Dxc Technology Company · NYSE:DXC
Dxc Technology — Q4 2020 Earnings Presentation
34 slides from Dxc Technology's earnings presentation, May 28, 2020
Slide 1: Earnings Presentation: 4th Quarter FY 2020
May 28, 2020 Earnings Presentation: 4th Quarter FY 2020 4th Quarter FY 2020 Earnings Presentation May 28, 2020 1
Slide 2: Non-GAAP Financial Measures
Non-GAAP Financial Measures We present non-GAAP financial measures of performance which are derived from the unaudited condensed consolidated statements of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes (“EBIT”), adjusted EBIT, non-GAAP income before
Slide 3: Forward-Looking Statements
Forward-Looking Statements All statements in this press release 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 state
Slide 4: Agenda for Today
Agenda for Today 1 “Big Picture” Context 2 Customer Feedback 3 Update on Our Transformation Journey 4 Fourth Quarter, Full Year FY20 Results and Liquidity 5 Closing Remarks 4th Quarter FY 2020 Earnings Presentation May 28, 2020 4
Slide 5: Context and Operational Performance
Context and Operational Performance • Solid results in the quarter ‒ Good progress with customers ‒ Improving customer delivery ‒ Stronger customer relationships • Fixed 35 of 40 Challenged accounts ‒ $2.1B in TCV over the last two quarters from these accounts • Increasing focus on top 200 accounts
Slide 6: Thank You, DXC!
THANK YOU, DXC! Workplace and Mobility On-Prem IT Infrastructure and Cloud Enabling Innovation and Execution “The DXC workplace services team that supports us has really “First and foremost, thanks for your note… DXC and [our stepped up their game. We were seeing evidence of that prior to “Anticipat
Slide 7: Building a Strong Foundation for Growth
Building a Strong Foundation for Growth • Take care of customers • Take care of people who do the detailed work for customers • Revenue run-off not caused by cloud trends, but due to – Sub-optimal delivery – Weakening customer relationships • Taking corrective actions to stem future revenue run-off
Slide 8: Focusing on Our People
Focusing on Our People • Health and safety of our people is a top priority • Hiring talented people on accounts and in delivery • Rewarding people closest to customers • COVID-19 command center 4th Quarter FY 2020 Earnings Presentation May 28, 2020 8
Slide 9: Transformation Journey
Transformation Journey Focus on Optimize Seize the Market Customers Costs Opportunity 4th Quarter FY 2020 Earnings Presentation May 28, 2020 9
Slide 10: Transformation Journey – Optimize Costs
Transformation Journey – Optimize Costs • Simplify management layers • Right-size cost structure to revenue Optimize Costs • Expect to eliminate ~$700 million of costs on an annualized basis ‒ $550 million in FY21 ‒ ~4,500 people or ~3.5% of our workforce to be impacted • Continue to hire and exit p
Slide 11: Transformation Journey – Seize the Market Opportunity
Transformation Journey – Seize the Market Opportunity • What DXC does is incredibly relevant • Renewed demand for on-prem infrastructure technology • IT estate assessment with Virtual Clarity validates strategy Seize the Market ‒ Worked with 95 of our key accounts to assess evolution to cloud Opport
Slide 12: Reconciliation of Non-GAAP Results
Reconciliation of Non-GAAP Results Q4 FY20 Transaction, Amortization of Pension and OPEB Restructuring Separation and Goodwill Gain on Arbitration Non-GAAP (in millions except EPS) GAAP Acquired Intangible Actuarial and Tax Adjustment Costs Integration-Related Impairment Losses Award Results Assets
Slide 13: 4th Quarter Results
4th Quarter Results Q4 FY FY20 FY19 FY20 FY19 Revenue ($M) $ 4,815 $ 5,280 $ 19,577 $ 20,753 – YoY Growth – GAAP (8.8%) (5.7%) – YoY Growth – cc (6.9%) (3.5%) – QtQ Growth – GAAP (4.1%) — – QtQ Growth – cc (3.3%) — Adjusted EBIT ($M) 352 827 2,061 3,269 Adjusted EBIT Margin (%) 7.3% 15.7% 10.5% 15.8
Slide 14: Global Business Services (GBS)
Global Business Services (GBS) Q4 FY20 Q4 FY19 FY20 FY19 Revenue ($M) $ 2,308 $ 2,191 $ 9,111 $ 8,684 – YoY Growth – GAAP 5.3% 4.9% – YoY Growth – cc 7.3% 7.0% – QtQ Growth – GAAP (2.2%) — – QtQ growth – cc (1.5%) — GBS Profit ($M) 223 447 1,301 1,645 GBS Profit Margin (%) 9.7% 20.4% 14.3% 18.9% Boo
Slide 15: Global Infrastructure Services (GIS)
Global Infrastructure Services (GIS) Q4 FY20 Q4 FY19 FY20 FY19 Revenue ($M) $ 2,507 $ 3,089 $ 10,466 $ 12,069 – YoY Growth – GAAP (18.8%) (13.3%) – YoY Growth – cc (16.9%) (11.1%) – QtQ Growth – GAAP (5.8%) — – QtQ growth – cc (4.9%) — GIS Profit ($M) 192 436 1,007 1,911 GIS Profit Margin (%) 7.7% 1
Slide 16: Enterprise Technology Stack – Performance Update
Enterprise Technology Stack – Performance Update Q4 FY20 QtQ Growth YoY Growth Book to Bill FY20 Revenue (6.0%) 71.3% 1.3x $1.8B* 0.6% (0.2%) 0.8x $5.5B 3.1% 7.0% 1.1x $2.0B (7.1%) (20.6%) 1.0x $5.5B (2.7%) (3.4%) 1.0x $14.8B* Strategic Alternatives – Q4 FY20 (5.1%) QtQ and (16%) YoY; FY20 Revenues
Slide 17: Financial Highlights
Financial Highlights Q4 FY20 FY20 Cash Flow • Adjusted Free Cash Flow $131M $1.34B Performance • Cap Ex — Including Payments on Capital Leases $368M $1,377M • Cap Ex as a % of Revenue 7.6% 7.0% Q4 FY20 FY20 Capital to Capital to • Cash Dividends $53M $214M Shareholders Shareholders $736M • Share Rep
Slide 18: Enhancing Liquidity and Financial Flexibility
Enhancing Liquidity and Financial Flexibility • Increased cash position ‒ Over $5.5 billion of cash on balance sheet as of April 30, 2020 3.0x • Modified bank covenants ‒ 3.0x Net Debt to EBITDA for the next 12 months 1.6x <1.0x ‒ 2.25x Net Debt to EBITDA in FY22 and beyond ‒ Current term-loans and
Slide 19: Guidance
Guidance • Suspending guidance for FY21 given current market conditions ‒ Managing a number of key transformation initiatives • Securing customers • Optimizing costs • Executing on our strategic alternatives, each with its own timeline for close ‒ Uncertainty from COVID • Greater resiliency of DXC b
Slide 20: Guidance
Guidance • Impact of transformation journey and COVID-19 more pronounced in first half of FY21 ‒ Q1 revenue headwinds of 8% - 10% sequentially; expected to stabilize sequentially thereafter ‒ Q1 EPS – low point in FY21, reflecting impact of revenue decline and minimal benefits from cost optimization
Slide 21: Closing Remarks
Closing Remarks Solid Progress • Sale of U.S. State and Local HHS business closing in Q2 of FY21 • Strengthening liquidity and enhancing financial flexibility to deliver on our transformation journey • Transformation journey moving at pace – Fixing our delivery and customer relationships – Executing
Slide 22: Thank you!
Thank you! 4th Quarter FY 2020 Earnings Presentation May 28, 2020 22
Slide 23: Supplemental Information
4th Quarter FY 2020 Supplemental Information 4th Quarter FY 2020 Earnings Presentation May 28, 2020
Slide 24: Consolidated Statements of Operations
Consolidated Statements of Operations (preliminary and unaudited) in millions, except per-share amounts Q4 FY20 Q4 FY19 FY20 FY19 Revenue $ 4,815 $ 5,280 $ 19,577 $ 20,753 Costs of services 3,773 3,836 14,901 14,946 Selling, general and administrative 536 459 2,050 1,959 Depreciation and amortizatio
Slide 25: Bookings
Bookings(1) $B FY19 FY20 $5.7 $5.8 $5.3 $4.4 $2.3 $4.2 $2.9 $3.8 $2.5 $2.2 $2.4 $1.9 $3.4 $2.9 $2.8 $1.9 $2.2 $1.8 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 GBS Global Business Services GIS Global Infrastructure Services 1 The summation of the quarter bookings number may not equal the full-yea
Slide 26: Non-GAAP Reconciliations
Non-GAAP Reconciliations EBIT and Adjusted EBIT (in millions) Q4 FY20 Q4 FY19 FY20 FY19 Net (loss) income $ (3,501) $ 271 $ (5,358) $ 1,262 Income from discontinued operations, net of taxes - - - (35) Income tax (benefit) expense (61) 83 130 288 Interest income (35) (36) (165) (128) Interest expense
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment profit (in millions) Q4 FY20 Q4 FY19 FY20 FY19 GBS profit $ 223 $ 447 $ 1,301 $ 1,645 GIS profit 192 436 1,007 1,911 All other loss (63) (56) (247) (287) Interest income 35 36 165 128 Interest expense (95) (85) (383) (334) Restructuring costs (4) (47) (252) (465) Tra
Slide 28: Q4 FY20 Non-GAAP Results
Q4 FY20 Non-GAAP Results Transaction, Amortization of Goodwill Pension and OPEB Restructuring Separation and Non-GAAP (in millions except EPS) GAAP Acquired Impairment Actuarial and Tax Adjustment Costs Integration-Related Results Intangible Assets Losses Settlement Gains Costs Cost of services (exc
Slide 29: FY20 Non-GAAP Results
FY20 Non-GAAP Results Transaction, Amortization of Goodwill Gain on Pension and OPEB Restructuring Separation and Non-GAAP (in millions except EPS) GAAP Acquired Impairment Arbitration Actuarial and Tax Adjustment Costs Integration-Related Results Intangible Assets Losses Award Settlement Gains Cost
Slide 30: Q4 FY19 Non-GAAP Results
Q4 FY19 Non-GAAP Results Transaction, Amortization of Pension and OPEB Restructuring Separation and Tax (in millions except EPS) GAAP Acquired Intangible Actuarial and Non-GAAP Results Costs Integration-Related Adjustment Assets Settlement Losses Costs Cost of services (excludes depreciation and amo
Slide 31: FY19 Non-GAAP Results
FY19 Non-GAAP Results Transaction, Amortization of Pension and OPEB Restructuring Separation and Tax (in millions except EPS) GAAP Acquired Intangible Actuarial and Non-GAAP Results Costs Integration-Related Adjustment Assets Settlement Losses Costs Cost of services (excludes depreciation and amorti
Slide 32: Adjusted Free Cash Flow
Adjusted Free Cash Flow (in millions) Q4 FY20 FY20 Net cash provided by operating activities $ 288 $ 2,350 Net cash used in investing activities(1) (53) (2,100) Acquisitions, net of cash acquired - 1,997 Payments on capital leases and other long-term asset financings (219) (865) Payments on transact
Slide 33: 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 34: DXC.technology
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DXC Technology Company — Q4 2020 Earnings Presentation on 6ix