Dxc Technology Company · NYSE:DXC
Dxc Technology — Investor Day (March 2017)
63 slides from Dxc Technology's investor day presentation, Mar 29, 2017
Slide 1: Investor Day 2017
Investor Day 2017 pre DXC.technology
Slide 2: Additional Information and Where to Find It
Additional Information and Where to Find It In connection with the proposed transaction, Everett SpinCo, Inc., a wholly-owned subsidiary of Hewlett Packard Enterprise Company (“HPE”) created for the transaction (“Spinco”) filed with the SEC a registration statement on Form S-4 and a registration sta
Slide 3: Non-GAAP financial measures
Non-GAAP financial measures This presentation includes certain non-GAAP financial measures, such as earnings before interest and taxes (EBIT), non- GAAP EPS and free cash flow. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for results prepared in ac
Slide 4: Agenda
Agenda Topic Presenter Welcome & DXC Strategic Overview Mike Lawrie PwC - Global Digital IQ Survey Chris Curran (PwC) DXC Offerings & Sales Mike Nefkens DXC Delivery Steve Hilton DXC Financial Overview Paul Saleh Q&A 4
Slide 5: DXC Strategic Overview
DXC Strategic Overview Mike Lawrie Chairman President and Chief Executive Officer March 29, 2017
Slide 6: Key messages
Key messages CSC and HPE-ES have both undergone successful transformational journeys The IT services industry is undergoing a technology paradigm shift that has strategic implications for service providers DXC Technology will be the world’s leading independent, end-to-end IT services company Our vis
Slide 7: CSC has proven ability to successfully navigate restructuring & transformations
CSC has proven ability to successfully navigate CSC adjusted share price restructuring & transformations $USD $109 Streamlined Rebalanced offerings assets Rationalized 2,000+ custom Acquisitions offerings to 140 standard offers across 14 offering families 5x Invested $500M+ in Digital Divestitures d
Slide 8: CSC and HPE-ES have both been on broad-based transformation journeys
CSC and HPE-ES have both been on broad-based transformation journeys $2B+ 850 24 bps margin NPS in FY16, 20 total cost improvement points higher take-out since FY12 than in FY13 2012 Turn-around strategy announced Announced $1B cost savings target Made key acquisitions (UXC, Spun off CSRA Xchanging)
Slide 9: IT services industry undergoing technology paradigm shift
IT services industry undergoing technology paradigm shift with strategic implications for service providers Cycle III Cycle IV Cycle I Cycle II IT Stack Outsourcing Digital Mainframe Disaggregation & Globalization Disruption Pre 90s 90s – 2000s Mid 90s – ongoing Emerging/ongoing IT enablement Prolif
Slide 10: Significant value opportunity in Digital cycle – requires success factors
Significant value opportunity in Digital cycle – requires 4 success factors Unprecedented value opportunity Digital shift poses significant challenges What is needed to succeed Massive value shift to Digital Widening skills gap of companies consider Digital ~$90B TAM 25%+ CAGR ~$100B 94% lack of Dig
Slide 11: DXC created to lead the Digital disruption cycle
DXC created to lead the Digital disruption cycle Scale & skills Agility & cost efficiency 170k+ Integrated Operational data mining $25B Employees 25% delivery model 50% incident Annual revenue Skilled in next-gen 50%+ low-cost Connect Analyze Optimize volume reduction potential through AMS UK&I N.EU
Slide 12: Our vision
Our vision Lead clients through accelerating change, helping them harness the power of technology to deliver new outcomes for their business Trusted transformation partner Clients World-class industry knowledge & Digital offerings We will measure Unparalleled joint value creation & innovation our su
Slide 13: Our strategic priorities
Our strategic priorities Lead clients on their technology-driven business transformations with 1 world-class Digital offerings developed jointly with our partners, leveraging our industry IP and domain expertise Invest in and grow our next-gen talent, including people, skills, 2 and new talent sourc
Slide 14: 1. Lead clients on their technology-driven business transformations
1. Lead clients on their technology-driven business transformations World-class Digital offerings Industry IP & domain expertise Joint innovation with partners Significant At par Differentiated Healthcare & gaps 800+ managed cloud clients Insurance Cloud Life Sciences Cloud brokerage 1,000+ AWS prof
Slide 15: 2. Invest in and grow our next-gen talent
2. Invest in and grow our next-gen talent Strategy Target talent mix Create a differentiated environment to attract, train, and retain talent Develop & Attract new Rejuvenate retain current Next-gen roles 25% Graduate talent Re-skill & up-skill Career management 50% Talent cloud DXC-University Perfo
Slide 16: 3. Drive levers of value creation for next phase of transformation
3. Drive levers of value creation for next phase of transformation Stable revenue Sustainable margin Strong free Disciplined capital growth expansion cash flow allocation 1% to 4% 700 – 800 bps 100% or more 30% growth by year 3 increase in EBIT margin of Net Income capital return to shareholders • S
Slide 17: 3. Stable revenue growth
3. Stable revenue growth 1% to 4% -4% to -1% Digital Digital Market Size and Growth Digital $90B+ TAM $28B, 30% $4B, 25% Industry Industry & BPS 25%+ CAGR $26B, 23% $33B, 23% & BPS Market Size and Growth DXC Revenue $280B TAM $100B, 4% $31B, 3% $92B, 4% Industry Traditional 4%+ CAGR $32B, 4% $27B, 3
Slide 18: 3. Stable revenue growth
3. Stable revenue growth 1% to 4% -4% to -1% DXC Revenue Digital Digital Industry & BPS Tuck-in acquisitions Combination 1% to 2% dis-synergies Industry -2% to -3% Growth in & BPS Digital portfolio 25% to 30% Productivity gains -2% to -4% Growth in key Traditional industries & BPS 7% to 10% Traditio
Slide 19: 3. Sustainable margin expansion
3. Sustainable margin expansion Policies • Harmonize corporate policies and benefits EBIT Margin Expansion alignment • Ensure consistent application of standards Supply chain • Consolidate redundant roles across all functions $300M Policies • Optimize span of control and management layers alignment
Slide 20: 3. Strong free cash flow
3. Strong free cash flow Targets Actions next 3 years • Shift in business mix 700 – 800 bps EBIT • Cost efficiencies expansion • Synergy realization • Mix of global income • Transfer pricing strategies Taxes • Tax planning 25 to 30% • Capitalize on potential tax reform FCF: 100% or more of Working •
Slide 21: 3. Disciplined capital allocation
3. Disciplined capital allocation Re-invest in business Business re-investment Acquisitions 7% Return to Target acquisitions that expand Digital 7% shareholders offerings 30% Maintain investment grade credit profile 35% 4% Debt CAPEX repayment 17% Return capital to shareholders through Restructuring
Slide 22: Financial targets
Financial targets FY18 FY18 - FY20 Revenue $24.0B – $24.5B 1% to 4% growth EBIT margin 11% to 12% 14% to 15% FCF as a % 100% or more 100% or more of Net Income Non-GAAP EPS $6.50 - $7.00 ~20% CAGR 22
Slide 23: Growth
Successful execution of our strategy will help DXC accelerate towards the top of the IT services market High Vision Strategy Growth Assets Leadership Financial model Low Low Profitability High 23
Slide 24: DXC Offerings & Sales
DXC Offerings & Sales Mike Nefkens EVP and GM – Regions and Industries March 29, 2017
Slide 25: DXC: Trusted Digital transformation partner
DXC: Trusted Digital transformation partner Positioned to thrive on market shifts & customer trends Clear customer growth model Unique end-to-end operating model – outcome-driven Leading Digital offerings and partner network Energized go-to-market already showing momentum 25
Slide 26: Digital disruption is the next big cycle for IT services
Digital disruption is the next big cycle for IT services Paradigm shift for IT services Outside-in innovation Digital platforms Digitization of Impacts all Consulting fatigue workflow at scale sectors Beyond just IT Product, service, Enterprise Customer CEO top of mind business model transformation
Slide 27: New business requirements have emerged, creating various challenges for the CxO
New business requirements have emerged, creating various challenges for the CxO Help me to: Existing environment is Business transformation overly complex enabled by new solutions • Traditional delivery models Business Process As a Service (BPaaS) • Data center management • Multiple licensing models
Slide 28: DXC uniquely positioned to thrive on market shifts and changing customer needs
DXC uniquely positioned to thrive on market shifts and changing customer needs Support traditional Lead shift to Capitalize on Leverage differentiated efficiency Digital customer growth approach model Digital for Outcome-driven Low cost Traditional Digital business outcomes operating model Services
Slide 29: DXC model to help customers transition to Digital
DXC model to help customers transition to Digital Expansionary IT cycle Big Data Mobile Avg. IT spend 25 to 30% VALUE FOR CLIENT AND DXC App. as % of revenue 3.5% Migration Cyber Digital Efficiency gains growth -2% to -4% Workload New Migration Workload traditional decline from productivity gains Sc
Slide 30: Unique Build-Sell-Deliver operating model
Unique Build-Sell-Deliver operating model designed to deliver business outcomes at scale Excellence for success in the Digital age 60,000 deals per year Build Sell Deliver End-to-end Client Advisory, Client Problem & Solutioning Account Startup & Business Offerings Sales Delivery No competing Engage
Slide 31: Building streamlined offerings from the best of innovation of both companies and partners
Building streamlined offerings from the best of innovation of both companies and partners Consulting #1 in core Insurance and Transportation #1 managed workplace Industry Software services provider & Solutions Workplace & Mobility Top 3 globally 9 Streamlined Security Business Process Services Offer
Slide 32: Largest offerings position DXC as a differentiated leader
Largest offerings position DXC as a differentiated leader FY17 TAM, $B Significant gaps At par Differentiated Cloud brokerage Cloud, Workload Platforms & ITO 210 Private cloud Network O365/Windows 10 Offerings Workplace and Mobility 90 Digital workplace rated as Mobility market MSS differentiated Se
Slide 33: Industry-leading partner network
Industry-leading partner network Extended reach and offerings +44% YoY bookings through Partners on transactions <$100M #1 ServiceNow integrator globally #2 SAP integrator Strategic Partners #1 AWS certified architects pool Solution Partners Offering Industry #1 HDS integrator in sales revenue Regio
Slide 34: New business activities showing momentum
New business activities showing momentum New business wins New logo wins U.S. Department of Defense I am really impressed with the commitment and the passion that the team has for United […] They’re some of the best experts in the industry […] This new company is going to be completely different and
Slide 35: Differentiated go-to-market performance
Differentiated go-to-market performance Selling at the scale that our Net Promoter Score +13 to 20 increase over last 3-yrs. customers expect ~$25B revenue Win rate >65% ~6,000 accounts 10 regions and industry Renewal rate >95% dedicated units 6,500 front-line sellers and Digital growth 25 to 30% sa
Slide 36: DXC: Trusted Digital transformation partner
DXC: Trusted Digital transformation partner Positioned to thrive on market shifts & customer trends Clear customer growth model Unique end-to-end operating model – outcome-driven Leading Digital offerings and partner network Energized go-to-market already showing momentum Trust Transform Thrive 36
Slide 37: DXC Delivery
DXC Delivery Steve Hilton EVP & Head of Global Delivery Organization March 29, 2017
Slide 38: Deliver business outcomes at-scale
Deliver business outcomes at-scale Build Sell Deliver Client Advisory, Client Problem & Solutioning Account Startup & Business Offerings Sales Delivery Engagement & Commercial Management Transformation Outcomes Functions Support Services — Finance, IT, HR, Legal, MarCom, Facilities, Supply Chain 38
Slide 39: Delivery models must transform to adapt to Digital disruption
Delivery models must transform to adapt to Digital disruption Cycle III Cycle IV Cycle I Cycle II IT Stack Outsourcing Digital Mainframe Disaggregation & Globalization Disruption Pre 90s 90s – 2000s Mid 90s – ongoing Emerging/ongoing IT enablement Proliferation of tech solutions Low cost “Your mess
Slide 40: Significant delivery capabilities enable client transformations
Significant delivery Enable client capabilities transformations 25% 60% <1% Higher revenue Reduction FTEs for delivery FTE of incidents above L4 Generate efficiencies from Productivity gains help delivery transformation clients invest in Digital Efficient Operational Streamlined operations data mini
Slide 41: DXC delivery transformation will unlock value from 3 key areas
DXC delivery transformation will unlock value from 3 key areas Target margin improvement In year 1 By year 3 Delivery • Streamlined organization structure $275M $800M • Delivery workforce optimization optimization • Industrialized operations 130 bps 280 bps Facilities • Delivery center rationalizati
Slide 42: Streamlined organization structure
Streamlined organization structure From siloed delivery & service lines To an offering based integrated delivery platform Industry Applications Infrastructure Software AGM Client AGM Client AGM Client Transition Delivery Account Engagement Solution Executive Executive Manager Architect Offering Head
Slide 43: Workforce optimization
Workforce optimization Build in-country low cost delivery centers +25% Integrated 50% 75% location From 17 to 8 Increase use of global LCC locations Global delivery centers strategy Today By year 3 Optimize span of control Optimized 1:15 1:25 Streamline management layers spans & layers Span improvem
Slide 44: Industrialized operations: operational data mining
Industrialized operations Operational Data Mining, Process standardization & digitization Connect Analyze data systematically Eliminate waste operational data to identify opportunities and reduce work Operational Alert Volume Incident Volume Data Mining 40% 50% 10% productivity 8% NPS • Leverage res
Slide 45: Industrialized operations: automation
Industrialized operations Automation Highly complex and inefficient processes Optimized using machines and task robots Technology Technology Suite Straight-through processing Suite E-mail Process 1 E-mail Service abstraction Process 1 layer Phone Process 2 Phone Process 2 IM Service abstraction laye
Slide 46: Significant value opportunity from next phase of transformation
Significant value opportunity from next phase of transformation Benefits In year 1 By year 3 • Integrated delivery $275M $800M Delivery optimization 130 bps 280 bps • Single face to the customer • Digitized workflows $75M $125M Facilities rationalization 40 bps 40 bps • Scaled best practices across
Slide 47: DXC Financial Overview
DXC Financial Overview Paul Saleh EVP and Chief Financial Officer March 29, 2017
Slide 48: Uniquely positioned to lead clients on their Digital journeys
Uniquely positioned to lead clients on their Digital journeys Target talent mix Create a differentiated environment to attract, train, and retain talent Develop & Attract new Rejuvenate Next-gen retain current roles Graduate talent Re-skill & up-skill Career management 25% 50% Talent cloud DXC-Unive
Slide 49: Drivers of value creation
Drivers of value creation Stable revenue Sustainable Strong free Disciplined 1 2 3 4 growth margin expansion cash flow capital allocation 1% to 4% 700 – 800 bps 100% or more 30% growth by year 3 increase in EBIT margin of Net Income capital return to shareholders • Scale Digital offerings • Harmoniz
Slide 50: Stable revenue growth
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Stable revenue growth Diversified offerings portfolio Cloud, Workload Workplace & Platforms & ITO Mobility Cybersecurity Application services Enterprise & Cloud Apps 1% to Traditional 4% M
Slide 51: Sustainable margin expansion
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Sustainable margin expansion Policies • Harmonize corporate policies and benefits EBIT Margin Expansion alignment • Ensure consistent application of standards In year 1 • Consolidate redun
Slide 52: Sustainable margin expansion
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Sustainable margin expansion Policies • Harmonize corporate policies and benefits EBIT Margin Expansion alignment • Ensure consistent application of standards By In year year13 • Consolida
Slide 53: Policies alignment
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Policies alignment Optimized travel policies $80M Revised device management policy $20M $200M In year 1 savings Aligned 401K and benefit plans $50M $50M Harmonized health insurance benefit
Slide 54: Workforce optimization
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Workforce optimization • Consolidate redundant roles across all functions Today By year 3 • Optimize span of control and management layers 75% Streamlined 50% 60% organization • Improve LC
Slide 55: Leveraged support model
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Leveraged support model Prague, Wroclaw, Payroll Performance Bucharest Hire to retire Recruiting processing management Pontiac, MI Dalian Guadalajara Invoicing Billing Credit & Kuala Lumpu
Slide 56: Supply chain efficiency
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Supply chain efficiency Hardware 33% External labor Addressable 32% $9B 10% Software spend Priorities: 18% 7% Network Indirect • Vendor consolidation • Contracts and terms renegotiation Nu
Slide 57: Facilities rationalization
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Facilities rationalization Today Target Office sites (#) 221 102 Exit low utilization 353 173 sites sites and sub-scale locations 56 30 50 26 Delivery centers (#) 178 110 sites sites sites
Slide 58: Strong free cash flow
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Strong free cash flow Targets Actions next 3 years • Shift in business mix 700 – 800 bps EBIT • Cost efficiencies expansion • Synergy realization • Mix of global income • Transfer pricing
Slide 59: Solid financial position
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Solid financial position Ample Access to Liquidity Investment Grade Credit Profile • Maintain cash balances of $1.0B+ • Fitch: BBB+/stable • Revolving credit facility of $2.9B • Moody's: B
Slide 60: Disciplined capital allocation
Stable revenue Sustainable margin Strong free cash Disciplined capital 1 2 3 4 growth expansion flow allocation Disciplined capital Total shareholder return (%) allocation 265% 3x Re-invest in business 93% 88% 17% Target acquisitions that expand LTM Last 5 yrs Digital offerings CSC S&P Maintain inve
Slide 61: Non-GAAP EPS roadmap
Non-GAAP EPS roadmap 1% to 4% revenue 700 – 800 bps Return to growth of margin expansion shareholders Share Facilities repurchases $9.25 - $10.00 Supply chain rationalization $0.70 efficiency $0.40 Workforce $1.50 optimization Policies $2.40 alignment Revenue growth $0.40 $3.85 $0.40 Operating Lever
Slide 62: Financial targets
Financial targets FY18 FY18 - FY20 Revenue $24.0B – $24.5B 1% to 4% growth EBIT margin 11% to 12% 14% to 15% FCF as a % 100% or more 100% or more of Net Income Non-GAAP EPS $6.50 - $7.00 ~20% CAGR 62
Slide 63: DXC.technology
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