4th QUARTER FY 2016 EARNINGS PRESENTATION

Transcription

1 4th QUARTER FY 2016 EARNINGS PRESENTATION 1

2 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. 2

3 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 from continuing operations and free cash flow. 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 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. 3

4 4th QUARTER FY 2016 EARNINGS PRESENTATION Mike Lawrie Chief Executive Officer 4

5 Key Messages FY16 non-gaap EPS* of $2.52 up 12% FY16 operating margin flat YoY despite ongoing investments Q4 FY16 revenue up sequentially, good book-to-bill Positive sustained momentum in next-gen offerings UXC and Xchanging acquisitions now complete, with synergies to come FY17 EPS target of $2.75 $3.00 *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, SEC settlement related items, debt extinguishment costs, and tax valuation allowance & adjustments, as applicable (see slides 7, for non-gaap reconciliations) 5

6 4th QUARTER FY 2016 EARNINGS PRESENTATION Paul Saleh Chief Financial Officer 6

7 Reconciliation of Non-GAAP Results Q4 FY16 and FY16 $M Except EPS GAAP Income (loss) from continuing operations, before taxes Certain CSRA overhead costs U.S. Pension & OPEB Separation, restructuring & other transaction costs Q4 FY16 Pension & OPEB actuarial & settlement gains SEC settlementrelated items Debt extinguishment costs Tax valuation allowance & adjustments (187) - - (78) (118) - (100) Income tax expense (benefit) (86) - - (14) (24) - (40) (14) 6 Non-GAAP results Income (loss) from continuing operations Diluted EPS from continuing operations* (101) - - (64) (94) - (60) $ (0.73) - - (0.45) (0.66) - (0.42) 0.10 $ 0.73 $M Except EPS GAAP Income (loss) from continuing operations, before taxes Certain CSRA overhead costs U.S. Pension & OPEB Separation, restructuring & other transaction costs FY16 Pension & OPEB actuarial & settlement losses SEC settlement related items Debt extinguishment costs Tax valuation allowance & adjustments Non-GAAP results 10 (88) 38 (161) (99) (5) (100) Income tax expense (benefit) (55) (34) 15 (41) (18) (2) (40) (4) 69 Income (loss) from continuing operations Diluted EPS from continuing operations* 65 (54) 23 (120) (81) (3) (60) $ 0.45 (0.38) 0.16 (0.85) (0.57) (0.02) (0.42) 0.03 $ 2.52 *EPS from continuing operations and per-share values of certain items may not add to non-gaap EPS due to rounding 7

8 4th Quarter and Full Year Results FY16 FY15 FY16 FY15 Revenue ($M) $ 1,807 $ 1,910 $ 7,106 $ 8,117 YoY Growth GAAP (5.4%) (12.5%) YoY Growth cc (2.4%) (6.7%) QoQ Growth GAAP 3.3% Adjusted Operating Income ($M)* Adjusted Operating Margin (%)* 7.6% 10.3% 8.9% 8.5% Adjusted EBIT ($M)* Adjusted EBIT Margin (%)* 6.8% 7.9% 7.1% 6.3% Non-GAAP Income from Continuing Operations ($M)* Non-GAAP EPS from Continuing Operations* $ 0.73 $ 0.71 $ 2.52 $ 2.24 Bookings ($B) $ 2.3 $ 2.3 $ 8.6 $ 8.8 Q4 Full Year *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, SEC settlement related items, debt extinguishment costs, and tax valuation allowance & adjustments, as applicable (see slides 7, for non-gaap reconciliations) 8

9 Global Business Services (GBS) Q4 Full Year FY16 FY15 FY16 FY15 Revenue ($M) $ 941 $ 980 $ 3,637 $ 4,036 YoY growth - GAAP (4.0%) (9.9%) YoY growth - cc (1.1%) (3.8%) QoQ growth - GAAP 6.2% Operating Income ($M) Adjusted* Operating Margin (%) Adjusted* 11.1% 16.3% 11.6% 12.7% Bookings ($B) $ 1.1 $ 1.1 $ 4.3 $ 4.7 FY 2016 Revenue ($M) Decline in cc of 3.8% OI Margin %* Bookings ($B) $4,036 $3, % 11.6% $4.7 $4.3 FY15 FY16 FY15 FY16 FY15 FY16 *Adjusted operating income and margin exclude impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring & other transaction costs 9

10 Global Infrastructure Services (GIS) Q4 Full Year FY16 FY15 FY16 FY15 Revenue ($M) $ 866 $ 930 $ 3,469 $ 4,081 YoY growth - GAAP (6.9%) (15.0%) YoY growth - cc (3.7%) (9.6%) QoQ growth - GAAP 0.2% Operating Income ($M) Adjusted* Operating Margin (%) Adjusted* 6.0% 5.8% 6.8% 5.9% Bookings ($B) $ 1.2 $ 1.2 $ 4.3 $ 4.1 FY 2016 Revenue ($M) Decline in cc of 9.6% OI Margin %* Bookings ($B) $4,081 $3, % 6.8% $4.1 $4.3 FY15 FY16 FY15 FY16 FY15 FY16 *Adjusted operating income and margin exclude impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring & other transaction costs 10

11 Financial Highlights Cash Flow Performance Q4 FY16 FY16 Free Cash Flow ($66M) $319M Cap Ex Including Capital Leases $169M $591M* Cap Ex as a % of Revenue 9.4% 8.3% Capital to Shareholders Q4 FY16 FY16 Dividends $20M $430M ** Share Repurchases 1.5M shares $45M 3.8M shares $173M Capital Structure Q4 FY16 Q4 FY15 Cash and Equivalents $1.2B $2.1B Net Debt to Capital Ratio 31.3% 8.1% *Excludes $101M CSRA capital expenditures **$313M special dividend paid by CSC during Q3 FY16 in connection with the separation of CSRA 11

12 FY 2017 Targets Revenue Up low double digits (cc) Non-GAAP EPS from Continuing Operations $2.75 $3.00 Free Cash Flow 100% or more of Adj. Net Income 12

13 4th QUARTER FY 2016 EARNINGS PRESENTATION Supplemental Information 13

14 Q4 Non-GAAP Reconciliation Operating Income ($M) Q4 FY16 Q4 FY15 Adjusted operating Income $ 138 $ 196 Certain CSRA overhead costs - (7) U.S. Pension & OPEB - 13 Separation, restructuring & other transaction costs (45) (241) Operating income (loss) $ 93 $ (39) Corporate G&A (45) (57) Pension & OPEB actuarial & settlement (losses) gains (118) (298) SEC settlement related charges and Other - (5) Separation costs (9) - Interest expense (31) (30) Interest income 12 6 Debt extinguishment costs (95) - Other income (expense), net 6 (5) Income (loss) from continuing operations, before taxes $ (187) $ (428) Earnings Before Interest and Taxes ($M) Q4 FY16 Q4 FY15 Adjusted EBIT $ 123 $ 151 Certain CSRA overhead costs - (24) U.S. Pension & OPEB - 13 Separation, restructuring & other transaction costs (78) (241) SEC settlement related charges and Other - (5) Pension & OPEB actuarial & settlement gains (losses) (118) (298) Debt extinguishment costs (95) - EBIT $ (168) $ (404) Interest expense (31) (30) Interest income 12 6 Income tax expense Income from continuing operations $ (101) $ (131) Margin % Q4 FY16 Q4 FY15 Revenue ($M) $ 1,807 $ 1,910 Adjusted operating margin 7.6% 10.3% Operating margin 5.1% (2.0%) Adjusted EBIT margin 6.8% 7.9% EBIT margin (9.3%) (21.2%) 14

15 FY16 Non-GAAP Reconciliation Operating Income ($M) FY16 FY15 Adjusted operating Income $ 632 $ 687 Certain CSRA overhead costs (48) (38) U.S. Pension & OPEB Separation, restructuring & other transaction costs (107) (241) Operating income (loss) $ 515 $ 459 Corporate G&A (216) (230) Pension & OPEB actuarial & settlement (losses) gains (99) (584) SEC settlement related charges and Other - (200) Separation costs (19) - Interest expense (123) (126) Interest income Debt extinguishment costs (95) - Other income (expense), net 9 (10) Income (loss) from continuing operations, before taxes $ 10 $ (671) Earnings Before Interest and Taxes ($M) FY16 FY15 Adjusted EBIT $ 503 $ 513 Certain CSRA overhead costs (88) (104) U.S. Pension & OPEB Separation, restructuring & other transaction costs (159) (241) SEC settlement related charges and Other (5) (200) Pension & OPEB actuarial & settlement gains (losses) (99) (584) Debt extinguishment costs (95) - EBIT $ 95 $ (565) Interest expense (123) (126) Interest income Income tax expense Income from continuing operations $ 65 $ (217) Margin % FY16 FY15 Revenue ($M) $ 7,106 $ 8,117 Adjusted operating margin 8.9% 8.5% Operating margin 7.2% 5.7% Adjusted EBIT margin 7.1% 6.3% EBIT margin 1.3% (7.0%) 15

16 Q4 FY16 Non-GAAP Results $M Except EPS GAAP Separation, restructuring & other transaction costs Pension & OPEB actuarial & settlement losses ASU Impact Debt extinguishment costs Non-GAAP results Revenues $ 1,807 $ - $ - $ - $ - $ 1,807 Costs of services (excludes depreciation and amortization and restructuring costs) Selling, general and administrative (excludes depreciation and amortization, SEC settlement related charges and restructuring costs) $ 1,460 $ - $ (116) $ - $ - $ 1,344 $ 251 $ (40) $ (2) $ - $ - $ 209 Income (loss) from continuing operations, before taxes $ (187) $ (78) $ (118) $ - $ (100) $ 109 Income tax expense (benefit) (86) (14) (24) (14) (40) 6 Income (loss) from continuing operations $ (101) $ (64) $ (94) $ 14 $ (60) $ 103 Net income $ (126) $ (64) $ (94) $ 14 $ (60) $ 78 Less: net income attributable to noncontrolling interest, net of tax Net income (loss) attributable to CSC common stockholders $ (126) $ (64) $ (94) $ 14 $ (60) $ 78 Effective tax rate 46.0% 5.5% Basic EPS from continuing operations* $ (0.73) $ (0.46) $ (0.68) $ 0.10 $ (0.43) $ 0.75 Diluted EPS from continuing operations* $ (0.73) $ (0.45) $ (0.66) $ 0.10 $ (0.42) $ 0.73 Weighted average common shares outstanding for: Basic EPS Diluted EPS *EPS from continuing operations and per-share values of certain items may not add to non-gaap EPS due to rounding 16

17 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 losses SEC settlement related items Debt extinguishment costs Tax valuation allowance & adjustments Non-GAAP results Revenues $ 7,106 $ - $ - $ - $ - $ - $ - $ - $ 7,106 Costs of services (excludes depreciation and amortization and restructuring costs) Selling, general and administrative (excludes depreciation and amortization, SEC settlement related charges and restructuring costs) $ 5,185 $ (41) $ 32 $ (5) $ (100) $ - $ - $ - $ 5,071 $ 1,040 $ (47) $ 6 $ (55) $ 1 $ (5) $ - $ - $ 940 Income (loss) from continuing operations, before taxes $ 10 $ (88) $ 38 $ (161) $ (99) $ (5) $ (100) $ - $ 425 Income tax expense (benefit) (55) (34) 15 (41) (18) (2) (40) (4) 69 Income (loss) from continuing operations $ 65 $ (54) $ 23 $ (120) $ (81) $ (3) $ (60) $ 4 $ 356 Net income $ 256 $ (54) $ 23 $ (120) $ (81) $ (3) $ (60) $ 4 $ 547 Less: net income attributable to noncontrolling interest, net of tax Net income (loss) attributable to CSC common stockholders $ 244 $ (54) $ 23 $ (120) $ (81) $ (3) $ (60) $ 4 $ 535 Effective tax rate (550.0)% 16.2% Basic EPS from continuing operations* $ 0.46 $ (0.39) $ 0.17 $ (0.87) $ (0.59) $ (0.02) $ (0.43) $ 0.03 $ 2.57 Diluted EPS from continuing operations* $ 0.45 $ (0.38) $ 0.16 $ (0.85) $ (0.57) $ (0.02) $ (0.42) $ 0.03 $ 2.52 Weighted average common shares outstanding for: Basic EPS Diluted EPS *EPS from continuing operations and per-share values of certain items may not add to non-gaap EPS due to rounding 17

18 Selected Cash Flow Items and Non-GAAP Reconciliation $M Q4 FY16 Q4 FY15 FY16 FY15 Net cash provided by operating activities $ 60 $ 295 $ 802 $ 1,473 Net cash used in investing activities (447) (137) (1,126) (536) Acquisitions, net of cash acquired Business dispositions - - (37) 13 Short-term investments (1) Payment on capital leases and other long-term asset financings (31) (49) (166) (242) Payments on separation and other transaction costs Payments on special restructuring costs SEC settlement-related payments Sale of NPS accounts receivables - - (239) - Certain CSRA overhead costs Free Cash Flow $ (66) $ 123 $ 319 $

19 Bookings* $B FY15 FY16 GBS Global Business Services GIS Global Infrastructure Services *Segment bookings may not add to total due to rounding 19

20 Non-GAAP and Other Definitions Operating income: Revenue less costs of services, depreciation and amortization expense, restructuring costs and segment selling, general and administrative (G&A) expenses. Operating income excludes corporate G&A, actuarial and settlement charges related to CSC s pension and OPEB plans, SEC settlement related charges, separation costs, and debt extinguishment 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, and 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, including certain CSRA overhead costs, U.S. Pension and OPEB, separation, restructuring & other transaction costs, SEC settlement related charges, pension and OPEB actuarial & settlement gains (losses), and debt extinguishment costs Adjusted EBIT margin: Adjusted EBIT as a percentage of revenue Free cash flow: Equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions, 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. Free cash flow is further adjusted for certain non-recurring cash flow items, such as (i) payments related to separation and transaction costs related to fiscal 2016 acquisitions, (ii) payments related to restructuring, (iii) SEC settlement related payments, (iv) benefit from the sale of accounts receivables, (v) certain CSRA overhead costs Capital expenditure: Equal to sum of purchases of property, equipment, and software, and payments on outsourcing contracts, less proceeds from sales of assets and purchases made through CSC Finco Net debt: Total debt, less cash and cash equivalents Net debt to capital ratio: Calculated as the ratio of net debt to total capital (total debt plus equity) 20

21 4th QUARTER FY 2016 EARNINGS PRESENTATION Thank You 21