Dxc Technology Company · NYSE:DXC
Dxc Technology — Q4 FY2021 Earnings Presentation
38 slides from Dxc Technology's earnings presentation, May 26, 2021
Slide 1: 4th Quarter FY 2021 Earnings Presentation
4th Quarter FY 2021 Earnings Presentation May 26, 2021
Slide 2: Non-GAAP Financial Measures
Non-GAAP Financial Measures We present non-GAAP financial measures of performance which are derived from the statements of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes (“EBIT”), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income
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 Q4 FY21 Results 2 Progress on Our Transformation Journey 3 Q4 FY21 Financial Results, FY22 and FY24 Guidance 4 Closing Remarks 4
Slide 5: Continued Strong Performance in Q4 FY21
Continued Strong Performance in Q4 FY21 Q4 FY21 – Key Metrics and Drivers Revenues $4.39B Strong progress delivering quarter-on-quarter revenue stabilization Adjusted EBIT Margin (1) 7.5% Sequential improvement driven by effective cost optimization Book-to-Bill 1.08x Continued success in bringing th
Slide 6: Transformation Journey
Transformation Journey Proof points: • Investing in our customers is paying off: Focus on – Delivering for customers Customers – Keeping the work we have and generating new business – Driving deeper customer relationships • Confident we can flatten organic revenue growth in FY22 6
Slide 7: Transformation Journey
Transformation Journey Proof points: • Continued progress on cost optimization program Optimize Costs • Achieved $550 million of cost savings in FY21 • Cost optimization program was driver of Q4 FY21 adjusted EBIT margin (1) of 7.5% • Expect to continue expanding margins in Q1 FY22 (1) This is a non
Slide 8: Transformation Journey
Transformation Journey Proof points: • Cross-selling to existing accounts and winning new work Seize the Market Opportunity • Book-to-bill of 1.08x in Q4 FY21 – fourth quarter in a row with >1x book-to-bill • 53% of Q4 FY21 bookings were new work and 47% were renewals • Expect another quarter with a
Slide 9: Moving from Sequential to YoY Organic Growth
Moving from Sequential to YoY Organic Growth Sequential Organic Growth % Change YoY Organic Growth % Change Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 1.7% 0.4% (2.4%) (6.8%) (7.0%) (9.8%) (11.0%) (10.5%) Organic revenue defined on Slide 37 of this presentation 9
Slide 10: Financial Priorities
Financial Priorities 1 2 3 4 5 Financial Strengthen Cash Restructuring Capital Foundation Balance Sheet Generation & TSI Allocation • True earnings power • Maintain investment • Improve cash flow • Reduce expense to • Investing in our grade credit rating generation ~$550M in FY22 people and offering
Slide 11: Quarterly Results
Quarterly Results Commentary U.S. State & Local HHS $4.5B $4.6B $4.4B • Continued sequential revenue stabilization $4.3B $0.4B $0.4B • Investments in our customers are paying off Revenue $4.2B • Organic (1) revenues increased 0.4% sequentially, and $4.1B declined 7.0% year-over-year Q1 FY21 Q2 FY21
Slide 12: Global Business Services (GBS)
Global Business Services (GBS) Commentary U.S. State & Local HHS • “Top of the stack” revenues increased 4.1% sequentially $2.2B $2.2B $1.9B $2.0B $0.4B $0.4B • Organic (1) revenues increased 2.0% sequentially, and Revenue declined 4.0% year-over-year $1.8B $1.8B • Strength in Applications new busin
Slide 13: Global Infrastructure Services (GIS)
Global Infrastructure Services (GIS) Commentary $2.3B $2.3B $2.4B $2.4B • Revenue (1) increased 0.8% sequentially • Organic (2) revenues declined 0.9% sequentially, and Revenue declined 9.3% year-over-year • ITO revenues were positive Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 • Q4 FY21 GIS profit margins (3)
Slide 14: Enterprise Technology Stack – Q4 FY21 Performance
Enterprise Technology Stack – Q4 FY21 Performance(1) Q1 FY21 Q2 FY21 Q3 FY21(2) Q4 FY21(2) QtQ Book- QtQ Book- QtQ Book- QtQ Book- Growth to-Bill Growth to-Bill Growth to-Bill Growth to-Bill (2.0%) 1.33x 4.0% 1.39x 4.6% 1.20x 2.0% 1.46x (8.7%) 1.50x (2.6%) 0.85x 2.6% 1.46x 1.9% 1.06x Transformation
Slide 15: Cash Flow
Cash Flow (in millions) Q4 FY21 FY21 Cash From Operations $ (280) $ 124 Less Capital Expenditures Purchase of property and equipment (46) (261) Payments for transition and transformation contract costs (72) (261) Software purchased and developed (45) (254) Free Cash Flow (443) (652) Payments on fina
Slide 16: Restructuring and TSI
Restructuring and TSI $1,148M $866M $909M $570M $550M $300M $100M FY18 FY19 FY20 FY21 FY22 FY23 FY24 Lower Restructuring and TSI Expense Drive >$500 Million in FCF in 3 Years 16
Slide 17: Continue Strengthening Our Balance Sheet
Continue Strengthening Our Balance Sheet • Committed to investment grade rating Outstanding Debt profile; demonstrated by our actions $12.0B $9.7B • Reduced debt by $6.5 billion in past 3 $6.2B $5.5B quarters • Expect to approach $5 billion in debt outstanding in the first half of FY22 Q1 FY21 Q2 FY
Slide 18: Q1 FY22 Outlook
Q1 FY22 Outlook YoY Organic Adjusted Non-GAAP Revenue Revenue EBIT Margin EPS Growth $4.08B – (2%) – (4%) 7.4% – 7.8% $0.72 – $0.76 $4.13B Q1 FY22 Financial Targets Organic revenue defined on Slide 37 of this presentation Adjusted EBIT margin is a non-GAAP measure 18
Slide 19: FY22 Outlook
FY22 Outlook YoY Organic Adjusted Non-GAAP Annual FCF Revenue Revenue EBIT Margin EPS (CFO less Cap. Ex.) Growth $16.6B – (1%) – (2%) 8.2% – 8.7% $3.45 – $3.65 $500M $16.8B FY22 Financial Targets Organic revenue defined on Slide 37 of this presentation Adjusted EBIT margin is a non-GAAP measure 19
Slide 20: FY24 Outlook
FY24 Outlook YoY Organic Adjusted Non-GAAP Annual FCF Revenue EBIT Margin EPS (CFO less Cap. Ex.) Growth 1% – 3% 10% – 11% $5.00 – $5.25 ~$1.5B Longer-Term Financial Targets Organic revenue defined on Slide 37 of this presentation Adjusted EBIT margin is a non-GAAP measure 20
Slide 21: Continued Positive Momentum
Continued Positive Momentum Past Today People/Culture Not engaged Engaged Customers Challenging Positive Revenue/Margin Trajectory Declining Improving Marketplace Losing Winning Balance Sheet High debt Strengthened • Delivered on our commitments in FY21 • FY22 will build the foundation for growth •
Slide 22: Supplemental Information
4th Quarter FY 2021 Supplemental Information 22
Slide 23: 4th Quarter Results
4th Quarter Results Q4 FY20 Q4 FY21 FY20 FY21 Revenue ($M) $ 4,815 $ 4,385 $ 19,577 $ 17,729 – YoY Growth – GAAP (8.9%) (9.4%) – YoY Growth – cc (1) (13.5%) (11.1%) – YoY Growth – organic (1) (7.0%) (9.6%) – QtQ Growth – GAAP 2.3% n.a. – YoY Growth – cc (1) 0.7% n.a. – YoY Growth – organic (1) 0.4%
Slide 24: Global Business Services (GBS)
Global Business Services (GBS) Q4 FY20 Q4 FY21 FY20 FY21 Revenue ($M) $ 2,308 $ 1,999 $ 9,111 $ 8,336 – YoY Growth – GAAP (13.4%) (8.5%) – YoY Growth – cc (1) (17.6%) (10.1%) – YoY Growth – organic (1) (4.0%) (6.6%) – QtQ Growth – GAAP 4.1% n.a. – YoY Growth – cc (1) 2.8% n.a. – YoY Growth – organic
Slide 25: Global Infrastructure Services (GIS)
Global Infrastructure Services (GIS) Q4 FY20 Q4 FY21 FY20 FY21 Revenue ($M) $ 2,507 $ 2,386 $ 10,466 $ 9,393 – YoY Growth – GAAP (4.8%) (10.3%) – YoY Growth – cc (1) (9.8%) (11.9%) – YoY Growth – organic (1) (9.3%) (11.8%) – QtQ Growth – GAAP 0.8% n.a. – YoY Growth – cc (1) (1.0%) n.a. – YoY Growth
Slide 26: Consolidated Statements of Operations
Consolidated Statements of Operations (preliminary and unaudited) in millions, except per-share amounts Q4 FY20 Q4 FY21 FY20 FY21 Revenue $ 4,815 $ 4,385 $ 19,577 $ 17,729 Costs of services 3,773 3,561 14,901 14,086 Selling, general and administrative 536 471 2,050 2,066 Depreciation and amortizatio
Slide 27: Non-GAAP Reconciliation: Organic Revenue
Non-GAAP Reconciliation: Organic Revenue Year-Over-Year Organic Revenue Growth Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Total Revenue Growth (7.9)% (6.1)% (14.6)% (8.9)% (9.4)% Foreign Currency (1) 2.0% (1.6)% (2.3)% (4.6)% (1.7)% Acquisitions (3.8)% (0.3)% (0.1)% (0.4)% (1.1)% Dispositions (1.3)%
Slide 28: Non-GAAP Reconciliation: Organic Revenue
Non-GAAP Reconciliation: Organic Revenue Sequential Organic Revenue Growth Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total Revenue Growth (6.5)% 1.2% (5.8)% 2.3% Foreign Currency (1) 0.8% (3.1)% (1.3)% (1.6)% Acquisitions (0.1)% — % — % (0.3)% Dispositions (1.0)% (0.5)% 8.8% — % Organic (1) Revenue Growth (6.
Slide 29: Reconciliation of Non-GAAP Results
Reconciliation of Non-GAAP Results Q4 FY21 Transaction, Pension and Amortization of Gain on Debt Restructuring Separation and Impairment OPEB Actuarial Non-GAAP (in millions except EPS) GAAP Costs Integration- Acquired Losses Disposition of and Settlement Extinguishment Tax Adjustment Results (2) In
Slide 30: Bookings
Bookings (1) FY20 FY21 $1.8B $2.2B $2.5B $2.3B $2.2B $3.5B $2.7B $2.2B $2.4B $2.4B Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Global Business Services Global Infrastructure Services (1) The summation of the quarter bookings number may not equal the full-year number due to rounding 30
Slide 31: Non-GAAP Reconciliation: EBIT and Adjusted EBIT
Non-GAAP Reconciliation: EBIT and Adjusted EBIT (in millions) Q4 FY20 Q4 FY21 FY20 FY21 Net loss $ (3,501) $ (804) $ (5,358) $ (146) Income tax (benefit) expense (61) 11 130 800 Interest income (35) (22) (165) (98) Interest expense 95 77 383 361 EBIT (3,502) (738) (5,010) 917 Restructuring costs 4 1
Slide 32: Reconciliation: Segment Profit to Income Before Taxes
Reconciliation: Segment Profit to Income Before Taxes (in millions) Q4 FY20 Q4 FY21 FY20 FY21 GBS profit $ 223 $ 315 $ 1,301 $ 1,120 GIS profit 192 98 1,007 245 All other loss (63) (84) (247) (263) Interest income 35 22 165 98 Interest expense (95) (77) (383) (361) Restructuring costs (4) (110) (252
Slide 33: Q4 FY21 Non-GAAP Results
Q4 FY21 Non-GAAP Results Transaction, Pension and Amortization of Gain on Debt Restructuring Separation and Impairment OPEB Actuarial Non-GAAP (in millions except EPS) GAAP Acquired Disposition of Extinguishment Tax Adjustment Costs Integration- Losses and Settlement Results (2) Intangible Assets Bu
Slide 34: FY21 Non-GAAP Results
FY21 Non-GAAP Results Transaction, Amortization of Pension and Gain on Debt Restructuring Separation and Acquired Impairment OPEB Actuarial Tax Non-GAAP (in millions except EPS) GAAP Disposition of Extinguishmen Costs Integration- Intangible Losses and Settlement Adjustment Results (2) Businesses t
Slide 35: Q4 FY20 Non-GAAP Results
Q4 FY20 Non-GAAP Results Transaction, Pension and Amortization of Goodwill Restructuring Separation and OPEB Actuarial Tax Non-GAAP (in millions except EPS) GAAP Acquired Impairment Costs Integration- and Settlement Adjustment Results (2) Intangible Assets Losses Related Costs Losses Cost of service
Slide 36: FY20 Non-GAAP Results
FY20 Non-GAAP Results Transaction, Pension and Amortization of Goodwill Restructuring Separation and Gain on OPEB Actuarial Tax Non-GAAP (in millions except EPS) GAAP Acquired Impairment Costs Integration- Arbitration Award and Settlement Adjustment Results (2) Intangible Assets Losses Related Costs
Slide 37: 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 38: DXC Technology
Bx¢ DXC.technology
DXC Technology Company — Q4 FY2021 Earnings Presentation on 6ix