Slide 1: 3rd Quarter FY 2024 Earnings Presentation
3rd Quarter FY 2024 Earnings Presentation February 1, 2024
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 Introduction 2 Update on Business Performance 3 Our Six Offerings 4 Q3 FY24 Financial Results and Guidance 5 Closing Remarks and Questions 4
Slide 5: Q3 FY24 Financial Performance
Q3 FY24 Financial Performance Q3 FY24 – Key Metrics and Drivers Revenue $3.4B Year-over-year organic revenue growth* of (4.5%) Adjusted Margin down 110 bps YoY (50 bps due to lower EBIT Margin* 7.6% non-cash pension income) EPS down $0.08 YoY, impacted by $0.12 higher tax rate, Non-GAAP Diluted EPS*
Slide 6: Raul Fernandez – CEO
Raul Fernandez – CEO • DXC board member since 2020 - Previously Chair of Nominating / Corporate Governance Committee and Member of the Compensation Committee • Over thirty years of experience in the technology industry spanning multiple roles across various public and private companies ─ Vice Chairm
Slide 7: What to Expect
What to Expect Priorities • Service delivery excellence • Winning in the marketplace • Delivering financial results – remain committed to our investment grade credit rating, investing in our business, and share repurchases Near-term actions • Fully implementing our operating model – global offerings
Slide 8: Analytics & Engineering
Analytics & Engineering • We engineer great products, services, experiences and operations MW A&E • DXC Engineering brings together distinctive software, data and AI services capabilities to help our customers envision, build and modernize industry software, data and AI platform GIS GBS ITO Applicat
Slide 9: Applications
Applications • DXC is uniquely positioned to service this market because of our decades long and deep Industry Expertise. Our heritage in running mission critical systems enables us to get to value quickly and with the minimum A&E operational risk. MW • Where our new focus and strategy has led us to
Slide 10: Insurance Software & BPS
Insurance Software & BPS MW A&E • Largest provider of insurance software and insurance BPS and facilitate business operations to 80% of Fortune 500 Insurance companies • Our work is valued and appreciated – earned 500+ customer renewals GIS GBS in FY23 demonstrating the stickiness of our relationshi
Slide 11: Security – End-to-End Solutions
Security – End-to-End Solutions • Cyber security is a top C-Suite concern given the pervasiveness of the MW A&E problem • DXC’s relationships with large platinum customers gives us the GIS GBS necessary insight and experience to effectively protect ourselves and ITO Applications 51% 49% our customer
Slide 12: Cloud Infrastructure & ITO
Cloud Infrastructure & ITO • A major cloud and infrastructure services provider bridging the gap MW A&E between legacy IT systems and innovation • Excellent reputation in the space with a technology independent GIS GBS approach encompassing over 200 partners ITO Applications 51% 49% • The key is the
Slide 13: Modern Workplace
Modern Workplace • Delivering exceptional digital employee experiences powered by AI ─ Digital support of the decentralized workplace MW A&E ─ Employees work, connect and collaborate without disruption ─ Success measured in productivity, engagement, sentiment and GIS GBS retention ITO Applications 5
Slide 14: 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 Q3 8.6% 8.7% 8.5% 8.7% 8.9% 8.0% 7.5% 1.2% 1.2% 7.3% 7.6% 1.8% 1.8% 1.8% 7.0% 1.8% 1.2% 6.5% 0.6% 0.7% 1.3% 0.6% (1.4%) (1.5%) 7.5% 7.7%
Slide 15: Q3 Key Financial Metrics
Q3 Key Financial Metrics (in $M, except EPS and shares) Q3 FY24 Q3 FY23 Change Revenue 3,399 3,566 (4.7%) Non-GAAP Gross Profit 763 775 (1.5%) As % of sales 22.4% 21.7% 70 bps Non-GAAP SG&A Expenses (290) (289) 0.4% As % of sales (8.5%) (8.1%) (40) bps Non-GAAP Depreciation & Amortization (262) (275
Slide 16: GBS/GIS Results
GBS/GIS Results GBS Organic Revenue Growth (YoY) GIS Organic Revenue Growth (YoY) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 Q3 7.0% 3.4% 3.4% 3.4% 3.3% 3.3% 2.8% (5.8%) 2.4% 2.0% (7.2%) (7.4%) (8.0%) (8.3%) (8.0%) (8.5%) 0.2% 0.3% (9.1%) (9.1%) (8.9%) (9.9%) FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24
Slide 17: GBS/GIS Offerings
GBS/GIS Offerings Q3 FY24 YoY Organic Revenue ($M) Book-to-Bill Growth* Analytics & Engineering 555 2.2% 1.24x Applications 759 (2.0%) 1.11x GBS Insurance Software & BPS 382 2.1% 1.58x Mergers, Acquisitions & Divestitures - - - GBS Total 1,696 0.3% 1.26x Security 109 (5.1%) 0.81x Cloud Infrastructur
Slide 18: Debt, Interest, Restructuring and Operating Leases
Debt, Interest, Restructuring and Operating Leases 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 4,541 23 25 22 17 16 15 17 17 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 Q3 FY21 Q
Slide 19: Capital Expenditure and Leases
Capital Expenditure and Leases Capital Expenditures ($M) Finance Lease & Asset Financing Payments ($M) 275 494 225 219 195 202 178 175 169 163 162 159 157 146 146 121 245 242 236 207 177 184 159 135 125 131 115 112 100 102 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Q4 FY24 Q1 Q2 Q3 FY21 Q1 Q2 Q
Slide 20: Capital Allocation – DXC Repurchased >15% of Shares YTD
Capital Allocation – DXC Repurchased >15% of Shares YTD $1,200 50 Share Repurchases 45 $1,000 40 10.6% of Shares O/S* 35 $800 7.4% of Shares O/S* $679M 30 $634M $600 25 24.4M 5.2% of Shares O/S* 20 $400 18.8M 4.9% of Shares O/S* 5.8% of Shares O/S* 15 $280M $252M $214M 10 $200 11.0M 10.0M 11.3M 5 $-
Slide 21: Q4 FY24 Outlook
Q4 FY24 Outlook YoY Organic Adjusted Non-GAAP Revenue Growth EBIT Margin Diluted EPS (6.5%) – (5.5%) 7.0% – 7.5% $0.80 – $0.85 21
Slide 22: FY24 Outlook
FY24 Outlook YoY Organic Adjusted Non-GAAP Free Cash Flow Revenue Growth EBIT Margin Diluted EPS (4.5%) – (4.3%) 7.1% – 7.2% $3.00 – $3.05 $800M 22
Slide 23: TECHNOLOGY
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Slide 24: Supplemental Information
Supplemental Information Q3 FY24 Quarterly Result Details Non-GAAP Reconciliations Definitions 24
Slide 25: YoY Organic Revenue Growth and Backlog
YoY Organic Revenue Growth and Backlog GBS ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Q3 FY24 GBS revenue 1,758 1,713 1,738 1,751 6,960 1,703 1,709 1,696 YoY GBS revenue growth (6.8%) (8.5%) (10.7%) (7.5%) (8.4%) (3.1%) (0.2%) (2.4%) Foreign currency 5.9% 7.4% 6.4% 3.8% 5.9% 0.8
Slide 26: YoY Organic Revenue Growth and Book-to-Bill by Offering
YoY 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 Q3 FY24 GBS 2.8% 3.4% 0.2% 3.3% 2.4% 3.3% 2.4% 0.3% Analytics & Engineering 15.7% 14.0% 11.7% 8.5% 12.3% 8.8% 5.3% 2.2% Applications (2.0%) (1.1%) (6.8%) (0
Slide 27: Sequential (QoQ) Organic Revenue Growth
Sequential (QoQ) Organic Revenue Growth GBS ($M) Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 GBS revenue 2,174 2,242 1,921 1,999 1,887 1,873 1,946 1,892 1,758 1,713 1,738 1,751 1,703 1,709 1,696 QoQ GBS revenue growth (5.8%)
Slide 28: Services and Resale Revenue by Offering
Services and Resale Revenue by Offering Services Revenue ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Q3 FY24 Analytics & Engineering 496 515 523 547 2,081 537 552 546 Applications 754 725 724 750 2,953 739 729 719 Insurance Software & BPS 367 362 370 387 1,486 380 384 379 GBS 1,6
Slide 29: DXC Insurance Key Metrics
DXC Insurance Key Metrics (in $M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Q3 FY24 Insurance Software Revenue 120 119 121 124 484 118 116 121 140 495 129 131 126 Insurance Business Process as a Service 147 146 146 149 588 142 148 150 150 5
Slide 30: Services and Resale Organic Revenue Growth
Services and Resale Organic Revenue Growth Revenue ($M) Total FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Q3 FY24 Service Revenue 16,693 3,772 3,757 3,694 3,614 14,837 3,414 3,261 3,262 3,282 13,219 3,198 3,187 3,125 Service revenue grow
Slide 31: Reconciliation of Segment Profit to Pretax Income
Reconciliation of Segment Profit to Pretax Income GBS ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Total FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Total FY23 Q1 FY24 Q2 FY24 Q3 FY24 Segment revenue 1,887 1,873 1,946 1,892 7,598 1,758 1,713 1,738 1,751 6,960 1,703 1,709 1,696 Segment profit 272 298 315 275 1,160
Slide 32: Adjusted EBIT and Adjusted EBITDA Reconciliation
Adjusted EBIT and Adjusted EBITDA Reconciliation EBIT to Adjusted EBIT ($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 Q3 FY24 Net income (loss) 282 (187) 102 539 736 103 28 61 (758) (566) 42 99 140 Income tax expense (benefit) 142 (61) 64 2
Slide 33: 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 Q3 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 2,636 Less: Impairment loss
Slide 34: Non-GAAP Reconciliation – Income Statement Measures
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 Q3 FY24 Adjusted EBIT 332 346 355 342 1,375 259 269 309 320 1,157 224 251 258 Interest expense 62 61 38 43 204 37
Slide 35: 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 Q3 FY24 Net income (loss) attributable to DXC 278 (188) 98 530 718 102 27 59 (756) (568) 36 99 156 Restructuring costs 57 111 32 53 253
Slide 36: 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 Q3 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 0.81 Restructuring costs 0.22 0.43 0.1
Slide 37: Income Statement Drivers – Headcount
Income Statement Drivers – Headcount Total Total DXC Employees Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 FY22 FY23 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 72,950 GIS 46,540 47,868 49,438 50,333 50,333 50,22
Slide 38: 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 Q3 FY24 Non-service cost components of net periodic (97) (96) (87) (786) (1,066) (67) (60) (60) 1,367 1,180 (37) (36) (35
Slide 39: 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 Q3 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 3,399 Adjusted EBIT (1) 332 346 355 342 1,3
Slide 40: 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 Q3 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 1,691 Receivables, net 4,081 3,821 3,670 3,854 3
Slide 41: 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 Q3 FY24 Short term debt & current LT debt 817 745 706 900 900 904 834 873 500 500 694 672 661 Accounts payable 857 724 759 840 840 795 857 8
Slide 42: 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 Q3 FY24 Short term debt & current LT debt 817 745 706 900 900 904 834 873 500 500 694 672 661 LT debt, net of current maturities 4,116 4,363 4,236
Slide 43: 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 Q3 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 2,446 Revenue 4,141 4,027 4
Slide 44: 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 Q3 FY24 (in $M) Net Income 282 (187) 102 539 736 103 28 61 (758) (566) 42 99 140 Depreciation & amortization 427 452 430
Slide 45: 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 Q3 FY24 Payments on finance leases & borrowings for (494) (177) (184) (135) (990) (159) (115) (125) (112) (511) (131) (100) (102) asset financing Less: Originations
Slide 46: 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 Q3 FY24 Cash paid for restructuring (115) (86) (78) (75) (354) (48) (63) (43) (52) (206) (43) (32) (32) Cash paid for TSI (1) (9) (3) (11) (3) (26) (2) (4) (6) (4) (16)
Slide 47: 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 Q3 FY24 Cash flows from operating activities (29) 563 696 271 1,501 163 212 625 415 1,415 127 248 706 Less capex Purchase of property & equipment (98) (67)
Slide 48: Q3 FY24 Non-GAAP Reconciliation: Organic Revenue – Offerings
Q3 FY24 Non-GAAP Reconciliation: Organic Revenue – Offerings Insurance Software Analytics & Cloud Infrastructure Acquisitions & (in $M) Applications & Business Process Security Modern Workplace Total Engineering & IT Outsourcing Divestitures Services (BPS) Revenue 555 759 382 109 1,168 426 - 3,399 P
Slide 49: Currency Impact
Currency Impact Quarterly averages Q1 Q2 Q3 Q4 Q1 Q2 Q3 YoY Spot Q4 FY24E (US$ per currency) FY23 FY23 FY23 FY23 FY24 FY24 FY24 Chg. 1/15/24 FY24E Euro 1.07 1.01 1.02 1.07 1.09 1.09 1.08 5% 1.09 2% 4% Pound sterling 1.26 1.18 1.17 1.22 1.25 1.27 1.24 6% 1.27 5% 4% Australian dollar 0.72 0.68 0.66 0.
Slide 50: Q3 FY24 Adjusted EBITDA and Free Cash Flow
Q3 FY24 Adjusted EBITDA and Free Cash Flow All values are in millions. Capex compares to depreciation of $112M. “Working capital & other” includes the impact of non-cash pension income ($21M). “Cash taxes paid” are net of refunds. 50
Slide 51: 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 52: 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 53: TECHNOLOGY
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