Dxc Technology Company · NYSE:DXC
Dxc Technology — Q2 2022 Earnings Presentation
41 slides from Dxc Technology's earnings presentation, Nov 3, 2021
Slide 1: 2nd Quarter FY 2022 Earnings Presentation
2nd Quarter FY 2022 Earnings Presentation November 3, 2021
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 Q2 FY22 Results 2 Progress on Our Transformation Journey 3 Q2 FY22 Financial Results and Guidance 4 Closing Remarks 4
Slide 5: Continued Strong Performance in Q2 FY22
Continued Strong Performance in Q2 FY22 Q2 FY22 – Key Metrics and Drivers Revenue $4.03B Organic revenue (2.4%); $59M negative Fx impact vs guidance Adjusted EBIT Margin* 8.6% 240 bps margin expansion YoY Book-to-Bill 0.91x Impacted by timing of new business Non-GAAP Diluted EPS* $0.90 41% increase
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: • Implementing a people first strategy • September employee engagement survey showed higher participation along Inspire and with improved and stable scores Take Care of • Hired & onboarded colleagues to offset attrition / service increased demand Our Colleagues •
Slide 8: Transformation Journey: Focus on Customers
Transformation Journey Proof points: • Key Metric of Customer Satisfaction - Net Promoter Score • 12-Month rolling average is now at the mid-point of the best practice Focus on range of 20 to 30. Up from 18 at our June Investor Day Customers • Customer strategy of delivering GIS services to build tr
Slide 9: Transformation Journey: Optimize Costs
Transformation Journey Proof points: • Operational work is driving the increased margin o Motivating our colleagues and hiring new talent Optimize o Moving to a virtual first model Costs o Making service delivery more efficient and implementing better IT tools, and o Reducing real estate, emphasizes
Slide 10: Transformation Journey: Seize the Market
Transformation Journey Proof points: • Book-to-bill of 0.91x in Q2 and over 1.0 Year-To-Date • 59% of Q2 FY22 bookings were new work and 41% renewals Seize the Market • Expect Q3 book to bill to be over 1.0 • Platinum customer channel showing evidence of success - highlighted by Luxoft enabling grow
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 8.0% 8.6% 7.5% 7.0% ~0.2% 6.2% ~0.2% (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%) Q1 FY21 Q2 FY21 Q3 FY
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 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 3.4% 2.0% (3.4%) (8.0%) (9.3%) (9.1%) (6.0%) (5.9%) (11.8%) (6.9%) (12.6%) (13.0%) GBS Segment Margin GIS Segment Margi
Slide 13: Enterprise Technology Stack
Enterprise Technology Stack Q2 FY22 YoY Organic FY22 YTD Revenue ($M) Book-to-Bill Growth Book-to-Bill Analytics and Engineering 520 17.3% 0.95x 1.13x Applications 1,216 1.5% 0.94x 1.13x GBS Business Process Services (BPS) 118 (13.7%) 0.69x 0.91x M&A and Acquisitions 19 GBS Total 1,873 3.4% 0.92x 1.
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 ~$550M in FY2
Slide 15: Evidence We Are Building Our Financial Foundation
Financial Update Evidence We Are Building Our Financial Foundation Total Debt ($M) Net Interest ($M) 83 12,016 71 9,668 54 55 42 45 6,239 5,512 4,933 5,108 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Restructuring/Transaction, Separation & Integrat
Slide 16: Debt Maturities Post Refinancing
Debt Maturities Post Refinancing Debt Maturity Schedule ($M) Existing and New Notes $3.7B Commercial Paper 0.2B Capital Leases and Other 1.2B Total Debt $5.1B 500 Retired 2.5B 463 Revolver Undrawn Capacity 3.0B 32 32 441 843 862 276 750 700 688 650 485 232 303 234 107 FY22 23 24 25 26 27 28 29 30 31
Slide 17: Q2 Cash Generation
Q2 Cash Generation (in millions) Q2 FY22 Q2 FY21 Cash from operations $ 563 $ 472 Less capital expenditures Purchase of property and equipment (67) (61) Payments for transition and transformation contract costs (52) (54) Software purchased and developed (40) (54) Total capital expenditures (159) (16
Slide 18: Trended Free Cash Flow
Trended Free Cash Flow $404M $303M $(106M) $(304M) $(406M) $(443M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 18
Slide 19: Lowering Restructuring & TSI
Lowering Restructuring & TSI $366M $1,148M $101M $909M $866M $570M $550M $148M $3M $265M $300M $145M $100M Q2 FY21 Q2 FY22 FY18 FY19 FY20 FY21 FY22 FY23 FY24 TSI Restructuring Lower Restructuring and TSI Expense To Improve FCF 19
Slide 20: Positively Evolving Capital Allocation Priorities
Positively Evolving Capital Allocation Priorities Prior Updated Debt & Lease Repayment Invest in the Business & 20% Share Buyback 45% Free Cash Flow Excess Cash Allocation 55% Allocation Debt & Lease Repayment 80% Invest in the Business & Share Buyback 20
Slide 21: Q3 FY22 Outlook
Q3 FY22 Outlook YoY Organic Adjusted Non-GAAP Revenue Revenue Growth EBIT Margin Diluted EPS $4.08B – $4.13B (1.0%) – (2.5%) 8.6% – 8.9% $0.88 – $0.93 Q3 FY22 Financial Targets 21
Slide 22: FY22 Outlook
FY22 Outlook YoY Organic Adjusted Non-GAAP FCF Revenue Revenue Growth EBIT Margin Diluted EPS $16.4B – (1%) – (2%) 8.5% – 8.9% $3.52 – $3.72 $500M $16.6B Increasing Adj. EBIT Margin & Non-GAAP Diluted EPS Ranges; Lowering Revenue Due to Fx Note: Fx rates for prior revenue guidance of $16.6B-$16.8B:
Slide 23: 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 ~$1.5B FY24 Financial Targets Reaffirmed 23
Slide 24: Building the Strong Foundation in FY22
Building the Strong Foundation in FY22 1 DELIVERING OPERATIONAL EFFICIENCY Employees motivated, Virtual First Model, Efficient Service Delivery, Implementing New IT Tools 2 FINANCIAL FOUNDATION Reducing Debt, Lowering Restructuring and TSI, Increased Margins and EPS, Strong FCF 3 EXPANDING MARGINS R
Slide 25: Supplemental Information
Supplemental Information Q2 FY22 Quarterly Result Details Non-GAAP Reconciliations Definitions 25
Slide 26: Organic Revenue Growth
Organic Revenue Growth GBS ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 GBS Revenue 2,174 2,242 1,921 1,999 8,336 1,887 1,873 YoY GBS revenue growth 0.7% (1.9%) (18.6%) (13.4%) (8.5%) (13.2%) (16.5%) Foreign currency 1.8% (1.5%) (2.2%) (4.2%) (1.6%) (4.7%) (0.9%) Acquisitions and
Slide 27: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS ($M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Total FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21 Q1 FY22 Q2 FY22 Segment revenue 2,159 2,285 2,359 2,308 9,111 2,174 2,242 1,921 1,999 8,336 1,887 1,873 Segment profit 366 359 353 223 1,301 215 317 273 31
Slide 28: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 EBIT to Adjusted EBIT ($M) T4Q PT4Q FY20 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY21 FY22 FY22 Net income (loss) 168 (2,115) 90 (3,501) (5,358) (199) (246) 1,103 (804) (146) 282 (187) 394 (3,856) Income tax e
Slide 29: Non-GAAP Reconciliation – Income Statement Measures
Non-GAAP Reconciliation – Income Statement Measures Total Total COS, SG&A, D&A ($M) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 FY20 FY21 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 Less: Impairment losses - - - - - -
Slide 30: Non-GAAP Reconciliation – Income Statement Measures
Supplemental Financial Information 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 FY20 FY21 Interest expense 91 104 93 95 383 106 96 82 77 361 62 61 Interest income (30) (
Slide 31: Non-GAAP Reconciliation – EPS
Supplemental Financial Information Non-GAAP Reconciliation – EPS Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Non-GAAP EPS (in $M, except EPS) FY20 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY21 FY22 FY22 Net income (loss) attributable to DXC 163 (2,119) 82 (3,495) (5,369) (205) (244) 1,098 (798) (149) 2
Slide 32: Non-GAAP Reconciliation – EPS
Supplemental Financial Information Non-GAAP Reconciliation – EPS Total Total Non-GAAP EPS Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 FY20 FY21 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)
Slide 33: DXC Historical Balance Sheet
Supplemental Financial Information DXC Historical Balance Sheet Assets (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 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 Receivables, net 5,23
Slide 34: DXC Historical Balance Sheet
Supplemental Financial Information 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 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 Accou
Slide 35: DXC Free Cash Flow
DXC Free Cash Flow Free Cash Flow (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 Cash Flow from Operations (66) 1,651 477 288 2,350 119 472 (187) (280) 124 (29) 563 Less capex Purchase of PPE (105) (87) (48) (110) (350) (95) (61) (59) (4
Slide 36: Non-GAAP Reconciliation: Organic Revenue – Enterprise Technology Stack
Non-GAAP Reconciliation: Organic Revenue – Enterprise Technology Stack Business Acquisitions Analytics and Process Cloud and IT Modern (in millions) Applications and Total Engineering Services Security Outsourcing Workplace Divestitures (BPS) Revenue $ 520 $ 1,216 $ 118 $ 521 $ 1,052 $ 581 $ 19 $ 4,
Slide 37: Q2 FY22 Non-GAAP Results
Q2 FY22 Non-GAAP Results Transaction, Amortization of Debt Restructuring Separation and Impairment Non-GAAP (in millions except EPS) As Reported Acquired Extinguishment Costs Integration- Losses Results Intangible Assets Costs Related Costs (2) Cost of services (excludes depreciation and amortizatio
Slide 38: YTD FY22 Non-GAAP Results
YTD FY22 Non-GAAP Results Transaction, Amortization of Gain on Debt Restructuring Separation and Acquired Impairment Tax Non-GAAP (in millions except EPS) As Reported Disposition of Extinguishment Costs Integration- Intangible Losses Adjustment Results Businesses Costs Related Costs (2) Assets Cost
Slide 39: Q2 FY21 Non-GAAP Results
Q2 FY21 Non-GAAP Results Transaction, Amortization of Restructuring Separation and Tax Non-GAAP (in millions except EPS) GAAP Acquired Costs Integration- Adjustment Results Intangible Assets Related Costs (2) Cost of services (excludes depreciation and amortization and restructuring costs) $ 3,563 $
Slide 40: YTD FY21 Non-GAAP Results
YTD FY21 Non-GAAP Results Transaction, Pension and Amortization of Restructuring Separation and OPEB Actuarial Tax Non-GAAP (in millions except EPS) GAAP Acquired Costs Integration- and Settlement Adjustment Results (2) Intangible Assets Related Costs Losses Cost of services (excludes depreciation a
Slide 41: 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
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