1st quarter fy 2014 earnings - assets1.dxc.technology · (31) (34) (25) (31) (121) total $ 3,655 $...

1st QUARTER FY 2014

EARNINGSPRESENTATION

August 6, 2013

21st Quarter FY 2014 Earnings Presentation August 6, 2013

Forward-Looking Statements

All written or oral statements made by CSC at this meeting or in these presentation materials that do not directly and exclusively relate to historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent CSC’s expectations and beliefs, and no assurance can be

given that the results described in such statements will be achieved. These statements are subject to risks, uncertainties, and other factors, many outside of CSC’s control, that could cause actual results to differ materially from the results described in such statements. For a

description of these factors, please see CSC’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.


Non-GAAP Reconciliations

This presentation includes certain non-GAAP financial measures, such as operating income, operating margin, earnings before interest and taxes (EBIT), EBIT margin, free cash flow,

and capital expenditures. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for results prepared in accordance with

accounting principles generally accepted in the United States (GAAP). A reconciliation of non-GAAP financial measures included in this presentation to the most directly comparable

financial measure calculated and presented in accordance with GAAP accompanies this presentation and is on our website at www.csc.com. CSC management believes that these

non-GAAP financial measures provide useful information to investors regarding the Company’s financial condition and results of operations as they provide another measure of the Company’s profitability and ability to service its debt, and are considered important

measures by financial analysts covering CSC and its peers.

1st QUARTER FY 2014 EARNINGS

Mike LawrieChief Executive Officer


Making investments to drive growth

Cost takeout drove higher margins and EPS

Continuing to return more cash to shareholders

Raising FY 2014 EPS* target to $3.50 – $3.70

Key Messages

*EPS from Continuing Operations

1st QUARTER FY 2014 EARNINGS

Paul SalehChief Financial Officer


1st Quarter Results

*Adjusted primarily for divestiture of Australian IT staffing business and NHS milestone payment in FY 2013

FY14 FY13

Revenue ($M) $ 3,260 $ 3,633

Adjusted Growth in cc* -6.1%

Operating Income ($M) 304 146

Operating Margin 9.3% 4.0%

EBIT ($M) 241 74

EBIT Margin 7.4% 2.0%

Income from Continuing Operations ($M) 141 17

EPS from Continuing Operations $ 0.91 $ 0.10

Bookings ($B) $ 2.8 $ 4.0


NPS 32%

GIS35%

GBS33%

Global Business Services (GBS)

Q1 FY14 Q1 FY13

Revenue ($M) $ 1,083 $ 1,278 YoY Growth – GAAP (15.3%) – cc (14.8%)Adjusted cc growth* (3.8%)

Operating Income ($M)– As reported 101 66

– Adjusted for restructuring 110 80

Operating Margin % – As reported 9.3% 5.2%– Adjusted for restructuring 10.2% 6.3%

Bookings ($B) $ 1.2 $ 2.1

Offerings

Technology and Business Consulting

Industry Software and Solutions

Applications Testing, Development, and Maintenance Services

*Adjusted primarily for divestiture of Australian IT staffing business and NHS milestone payment in FY 2013


Global Infrastructure Services (GIS)

Q1 FY14 Q1 FY13

Revenue ($M) $ 1,150 $ 1,203 YoY Growth – GAAP (4.4%) – cc (3.7%)

Operating Income ($M)– As reported 82 16 – Adjusted for restructuring 82 29 Operating Margin % – As reported 7.1% 1.3%

– Adjusted for restructuring 7.1% 2.4%

Bookings ($B) $ 0.9 $ 1.1 Offerings

Platform

Workplace Services

Data Center

Enterprise Service Management

Next-Generation IT: Cyber and Cloud Solutions

NPS 32%

GIS35%

GBS33%


North American Public Sector (NPS)

Q1 FY14 Q1 FY13

Revenue ($M) $ 1,053 $ 1,183

YoY Growth – GAAP (11.0%)

Operating Income ($M)

– As reported 121 93

Operating Margin %

– As reported 11.5% 7.9%

Bookings ($B) $ 0.7 $ 0.8

DoD 57%Civil 38%Other 5%

NPS 32%

GIS35%

GBS33%

OfferingsMission-Specific IT Services

Business Services • Consulting• Applications • BPO

Infrastructure Services • Workplace• Platform• Data Center • Enterprise Service Management• Next-Generation IT: Cyber and Cloud Solutions


Financial Highlights

Q1 FY14

Share Repurchases2.8M shares

$127M

Dividends $30M

Capital to Shareholders

Divestiture of Non-Core Businesses

FY13Revenue ($M)

Gross Proceeds ($M)

Applied Technology Division (ATD)* ~$729 $178

Flood Insurance BPO ~$45 $47

Total ~$774 $225

Asset PortfolioRebalancing

*Proceeds from sale of Applied Technology Division received subsequent to the quarter end


Financial Highlights (Cont’d)

Strengthening Balance Sheet

Q1 FY14 Q1 FY13

Cash and Cash Equivalents $1,929M $1,000M

Net Debt to Capital Ratio 13.3% 31.5%

($M) Q1 FY14 Q1 FY13

Free Cash Flow $(9) $(25)

DSO 77 79

DSO — Excluding Unbilled 45 46

Cap Ex — Including Capital Leases $228 $264

Cap Ex as a % of Revenue 7.0% 7.3%

Cash Flow Performance


COST TAKEOUT• Contract management discipline• Supply chain and procurement• Workforce optimization• Enterprise overhead reduction

REINVESTMENTS• Customer-committed savings• Business transformation

– Enterprise finance and HR systems– Sales and go-to-market initiatives

• Restructuring

Cost Takeout Update

Q1 FY14 FY14 Targets

~$175M Revised ~$500M

~$35M Revised ~$300M

Previous ~$400M

Previous ~$300M


FY14 Free Cash Flow Update

• Shift to utility-based model• Disciplined demand management

• Cost takeout• Operational efficiencies

• Optimized geographic income mix• Use of valuation allowances• R&D credit opportunities

• DSO improvement• Better supplier terms

EBIT

Taxes

WorkingCapital

CapitalExpenditures

Drivers

Revised Target: $550MPrevious Target: $500M


Free Cash Flow Comparison

$M

Free Cash Flow* $ 764 $ 550 Adjustments:Net Income from Divestitures (75)

NHS Settlement (110) -

Incremental Bonus Payments - 90

Incremental Restructuring - 50

Adjusted Free Cash Flow $ 579 $ 690

FY13 FY14Target

*FY13 Free Cash Flow excludes impact of $500M in discretionary pension contributions

~20% YoY

~~


Revenue

EPS from Continuing Operations $3.50 – $3.70

Free Cash Flow $550 million

Flat to slightly down• NPS — high-single-digit to low-double-digit decline

• Commercial — slightly up

Summary — FY14 Targets

Supplemental Information


CSC’s New Operating Model

Financial Services Healthcare Manu-

facturing Diversified Public Sector (incl.

Federal) Regions

Global Industries

Workplace

Cloud

Cyber

Big Data

PlatformsGlobal Infrastructure

Services

Global Business Services

CEO direct reports

Enterprise Service Management

Data Center

Americas

Australia

Nordics

India

Asia

Central Europe

UK & Ireland

Sales & MarketingContract Performance & Quality Control

Finance, Legal & Human Resources, CIO, CTOCorporate Strategy & Business Development

South & West Europe

Industry Softwareand Solutions

Applications

Consulting


$M Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FY13GBS $ 1,278 $ 1,207 $ 1,226 $ 1,230 $ 4,941 GIS 1,203 1,163 1,191 1,186 4,743NPS 1,183 1,190 1,157 1,132 4,662Corporate and Elim. (31) (25) (32) (39) (127)

Total $ 3,633 $ 3,535 $ 3,542 $ 3,509 $ 14,219

$M Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 FY12GBS $ 1,242 $ 1,230 $ 1,062 $ 1,359 $ 4,893 GIS 1,184 1,195 1,216 1,245 4,840NPS 1,260 1,219 1,185 1,216 4,880Corporate and Elim. (31) (34) (25) (31) (121)

Total $ 3,655 $ 3,610 $ 3,438 $ 3,789 $ 14,492

FY 2013 and FY 2012 Revenue by Segment*

*Revenue recast for change in reportable segments and impact of the following discontinued operations: U.S. credit services business, Italian consulting and systems integration business, enterprise system integration

business in Malaysia and Singapore, Applied Technology Division, and flood insurance BPO


$M Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FY13GBS $ 66 $ 78 $ 96 $ 123 $ 363 GIS 16 42 58 9 125NPS 93 143 131 123 490 Corporate and Elim. (29) (4) (30) (53) (116)

Total $ 146 $ 259 $ 255 $ 202 $ 862

$M Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 FY12GBS $ 73 $ 42 $ (1,375) $ (32) $ (1,292)GIS (34) 2 18 (130) (144)NPS 110 (139) 60 73 104 Corporate and Elim. (4) (22) (21) (18) (65)

Total $ 145 $ (117) $ (1,318) $ (107) $ (1,397)

FY 2013 and FY 2012 Operating Income by Segment*

*Operating Income recast for change in reportable segments and impact of the following discontinued operations: U.S. credit services business, Italian consulting and systems integration business, enterprise system integration

business in Malaysia and Singapore, Applied Technology Division, and flood insurance BPO


FY 2013 and FY 2012 EPS*

*EPS from Continuing Operations recast to exclude impact of the following discontinued operations: U.S. credit services business, Italian consulting and systems integration business, enterprise system integration

business in Malaysia and Singapore, Applied Technology Division, and flood insurance BPOQuarterly earnings per share (EPS) amounts may not total full-year EPS. EPS is calculated based on weighted average shares outstanding

for the period. Quarterly weighted average shares may not equal the full-year weighted average shares for the fiscal year.

Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FY13DilutedContinuing Operations $ 0.10 $ 0.68 $ 0.70 $ 1.54 $ 3.02 Discontinued Operations $ 0.16 $ 0.15 $ 2.57 $ 0.27 $ 3.16 Total EPS $ 0.26 $ 0.83 $ 3.27 $ 1.81 $ 6.18

Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 FY12DilutedContinuing Operations $ 0.48 $ (18.42) $ (9.28) $ (1.27) $ (28.50)Discontinued Operations $ 0.69 $ (0.14) $ 0.32 $ 0.25 $ 1.13 Total EPS $ 1.17 $ (18.56) $ (8.96) $ (1.02) $ (27.37)


1st Quarter Selected Cash Flow Items

$MNet Income $ 159 $ 42 Depreciation and Amortization 255 262 Change in Working Capital (182) (89) (Gain)/Loss on Dispositions (25) 3 Other 6 3 Operating Cash Flow 213 221

Capital Expenditures (168) (199) Business Dispositions 56 2 Other 11 18 Investing Cash Flow (101) (179)

Capital Leases and Other Financing (60) (65) Business Dispositions (56) (2) Other (5) - Free Cash Flow $ (9) $ (25)

Q1 FY14 Q1 FY13


Non-GAAP Reconciliation

Operating Income $M Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FY13Operating Income $ 146 $ 259 $ 255 $ 202 $ 862 Corporate G&A (60) (70) (56) (107) (293)Interest Expense (44) (46) (56) (37) (183)Interest Income 5 5 4 8 22 Other (Expense) Income, Net (12) 11 (6) 32 25 Income from Continuing Operations Before Taxes $ 35 $ 159 $ 141 $ 98 $ 433

Operating Income $M Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 FY12Operating Income $ 145 $ (117) $ (1,318) $ (107) $ (1,397)Corporate G&A (54) (66) (46) (53) (219)Interest Expense (42) (45) (42) (44) (173)Interest Income 12 12 8 6 38 Goodwill Impairment - (2,685) (60) - (2,745)Other Income (Expense), Net 1 5 (15) 4 (5)Income from Continuing Operations Before Taxes $ 62 $ (2,896) $ (1,473) $ (194) $ (4,501)


*Capital lease payments, repayments of obligations related to assets acquired under long-term financing arrangements, and proceeds from the sale of P&E (included in investing activities) are included in the calculation of Free Cash Flow

Operating Income $M Q1 FY14 Q1 FY13Operating Income $ 304 $ 146 Corporate G&A (64) (60)Interest Expense (39) (44)Interest Income 4 5 Other Income (Expense), Net 1 (12)Income from Continuing Operations Before Taxes

$ 206 $ 35

Non-GAAP Reconciliation (Cont’d)

Free Cash Flow $M* Q1 FY14 Q1 FY13Net Cash Provided by Operating Activities $ 213 $ 221

Net Cash Used in Investing Activities (101) (179)Business Dispositions (56) (2)Short-Term Investments (5) - Payments on Capital Leases and Other Long-Term Asset Financings (60) (65)

Free Cash Flow $ (9) $ (25)


Non-GAAP Reconciliation (Cont’d)

Q1 FY14 Q1 FY13Earnings Before Interest and Taxes $ 241 $ 74 Interest Expense (39) (44)Interest Income 4 5 Taxes on Income (65) (18)Income from Continuing Operations $ 141 $ 17

Earnings Before Interest and Taxes $M

Q1 FY14 Q1 FY13Earnings Before Interest and Taxes $ 241 $ 74 Revenue $ 3,260 $ 3,633 EBIT Margin % 7.4% 2.0%

EBIT Margin %


Adjusted Operating Income

$M Operating Income

Restructuring Costs

Adjusted Operating

Income

Adjusted Operating

MarginGBS $ 101 $ 9 $ 110 10.2%GIS 82 - 82 7.1%NPS 121 - 121 11.5%Corporate & Eliminations - (2) (2)Total $ 304 $ 7 $ 311 9.5%

$M Operating Income

Restructuring Costs

Adjusted Operating

Income

Adjusted Operating

MarginGBS $ 66 $ 14 $ 80 6.3%GIS 16 13 29 2.4%NPS 93 - 93 7.9%Corporate & Eliminations (29) - (29)Total $ 146 $ 27 $ 173 4.8%

Q1 FY14

Q1 FY13


$M Q1 FY14 Q1 FY13Cost of Services (excluding restructuring costs) $ 2,466 $ 2,977 Percentage of Revenue 75.6% 82.0%SG&A (excluding Corp. G&A) 228 221 Percentage of Revenue 7.0% 6.1%Depreciation and Amortization 255 262 Percentage of Revenue 7.8% 7.2%Restructuring Costs 7 27 Percentage of Revenue .2% .7%Operating Costs 2,956 3,487 Percentage of Revenue 90.7% 96.0%Corporate G&A 64 60 Percentage of Revenue 2.0% 1.6%

Components of Operating Costs

0 0


• Operating Cost: Equal to the sum of (1) cost of services, (2) segment SG&A excluding Corporate G&A, (3) depreciation and amortization, and (4) restructuring costs

• Operating Income: Revenue minus Operating Cost• Operating Income Margin: Operating Income as a percentage of Revenue• DSO: Total receivables at quarter end, divided by Revenue per day

– Revenue per day equals total revenues divided by the number of days in the fiscal quarter– Total receivables includes unbilled receivables, but excludes income tax receivables and

long-term receivables• DSO Excluding Unbilled Receivables: Total receivables excluding income tax receivables and

long-term receivables less unbilled receivables at quarter end divided by Revenue per day. Revenue per day equals total revenues divided by the number of days in the fiscal quarter

• Free Cash Flow: Equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions and dispositions, and investments (including short-term investments and purchase or sale of available-for-sale securities), and (3) payments on capital leases and other long-term asset financings

• Capital Expenditures: Equal to sum of net purchases of property, plant, and equipment, outsourcing contracts, and software

• Earnings Before Interest and Taxes: Revenue minus cost of services, selling, general and administrative expenses, depreciation and amortization, goodwill impairment, restructuring costs and other income (expense)

• Earnings Before Interest and Taxes Margin: Earnings Before Interest and Taxes as a percentage of Revenue

Non-GAAP and Other Definitions

Thank You

1st quarter fy 2014 earnings - assets1.dxc.technology · (31) (34) (25) (31) (121) total $ 3,655 $...

Documents