Dxc Technology Company · NYSE:DXC
Dxc Technology — Q1 2023 Earnings Presentation
42 slides from Dxc Technology's earnings presentation, Aug 3, 2022
Slide 1: 1st Quarter FY 2023 Earnings Presentation
1st Quarter FY 2023 Earnings Presentation August 3, 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 Overview of Q1 FY23 Results 2 Progress on Our Transformation Journey 3 Q1 FY23 Financial Results and Guidance 4 Closing Remarks 4
Slide 5: Q1 FY23 Financial Performance
Q1 FY23 Financial Performance Q1 FY23 – Key Metrics and Drivers Revenue $3.71B Organic revenue growth* of (2.6%) Adjusted EBIT Margin* 7.0% 100 bps margin decline YoY Book-to-bill of 1.06x on a trailing 12-month basis; Book-to-Bill 0.87x $3.22 billion in bookings in Q1 Non-GAAP Diluted EPS* $0.75 10
Slide 6: Transformation Journey: Inspire and Take Care of Our Colleagues
Transformation Journey Proof points: • It is very clear that people want to join DXC, which used to be an issue in the market Inspire and • Pleased with the manner in which we have taken care of our people impacted by the Russian/Ukraine conflict and by COVID-19 Take Care of Our Colleagues 6
Slide 7: Transformation Journey: Focus on Customers
Transformation Journey Proof points: • Most recent NPS score was 30 – at the high end of the industry benchmark range • Customers are now trusting us with their higher-value business needs Focus on Customers • Helping our customers grow and lowering costs • Analytics & Engineering has consistently g
Slide 8: Transformation Journey: Optimize Costs
Transformation Journey Proof points: • High confidence that our cost optimization will improve our margins, make it easier for our colleagues to work here, easier for our customers to work with us, and position us well for the future Optimize • Expect to eliminate roughly $500 million of cost. Areas
Slide 9: Transformation Journey: Seize the Market
Transformation Journey Proof points: • Q1 book-to-bill of 0.87x was a direct result of more disciplined deal making - Trailing 12-month book-to-bill is still a healthy 1.06x • New work for Q1 was 57% and renewals were 43% Seize the Market • We pushed out a number of deals in ITO and Modern Workplace
Slide 10: Transformation Journey: Financial Foundation
Transformation Journey Proof points: • Pleased with what we have achieved with our financial foundation and how far we have improved the quality of DXC over the last couple years • Producing results – free cash flow is significantly improved and managed Financial our debt to below $5 billion Foundat
Slide 11: Transformation Journey Continues Forward
Financial Update Transformation Journey Continues Forward Organic Revenue Growth Trends* (YoY) Adjusted EBIT Margin* FY22 Q1 Q2 Q3 Q4 FY23 Q1 8.0% 8.6% 8.7% 8.5% 7.0% (1.4%) (2.4%) (2.6%) (2.8%) (3.7%) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Free Cash Flow* ($M) Non-GAAP Diluted EPS* 550 $0.90 $0.92 404 $0.84 $0.8
Slide 12: Q1 Key Financial Metrics
Q1 Key Financial Metrics (in $M, except EPS and shares) Q1 FY23 Q1 FY22 % change Revenue 3,707 4,141 (10.5%) Non-GAAP Gross Profit 777 886 (12.3%) As % of sales 21.0% 21.4% (40) bps Non-GAAP SG&A Expenses (337) (374) (9.9%) As % of sales (9.1%) (9.0%) (10) bps Non-GAAP Depreciation & Amortization (2
Slide 13: Currency Impact
Financial Update Currency Impact Fx Rate Fluctuations Revenue Impact (YoY, M) Q1 Q2E* Q3E* Q4E* FY23E* Prior Prior Jul ‘22 Change Change Year Guide Spot (YoY) (Guide) ($240) ($251) ($213) EUR $1.21 $1.05 $1.01 (17%) (4%) ($292) GBP $1.40 $1.25 $1.19 (15%) (5%) AUD $0.77 $0.70 $0.68 (9%) (3%) ($996)
Slide 14: GBS/GIS Results
GBS/GIS Results GBS Organic Revenue Growth* (YoY) GIS Organic Revenue Growth* (YoY) FY22 Q1 Q2 Q3 Q4 FY23 Q1 FY22 Q1 Q2 Q3 Q4 FY23 Q1 7.0% 3.4% 3.4% 2.8% 2.0% (7.2%) (8.0%) (8.3%) (8.0%) (9.1%) GBS Segment Profit Margin GIS Segment Profit Margin 15.9% 16.2% 14.4% 14.5% 6.5% 11.9% 5.8% 5.5% 5.9% 4.8%
Slide 15: GBS/GIS Offerings
GBS/GIS Offerings Q1 FY23 YoY Organic TTM Revenue ($M) Book-to-Bill Growth* Book-to-Bill Analytics & Engineering 503 15.7% 1.17x 1.27x Applications 882 (2.0%) 0.86x 1.10x GBS Insurance Software & BPS 368 0.3% 1.01x 1.23x Mergers, Acquisitions & Divestitures 5 GBS Total 1,758 2.8% 0.98x 1.17x Securit
Slide 16: Continuing Progress on Our Financial Foundation
Financial Update Continuing Progress on Our Financial Foundation Total Debt ($M) Net Interest Expense ($M) 45 5,108 42 4,942 4,965 29 4,933 23 4,778 17 FY22 Q1 Q2 Q3 Q4 FY23 Q1 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Restructuring/Transaction, Separation & Integration ($M) Cash Payments for Operating Leases ($M) 1
Slide 17: Continuing Progress on Our Financial Foundation
Financial Update Continuing Progress on Our Financial Foundation Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 275 245 242 236 225 219 207 178 191 177 184 169 163 175 159 146 159 135 Q1 FY21 Q2 Q3 Q4 Q1 FY22 Q2 Q3 Q4 Q1 FY23 Q1 FY21 Q2 Q3 Q4 Q1 FY22 Q2 Q3 Q4 Q1 FY23 Q1 FY22
Slide 18: Capital Allocation – FY23 Financing Lease Impact
Capital Allocation – FY23 Financing Lease Impact Targeted debt level $5.0B $5.0 Commercial paper and other $0.3B $4.8 ($0.5B) $0.4B Commercial paper and other $4.6 $0.2B $0.7B $4.4 Commercial paper Financing leases and other $1.0B $4.2 $0.4B Financing leases $4.0 $0.7B Financing leases $0.5B $3.8 $3
Slide 19: Executing Our Disciplined Capital Allocation Plan
Executing Our Disciplined Capital Allocation Plan Capital Deployment Highlights # Shares Repurchased 8.9M • $900 million of capital returned to shareholders through 8.2M buybacks in the past five quarters 6.8M • 27.8 million shares repurchased since Q1 FY22, or over 10% of shares o/s • $1 billion se
Slide 20: Q2 FY23 Outlook
Q2 FY23 Outlook YoY Organic Adjusted Non-GAAP Revenue Growth EBIT Margin Diluted EPS (1.5%) – (2.5%) 7.0% – 7.5% $0.70 – $0.75 20
Slide 21: FY23 Outlook
FY23 Outlook YoY Organic Adjusted Non-GAAP Free Cash Flow Revenue Growth EBIT Margin Diluted EPS (1.0%) – (2.0%) 8.0% – 8.5% $3.45 – $3.75 $700M 21
Slide 22: FY24 Long-Term Outlook
FY24 Long-Term Outlook YoY Organic Adjusted Non-GAAP Free Cash Flow Revenue Growth EBIT Margin Diluted EPS 1% – 3% 10% – 11% $5.00 – $5.25 ~$1.5B FY24 Financial Targets Reaffirmed 22
Slide 23: Transformation Journey is Creating Value
1 Transformation Journey is creating value Taking the right steps for DXC in the short term that will set us up for success longer term Quality DXC 2 Stable debt, sound capital allocation, free cash flow, investment grade profile, improved governance, and consistent growth in GBS 3 Deliver for our c
Slide 24: Supplemental Information
Supplemental Information Q1 FY23 Quarterly Result Details Non-GAAP Reconciliations Definitions 24
Slide 25: Organic Revenue Growth
Organic Revenue Growth GBS (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 GBS revenue 1,887 1,873 1,946 1,892 7,598 1,758 YoY GBS revenue growth (13.2%) (16.5%) 1.3% (5.4%) (8.9%) (6.8%) Foreign currency (4.7%) (0.9%) 1.3% 3.2% (0.4%) 5.9% Acquisitions and divestitures 19.9% 20.8% 4.4% 5
Slide 26: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 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 Segment profit 215 317 273 315 1,120 272 298 315 275 1,160 210 GBS profit
Slide 27: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation EBIT to Adjusted EBIT (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Net income (loss) (199) (246) 1,103 (804) (146) 282 (187) 102 539 736 103 Income tax expense (benefit) (26) (60) 875 11 800 142 (61) 64 260
Slide 28: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures COS, SG&A, D&A (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 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 Less: Impairment losses - - - (190) (190) - - - - - - Less
Slide 29: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures EBIT to EPS (in $M, except EPS) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Adjusted EBIT (1) 190 283 300 329 1,102 332 346 355 342 1,375 259 Interest expense 106 96 82 77 361 62 61 38 43 204 37 Interest income
Slide 30: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS (in $M, except EPS) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Net income (loss) attributable to DXC (205) (244) 1,098 (798) (149) 278 (188) 98 530 718 102 Restructuring costs 60 213 93 93 459 57 111 32 53 253 25 TSI 8
Slide 31: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 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 Restructuring costs 0.24 0.83 0.36 0.36 1.79 0.22 0.43 0.13 0.21 0.99
Slide 32: DXC Historical Balance Sheet
DXC Historical Balance Sheet Assets (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 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 Receivables, net 4,271 4,194 4,130 4,156 4,156 4,081 3,821 3,664 3,854 3,854 3,693
Slide 33: DXC Historical Balance Sheet
DXC Historical Balance Sheet Liabilities & Equity (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Short term debt & current LT debt 1,682 1,622 795 1,167 1,167 817 745 706 900 900 904 Accounts payable 1,522 1,345 852 914 914 857 724 759 840 840 795 Accrued p
Slide 34: DXC Working Capital Key Metrics
DXC Working Capital Key Metrics (in $M, except days) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 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 Revenue 4,502 4,554 4,288 4,385 17,729 4,141 4,027 4,089 4,00
Slide 35: DXC Cash Flows from Operating Activities
DXC Cash Flows from Operating Activities Cash Flows from Operating Activities (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Net income (199) (246) 1,103 (804) (146) 282 (187) 102 539 736 103 Depreciation & amortization 496 529 481 482 1,988 427 452 430 433
Slide 36: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Payments on finance leases & borrowings for (245) (242) (207) (236) (930) (494) (177) (184) (135) (990) (159) asset financing Less: Originations Capital expenditures through finance le
Slide 37: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Cash paid for restructuring (61) (99) (149) (133) (442) (115) (86) (78) (75) (354) (48) Cash paid for TSI (1) (88) (81) (135) (56) (360) (9) (3) (11) (3) (26) (2) Total cash paid for r
Slide 38: DXC Free Cash Flow
DXC Free Cash Flow Free Cash Flow (in $M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Cash flows from operating activities 119 472 (187) (280) 124 (29) 563 696 271 1,501 163 Less capex Purchase of property & equipment (95) (61) (59) (46) (261) (98) (67) (52) (37
Slide 39: Q1 FY23 Non-GAAP Reconciliation: Organic Revenue – Offerings
Q1 FY23 Non-GAAP Reconciliation: Organic Revenue – Offerings Insurance and Analytics and Cloud Infrastructure Acquisitions and (in $M) Applications Business Process Security Modern Workplace Total Engineering and IT Outsourcing Divestitures Services (BPS) Revenue $ 503 $ 882 $ 368 $ 105 $ 1,395 $ 44
Slide 40: 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 41: 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 42: DXC Technology
oX. TECHNOLOGY
DXC Technology Company — Q1 2023 Earnings Presentation on 6ix