Dxc Technology Company · NYSE:DXC
Dxc Technology — Q2 2024 Earnings Presentation
48 slides from Dxc Technology's earnings presentation, Nov 1, 2023
Slide 1: 2nd Quarter FY 2024 Earnings Presentation
2nd Quarter FY 2024 Earnings Presentation November 1, 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 excluding pension income, a
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 Update on Business Performance 2 Performance of GBS and GIS 3 Q2 FY24 Financial Results and Guidance 4 Closing Remarks and Questions 4
Slide 5: Q2 FY24 Financial Performance
Q2 FY24 Financial Performance Q2 FY24 – Key Metrics and Drivers Revenue $3.44B Year-over-year organic revenue growth* of (3.6%) Adjusted EBIT Margin* 7.3% Margin up 80 bps sequentially and down 20 bps YoY Non-GAAP Diluted EPS* $0.70 EPS up $0.07 sequentially, down $0.05 YoY TTM book-to-bill of 1.02x
Slide 6: Industry Veterans Added to Senior Leadership Team
Industry Veterans Added to Senior Leadership Team • Three industry experts joined Senior Leadership team in the past five months • DXC now has three former CXOs of Fortune 500 companies leading almost 70% of our revenue Howard Boville Andrew Wilson • Leading Applications Offering • Leading Modern Wo
Slide 7: GBS – Growing High Margin / Quality Business
GBS – Growing High Margin / Quality Business • 2.4% organic revenue growth in GBS • GBS grew organically for the 10th consecutive quarter, now accounts for 49.7% of total revenue • Selling GBS offerings to GIS customers • $370M revenue from selling A&E to GIS customers in 1H24, growing thus far in F
Slide 8: GIS – Taking the Right Steps to Improve this Business
GIS – Taking the Right Steps to Improve this Business • Reduced the decline in organic revenue from -9.9% in Q1 to -9.1% in Q2 • Increased segment margin from 5.2% in Q1 to 5.8% in Q2 • Infrastructure Light model in ITO Offering. Poised to sell facilities to generate ~$200M of cash before the end of
Slide 9: Financial Performance
Financial Update Financial Performance Organic Revenue Growth Trends (YoY) Adjusted EBIT Margin Adj. EBIT ex. Pension FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 8.6% 8.7% 8.5% 8.7% 8.9% 8.0% 7.5% 1.2% 1.2% 7.3% 1.8% 1.8% 1.8% 7.0% 1.8% 1.2% 6.5% 0.6% 1.3% 0.6% (1.4%) (1.5%) 6.9% 7.5% 7.7% 6.2% 6.8
Slide 10: Q2 Key Financial Metrics
Q2 Key Financial Metrics (in $M, except EPS and shares) Q2 FY24 Q2 FY23 Change Revenue 3,436 3,566 (3.6%) Non-GAAP Gross Profit 805 791 1.8% As % of sales 23.4% 22.2% 120 bps Non-GAAP SG&A Expenses (323) (312) 3.5% As % of sales (9.4%) (8.8%) 60 bps Non-GAAP Depreciation & Amortization (272) (279) (
Slide 11: GBS/GIS Results
GBS/GIS Results GBS Organic Revenue Growth (YoY) GIS Organic Revenue Growth (YoY) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 7.0% 3.4% 3.4% 3.4% 3.3% 3.3% 2.8% (5.8%) 2.4% 2.0% (7.2%) (7.4%) (8.0%) (8.3%) (8.0%) (8.5%) 0.2% (9.1%) (9.1%) (9.9%) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 GBS Segm
Slide 12: GBS/GIS Offerings
GBS/GIS Offerings Q2 FY24 YoY Organic Revenue ($M) Book-to-Bill Growth* Analytics & Engineering 561 5.3% 0.87x Applications 762 (0.8%) 0.74x GBS Insurance Software & BPS 386 5.2% 0.60x Mergers, Acquisitions & Divestitures - - - GBS Total 1,709 2.4% 0.76x Security 109 (1.8%) 1.35x Cloud Infrastructur
Slide 13: Financial Foundation Metrics
Financial Foundation Metrics Total Debt ($M) Net Interest Expense ($M) 83 12,016 71 9,668 54 55 45 42 6,239 5,512 5,108 4,933 4,942 4,965 4,778 4,723 4,585 29 4,529 4,400 4,463 23 25 17 16 15 17 17 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q
Slide 14: Financial Foundation Metrics
Financial Foundation Metrics Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 275 494 225 219 195 202 178 175 169 163 162 159 157 146 146 245 242 236 207 177 184 159 135 125 131 115 112 100 Q1 FY21 Q2 Q3 Q4 Q1 FY22 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 Q1 FY21 Q2 Q3 Q4 Q1 FY22
Slide 15: Capital Allocation – DXC repurchased 10% of Shares YTD
Capital Allocation – DXC repurchased 10% of Shares YTD $1,200 50 Share Repurchases 45 $1,000 40 $800 7.4% of Shares O/S* 10.6% of Shares O/S* 35 $679M 30 $634M $600 25 24.4M 20 5.2% of Shares O/S* $400 18.8M 4.9% of Shares O/S* 15 $280M $214M 10 $200 11.0M 10.0M 5 $- 0 FY22 FY23 1Q24 2Q24 • Since th
Slide 16: Q3 FY24 Outlook
Q3 FY24 Outlook YoY Organic Adjusted Non-GAAP Revenue Growth EBIT Margin Diluted EPS (5.0%) – (4.0%) 7.0% – 7.5% $0.75 – $0.80 16
Slide 17: FY24 Outlook
FY24 Outlook YoY Organic Adjusted Non-GAAP Free Cash Flow Revenue Growth EBIT Margin Diluted EPS (4.0%) – (3.0%) 7.0% – 7.5% $3.15 – $3.40 $800M 17
Slide 18: Key Takeaways
Key Takeaways • Seeing the benefits of our new operating model in our financial performance and focused intently on making sure this continues • Right model and the right leaders to run the global offerings. Three ex-CXO’s running Applications, ITO, and Modern Workplace • Positive progress from Q1 t
Slide 19: TECHNOLOGY
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Slide 20: Supplemental Information
Supplemental Information Q2 FY24 Quarterly Result Details Non-GAAP Reconciliations Definitions 20
Slide 21: Organic Revenue Growth and Backlog
Organic Revenue Growth and Backlog GBS ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 GBS revenue 1,758 1,713 1,738 1,751 6,960 1,703 1,709 YoY GBS revenue growth (6.8%) (8.5%) (10.7%) (7.5%) (8.4%) (3.1%) (0.2%) Foreign currency 5.9% 7.4% 6.4% 3.8% 5.9% 0.8% (1.6%) Acquisitions and
Slide 22: Organic Revenue Growth and Book-to-Bill by Offering
Organic Revenue Growth and Book-to-Bill by Offering Organic Revenue Growth (YoY) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 GBS 2.8% 3.4% 0.2% 3.3% 2.4% 3.3% 2.4% Analytics & Engineering 15.7% 14.0% 11.7% 8.5% 12.3% 8.8% 5.3% Applications (2.0%) (1.1%) (6.8%) (0.5%) (2.7%) (0.7%) (0.
Slide 23: DXC Insurance Key Metrics
DXC Insurance Key Metrics Total Total (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 FY22 FY23 Insurance Software Revenue 120 119 121 124 484 118 116 121 140 495 129 131 Insurance Business Process as a Service 147 146 146 149 588 142 148 150 150 590 153 159 R
Slide 24: Services and Resale Revenue by Offering
Services and Resale Revenue by Offering Services Revenue ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Analytics & Engineering 496 515 523 547 2,081 537 552 Applications 754 725 724 750 2,953 739 729 Insurance Software & BPS 367 362 370 387 1,486 380 384 GBS 1,617 1,602 1,617 1,684
Slide 25: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Segment revenue 1,887 1,873 1,946 1,892 7,598 1,758 1,713 1,738 1,751 6,960 1,703 1,709 Segment profit 272 298 315 275 1,160 210 218 244 24
Slide 26: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation EBIT to Adjusted EBIT ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Net income (loss) 282 (187) 102 539 736 103 28 61 (758) (566) 42 99 Income tax expense (benefit) 142 (61) 64 260 405 19 26
Slide 27: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures COS, SG&A, D&A ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Cost of services 3,255 3,088 3,179 3,161 12,683 2,930 2,775 2,799 2,742 11,246 2,719 2,633 Less: Impairment losses — — — — — —
Slide 28: Non-GAAP Reconciliation – Income Statement Measures
Supplemental Financial Information Non-GAAP Reconciliation – Income Statement Measures EBIT to EPS (in $M, except EPS) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Adjusted EBIT 332 346 355 342 1,375 259 269 309 320 1,157 224 251 Interest expe
Slide 29: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS (in $M, except EPS) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Net income (loss) attributable to DXC 278 (188) 98 530 718 102 27 59 (756) (568) 36 99 Restructuring costs 57 11 32 53 253 25 43 39 65
Slide 30: Non-GAAP Reconciliation – EPS
Non-GAAP Reconciliation – EPS Non-GAAP EPS Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 GAAP EPS (diluted) $ 1.07 $ (0.74) $ 0.38 $ 2.14 $ 2.81 $ 0.43 $ 0.12 $ 0.25 $ (3.38) $ (2.48) $ 0.17 $ 0.49 Restructuring costs 0.22 0.43 0.13 0.21 0.99 0
Slide 31: 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 Q1 FY24 Q2 FY24 GBS 72,500 72,786 75,587 76,718 76,718 75,527 76,233 76,284 75,945 75,945 74,372 73,720 GIS 46,540 47,868 49,438 50,333 50,333 50,221 49,252 48,273
Slide 32: Income Statement Drivers – Other Income and Pension Income
Income Statement Drivers – Other Income and Pension Income Other Income ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Non-service cost components of net periodic (97) (96) (87) (786) (1,066) (67) (60) (60) 1,367 1,180 (37) (36) pension inc
Slide 33: Reconciliation – Adjusted EBIT Margin ex. Pension Income
Reconciliation – Adjusted EBIT Margin ex. Pension Income (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Revenue 4,141 4,027 4,089 4,008 16,265 3,707 3,566 3,566 3,591 14,430 3,446 3,436 Adjusted EBIT (1) 332 346 355 342 1,375 259 269 309
Slide 34: DXC Historical Balance Sheet
DXC Historical Balance Sheet Assets (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Cash and cash equivalents 2,460 2,699 2,919 2,672 2,672 2,209 2,260 2,091 1,858 1,858 1,576 1,412 Receivables, net 4,081 3,821 3,670 3,854 3,854 3,693 3,4
Slide 35: DXC Historical Balance Sheet
DXC Historical Balance Sheet Liabilities & Equity (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Short term debt & current LT debt 817 745 706 900 900 904 834 873 500 500 694 672 Accounts payable 857 724 759 840 840 795 857 852 782 782 7
Slide 36: Net Debt and Leverage Ratios
Net Debt and Leverage Ratios (in $M, except ratios) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Short term debt & current LT debt 817 745 706 900 900 904 834 873 500 500 694 672 LT debt, net of current maturities 4,116 4,363 4,236 4,065 4,065
Slide 37: DXC Working Capital Key Metrics
DXC Working Capital Key Metrics (in $M, except days) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Billed & unbilled accounts receivable 3,205 3,053 2,905 3,065 3,065 2,852 2,724 2,689 2,635 2,635 2,573 2,458 Revenue 4,141 4,027 4,089 4,008 16,
Slide 38: DXC Cash Flows from Operating Activities
DXC Cash Flows from Operating Activities Cash Flows from Operating Activities Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 (in $M) Net Income 282 (187) 102 539 736 103 28 61 (758) (566) 42 99 Depreciation & amortization 427 452 430 433 1,742 3
Slide 39: DXC Key Cash Flow Drivers
DXC Key Cash Flow Drivers (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Payments on finance leases & borrowings for asset (494) (177) (184) (135) (990) (159) (115) (125) (112) (511) (131) (100) financing Less: Originations Capital expen
Slide 40: DXC Cash Flow Drivers
DXC Cash Flow Drivers (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Cash paid for restructuring (115) (86) (78) (75) (354) (48) (63) (43) (52) (206) (43) (32) Cash paid for TSI (1) (9) (3) (11) (3) (26) (2) (4) (6) (4) (16) (1) (3) Tota
Slide 41: DXC Free Cash Flow
DXC Free Cash Flow Free Cash Flow (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Cash flows from operating activities (29) 563 696 271 1,501 163 212 625 415 1,415 127 248 Less capex Purchase of property & equipment (98) (67) (52) (37) (2
Slide 42: Q2 FY24 Non-GAAP Reconciliation: Organic Revenue – Offerings
Q2 FY24 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 561 762 386 109 1,209 409 - $ 3,436
Slide 43: Currency Impact
Currency Impact Quarterly averages Q1 Q2 Q3 Q4 Q1 Q2 YoY Spot Q3 Q4 FY24E (US$ per currency) FY23 FY23 FY23 FY23 FY24 FY24 Chg. 10/17/23 FY24E FY24E Euro 1.07 1.01 1.02 1.07 1.09 1.09 8% 1.05 3% (2%) 3% Pound sterling 1.26 1.18 1.17 1.22 1.25 1.27 8% 1.22 4% 0% 2% Australian dollar 0.72 0.68 0.66 0.
Slide 44: Q2 FY24 Adjusted EBITDA and Free Cash Flow
Q2 FY24 Adjusted EBITDA and Free Cash Flow - All values in millions - Capex compares to depreciation of $112M, Working capital & other includes the impact of non-cash pension income ($21M), and cash taxes paid are net of refunds 44
Slide 45: FCF 2H Walk to FY Guidance of $800M
FCF 2H Walk to FY Guidance of $800M *Other includes Working Capital, CapEx, Restructuring, Interest, and other items 45
Slide 46: 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 47: 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, separat
Slide 48: TECHNOLOGY
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DXC Technology Company — Q2 2024 Earnings Presentation on 6ix