Dxc Technology Company · NYSE:DXC
Dxc Technology — Q4 2022 Earnings Presentation
44 slides from Dxc Technology's earnings presentation, May 25, 2022
Slide 1: 4th Quarter FY 2022 Earnings Presentation
4th Quarter FY 2022 Earnings Presentation May 25, 2022
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 earnings before interest, taxes,
Slide 3: Forward-Looking Statements
Forward-Looking Statements All statements in this 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,” “expects,” “forecast,” “goal,” “inten
Slide 4: Agenda for Today
Agenda for Today 1 FY22 Performance on Our Transformation Journey 2 Russia/Ukraine Update 3 Q4 FY22 Financial Results and FY23 Guidance 4 Closing Remarks 4
Slide 5: FY22 Performance on Our Transformation Journey
Financial Update FY22 Performance on Our Transformation Journey Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin FY21 FY22 8.5% 6.2% (2.6%) ~1.1% +230 bps +620 bps 5.1% (8.8%) FY21 FY22 Impact of Divestitures Non-GAAP Diluted EPS Free Cash Flow $3.50 $743M $2.43 +$1.4B +44% ($652M) FY21 FY22
Slide 6: FY22 Performance on Our Transformation Journey Proof Points
FY22 Performance on Our Transformation Journey Inspire and Take Care Build Financial Focus on Customers Optimize Costs Seize the Market of Our Colleagues Foundation Improve Year-over-Year Goals Increase Employee Expand Adjusted Improve Solidify Fundamentals Organic Revenue Engagement EBIT Margin Boo
Slide 7: Russia/Ukraine Update
Russia/Ukraine Update Business Status Key Points • Successfully moved many colleagues to Western Ukraine, Poland and Romania Ukraine Colleagues Continuing • Productivity remains very high – utilization ~85% Non-Domestic and Corporate Employees On Track • By the end of June, we will have moved corpor
Slide 8: FY23 – GBS Actions
FY23 – GBS Actions FY22 GBS Revenue • Have clarity on actions needed to be executed for GBS and GIS Analytics & Engineering ~2.1B • GBS has grown consistently for four quarters and is composed of digital offerings that are high value for our customers and DXC Applications & Cloud ~4.0B • Engineering
Slide 9: FY23 – GIS Actions
FY23 – GIS Actions FY22 GIS Revenue • GIS top priority: improve the financial performance Security ~0.5B • Modern Workplace: FY22 improvements drive organic revenue growth and expected to turn positive by end of FY23 Cloud Infrastructure & ITO ~5.9B • Cloud Infrastructure/ITO focus on: − Fixing poor
Slide 10: Transformation Journey Remains on Track
Financial Update Transformation Journey Remains on Track Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 8.0% 8.6% 8.7% 8.5% 7.5% 7.0% ~0.2% 6.2% ~0.2% (1.4%) (2.4%) (2.8%) 4.2% ~2.2% (3.7%) 7.3% ~2.2% 6.8% (6.5%) 4.0% 2.0% (9.1%) (10.1%) (9.7%) FY21 Q1 Q2
Slide 11: Q4 Key Financial Metrics – Non-GAAP
Q4 Key Financial Metrics – Non-GAAP (in $M, except EPS) Q4 FY22 Q4 FY21 % change Revenue $ 4,008 $ 4,385 (8.6%) Non-GAAP Gross Profit 847 1,016 (16.6%) As % of sales 21.1% 23.2% (210) bps Non-GAAP SG&A Expenses 312 422 (26.1%) As % of sales 7.8% 9.6% (180) bps Non-GAAP Depreciation & Amortization 31
Slide 12: GBS/GIS Results
GBS/GIS Results GBS Organic Revenue Growth (YoY) GIS Organic Revenue Growth (YoY) FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 7.0% 3.4% 3.4% 2.0% (8.0%) (8.3%) (8.0%) (9.3%) (9.1%) (3.4%) (11.8%) (12.6%) (13.0%) (6.9%) (6.0%) (5.9%) GBS Segment Profit Margin GIS Segment Profi
Slide 13: GBS/GIS Offerings
GBS/GIS Offerings Q4 FY22 YoY Organic TTM Revenue ($M) Book-to-Bill Growth Book-to-Bill Analytics and Engineering 554 19.7% 1.44x 1.30x Applications 1,224 (0.6%) 1.47x 1.26x GBS Business Process Services (BPS) 112 (12.8%) 1.42x 0.93x Mergers, Acquisitions, and Divestitures 2 GBS Total 1,892 3.4% 1.4
Slide 14: Evidence We Are Building Our Financial Foundation
Financial Update Evidence We Are Building Our Financial Foundation Total Debt ($M) Net Interest Expense ($M) 83 12,016 71 9,668 54 55 42 45 6,239 5,512 4,933 5,108 4,942 4,965 29 23 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 Restructuring/Transaction, Separation & Integratio
Slide 15: Evidence We Are Building Our Financial Foundation
Financial Update Evidence We Are Building Our Financial Foundation Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 275 240 236 245 242 236 228 225 219 210 211 225 219 207 178 191 177 184 162 169 163 159 146 135 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 16: Trended Free Cash Flow
Trended Free Cash Flow $550M $404M $303M $93M ($106M) ($304M) ($406M) ($443M) FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 16
Slide 17: Financial Foundation in a Better Place
Financial Foundation in a Better Place 1 2 3 4 5 Financial Strengthen Cash Restructuring Capital Discipline Balance Sheet Generation & TSI Allocation • True earnings power • Maintain investment • Improve cash flow • Reduced expense by • Investing in our grade credit profile rating generation $565M f
Slide 18: Driving GIS Forward
Driving GIS Forward Disciplined Focus on service Deal structure/not Price Commercial Quality Account revenue/not on leveraging the resale increases balance sheet oversight Revenues Management Cost Optimize Data Restructuring and Contractor and Margin Optimization real estate centers TSI reduction la
Slide 19: Executing Our Disciplined Capital Allocation Plan
Executing Our Disciplined Capital Allocation Plan Capital Deployment Highlights # Shares Repurchased in FY22 8.2M • $634M of capital returned to shareholders through buybacks in FY22 6.8M • 18.8M shares repurchased or over 7% of shares o/s in FY22 • $1B self-funded repurchase program announced Q3 FY
Slide 20: Governance Checklist
Governance Checklist Remediated the Legacy Material Weakness Executed 11-point plan to address deficiencies and enhanced our control environment Incentive Metrics Revised Based on Shareholder Feedback Moving long-term incentive targets to free cash flow and relative total shareholder return Movi
Slide 21: FY23 Outlook
FY23 Outlook YoY Organic Adjusted Non-GAAP FCF Revenue Growth EBIT Margin Diluted EPS (1.0%) – (2.0%) 8.5% – 9.0% $3.85 – $4.15 $800M 21
Slide 22: Q1 FY23 Outlook
Q1 FY23 Outlook YoY Organic Adjusted Non-GAAP Revenue Growth EBIT Margin Diluted EPS (1.5%) – (2.5%) 7.5% – 8.0% $0.80 – $0.85 22
Slide 23: FY24 Long-Term Outlook
FY24 Long-Term Outlook YoY Organic Adjusted Non-GAAP FCF Revenue Growth EBIT Margin Diluted EPS 1% – 3% 10% – 11% $5.00 – $5.25 ~$1.5B FY24 Financial Targets Reaffirmed 23
Slide 24: FY23: Setting DXC Up for Success in FY24
Financial Update FY23: Setting DXC Up for Success in FY24 Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin 1% – 3% 10% – 11% 8.5% – 9.0% 8.5% (1%) – (2%) (2.6%) 6.2% ~1.1% (8.8%) 5.1% FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E Impact of Divestitures Non-GAAP Diluted EPS Free Cash Flow $5.00
Slide 25: DXC Is in a Better Place
Financial Update 1 DXC Is in a Better Place Significant improvement in organic revenue growth, adjusted EBIT and free cash flow Russia’s Invasion of Ukraine 2 Despite the tragedy, our people have done a great job caring for our colleagues and delivering for our customers – do not anticipate a signif
Slide 26: Supplemental Information
Supplemental Information Q4 FY22 Quarterly Result Details Non-GAAP Reconciliations Definitions 26
Slide 27: Organic Revenue Growth
Organic Revenue Growth GBS (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 GBS revenue 2,174 2,242 1,921 1,999 8,336 1,887 1,873 1,946 1,892 7,598 YoY GBS revenue growth 0.7% (1.9%) (18.6%) (13.4%) (8.5%) (13.2%) (16.5%) 1.3% (5.4%) (8.9%) Foreign curren
Slide 28: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Segment revenue 2,159 2,285 2,359 2,308 9,111 2,174 2,242 1,921 1,999 8,336 1,887 1,873 1,946 1,892 7,598 Segment profit 366 35
Slide 29: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation EBIT to Adjusted EBIT (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Net income (loss) 168 (2,115) 90 (3,501) (5,358) (199) (246) 1,103 (804) (146) 282 (187) 102 539 736 Income ta
Slide 30: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures COS, SG&A, D&A (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Cost of services 3,622 3,679 3,827 3,773 14,901 3,629 3,563 3,333 3,561 14,086 3,255 3,088 3,179 3,161 12,683 Less
Slide 31: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures EBIT to EPS (in $M, except EPS) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Adjusted EBIT (1) 652 529 528 352 2,061 190 283 300 329 1,102 332 346 355 342 1,375 Interest expense 91 1
Slide 32: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS (in $M, except EPS) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Net income (loss) attributable to DXC 163 (2,119) 82 (3,495) (5,369) (205) (244) 1,098 (798) (149) 278 (188) 98 530 718 Restru
Slide 33: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 GAAP EPS (diluted) $ 0.61 $ (8.19) $ 0.32 $ (13.79) $ (20.76) $ (0.81) $ (0.96) $ 4.29 $ (3.14) $ (0.59) $ 1.07 $ (0.74) $ 0.38 $ 2.14 $ 2.81 Rest
Slide 34: DXC Historical Balance Sheet
DXC Historical Balance Sheet Assets (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Cash and cash equivalents 1,868 2,880 2,560 3,679 3,679 5,509 3,079 3,919 2,968 2,968 2,460 2,699 2,919 2,672 2,672 Receivables, net 5,234 4,611
Slide 35: DXC Historical Balance Sheet
DXC Historical Balance Sheet Liabilities & Equity (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Short term debt & current LT debt 1,511 1,471 1,581 1,276 1,276 1,682 1,622 795 1,167 1,167 817 745 706 900 900 Accounts payable 1,
Slide 36: DXC Working Capital Key Metrics
DXC Working Capital Key Metrics (in $M, except days) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Billed & unbilled accounts receivable 3,883 3,859 3,696 3,513 3,513 3,428 3,363 3,203 3,222 3,222 3,205 3,053 2,905 3,065 3,065 Revenue
Slide 37: DXC Cash Flows from Operating Activities
DXC Cash Flows from Operating Activities Cash Flows from Operating Activities (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Net income 168 (2,115) 90 (3,501) (5,358) (199) (246) 1,103 (804) (146) 282 (187) 102 539 736 Depreciat
Slide 38: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Payments on finance leases & (210) (211) (225) (219) (865) (245) (242) (207) (236) (930) (494) (177) (184) (135) (990) borrowings for asset financing Less:
Slide 39: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Cash paid for restructuring (92) (105) (76) (61) (334) (61) (99) (149) (133) (442) (115) (86) (78) (75) (354) Cash paid for TSI (1) (94) (41) (68) (54) (25
Slide 40: DXC Free Cash Flow
DXC Free Cash Flow Free Cash Flow (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Cash flows from operating (66) 1,651 477 288 2,350 119 472 (187) (280) 124 (29) 563 696 271 1,501 activities Less capex Purchase of property & equi
Slide 41: Q4 FY22 Non-GAAP Reconciliation: Organic Revenue – Enterprise Technology Stack
Q4 FY22 Non-GAAP Reconciliation: Organic Revenue – Enterprise Technology Stack Analytics and Business Process Acquisitions and (in $M) Applications Cloud and Security IT Outsourcing Modern Workplace Total Engineering Services (BPS) Divestitures Revenue $ 554 $ 1,224 $ 112 $ 488 $ 1,115 $ 513 $ 2 $ 4
Slide 42: 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 43: 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, plannin
Slide 44: BD) (e
BD) (e TECHNOLOGY
DXC Technology Company — Q4 2022 Earnings Presentation on 6ix