Dxc Technology Company · NYSE:DXC
Dxc Technology — Q3 2022 Earnings Presentation
40 slides from Dxc Technology's earnings presentation, Feb 2, 2022
Slide 1: 3rd Quarter FY 2022 Earnings Presentation
3rd Quarter FY 2022 Earnings Presentation February 2, 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, Non-GAAP income from continuing operation
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.” These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statem
Slide 4: Agenda for Today
Agenda for Today 1 Overview of Q3 FY22 Results 2 Progress on Our Transformation Journey 3 Q3 FY22 Financial Results and Guidance 4 Closing Remarks 4
Slide 5: Continued Strong Performance in Q3 – Key Metrics and Drivers
Continued Strong Performance in Q3 FY22 Q3 FY22 – Key Metrics and Drivers Organic revenue growth* improved to (1.4%); Revenue $4.09B Fx. negatively impacted by $26M vs. guidance Adjusted EBIT Margin* 8.7% 170 bps margin expansion YoY $5 billion in bookings in Q3; book-to-bill of 1.08x on a Book-to-B
Slide 6: Transformation Journey – Building the Foundation in FY22
DXC Investor Day Transformation Journey – Building the Foundation in FY22 Inspire and Take Care Focus on Optimize Costs Seize the Market Financial Foundation of Our Colleagues Customers Increase Employee Stabilize Year over Expand Book-to-Bill: Financial Engagement: Year Organic Adjusted Foundation:
Slide 7: Transformation Journey: Inspire and Take Care of Our Colleagues
Transformation Journey Proof points: • Hiring is a major focus to capture more open demand and project work • Successfully increased head count by 3% in Q3 FY22 as compared to Q2 and increased project work by 13% Inspire and • Continue to see that our people-first strategy and our virtual-first mode
Slide 8: Transformation Journey: Focus on Customers
Transformation Journey Proof points: • Key metric of customer satisfaction – Net Promoter Score (NPS) • 12-month rolling NPS is now at the top end of the industry best practice range of 20 to 30 Focus on • Running mission critical systems builds trust with our customers; leveraging Customers those r
Slide 9: Transformation Journey: Optimize Costs
Transformation Journey Proof points: • Portfolio shaping is accretive to our valuation and improves our focus • Expect sales of businesses to result in an additional $500 million of proceeds within the next 12 months Optimize • At the same time, we are focused on prudently investing in assets that C
Slide 10: Transformation Journey: Seize the Market
Transformation Journey Proof points: • Strong bookings of $5 billion drive book-to-bill of 1.23x in Q3 and 1.08x TTM • 58% of Q3 FY22 bookings were new work and 42% renewals Seize the • ITO organic revenue growth improved from (17.7%) to (1.9%) Market • Modern Workplace book-to-bill of 1.11x – expec
Slide 11: Transformation Journey Remains on Track
Financial Update Transformation Journey Remains on Track Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 8.0% 8.6% 8.7% 7.5% 7.0% ~0.2% 6.2% ~0.2% (1.4%) (2.4%) 4.2% ~2.2% (3.7%) 7.3% ~2.2% 6.8% (6.5%) 4.0% 2.0% (9.1%) (10.1%) (9.7%) Q
Slide 12: Results by Segment
Results by Segment GBS Organic Revenue Growth (YoY) GIS Organic Revenue Growth (YoY) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 7.0% 3.4% 2.0% (8.0%) (8.3%) (9.3%) (9.1%) (3.4%) (11.8%) (6.0%) (5.9%) (12.6%) (13.0%) (6.9%) GBS Segm
Slide 13: Enterprise Technology Stack
Enterprise Technology Stack Q3 FY22 YoY Organic TTM Revenue ($M) Book-to-Bill Growth Book-to-Bill Analytics and Engineering 545 18.7% 1.46x 1.29x Applications 1,268 4.8% 1.28x 1.16x GBS Business Process Services (BPS) 116 (8.3%) 0.50x 1.00x Mergers, Acquisitions, and Divestitures 17 GBS Total 1,946
Slide 14: Building the Financial Foundation
Building the Financial Foundation 1 2 3 4 5 Financial Strengthen Cash Restructuring Capital Discipline Balance Sheet Generation & TSI Allocation • True earnings power • Maintain investment • Improve cash flow • Reduce expense to • Investing in our grade credit profile rating generation ~$100M in FY2
Slide 15: Evidence We Are Building Our Financial Foundation
Financial Update Evidence We Are Building Our Financial Foundation Total Debt ($M) Net Interest Expense ($M) 83 12,016 71 9,668 54 55 42 45 6,239 5,512 4,933 5,108 4,942 23 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Restructuring/T
Slide 16: Evidence We Are Building Our Financial Foundation
Financial Update Evidence We Are Building Our Financial Foundation Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 275 240 245 242 236 236 228 225 225 219 219 210 211 207 191 177 184 162 169 163 159 146 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY20 FY
Slide 17: Cash Generation
Cash Generation (in millions) Q3 FY22 YTD FY22 Q3 FY21 YTD FY21 Cash from operations $ 696 $ 1,230 $ (187) $ 404 Less capital expenditures Purchase of property and equipment (52) (217) (59) (215) Payments for transition and transformation contract costs (45) (152) (53) (189) Software purchased and d
Slide 18: Trended Free Cash Flow
Trended Free Cash Flow $550M $404M $303M ($106M) ($304M) ($406M) ($443M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 18
Slide 19: Expect $1B of Self-Funded Share Repurchases in Next Year
Expect $1B of Self-Funded Share Repurchases in Next Year Target $5.0B debt balance $4.9B as of Q3 FY22 Debt & Lease Repayment Maintain $2.5B cash to operate* 20% $2.9B as of Q3 FY22 Excess Generate $500M+ through portfolio shaping by end of Q3 FY23 Targeting deals that are EBIT/FCF neutral Cash Allo
Slide 20: Q4 FY22 Outlook
Q4 FY22 Outlook YoY Organic Adjusted Non-GAAP Revenue Revenue Growth EBIT Margin Diluted EPS $4.11B – $4.15B (1.2%) – (1.7%) 8.7% – 9.0% $0.98 – $1.03 Q4 FY22 Financial Targets 20
Slide 21: FY22 Outlook
FY22 Outlook YoY Organic Adjusted Non-GAAP FCF Revenue Revenue Growth EBIT Margin Diluted EPS ~$16.4B (2.2%) – (2.3%) 8.5% – 8.6% $3.64 – $3.69 >$650M (prev. $500M) Note: Fx. rates for prior revenue guidance of $16.4B-$16.5B: Euro $1.16, Sterling $1.36 and AUD $0.74. Fx. rates for updated revenue gu
Slide 22: 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 ~$1.5B FY24 Financial Targets Reaffirmed 22
Slide 23: FY22 Goals
Financials FY22 Goals ✓ ❑ Win in the market – book to bill >1 ✓ ❑ Sequential revenue stability ✓ ❑ Strengthen the balance sheet ❑ Achieve organic revenue growth of (1%) to (2%) in FY22 ❑ Remediate material weakness and improve governance score ✓ ❑ Reduce restructuring and TSI ✓ ❑ Continued margin ex
Slide 24: Supplemental Information
Supplemental Information Q3 FY22 Quarterly Result Details Non-GAAP Reconciliations Definitions 24
Slide 25: Organic Revenue Growth
Organic Revenue Growth GBS ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 GBS revenue 2,174 2,242 1,921 1,999 8,336 1,887 1,873 1,946 YoY GBS revenue growth 0.7% (1.9%) (18.6%) (13.4%) (8.5%) (13.2%) (16.5%) 1.3% Foreign currency 1.8% (1.5%) (2.2%) (4.2%) (1.6%) (4.7%) (0.9%
Slide 26: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS ($M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Total FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Segment revenue 2,159 2,285 2,359 2,308 9,111 2,174 2,242 1,921 1,999 8,336 1,887 1,873 1,946 Segment profit 366 359 353 223 1,301
Slide 27: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 EBIT to Adjusted EBIT ($M) T4Q PT4Q FY20 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY21 FY22 FY22 FY22 Net income (loss) 168 (2,115) 90 (3,501) (5,358) (199) (246) 1,103 (804) (146) 282 (187) 102 (607) (2,843
Slide 28: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 COS, SG&A, D&A ($M) FY20 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY21 FY22 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 Less: Impairment loss
Slide 29: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures Total Total EBIT to EPS (in $M, except EPS) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 FY20 FY21 Adjusted EBIT(1) 652 529 528 352 2,061 190 283 300 329 1,102 332 346 355 Interest expense 91 104 93 95 383
Slide 30: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Non-GAAP EPS (in $M, except EPS) FY20 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY21 FY22 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 Restructuring c
Slide 31: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Non-GAAP EPS FY20 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY21 FY22 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 Restructuring costs
Slide 32: DXC Historical Balance Sheet
DXC Historical Balance Sheet Total Assets (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 FY20 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 Receivables, net 5,234 4,611 4,619 4,392 4
Slide 33: DXC Historical Balance Sheet
DXC Historical Balance Sheet Liabilities & Equity (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Total FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 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 Accounts payable 1,517 1,603
Slide 34: DXC Cash Flows from Operating Activities
DXC Cash Flows from Operating Activities Cash Flows from Operating Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Total FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Activities (in $M) Net income 168 (2,115) 90 (3,501) (5,358) (199) (246) 1,103 (804) (146) 282 (187) 102 Depreciation & amo
Slide 35: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Total FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Payments on finance leases & (210) (211) (225) (219) (865) (245) (242) (207) (236) (930) (494) (177) (184) borrowings for asset financing Less: Originations
Slide 36: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Total FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Cash paid for restructuring (92) (105) (76) (61) (334) (61) (99) (149) (133) (442) (115) (86) (78) Cash paid for TSI (1) (94) (41) (68) (54) (257) (88) (81)
Slide 37: DXC Free Cash Flow
DXC Free Cash Flow Total Free Cash Flow (in $M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 FY20 Cash flows from operating (66) 1,651 477 288 2,350 119 472 (187) (280) 124 (29) 563 696 activities Less capex Purchase of property & (105) (87) (48)
Slide 38: Organic Revenue – Enterprise Technology Stack
Q3 FY22 Non-GAAP Reconciliation: Organic Revenue – Enterprise Technology Stack Business Acquisitions Analytics and Process Cloud and IT Modern (in $M) Applications and Total Engineering Services Security Outsourcing Workplace Divestitures (BPS) Revenue $ 545 $ 1,268 $ 116 $ 471 $ 1,111 $ 561 $ 18 $
Slide 39: 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 40: TECHNOLOGY
XO TECHNOLOGY
DXC Technology Company — Q3 2022 Earnings Presentation on 6ix