue mix Higher-margin GBS will be the majority of DXC revenue by end of FY24 2 GIS: Still confident that we can stabilize Security is solid; taking strategic actions in Cloud/ITO and Modern Workplace 3 Making improvements to be more c
Slide 20: Technology
XK TECHNOLOGY
Slide 21: Supplemental Information
Supplemental Information Q1 FY24 Quarterly Result Details Non-GAAP Reconciliations Definitions 21
Slide 22: Organic Revenue Growth and Backlog
Organic Revenue Growth and Backlog GBS ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 GBS revenue 1,758 1,713 1,738 1,751 6,960 1,703 YoY GBS revenue growth (6.8%) (8.5%) (10.7%) (7.5%) (8.4%) (3.1%) Foreign currency 5.9% 7.4% 6.4% 3.8% 5.9% 0.8% Acquisitions and divestitures 3.7% 4.5% 4.5%
Slide 23: Organic Revenue Growth and Book-to-Bill by Offering
Organic Revenue Growth and Book-to-Bill by Offering Organic Revenue Growth (YoY) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 GBS 2.8% 3.4% 0.2% 3.3% 2.4% 3.3% Analytics & Engineering 15.7% 14.0% 11.7% 8.5% 12.3% 8.8% Applications (2.0%) (1.1%) (6.8%) (0.5%) (2.7%) (0.7%) Insurance Software &
Slide 24: DXC Insurance Key Metrics
DXC Insurance Key Metrics Total Total (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 FY22 FY23 Insurance Software Revenue 120 119 121 124 484 118 116 121 140 495 129 Insurance Business Process as a Service 147 146 146 149 588 142 148 150 150 590 153 Revenue Total Ins
Slide 25: Services and Resale Revenue by Offering
Services and Resale Revenue by Offering Services Revenue ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Analytics & Engineering 496 515 523 547 2,081 537 Applications 754 725 724 750 2,953 739 Insurance Software & BPS 367 362 370 387 1,486 380 GBS 1,617 1,602 1,617 1,684 6,520 1,656 Securit
Slide 26: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Segment revenue 1,887 1,873 1,946 1,892 7,598 1,758 1,713 1,738 1,751 6,960 1,703 Segment profit 272 298 315 275 1,160 210 218 244 240 912 192 GBS
Slide 27: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation EBIT to Adjusted EBIT ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Net income (loss) 282 (187) 102 539 736 103 28 61 (758) (566) 42 Income tax expense (benefit) 142 (61) 64 260 405 19 26 41 (405) (
Slide 28: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures COS, SG&A, D&A ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Cost of services 3,255 3,088 3,179 3,161 12,683 2,930 2,775 2,799 2,742 11,246 2,719 Less: Impairment losses — — — — — — — (8) — (8) —
Slide 29: Non-GAAP Reconciliation – Income Statement Measures
Supplemental Financial Information Non-GAAP Reconciliation – Income Statement Measures EBIT to EPS (in $M, except EPS) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Adjusted EBIT 332 346 355 342 1,375 259 269 309 320 1,157 224 Interest expense 62 61 38
Slide 30: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS (in $M, except EPS) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Net income (loss) attributable to DXC 278 (188) 98 530 718 102 27 59 (756) (568) 36 Restructuring costs 57 11 32 53 253 25 43 39 65 172 15 TSI
Slide 31: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 GAAP EPS (diluted) $ 1.07 $ (0.74) $ 0.38 $ 2.14 $ 2.81 $ 0.43 $ 0.12 $ 0.25 $ (3.38) $ (2.48) $ 0.17 Restructuring costs 0.22 0.43 0.13 0.21 0.99 0.11 0.18 0.17 0
Slide 32: Income Statement Drivers – Headcount
Income Statement Drivers – Headcount DXC Employees Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 GBS 72,500 72,786 75,587 76,718 76,718 75,527 76,233 76,284 75,945 75,945 74,372 GIS 46,540 47,868 49,438 50,333 50,333 50,221 49,252 48,273 47,412 47,412
Slide 33: Income Statement Drivers – Other Income and Pension Income
Income Statement Drivers – Other Income and Pension Income Other Income ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Non-service cost components of net periodic (97) (96) (87) (786) (1,066) (67) (60) (60) 1,367 1,180 (37) pension income Foreign c
Slide 34: Reconciliation – Adjusted EBIT Margin ex. Pension Income
Reconciliation – Adjusted EBIT Margin ex. Pension Income (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Revenue 4,141 4,027 4,089 4,008 16,265 3,707 3,566 3,566 3,591 14,430 3,446 Adjusted EBIT (1) 332 346 355 342 1,375 259 269 309 320 1,157 224
Slide 35: DXC Historical Balance Sheet
DXC Historical Balance Sheet Assets (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Cash and cash equivalents 2,460 2,699 2,919 2,672 2,672 2,209 2,260 2,091 1,858 1,858 1,576 Receivables, net 4,081 3,821 3,670 3,854 3,854 3,693 3,467 3,454 3,441
Slide 36: DXC Historical Balance Sheet
DXC Historical Balance Sheet Liabilities & Equity (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Short term debt & current LT debt 817 745 706 900 900 904 834 873 500 500 694 Accounts payable 857 724 759 840 840 795 857 852 782 782 701 Accrued p
Slide 37: Net Debt and Leverage Ratios
Net Debt and Leverage Ratios (in $M, except ratios) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Short term debt & current LT debt 817 745 706 900 900 904 834 873 500 500 694 LT debt, net of current maturities 4,116 4,363 4,236 4,065 4,065 3,874 3,695
Slide 38: DXC Working Capital Key Metrics
DXC Working Capital Key Metrics (in $M, except days) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Billed & unbilled accounts receivable 3,205 3,053 2,905 3,065 3,065 2,852 2,724 2,689 2,635 2,635 2,573 Revenue 4,141 4,027 4,089 4,008 16,265 3,707 3,56
Slide 39: DXC Cash Flows from Operating Activities
DXC Cash Flows from Operating Activities Cash Flows from Operating Activities Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 (in $M) Net Income 282 (187) 102 539 736 103 28 61 (758) (566) 42 Depreciation & amortization 427 452 430 433 1,742 398 388 383
Slide 40: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Payments on finance leases & borrowings for asset (494) (177) (184) (135) (990) (159) (115) (125) (112) (511) (131) financing Less: Originations Capital expenditures throug
Slide 41: DXC Cash Flow Drivers
DXC Cash Flow Drivers (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Cash paid for restructuring (115) (86) (78) (75) (354) (48) (63) (43) (52) (206) (43) Cash paid for TSI (1) (9) (3) (11) (3) (26) (2) (4) (6) (4) (16) (1) Total cash paid for r
Slide 42: DXC Free Cash Flow
DXC Free Cash Flow Free Cash Flow (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Cash flows from operating activities (29) 563 696 271 1,501 163 212 625 415 1,415 127 Less capex Purchase of property & equipment (98) (67) (52) (37) (254) (68) (78
Slide 43: Q1 FY24 Non-GAAP Reconciliation: Organic Revenue – Offerings
Q1 FY24 Non-GAAP Reconciliation: Organic Revenue – Offerings Insurance Software Analytics & Cloud Infrastructure Acquisitions & (in $M) Applications & Business Process Security Modern Workplace Total Engineering & IT Outsourcing Divestitures Services (BPS) Revenue 546 770 382 111 1,209 423 5 $ 3,446
Slide 44: Currency Impact
Currency Impact Quarterly averages Q1 Q2 Q3 Q4 Q1 YoY Spot Q2 Q3 Q4 FY24E (US$ per currency) FY23 FY23 FY23 FY23 FY24 Change 7/20/23 FY24E FY24E FY24E Euro 1.07 1.01 1.02 1.07 1.09 2% 1.11 10% 9% 4% 7% Pound sterling 1.26 1.18 1.17 1.22 1.25 0% 1.28 9% 9% 6% 6% Australian dollar 0.72 0.68 0.66 0.68
Slide 45: Non-GAAP and Other Definitions
Non-GAAP and Other Definitions Segment profit: Segment revenue less costs of services, segment selling, general and administrative, depreciation and amortization, and other income, excluding the movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities an
Slide 46: Non-GAAP Adjustments
Non-GAAP Adjustments Our Non-GAAP adjustments include: • Restructuring costs: Includes costs, net of reversals, related to workforce and real estate optimization and other similar charges. • Transaction, separation and integration-related (“TSI”) costs: Includes costs related to integration, separat
Slide 47: Technology
XK TECHNOLOGY
DXC Technology Company — Q1 2024 Earnings Presentation on 6ix