Slide 1: 2nd Quarter FY 2020 Earnings Presentation
2nd Quarter FY 2020 Earnings Presentation November 11, 2019
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 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. Share observations on the business 2. Review preliminary second quarter results and full-year outlook 3. Introduce the enterprise technology stack and strategy moving forward 4. Present results of strategic review of assets 5. Outline longer term outlook for DXC Technology 2nd Qu
Slide 5: My observations – Positives
My observations – Positives Experienced and loyal global talent base with knowledge of mission-critical systems Significant scale and global reach across technology offerings Loyal customer base comprising world’s leading enterprises Strong core capabilities ranging from traditional ITO and applicat
Slide 6: My observations – Challenges
My observations – Challenges Insufficient execution on delivery of extended cost improvements at previously targeted pace Evolving employee value proposition needing greater focus Recent delivery issues on some large, complex accounts – recovery plans underway Under-emphasized ITO business
Slide 7: Priorities
Priorities Running the Business Unlock Value 1. Customers: 1. Execute go-forward strategy centered on: • Upgrade engagement and service at key accounts • Enterprise technology stack • Deliver against customer priorities 2. People: • Selling industry solutions • Invest in our people/employee value pr
Slide 8: Reconciliation of non-GAAP results
Reconciliation of non-GAAP results Q2 FY20 Transaction, Amortization of Restructuring Separation and Goodwill Gain on Arbitration Non-GAAP (in millions except EPS) GAAP Acquired Intangible Tax Adjustment Costs Integration-Related Impairment Losses Award Results Assets Costs (Loss) income from contin
Slide 9: 2nd quarter results
2nd quarter results Q2 YTD FY20 FY19 FY20 FY19 Revenue ($M) $ 4,851 $ 5,013 $ 9,741 $ 10,295 – YoY Growth – GAAP (3.2%) (5.4%) – YoY Growth – cc (0.8%) (2.6%) – QtQ Growth – GAAP (0.8%) — – QtQ Growth – cc 0.2% — Adjusted EBIT ($M) 529 799 1,181 1,602 Adjusted EBIT Margin (%) 10.9% 15.9% 12.1% 15.6%
Slide 10: Global Business Services (GBS)
Global Business Services (GBS) Q2 FY20 Q2 FY19 YTD FY20 YTD FY19 Revenue ($M) $ 2,285 $ 2,111 $ 4,444 $ 4,324 – YoY Growth – GAAP 8.2% 2.8% – YoY Growth – cc 10.5% 5.4% – QtQ Growth – GAAP 5.9% — – QtQ growth – cc 6.7% — GBS Profit ($M) 359 400 725 803 GBS Profit Margin (%) 15.7% 18.9% 16.3% 18.6% B
Slide 11: Global Infrastructure Services (GIS)
Global Infrastructure Services (GIS) Q2 FY20 Q2 FY19 YTD FY20 YTD FY19 Revenue ($M) $ 2,566 $ 2,902 $ 5,297 $ 5,971 – YoY Growth – GAAP (11.6%) (11.3%) – YoY Growth – cc (9.1%) (8.3%) – QtQ Growth – GAAP (6.1%) — – QtQ growth – cc (5.0%) — GIS Profit ($M) 243 473 583 947 GIS Profit Margin (%) 9.5% 1
Slide 12: Financial highlights
Financial highlights Q2 FY20 YTD FY20 Cash Flow ► Adjusted Free Cash Flow $739M $813M Performance ► Cap Ex — Including Payments on Capital Leases $342M $699M ► Cap Ex as a % of Revenue 7.1% 7.2% Q2 FY20 YTD FY20 Capital to Capital to ► Cash Dividends $56M $107M Shareholders Shareholders $250M $650M
Slide 13: FY20 revenue guidance update
FY20 revenue guidance update Execution related Industry trends Previous Guidance $20.2B to $20.7B • $235M from deal delays and losses Revenue delays $275M • $40M from delayed acquisitions Execution at • $75M add-on revenue impact from delivery execution at select customers $250M existing customers •
Slide 14: FY20 EPS guidance update
FY20 EPS guidance update Non-recurring Previous Guidance $7.00 to $7.75 EBIT Impact ($M) • Profit impact from reduced revenue forecast, Revenue $0.73 including potential disruption given announcement $275M of strategic alternatives • Complex actions taking longer than expected $170M Cost take-out $0
Slide 15: DXC strategy moving forward
DXC strategy moving forward Enterprise technology stack Customer expectations • DXC is running mission-critical systems – our customers expect silent operations • Customers need to upgrade these mission-critical systems and want to partner with someone they trust • However, not all workloads will mo
Slide 16: DXC has capabilities at scale across the stack
DXC has capabilities at scale across the stack Guiding principles Strategic alternatives • Importance to U.S. State & $0.5B technology stack $1.4B Local HHS $1.4B • Ability to create industry solutions $5.4B Horizontal BPS $0.7B • What customers want $2.1B • Potential to Workplace $2.9B $5.4B unlock
Slide 17: Illustrative impact of executing strategy
Illustrative impact of executing strategy FY20E FY22E Revenue range $19.5B – $19.8B $15B+ EBIT margin (non-GAAP) ~11% 12%+ FCF 80%+ 85%+ Non-GAAP EPS range $5.25 – $5.75 $7.00+ Non-GAAP EPS incl. restructuring, integration, and $3.25 – $3.75 $5.25+ transaction costs range Capital returned to shareho
Slide 18: DXC is well positioned to grow
DXC is well positioned to grow DXC has significant scale and scope, along with mission-critical positions at large customers DXC has reduced its cost structure in an industry where being a low-cost player boosts competitiveness Customers are facing transformation challenges across the entire enterpr
Slide 19: pre DXC.technology
pre DXC.technology