Dxc Technology Company · NYSE:DXC
Dxc Technology — Q4 2023 Earnings Presentation
52 slides from Dxc Technology's earnings presentation, May 18, 2023
Slide 1: 4th Quarter FY 2023 Earnings Presentation
4th Quarter FY 2023 Earnings Presentation May 18, 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 margin, adjusted EBIT margi
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 Overview of Q4 FY23 Results 2 DXC’s Transformation Journey 3 Q4 FY23 Financial Results and Guidance 4 Closing Remarks © 2022 DXC Technology Company. All rights reserved. May 18, 2023 4
Slide 5: Q4 FY23 Financial Performance
Q4 FY23 Financial Performance Q4 FY23 – Key Metrics and Drivers Year-over-year organic revenue growth* of (2.9%), Revenue $3.59B fourth quarter of sequentially flat revenues on a constant currency basis excluding dispositions Adjusted EBIT Margin* 8.9% Margin up 20 bps sequentially and 40 bps YoY No
Slide 6: Transformation Journey: Inspire and Take Care of Our Colleagues
Transformation Journey FY23 Proof Points: • We have done a good job changing the culture of DXC • Our team is executing, and we continue to add to it with strong industry talent FY24 Position: • To enhance our execution, we have changed our Operating Model to be led by our Offering Leaders. Inspire
Slide 7: Transformation Journey: Focus on Our Customers
Transformation Journey FY23 Proof Points: • Constant currency revenues have been stable for the past four quarters - revenue is now higher-quality and trending toward GBS • Current NPS score of 29, at the high end of the industry average • Quotes from the customer discussions with the outside firm:
Slide 8: Transformation Journey: Optimize Costs
Transformation Journey FY23 Proof Points: • We have built a team that knows how to drive cost optimization and expand margin • Adjusted EBIT margin expanded from 7.0% in Q1 FY23 to 8.9% in Q4 FY23 – Function of cost optimization initiatives in staff optimization, contractors, real estate and data ce
Slide 9: Transformation Journey: Seize the Market
Transformation Journey FY23 Proof Points: • Relationship selling model in GBS and disciplined approach in GIS is working • Since implementing this approach, we have delivered book-to-bill >1 for 2 quarters • Both GBS and GIS book-to-bill >1 - customers will give us new work because we are essential
Slide 10: Transformation Journey: Financial Foundation
Transformation Journey FY23 Proof Points: • Maintained our investment grade credit profile • Delivered free cash flow >$700 million for the second year • Completed our $1 billion share repurchase program FY24 Position: • Continue to maintain investment grade credit profile Financial • Expand our fre
Slide 11: Transformation Journey Continues Forward
Financial Update Transformation Journey Continues Forward Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 8.6% 8.7% 8.5% 8.7% 8.9% 8.0% 7.5% 7.0% (1.4%) (1.5%) (2.4%) (2.6%) (2.8%) (2.9%) (3.7%) (3.8%) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 Non-GAAP Diluted EPS
Slide 12: Q4 Key Financial Metrics
Q4 Key Financial Metrics (in $M, except EPS and shares) Q4 FY23 Q4 FY22 Change Revenue 3,591 4,008 (10.4%) Non-GAAP Gross Profit 849 847 0.2% As % of sales 23.6% 21.1% 250 bps Non-GAAP SG&A Expenses (338) (312) 8.3% As % of sales (9.4%) (7.8%) (160) bps Non-GAAP Depreciation & Amortization (278) (31
Slide 13: GBS/GIS Results
GBS/GIS Results GBS Organic Revenue Growth (YoY) GIS Organic Revenue Growth (YoY) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 7.0% 3.4% 3.4% 3.4% 3.3% 2.8% (5.8%) 2.0% (7.2%) (7.4%) (8.0%) (8.3%) (8.0%) (8.5%) 0.2% (9.1%) GBS Segment Profit Margin GIS Segment Profit Margin 15
Slide 14: GBS/GIS Offerings
GBS/GIS Offerings Q4 FY23 YoY Organic Revenue ($M) Book-to-Bill Growth* Analytics & Engineering 558 8.5% 1.22x Applications 786 (0.5%) 1.03x GBS Insurance Software & BPS 390 5.9% 0.75x Mergers, Acquisitions & Divestitures 17 - - GBS Total 1,751 3.3% 1.04x Security 113 (0.4%) 1.42x Cloud Infrastructu
Slide 15: Setting the Foundation for YoY CC Revenue Growth
Setting the Foundation for YoY CC Revenue Growth* 3,570 3,574 3,586 3,574 FY23 Q1 Q2 Q3 Q4 Reconciliation ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 GAAP Revenue 3,707 3,566 3,566 3,591 Fx impact @ Q4 FY23 (41) 72 83 - rates Dispositions (96) (64) (63) (17) CC revenue @ 3,570 3,574 3,586 3,574 Q4 FY23 rat
Slide 16: Continuing Progress on Our Financial Foundation
Continuing Progress on Our Financial Foundation Total Debt ($M) Net Interest Expense ($M) 5,108 45 42 4,933 4,942 4,965 4,778 4,723 29 4,529 23 4,400 17 16 15 17 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 Restructuring/Transaction, Separation & Integration ($M) Cash Payments
Slide 17: Continuing Progress on Our Financial Foundation
Continuing Progress on Our Financial Foundation Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 275 191 184 177 195 159 178 175 159 162 135 125 146 146 115 112 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY22 Q1 excludes $303 million of non-scheduled a
Slide 18: Strong Debt Position Maintains Financial Flexibility
Strong Debt Position Maintains Financial Flexibility Existing Notes $3.5B Commercial Paper 0.1B Debt Maturity Schedule ($M) Capital Leases and Other 0.8B Total Debt $4.4B 14 Revolver - Undrawn Capacity 3.0B 115 Term Loan - Undrawn 0.5B 57 109 810 704 696 645 646 391 213 FY24 FY25 FY26 FY27 FY28 FY29
Slide 19: Pension Income Impact on Adjusted EBIT Margin
Pension Income Impact on Adjusted EBIT Margin Adjusted EBIT Margin 8.5% 8.25% 8.0% 0.5% 1.9% 1.2% 6.2% 1.8% 7.75% 6.6% 6.8% 4.4% FY21 FY22 FY23 FY24E Non-GAAP Adjusted EBIT Margin ex. Pension Income Pension Income • Non-GAAP adjusted EBIT margin positively impacted by non-cash pension income • Pensi
Slide 20: Cash Culture and Capital Allocation
Cash Culture and Capital Allocation Free Cash Flow ($M) Deployable Capital from Asset Sales ($M) 164 171* 743 737 100 -652 FY21 FY22 FY23 FY21 FY22 FY23 *Excludes $329M of proceeds from the German Financial Services Subsidiary Restructuring & TSI ($M) Weighted Avg. Diluted Shares Outstanding (M) 256
Slide 21: Capital Allocation – $1B Completed & $1B Program Announced
Capital Allocation – $1B Completed & $1B Program Announced $1,200 50 Share Repurchases 45 $1,000M $1,000 40 Completed $1B Share Repurchase Program 35 $800 $679M 30 $600 25 24.4M 20 $400 $378M 15 $256M 10 $200 11.7M 7.1M $88M 5 3.5M $- 0 FY22 Prior FY22 In-Program FY23 FY24 In-Program FY24 New Progra
Slide 22: Q1 FY24 Outlook
Q1 FY24 Outlook YoY Organic Adjusted Non-GAAP Revenue Growth EBIT Margin Diluted EPS (2.0%) – (1.0%) 7.5% – 8.0% $0.80 – $0.85 Note: Fx rates for guidance: Euro $1.10, Sterling $1.26, and AUD $0.68. © 2022 DXC Technology Company. All rights reserved. May 18, 2023 22
Slide 23: FY24 Outlook
FY24 Outlook YoY Organic Adjusted Non-GAAP Free Cash Flow Revenue Growth EBIT Margin Diluted EPS (0.5%) – 0.5% 8.0% – 8.5% $3.80 – $4.05 $900M Note: Fx rates for guidance: Euro $1.10, Sterling $1.26, and AUD $0.68. © 2022 DXC Technology Company. All rights reserved. May 18, 2023 23
Slide 24: FY24: Delivering the DXC We've Always Envisioned
FY24: Delivering the DXC We’ve Always Envisioned FY23 Steps on the Transformation Journey FY24 Initiatives Targeted Outcomes New talent in leadership team Focus on differentiation, clarity and simplicity Inspire and Take Care of Our Colleagues Operating model places senior leaders in Allows leaders
Slide 25: oXO Technology
oXO TECHNOLOGY
Slide 26: Supplemental Information
Supplemental Information Q4 FY23 Quarterly Result Details Non-GAAP Reconciliations Definitions 26
Slide 27: Organic Revenue Growth and Backlog
Organic Revenue Growth and Backlog GBS ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 GBS revenue 1,887 1,873 1,946 1,892 7,598 1,758 1,713 1,738 1,751 6,960 YoY GBS revenue growth (13.2%) (16.5%) 1.3 % (5.4%) (8.9%) (6.8%) (8.5%) (10.7%) (7.5%) (8.4%) For
Slide 28: Organic Revenue Growth and Book-to-Bill by Offering
Organic Revenue Growth and Book-to-Bill by Offering Organic Revenue Growth (YoY) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 GBS 2.0% 3.4% 7.0% 3.4% 3.9% 2.8% 3.4% 0.2% 3.3% 2.4% Analytics & Engineering 12.9% 17.3% 18.7% 19.7% 17.3% 15.7% 14.0% 11.7% 8.5% 12
Slide 29: DXC Insurance Key Metrics
DXC Insurance Key Metrics Total Total (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY22 FY23 Insurance Software Revenue 120 119 121 124 484 118 116 121 140 495 Insurance Business Process as a Service Revenue 147 146 146 149 588 142 148 150 150 590 Total Insurance SaaS Reve
Slide 30: Services and Resale Revenue by Offering
Services and Resale Revenue by Offering Services Revenue ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Analytics & Engineering 451 484 498 523 1,956 496 515 523 547 2,081 Applications 925 887 918 787 3,517 846 790 788 754 3,178 Insurance Software & BPS 38
Slide 31: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Segment revenue 2,174 2,242 1,921 1,999 8,336 1,887 1,873 1,946 1,892 7,598 1,758 1,713 1,738 1,751 6,960 Segmen
Slide 32: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation EBIT to Adjusted EBIT ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Net income (loss) (199) (246) 1,103 (804) (146) 282 (187) 102 539 736 103 28 61 (758) (566) Inc
Slide 33: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures COS, SG&A, D&A ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Cost of services 3,629 3,563 3,333 3,561 14,086 3,255 3,088 3,179 3,161 12,683 2,930 2,775 2,799 2,
Slide 34: Non-GAAP Reconciliation – Income Statement Measures
Supplemental Financial Information Non-GAAP Reconciliation – Income Statement Measures EBIT to EPS (in $M, except EPS) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Adjusted EBIT 190 283 300 329 1,102 332 346 355 342
Slide 35: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS (in $M, except EPS) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Net income (loss) attributable to DXC (205) (244) 1,098 (798) (149) 278 (188) 98 530 718 102 27 59 (756) (56
Slide 36: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 GAAP EPS (diluted) $ (0.81) $ (0.96) $ 4.29 $ (3.14) $ (0.59) $ 1.07 $ (0.74) $ 0.38 $ 2.14 $ 2.81 $ 0.43 $ 0.12 $ 0.25 $ (3.38)
Slide 37: 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 GBS 72,500 72,786 75,587 76,718 76,718 75,527 76,233 76,284 75,945 75,945 GIS 46,540 47,868 49,438 50,333 50,333 50,221 49,252 48,273 47,412 47,412 Other 11,314 10
Slide 38: Income Statement Drivers – Other Income and Pension Income
Income Statement Drivers – Other Income and Pension Income Total Total Total Other Income ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY21 FY22 FY23 Non-service cost components of net (95) (99) (103) 407 110 (97) (96) (87) (786) (1,066) (67) (
Slide 39: Reconciliation – Adjusted EBIT Margin ex. Pension Income
Reconciliation – Adjusted EBIT Margin ex. Pension Income Total Total Total (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY21 FY22 FY23 Revenue 4,502 4,554 4,288 4,385 17,729 4,141 4,027 4,089 4,008 16,265 3,707 3,566 3,566 3,591 14,430 Adjus
Slide 40: DXC Historical Balance Sheet
DXC Historical Balance Sheet Assets (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Cash and cash equivalents 5,509 3,079 3,919 2,968 2,968 2,460 2,699 2,919 2,672 2,672 2,209 2,260 2,091 1,858 1,858 Receivables
Slide 41: DXC Historical Balance Sheet
DXC Historical Balance Sheet Liabilities & Equity (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Short term debt & current LT debt 1,682 1,622 795 1,167 1,167 817 745 706 900 900 904 834 873 500 500 Accounts pa
Slide 42: Net Debt and Leverage Ratios
Net Debt and Leverage Ratios (in $M, except ratios) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Short term debt & current LT debt 1,682 1,622 795 1,167 1,167 817 745 706 900 900 904 834 873 500 500 LT debt, net of c
Slide 43: DXC Working Capital Key Metrics
DXC Working Capital Key Metrics (in $M, except days) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Billed & unbilled accounts receivable 3,428 3,363 3,203 3,222 3,222 3,205 3,053 2,905 3,065 3,065 2,852 2,724 2,689 2,
Slide 44: DXC Cash Flows from Operating Activities
DXC Cash Flows from Operating Activities Cash Flows from Operating Activities Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 (in $M) Net Income (199) (246) 1,103 (804) (146) 282 (187) 102 539 736 103 28 61 (758) (566)
Slide 45: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Payments on finance leases & borrowings (245) (242) (207) (236) (930) (494) (177) (184) (135) (990) (159) (115) (125) (112) (511) for ass
Slide 46: DXC Cash Flow Drivers
DXC Cash Flow Drivers Total Total Total (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY21 FY22 FY23 Cash paid for restructuring (61) (99) (149) (133) (442) (115) (86) (78) (75) (354) (48) (63) (43) (52) (206) Cash paid for TSI (1) (88) (81)
Slide 47: DXC Free Cash Flow
DXC Free Cash Flow Free Cash Flow (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Cash flows from operating activities 119 472 (187) (280) 124 (29) 563 696 271 1,501 163 212 625 415 1,415 Less capex Purchase of
Slide 48: Q4 FY23 Non-GAAP Reconciliation: Organic Revenue – Offerings
Q4 FY23 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 558 786 390 113 1,270 457 17 $ 3,59
Slide 49: Currency Impact
Currency Impact Quarterly averages Q1 Q2 Q3 Q4 YoY Spot Q1 Q2 Q3 Q4 FY24E (US$ per currency) FY23 FY23 FY23 FY23 Change 5/8/23 FY24E FY24E FY24E FY24E Euro 1.07 1.01 1.02 1.07 (4%) 1.10 3% 9% 8% 3% 6% Pound sterling 1.26 1.18 1.17 1.22 (9%) 1.26 0% 7% 8% 4% 4% Australian dollar 0.72 0.68 0.66 0.68 (
Slide 50: 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 51: 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 52: oXO Technology
oXO TECHNOLOGY
DXC Technology Company — Q4 2023 Earnings Presentation on 6ix