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1February 9, 20163rd Quarter FY 2016 Earnings Presentation
3rd QUARTER FY 2016EARNINGS PRESENTATIONFebruary 9, 2016
2February 9, 20163rd Quarter FY 2016 Earnings Presentation
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”. 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.
3February 9, 20163rd Quarter FY 2016 Earnings Presentation
Non-GAAP Reconciliations
This presentation includes certain non-GAAP financial measures such as operating income, operating margin, adjusted operating income, adjusted operating margin, earnings before interest and taxes (EBIT), EBIT margin, adjusted EBIT, adjusted EBIT margin. Also included are certain non-GAAP results such as non-GAAP income from continuing operations and non-GAAP EPS. 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 measures 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.
Selected references are made on a “constant currency basis” (cc) so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. Financial results on a “constant
currency basis” are non-GAAP measures calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This approach is used for
all results where the functional currency is not the U.S. dollar.
4February 9, 20163rd Quarter FY 2016 Earnings Presentation
3rd QUARTER FY 2016EARNINGS PRESENTATION
Mike LawrieChief Executive Officer
5February 9, 20163rd Quarter FY 2016 Earnings Presentation
Key Messages
Q3 FY16 non-GAAP EPS* of $0.71 up 16% YoY
Successfully completed separation of CSRA
Positive momentum in next-gen offerings & partnerships
Making good progress on acquisition strategy
Operating margin up YoY, strong bookings
*Non-GAAP EPS from continuing operations excludes certain CSRA overhead costs, impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring & other transaction costs, net actuarial pension and OPEB gains/losses, and tax valuation allowance & adjustments
(see slides 7, 14 – 17 for non-GAAP reconciliations)
FY16 target update
6February 9, 20163rd Quarter FY 2016 Earnings Presentation
3rd QUARTER FY 2016EARNINGS PRESENTATION
Paul SalehChief Financial Officer
7February 9, 20163rd Quarter FY 2016 Earnings Presentation
Reconciliation of Non-GAAP ResultsQ3 FY16 and YTD FY16
*EPS from continuing operations and per-share values of certain items may not add to non-GAAP EPS due to rounding
$M Except EPS GAAP Certain CSRA overhead costs
U.S. Pension & OPEB
Separation, restructuring &
other transaction costs
Pension & OPEB actuarial & settlement
gains
SEC settlement-related items
Tax valuation allowance & adjustments
Non-GAAP results
Income (loss) from continuing operations, before taxes 78 (22) 10 (53) 19 - - 124
Income tax expense (benefit) 63 (8) 4 (17) 6 - 54 24
Income (loss) from continuing operations 15 (14) 6 (36) 13 - (54) 100
Diluted EPS from continuing operations* $ 0.10 (0.10) 0.04 (0.25) 0.09 - (0.38) $ 0.71
$M Except EPS GAAP Certain CSRA overhead costs
U.S. Pension & OPEB
Separation, restructuring &
other transaction costs
Pension & OPEB actuarial & settlement
gains
SEC settlement-related items
Tax valuation allowance & adjustments
Non-GAAP results
Income (loss) from continuing operations, before taxes 197 (88) 38 (83) 19 (5) - 316
Income tax expense (benefit) 31 (34) 15 (27) 6 (2) 10 63
Income (loss) from continuing operations 166 (54) 23 (56) 13 (3) (10) 253
Diluted EPS from continuing operations* $ 1.17 (0.38) 0.16 (0.40) 0.09 (0.02) (0.07) $ 1.79
Q3 FY16
YTD FY16
8February 9, 20163rd Quarter FY 2016 Earnings Presentation
3rd Quarter Results
*Adjusted for full impact of extra week in Q1 of fiscal 2015**Non-GAAP and adjusted results exclude certain CSRA overhead costs, impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring& other transaction costs, net actuarial pension and OPEB gains/losses, SEC settlement-related items, and tax valuation allowance & adjustments, as applicable
(see slides 7, 14 – 17 for non-GAAP reconciliations)
FY16 FY15 FY16 FY15
Revenue ($M) 1,750$ 1,949$ 5,299$ 6,207$
YoY Growth – GAAP (10.2%) (14.6%)
YoY Growth – cc (4.9%) (7.2%)*
QoQ Growth – GAAP 0.3%
Adjusted Operating Income ($M)** 190 174 494 491
Adjusted Operating Margin (%)** 10.9% 8.9% 9.3% 7.9%
Adjusted EBIT ($M)** 147 137 375 362
Adjusted EBIT Margin (%)** 8.4% 7.0% 7.1% 5.8%
Non-GAAP Income from Continuing Operations ($M)** 100 87 253 223
Non-GAAP EPS from Continuing Operations** 0.71$ 0.61$ 1.79$ 1.52$
Bookings ($B) 2.7$ 2.2$ 6.3$ 6.4$
Q3 YTD
9February 9, 20163rd Quarter FY 2016 Earnings Presentation
Global Business Services (GBS)
$3.6 $3.2
YTD FY15 YTD FY16
$3,056 $2,696
YTD FY15 YTD FY16
OI Margin %Revenue ($M) Bookings ($B)Year to Date
11.6% 11.8%*
YTD FY15 YTD FY16
Decline in cc of 3.5%**
Q3 FY16 Q3 FY15
Revenue ($M) 886$ 965$ – YoY growth - GAAP (8.2%)– YoY growth - cc (2.5%)Operating Income ($M)– Adjusted* 116 124 Operating Margin (%) – Adjusted* 13.1% 12.8%Bookings ($B) 1.6$ 1.2$
*Adjusted Operating income and margin excludes impact of transfer of U.S. pension & OPEB assets to CSRA and separation, restructuring & other transaction costs**Adjusted for full impact of extra week in Q1 of fiscal 2015
10February 9, 20163rd Quarter FY 2016 Earnings Presentation
Global Infrastructure Services (GIS)
$2.8 $3.1
YTD FY15 YTD FY16
$3,151$2,603
YTD FY15 YTD FY16
5.9%7.1%*
YTD FY15 YTD FY16
Revenue ($M) Bookings ($B)Year to DateDecline in cc of 10.8%**
OI Margin %
Q3 FY16 Q3 FY15
Revenue ($M) 864$ 984$ – YoY growth - GAAP (12.2%)– YoY growth - cc (7.2%)Operating Income ($M)– Adjusted* 79 63 Operating Margin (%) – Adjusted* 9.1% 6.4%Bookings ($B) 1.0$ 1.0$
*Adjusted Operating income and margin excludes impact of transfer of U.S. pension & OPEB assets to CSRA and separation, restructuring & other transaction costs**Adjusted for full impact of extra week in Q1 of fiscal 2015
11February 9, 20163rd Quarter FY 2016 Earnings Presentation
Financial Highlights
Q3 FY16
Cash and Equivalents $1.8B
Net Debt to Capital Ratio 16.8%
Capital Structure
Q3 FY16
Dividends $32M
Special Dividend* $1.5B
Share Repurchases0.3M shares
$10M
Capital to Shareholders
*$313M paid by CSC
12February 9, 20163rd Quarter FY 2016 Earnings Presentation
FY 2016 Targets
Free Cash Flow 100% of Adj. Net Income
Revenue Down mid-single digits (cc)
Non-GAAP EPS from Continuing Operations* $2.40 – $2.60
*Non-GAAP EPS from continuing operations excludes certain CSRA overhead costs, impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring & other transaction costs, net actuarial pension and OPEB gains/losses, and tax valuation adjustments
13February 9, 20163rd Quarter FY 2016 Earnings Presentation
3rd QUARTER FY 2016EARNINGS PRESENTATION
Supplemental Information
14February 9, 20163rd Quarter FY 2016 Earnings Presentation
Q3 Non-GAAP ReconciliationOperating Income ($M) Q3 FY16 Q3 FY15
Adjusted operating income 190$ 174$ Certain CSRA overhead costs (12) (9) U.S. Pension & OPEB 10 13 Separation, restructuring & other transaction costs (40) - Operating income 148$ 178$ Corporate G&A (58) (55) Pension & OPEB actuarial & settlement gains (losses) 19 (285) SEC settlement related charges - (195) Separation costs (2) - Interest expense (33) (32) Interest income 8 4 Other (expense) income, net (4) (1) Income from continuing operations before taxes 78$ (386)$
Earnings Before Interest and Taxes ($M) Q3 FY16 Q3 FY15
Adjusted EBIT 147$ 137$ Certain CSRA overhead costs (22) (28) U.S. Pension & OPEB 10 13 Separation, restructuring & other transaction costs (51) - Pension & OPEB actuarial & settlement gains (losses) 19 (285) SEC settlement related charges - (195) EBIT 103$ (358)$ Interest expense (33) (32) Interest income 8 4 Income tax expense (63) 192 Income from continuing operations 15$ (194)$
Margin % Q3 FY16 Q3 FY15
Revenue ($M) 1,750$ 1,949$ Adjusted operating margin 10.9% 8.9%Operating margin 8.5% 9.1%Adjusted EBIT margin 8.4% 7.0%EBIT margin 5.9% (18.4%)
15February 9, 20163rd Quarter FY 2016 Earnings Presentation
YTD Non-GAAP ReconciliationOperating Income ($M) YTD FY16 YTD FY15
Adjusted operating income 494$ 491$ Certain CSRA overhead costs (48) (31) U.S. Pension & OPEB 38 38 Separation, restructuring & other transaction costs (62) - Operating income 422$ 498$ Corporate G&A (171) (173) Pension & OPEB actuarial & settlement gains (losses) 19 (286) SEC settlement related charges - (195) Separation costs (10) - Interest expense (92) (96) Interest income 26 14 Other (expense) income, net 3 (5) Income from continuing operations before taxes 197$ (243)$
Earnings Before Interest and Taxes ($M) YTD FY16 YTD FY15
Adjusted EBIT 375$ 362$ Certain CSRA overhead costs (88) (80) U.S. Pension & OPEB 38 38 Separation, restructuring & other transaction costs (81) - Pension & OPEB actuarial & settlement gains (losses) 19 (286) SEC settlement related charges - (195) EBIT 263$ (161)$ Interest expense (92) (96) Interest income 26 14 Income tax expense (31) 157 Income from continuing operations 166$ (86)$
Margin % YTD FY16 YTD FY15
Revenue ($M) 5,299$ 6,207$ Adjusted operating margin 9.3% 7.9%Operating margin 8.0% 8.0%Adjusted EBIT margin 7.1% 5.8%EBIT margin 5.0% (2.6%)
16February 9, 20163rd Quarter FY 2016 Earnings Presentation
Q3 FY16 Non-GAAP Results
*EPS from continuing operations and per-share values of certain items may not add to non-GAAP EPS due to rounding
$M Except EPS GAAP Certain CSRA overhead costs
U.S. Pension & OPEB
Separation, restructuring & other transaction
costs
Pension & OPEB actuarial &
settlement gains
Tax valuation allowance & adjustments
Non-GAAPresults
Costs of services (excludes depreciation and amortization and restructuring costs) 1,216$ (7)$ 8$ (5)$ 16$ -$ 1,228$
Selling, general and administrative (excludes restructuring costs) 257$ (15)$ 2$ (13)$ 3$ -$ 234$
Income (loss) from continuing operations, before taxes 78$ (22)$ 10$ (53)$ 19$ -$ 124$ Income tax expense (benefit) 63$ (8)$ 4$ (17)$ 6$ 54$ 24$ Income (loss) from continuing operations 15$ (14)$ 6$ (36)$ 13$ (54)$ 100$
Net income (loss) 45$ (14)$ 6$ (36)$ 13$ (54)$ 130$ Less: net income attributable to noncontrolling interest, net of tax 2$ -$ -$ -$ -$ -$ 2$ Net income (loss) attributable to CSC common stockholders 43$ (14)$ 6$ (36)$ 13$ (54)$ 128$
Effective tax rate 80.6% 19.4%
Basic EPS from continuing operations* 0.11$ (0.10)$ 0.04$ (0.26)$ 0.09$ (0.39)$ 0.72$ Diluted EPS from continuing operations* 0.10$ (0.10)$ 0.04$ (0.25)$ 0.09$ (0.38)$ 0.71$
Weighted average common shares outstanding for:Basic EPS 138.864 138.864 138.864 138.864 138.864 138.864 138.864 Diluted EPS 141.183 141.183 141.183 141.183 141.183 141.183 141.183
17February 9, 20163rd Quarter FY 2016 Earnings Presentation
YTD FY16 Non-GAAP Results
$M Except EPS GAAP Certain CSRA overhead costs
U.S. Pension & OPEB
Separation, restructuring & other transaction
costs
Pension & OPEB actuarial &
settlement gains
SEC settlement-related items
Tax valuation allowance & adjustments
Non-GAAPresults
Costs of services (excludes depreciation and amortization and restructuring costs) 3,725$ (41)$ 32$ (5)$ 16$ -$ -$ 3,727$
Selling, general and administrative (excludes restructuring costs) 789$ (47)$ 6$ (15)$ 3$ (5)$ -$ 731$
Income (loss) from continuing operations, before taxes 197$ (88)$ 38$ (83)$ 19$ (5)$ -$ 316$ Income tax expense (benefit) 31$ (34)$ 15$ (27)$ 6$ (2)$ 10$ 63$ Income (loss) from continuing operations 166$ (54)$ 23$ (56)$ 13$ (3)$ (10)$ 253$
Net income (loss) 382$ (54)$ 23$ (56)$ 13$ (3)$ (10)$ 469$ Less: net income attributable to noncontrolling interest, net of tax 12$ -$ -$ -$ -$ -$ -$ 12$ Net income (loss) attributable to CSC common stockholders 370$ (54)$ 23$ (56)$ 13$ (3)$ (10)$ 457$
Effective tax rate 15.6% 19.9%
Basic EPS from continuing operations* 1.19$ (0.39)$ 0.17$ (0.40)$ 0.09$ (0.02)$ (0.07)$ 1.82$ Diluted EPS from continuing operations* 1.17$ (0.38)$ 0.16$ (0.40)$ 0.09$ (0.02)$ (0.07)$ 1.79$
Weighted average common shares outstanding for:Basic EPS 138.359 138.359 138.359 138.359 138.359 138.359 138.359 138.359 Diluted EPS 141.003 141.003 141.003 141.003 141.003 141.003 141.003 141.003
*EPS from continuing operations and per-share values of certain items may not add to non-GAAP EPS due to rounding
18February 9, 20163rd Quarter FY 2016 Earnings Presentation
$1.0 $1.2 $1.4
$0.7 $1.0
$1.2 $1.1 $0.9
$0.7
$1.6
$2.2 $2.3 $2.2
$1.4
$2.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16
$B
Global Business ServicesGBS Global Infrastructure ServicesGIS
Bookings*
FY15 FY16
*Segment bookings may not add to total due to rounding
19February 9, 20163rd Quarter FY 2016 Earnings Presentation
• Operating income: Revenue less costs of services, segment selling, general and administrative (SG&A) expenses, depreciation and amortization expense, and restructuring costs. Operating income excludes corporate G&A, actuarial and settlement charges related to CSC’s pension and other post-employment benefit (OPEB) plans, and separation and restructuring costs
• Operating income margin: Operating income as a percentage of revenue
• Adjusted operating income: Operating income excluding certain CSRA overhead costs, U.S. Pension and OPEB, and separation, restructuring & other transaction costs
• Adjusted operating margin: Adjusted operating income as a percentage of revenue
• Earnings before interest and taxes (EBIT): Income from continuing operations less interest expense, interest income and income tax expense
• EBIT margin: EBIT as a percentage of revenue
• Adjusted EBIT: EBIT excluding the impact of certain items in the third quarter and first nine months of fiscal 2016, including certain CSRA overhead costs, U.S. Pension and OPEB, separation, restructuring & other transaction costs, SEC settlement related charges,and pension and OPEB actuarial & settlement gains (losses)
• Adjusted EBIT margin: Adjusted EBIT as a percentage of revenue
• Net debt: Calculated as the sum of long-term and short-term debt, less cash and cash equivalents
• Net debt to capital: Calculated as the ratio of net debt to capital (total debt plus equity)
Non-GAAP and Other Definitions
20February 9, 20163rd Quarter FY 2016 Earnings Presentation
3rd QUARTER FY 2016EARNINGS PRESENTATION
Thank You