Dxc Technology Company · NYSE:DXC
Dxc Technology — Investor Day (November 2018)
55 slides from Dxc Technology's investor day presentation, Nov 8, 2018
Slide 1: TheTimesCenter in New York
TheTimesCenter in New York 242 West 41st Street New York, NY 10036 © 2018 DXC Technology Company. All rights reserved.
Slide 2: Cautionary note regarding forward-looking statements
Text Cautionary note regarding 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 r
Slide 3: Non-GAAP reconciliations
Text Non-GAAP reconciliations We present non-GAAP financial measures of performance to provide investors with meaningful supplemental financial information, in addition to the financial information presented on a GAAP basis. Non-GAAP financial measures exclude certain items from GAAP results which D
Slide 4: Agenda
Text Agenda Topic Presenter Strategic overview Mike Lawrie Offerings and partnerships Edward Ho Digital go-to-market and talent Jim Smith Paul Gaynor (PwC) Delivery Samson David Financials Paul Saleh Q&A 4
Slide 5: Key messages
Key messages DXC Technology’s transformation journey is well underway: rapidly integrating CSC and HPE Enterprise Services, achieved synergy targets, rebalanced asset portfolio, and established market-leading brand. Digital is disrupting all industries, but large enterprises are still in the early s
Slide 6: We are successfully executing on our strategic roadmap
We are successfully executing on our strategic roadmap and continue to deliver strong shareholder returns Delivered on CSC–HPE ES integration ESTABLISHED DXC BRAND $6.75 FY18 non-GAAP EPS #6 most valuable IT services brand in 2018 13.8% adj. EBIT margin; up 460 bps vs. FY17 REBALANCED ASSET PORTFOLI
Slide 7: Digital is disrupting all industries
Digital is disrupting all industries DIGITAL IS REVOLUTIONIZING …CREATING A MUCH LARGER MARKET FOR INDUSTRY LANDSCAPES… SERVICE PROVIDERS Addressable market $1T+ and growing Digital-first companies are attacking established business models $1.2T $1.0T 75%+ of execs concerned about digital startup th
Slide 8: Large enterprises are still in the early stages of adoption
Large enterprises are still in the early stages of adoption – to transform at scale, they will need partners such as DXC ENTERPRISE CHALLENGES WHAT TRANSFORMATION PARTNERS NEED TO OFFER Insufficient scaling 90% of companies engage in digital pilot Savings in mainstream technology to fund programs; t
Slide 9: Early successes validate our approach
Early successes validate our approach GAINING TRACTION WITH OUR CLIENTS EXAMPLE SUCCESS STORIES Major European insurance group ~80% ~15% Transformed global IT infrastructure growth in digital pipeline digital revenue growth • Migrated critical workloads to multi-cloud Integrated delivery • 20% highe
Slide 10: We are investing to scale this approach
We are investing to scale this approach ABILITY TO SIMPLIFY Open and scalable Best-of-breed DXC and Integrates digital MAINSTREAM IT framework partner technology with mainstream DIFFERENTIATED Targeted acquisitions Organic investments OFFERINGS INDUSTRY-LEADING PARTNERSHIPS Digital NEW DIGITAL Digit
Slide 11: Four primary value creation levers
Four primary value creation levers STABLE SUSTAINABLE STRONG DISCIPLINED REVENUE GROWTH MARGIN EXPANSION FREE CASH FLOW CAPITAL ALLOCATION 2% to 4% CAGR 250 – 350 bps 100% or more 40% increase in EBIT margin of net income capital return to shareholders • Invest to capitalize on digital • Optimize wo
Slide 12: Continued expansion of digital business will drive overall revenue growth
Continued expansion of digital business will drive overall revenue growth Growth drivers Revenue plan includes 1% to 2% of 2% to 4% targeted M&A activity At-scale growth driven by differentiated Digital Digital 20% to 30% offerings, digital sales motion, and expanded talent Industry IP & BPS Industr
Slide 13: Sustainable margin expansion
Sustainable margin expansion Gross margin impact: 4% to 5% Revenue mix • Increase margin from greater digital, Revenue Facilities mix IP, and BPS mix rationalization 30 70 bps bps Workforce • Increase near-shore and low cost labor mix optimization • Rebalance labor pyramid • Deploy at-scale automati
Slide 14: Financial targets
Financial targets FY19 By FY22 Revenue $20.7B – $21.2B 2% to 4% CAGR EBIT margin 15% to 16% 250 – 350 bps expansion FCF as % of net income 90%+ 100%+ Non-GAAP EPS $7.95 – $8.20 $11.75 – $12.50 13% to 16% CAGR 14
Slide 15: Large enterprises are still in the early stages of adoption
Large enterprises are still in the early stages of adoption – to transform at scale, they will need partners such as DXC ENTERPRISE CHALLENGES WHAT TRANSFORMATION PARTNERS NEED TO OFFER Insufficient scaling 90% of companies engage in digital pilot Savings in mainstream technology to fund programs; t
Slide 16: We have developed compelling offerings at scale
We have developed compelling …and are investing to meet the evolving needs offerings at scale… of our clients STRENGTHENING EXISTING OFFERINGS CLOUD & PLATFORM WORKPLACE SECURITY Elevating performance Increasing scalability SERVICES & MOBILITY 10+ Intelligent SOCs 310,000+ VMs 45M+ managed Robotic m
Slide 17: DXC integrates products and services with partners
DXC integrates products and services with partners to deliver unique solutions for clients Co-investment and R&D Collaborative solutioning and go-to-market Iterative Visibility and Joint go- Faster to Co-located access to client to-market Scale Talent feedback and market teams pipeline development D
Slide 18: Building on deep industry expertise and expanding into adjacent markets
We are building on our deep industry expertise and expanding into adjacent markets Added Medicaid Extending core banking Expanding Insurance Adapting Connected Enhancing industry IP processing in six states offerings in new verticals, BPS to Australia, UK, Transportation Platform and standardizing t
Slide 19: The next generation of managed services will be delivered differently
The next generation of managed services will be delivered differently Platform DXC is an open framework that analyzes and automates IT environments Orchestration With Platform DXC, we are able to: Deploys standardized offerings, tools, and processes for Automates to enable cost • Leverage automation
Slide 20: DXC's integrated solutions drive business outcomes at scale
DXC’s integrated solutions drive business outcomes at scale BUSINESS TRANSFORMATIONS • Create new revenue streams Standardized offerings Digital • Broaden customer base at scale General • Enhance customer experience Manager Digital IT MODERNIZATIONS CLIENT Delivery • Enhance agility BUSINESS • Lower
Slide 21: DXC is uniquely positioned to integrate transformations with mainstream IT
DXC is uniquely positioned to integrate transformations with mainstream IT CLIENTS ARE ATTEMPTING DIGITAL …WHILE SEPARATELY MODERNIZING TRANSFORMATIONS… MAINSTREAM IT Digital Mainstream IT transformations modernization Transformations typically fail due to lack of integration with mainstream Busines
Slide 22: DXC is uniquely positioned to integrate transformations with mainstream IT
DXC is uniquely positioned to integrate transformations with mainstream IT CLIENTS ARE ATTEMPTING DIGITAL …WHILE SEPARATELY MODERNIZING TRANSFORMATIONS… MAINSTREAM IT Digital Mainstream IT transformations modernization Compelling offerings Scale Consultative client Automation engagement capabilities
Slide 23: Large enterprises are still in the early stages of adoption
Large enterprises are still in the early stages of adoption – to transform at scale, they will need partners such as DXC ENTERPRISE CHALLENGES WHAT TRANSFORMATION PARTNERS NEED TO OFFER Insufficient scaling 90% of companies engage in digital pilot Savings in mainstream technology to fund programs; t
Slide 24: Clients are engaging differently with technology providers
Clients are engaging differently with technology providers, requiring new go-to-market motion and digital skills at scale Changing client landscape requires a different engagement model DXC is addressing client needs End-user expectations have evolved dramatically Necessary to integrate Consultative
Slide 25: Consultative engagement is critical for digital transformation
Consultative engagement is critical for digital transformation Emphasis on business value Innovative user experience Deep industry expertise needed To succeed at scale, experience must inspire to deliver business outcomes employees and customers to adopt technology Stakeholder proliferation Continuo
Slide 26: Together, DXC and PwC deliver the capabilities clients need
Together, DXC and PwC deliver the capabilities clients need to thrive in the digital era Expansive breadth of cross-functional, End-to-end portfolio of technology C-level relationships offerings and capabilities Deep experience across design, implementation, and management & Global scale of consulti
Slide 27: DXC partnered with PwC to transform supply chain
DXC partnered with PwC to transform the supply chain of a leading health services agency CLIENT SITUATION Deep industry expertise and IP in healthcare $5B+ annual procurement spend Technical expertise 100+ stakeholders implementing and integrating involved in purchasing process supply chain systems
Slide 28: Scaling go-to-market approach through agile collaboration with clients
Scaling go-to-market approach through agile collaboration with clients DXC established Digital Transformation Centers (DTCs) around the globe to drive this approach Engage clients DTCs Delivery Centers Partners Design digital blueprint Prototype minimum viable product Develop in agile sprints Scale
Slide 29: Enhancing our talent ecosystem to support digital growth
We are enhancing our talent ecosystem to support our digital growth DXC HAS DEMONSTRATED STRONG …AND WE HAVE DEVELOPED A TALENT ECOSYSTEM TRACTION IN DIGITAL… TO ENABLE OUR DIGITAL GROWTH Partner skills Advisory sales 250+ $4B+ revenue LEVERAGING PARTNERS strategic and solutions partners Co-located
Slide 30: Client engagements validate our approach
Client engagements validate our approach – major manufacturer Engaged Approached client We have a roadmap to achieve: Engage C-suite with multiple partners $50M+ Ideation sprints Digital blueprint annual client savings Design from core across all IT providers Smart Digital Predictive Prototype facto
Slide 31: Large enterprises are still in the early stages of adoption
Large enterprises are still in the early stages of adoption – to transform at scale, they will need partners such as DXC ENTERPRISE CHALLENGES WHAT TRANSFORMATION PARTNERS NEED TO OFFER Insufficient scaling 90% of companies engage in digital pilot Savings in mainstream technology to fund programs; t
Slide 32: Key Delivery Priorities
Key Delivery Priorities Operate & Integrate modernize digital into Scale digital delivery mainstream IT mainstream Generate savings from efficiencies Transform workforce 32
Slide 33: Operating and modernizing mainstream IT through Bionix
Modernize Generate Scale digital delivery 1 mainstream 2 savings from 3 and integrate into 4 Transform IT efficiencies mainstream workforce We are operating and modernizing mainstream IT through Bionix while enhancing service levels Operate and modernize mainstream IT via Strengthen operational stab
Slide 34: Modernization of mainstream IT will drive significant savings and margin expansion
Modernize Generate Scale digital delivery 1 mainstream 2 savings from 3 and integrate into 4 Transform IT efficiencies mainstream workforce Modernization of mainstream IT will drive significant savings and margin expansion By FY22 Optimize labor utilization and deployment through BIONIX automation a
Slide 35: Delivering digital services at scale
Modernize Generate Scale digital delivery 1 mainstream 2 savings from 3 and integrate into 4 Transform IT efficiencies mainstream workforce Delivering digital services at scale Ideate and explore Scale and transform Deploy industry platforms 1. Design thinking 1. Standardize offerings 1. Leverage de
Slide 36: Platform DXC and Bionix are driving the integration of digital
Platform DXC and Bionix are driving the integration of digital into mainstream Open framework to deploy end-to-end managed services at scale Delivers integrated DXC offerings and Bionix assets Leverages best-of-breed partner technology and IP Platform DXC Applicable across industries and embeds vert
Slide 37: Transforming our workforce to enable scaling of digital services
Modernize Generate Scale digital delivery 1 mainstream 2 savings from 3 and integrate into 4 Transform IT efficiencies mainstream workforce We are transforming our workforce to enable scaling of our digital services and offerings Reskill and upskill Enhance digital Source digital talent talent cultu
Slide 38: Key Delivery Priorities
Key Delivery Priorities Operate & Integrate modernize digital into Scale digital delivery mainstream IT mainstream Generate savings from efficiencies Transform workforce 38
Slide 39: DXC.technology
Dre DXC.technology
Slide 40: DXC is well positioned to lead in the new digital cycle
DXC is well positioned to lead in the new digital cycle ~$21B Annual revenue 130k N.EUR 16% Employees UK&I 18% AMS 44% S.EUR 8% AMEA 6% 100+ AI Countries ML Robotics Automation Analytics Lean ANZ 8% Agile Scale delivery International Healthcare Standardized Public Sector offerings 13% at scale ~6000
Slide 41: Value creation levers
Value creation levers STABLE REVENUE SUSTAINABLE STRONG FREE DISCIPLINED GROWTH MARGIN CASH FLOW CAPITAL EXPANSION ALLOCATION 2% to 4% CAGR 250 to 350 bps 100% or more 40% increase in EBIT of Net Income capital return margin to shareholders © 2018 DXC Technology Company. All rights reserved. Novembe
Slide 42: Stable revenue growth
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Stable revenue growth 2% to 4% CAGR by FY22 Today Industry IP 4% to 6% & BPS Industry IP ▪ Expand industry IP and capitalize on cross-functional BPS opportunities & BPS ▪ Strengthen market
Slide 43: Sustainable margin expansion
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Sustainable margin expansion Gross margin impact: 4% to 5% Revenue mix • Increase margin from greater digital, Revenue Facilities mix IP, and BPS mix rationalization 30 70 bps bps Workforc
Slide 44: Workforce optimization
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Workforce optimization Labor footprint LABOR PYRAMID GLOBAL LABOR FOOTPRINT • Consolidate in low-cost locations • Focus hiring in global delivery centers Labor pyramid • Rebalance organiza
Slide 45: Text
Text © 2018 DXC Technology Company. All rights reserved. November 8, 2018 45 PD_XXXXa-1945
Slide 46: Facilities rationalization
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Facilities rationalization Today Target Office sites Today Target Continue exiting low- utilization and sub-scale 292 167 locations 168 107 84 42 24 12 16 6 © 2018 DXC Technology Company.
Slide 47: Facilities rationalization
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Facilities rationalization Today Target Office sites Today Target Continue exiting low- utilization and sub-scale 292 167 locations Delivery centers 16 14 Today Target 11 10 Rebalance deli
Slide 48: Facilities rationalization
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Facilities rationalization Today Target Office sites Today Target Continue exiting low- utilization and sub-scale 292 167 locations Delivery centers 38 24 Today Target 37 28 Rebalance deli
Slide 49: Facilities rationalization
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Facilities rationalization Today Target Office sites Today Target Continue exiting low- utilization and sub-scale 292 167 locations Delivery centers Today Target Rebalance delivery center
Slide 50: Strong free cash flow
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Strong free cash flow Actions Targets By FY22 • Revenue mix • Workforce optimization 250 to 350 bps EBIT • Supply chain efficiencies expansion • Facilities rationalization • Mix of global
Slide 51: Disciplined capital allocation
1 Stable 2 Sustainable 3 Strong free 4 Disciplined revenue margin cash flow capital growth expansion allocation Disciplined capital allocation Re-investment to fund digital, IP, and BPS growth 9% Return to shareholders through dividends and share repurchase 40% Optimized capital 30% expenditures 9%
Slide 52: Solid financial position
Solid financial position Ample Access to Liquidity Investment Grade Credit Profile Targeted Leverage Ratios • Strong Free Cash Flow • Fitch: BBB+/stable • Cash balances of $1.5B to $2B • Moody's: Baa2/stable <2.0x <1.5x • Revolving credit facility of $4B • S&P: BBB/stable • Multi-currency pooling st
Slide 53: Non-GAAP EPS roadmap
Non-GAAP EPS roadmap 2% to 4% Incremental revenue 400 – 500 bps reinvestments Return to growth of margin expansion and offsets shareholders Incremental Share Facilities reinvestments rationalization and offsets repurchases $11.75 – $12.50 Supply chain efficiencies $0.50 ($1.00) $1.10 Workforce optim
Slide 54: Financial targets
Financial targets By FY22 Revenue 2% to 4% CAGR Adj. EBIT margin 18.5% to 19.5% Adj. free cash flow 100%+ of adj. net income $11.75 to $12.50 Non-GAAP EPS 13% to 16% CAGR 54
Slide 55: DXC.technology
Dre DXC.technology
DXC Technology Company — Investor Day (November 2018) on 6ix