Post on 24-May-2020
transcript
1st QUARTER FY 2015 EARNINGS PRESENTATIONAugust 7, 2014
2August 7, 20141st Quarter FY 2015 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” 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.
3August 7, 20141st Quarter FY 2015 Earnings Presentation
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 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.
4August 7, 20141st Quarter FY 2015 Earnings Presentation
Basis of Presentation
During the first quarter of fiscal year 2015, CSC changed its pension accounting policy. Under the new policy, actuarial gains and losses and changes in fair value of plan assets are recorded in
the year in which they occur. Also during the quarter, CSC changed its inter-company accounting policy. Previously, inter-company transactions between segments were generally reflected as inter-company revenue. Under the new policy, inter-company transactions are now generally treated as cost transfers. The company has recast its financial statements for the year-ago
period to reflect both these accounting policy changes.
1st QUARTER FY 2015 EARNINGS PRESENTATION
Mike LawrieChief Executive Officer
6August 7, 20141st Quarter FY 2015 Earnings Presentation
NPS business performing well
EPS* of $1.03 consistent with expectations
Maintaining FY 2015 EPS* target of $4.35 – $4.55
Key Messages
*EPS from Continuing Operations
Commercial business in line with expectations
Investing in new offerings and partnerships
Continuing to return capital to shareholders
1st QUARTER FY 2015 EARNINGS PRESENTATION
Paul SalehChief Financial Officer
8August 7, 20141st Quarter FY 2015 Earnings Presentation
1st Quarter Results Q1 FY15 Q1 FY14
Revenue ($M) $ 3,237 $ 3,254
YoY Growth – GAAP (0.5%)
YoY Growth – cc (1.9%)
Operating Income ($M) 304 332
Operating Margin (%) 9.4% 10.2%
EBIT ($M) 248 269
EBIT Margin 7.7% 8.3%
Income from Continuing Operations ($M) 159 161*
EPS from Continuing Operations $ 1.03 1.03**
Bookings ($B) $ 2.7 $ 2.8 *Q1 FY14 Income from Continuing Operations was $145 million prior to the change in the pension accounting policy
**Q1 FY14 EPS from Continuing Operations was $0.93 prior to the change in the pension accounting policy
9August 7, 20141st Quarter FY 2015 Earnings Presentation
NPS 31%
GIS35%
GBS34%
Global Business Services (GBS)
Q1 FY15 Q1 FY14
Revenue ($M) $ 1,088 $ 1,054 YoY Growth – GAAP 3.2% YoY Growth – cc 0.9%
Operating Income ($M)– As reported 108 113
– Adjusted for restructuring 112 122
Operating Margin (%)– As reported 9.9% 10.7%– Adjusted for restructuring 10.3% 11.6%
Bookings ($B) $ 1.2 $ 1.2 Offerings
Next-Generation Technology Consulting
Industry Software and Solutions
Applications
10August 7, 20141st Quarter FY 2015 Earnings Presentation
Global Infrastructure Services (GIS)
NPS 31%
GIS35%
GBS34%
Q1 FY15 Q1 FY14
Revenue ($M) $ 1,131 $ 1,147 YoY Growth – GAAP (1.4%)YoY Growth – cc (3.2%)
Operating Income ($M)– As reported 71 92 – Adjusted for restructuring 77 92 Operating Margin (%) – As reported 6.3% 8.0%– Adjusted for restructuring 6.8% 8.0%
Bookings ($B) $ 1.2 $ 0.9 OfferingsPlatform
Workplace Services
Data Center
Enterprise Service Management
Next-Generation Cyber & Cloud Solutions
11August 7, 20141st Quarter FY 2015 Earnings Presentation
North American Public Sector (NPS)
DoD 55%Civil 37%Other 8%
NPS 31%
GBS34%
GIS35%
Q1 FY15 Q1 FY14
Revenue ($M) $ 1,018 $ 1,053
YoY Growth – GAAP (3.3%)
Operating Income ($M)
– As reported 151 127 – Adjusted for restructuring 151 127
Operating Margin (%)
– As reported 14.8% 12.1%– Adjusted for restructuring 14.8% 12.1%
Bookings ($B) $ 0.3 $ 0.7 OfferingsMission-Specific IT Services
Business Services • Consulting• Applications • BPO
Infrastructure Services • Workplace• Platform• Data Center • Enterprise Service Management• Next-Generation Cyber & Cloud Solutions
12August 7, 20141st Quarter FY 2015 Earnings Presentation
Financial Highlights
Effective Tax Rate
Favorable mix of global income
Benefits from favorable outcome in non-U.S. jurisdictionContinuing with tax planning strategies
Q1 FY15 Q1 FY14
Free Cash Flow $70M ($9M)
Cash and Equivalents $2.4B $1.9B
Cap Ex — Including Capital Leases $203M $220M
Cap Ex as a % of Revenue 6.3% 6.8%
Capital to Shareholders
Q1 FY15 Q1 FY14
Share Repurchases2.4M shares
$148M2.8M shares
$127M
Dividend Payments $29M $30M
Cash Flow Performance
13August 7, 20141st Quarter FY 2015 Earnings Presentation
Cost Takeout and Reinvestment Update
$350M – $400M~$105M
~$110M
COST TAKEOUT• Continued G&A efficiency• Low-cost delivery centers• Productivity gains from automation• Contract management
REINVESTMENTS• Finance and HR systems• Customer-committed savings• Restructuring
– Workforce rebalancing– Real estate optimization
• Next-generation offerings
Q1 FY15
$450M – $500M
FY15 Targets
14August 7, 20141st Quarter FY 2015 Earnings Presentation
FY 2015 Targets
Revenue
Reinvestments
Cost Takeout $450 – $500 million
Free Cash Flow $700 million
Flat to slightly up• Commercial — modest growth• NPS — mid-single digit decline
$350 – $400 million
EPS from Continuing Operations $4.35 – $4.55
1st QUARTER FY 2015 EARNINGS PRESENTATION
Supplemental Information
16August 7, 20141st Quarter FY 2015 Earnings Presentation
$BFY14 FY15
North American Public SectorNPSGlobal Business ServicesGBS Global Infrastructure ServicesGIS
Bookings*
*The summation of the quarter bookings number may not equal the full-year number, due to rounding
17August 7, 20141st Quarter FY 2015 Earnings Presentation
Non-GAAP Reconciliations
Q1 FY15 Q1 FY14Q1 FY14
As Previously Reported*
Earnings Before Interest and Taxes $ 248 $ 269 $ 246 Interest Expense (39) (39) (39)Interest Income 5 4 4 Taxes on Income (55) (73) (66)Income from Continuing Operations $ 159 $ 161 $ 145
Q1 FY15 Q1 FY14Q1 FY14
As Previously Reported*
Revenue ($M) $ 3,237 $ 3,254 $ 3,254 Pre-tax Margin % 6.6% 7.2% 6.5%Operating Income Margin % 9.4% 10.2% 9.5%EBIT Margin % 7.7% 8.3% 7.6%
Earnings Before Interest and Taxes ($M)
Margin %
Operating Income ($M) Q1 FY15 Q1 FY14Q1 FY14
As Previously Reported*
Operating Income $ 304 $ 332 $ 309 Corporate G&A (56) (64) (64)Mark-to-Market Adjustment to Pension Expense (1) - - Interest Expense (39) (39) (39)Interest Income 5 4 4 Other Income, Net 1 1 1 Income from Continuing Operations Before Taxes $ 214 $ 234 $ 211
*Before the change in the pension accounting policy
18August 7, 20141st Quarter FY 2015 Earnings Presentation
Adjusted Operating Income by Segment
$M Operating Income
Restructuring Costs
Adjusted Operating
Income
Adjusted Operating
MarginGBS $ 108 $ 4 $ 112 10.3%GIS 71 6 77 6.8%NPS 151 - 151 14.8%Corporate & Eliminations (26) - (26)Total $ 304 $ 10 $ 314 9.7%
$M Operating Income
Restructuring Costs
Adjusted Operating
Income
Adjusted Operating
Margin
Operating Income
As Previously Reported
GBS $ 113 $ 9 $ 122 11.6% $ 106 GIS 92 - 92 8.0% 82 NPS 127 - 127 12.1% 121 Corporate & Eliminations - (2) (2) - Total $ 332 $ 7 $ 339 10.4% $ 309
Q1 FY15
Q1 FY14
19August 7, 20141st Quarter FY 2015 Earnings Presentation
Q1 FY14 Select P&L Items
$M except EPSAs
Previously Reported
As Reported Impact of MtM*
Revenue $ 3,254 $ 3,254 $ - Cost of Services 2,456 2,437 (19)SG&A 292 288 (4)Income from Continuing Operations, Before Taxes 211 234 23 Taxes on Income 66 73 7 Income from Continuing Operations 145 161 16 Income from Discontinued Operations, Net of Taxes 14 16 2 Net Income 159 177 18 Net Income Attributable to Noncontrolling Interest, Net of Taxes 3 3 - Net Income Attributable to CSC Common Stakeholders 156 174 18 EPS - Continuing Operations $ 0.93 $ 1.03 $ 0.10 EPS - Discontinued Operations $ 0.09 $ 0.11 $ 0.02
*Change in the pension accounting policy
20August 7, 20141st Quarter FY 2015 Earnings Presentation
Non-GAAP Reconciliation
*Capital lease payments, repayments of obligations related to assets acquired under long-term financing arrangements, and proceeds from the sale of assets (included in investing activities) are included in the calculation of Free Cash Flow
Free Cash Flow* ($M) Q1 FY15 Q1 FY14Net Cash Provided by Operating Activities $ 273 $ 213 Net Cash Used in Investing Activities (114) (101)Business Dispositions (5) (56)Short-Term Investments - (5)Payments on Capital Leases and Other Long-Term Asset Financings (84) (60)
Free Cash Flow $ 70 $ (9)
21August 7, 20141st Quarter FY 2015 Earnings Presentation
Selected Cash Flow Items
$MNet Income $ 151 $ 177 Depreciation and Amortization 272 255 Change in Assets and Liabilities (154) (200) Gain on Dispositions (20) (25) Other 24 6 Operating Cash Flow 273 213
Capital Expenditures (119) (160) Business Dispositions 5 56 Other - 3 Investing Cash Flow (114) (101)
Capital Leases and Other Financing (84) (60) Business Dispositions (5) (56) Other - (5) Free Cash Flow $ 70 $ (9)
Q1 FY15 Q1 FY14
22August 7, 20141st Quarter FY 2015 Earnings Presentation
Recast FY14 and FY13 Quarterly Revenues by Segment
Quarterly revenues have been recast to reflect the change in CSC’s inter-company accounting policy
$M Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 FY14GBS $ 1,054 $ 1,021 $ 1,093 $ 1,152 $ 4,320 GIS 1,147 1,114 1,145 1,173 4,579 NPS 1,053 1,052 990 1,004 4,099 Corporate & Eliminations - - - - - Total Revenues $ 3,254 $ 3,187 $ 3,228 $ 3,329 $ 12,998
$M Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FY13GBS $ 1,256 $ 1,185 $ 1,201 $ 1,201 $ 4,843 GIS 1,189 1,153 1,178 1,170 4,690 NPS 1,183 1,190 1,157 1,132 4,662 Corporate & Eliminations - - - - - Total Revenues $ 3,628 $ 3,528 $ 3,536 $ 3,503 $ 14,195
23August 7, 20141st Quarter FY 2015 Earnings Presentation
Recast FY14 and FY13 Quarterly OI by Segment
Quarterly operating income (loss) has been recast to reflect the change in pension accounting policy and change in CSC’s inter-company accounting policy
$M Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 FY14GBS $ 113 $ 122 $ 138 $ 201 $ 574 GIS 92 109 89 92 382 NPS 127 163 122 112 524 Corporate & Eliminations - (29) (15) (20) (64)Total OI $ 332 $ 365 $ 334 $ 385 $ 1,416
$M Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 FY13GBS $ 77 $ 92 $ 106 $ 130 $ 405 GIS 25 55 67 19 166 NPS 97 148 135 131 511 Corporate & Eliminations (28) (4) (28) (53) (113)Total OI $ 171 $ 291 $ 280 $ 227 $ 969
24August 7, 20141st Quarter FY 2015 Earnings Presentation
• 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• Earnings Before Interest and Taxes: Revenue minus cost of services, selling, general and
administrative expenses, depreciation and amortization, restructuring costs, and other income (expense)
• Earnings Before Interest and Taxes Margin: Earnings Before Interest and Taxes as a percentage of Revenue
• Pre-tax Margin: Income from Continuing Operations Before Taxes as a percentage of Revenue• 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 purchases of property, equipment, and software, and payments on outsourcing contracts, less proceeds from sales of assets
Non-GAAP and Other Definitions
1st QUARTER FY 2015 EARNINGS PRESENTATION
Thank You