1st quarter fy 2016 earnings presentation · 1st quarter fy 2016 earnings presentation august 11,...

1August 11, 20151st Quarter FY 2016 Earnings Presentation

1st QUARTER FY 2016EARNINGS PRESENTATIONAugust 11, 2015


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.


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, adjusted EBIT, adjusted EBIT margin, free cash flow and capital expenditures. 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.


1st QUARTER FY 2016EARNINGS PRESENTATION

Mike LawrieChief Executive Officer


Key Messages

Strength in next-gen offerings and partnerships

Q1 FY16 non-GAAP EPS* of $1.11 up 8% YoY

On track to separate CSC into two industry leaders

Commercial margin up YoY, solid book-to-bill

Strong profit margins and bookings in NPS

*Non-GAAP EPS from continuing operations excludes separation costs, a gain on divestiture, and SEC settlement-related items(see slides 7, 15 – 17 for non-GAAP reconciliations)

Maintaining FY16 financial targets



Paul SalehChief Financial Officer


$M Except EPS GAAP Separation costs

Gain on divestiture

SEC settlement-related items

Non-GAAP results

Income (loss) from continuing operations, before taxes 228 (18) 22 3 221

Income tax expense (benefit) 64 (6) 8 1 61

Income (loss) from continuing operations 164 (12) 14 2 160

Less: net income attributable to noncontrolling interest, net of tax 4 - - - 4

Net income (loss) attributable to CSC common stockholders 160 (12) 14 2 156

Diluted EPS from continuing operations* $ 1.14 (0.09) 0.10 0.01 $ 1.11

Q1 FY16

Reconciliation of Non-GAAP ResultsQ1 FY16

*EPS from continuing operations and per-share values of certain items may not add to non-GAAP EPS due to rounding


Q1 FY16 Q1 FY15

Revenue ($M) 2,761$ 3,237$

YoY Growth – GAAP (14.7%)

YoY Growth – cc* (6.4%)

QoQ Growth – GAAP (5.1%)

Operating Income ($M) 298 304

Operating Margin (%) 10.8% 9.4%

Adjusted EBIT ($M)** 245 248

Adjusted EBIT Margin (%)** 8.9% 7.7%

Non-GAAP Income from Continuing Operations ($M)** 160 159

Non-GAAP EPS from Continuing Operations** 1.11$ 1.03$

Bookings ($B) 3.2$ 2.7$

1st Quarter Results

*Adjusted for full impact of extra week in prior year

**Non-GAAP and adjusted results exclude certain first quarter fiscal 2016 items including separation costs, a gain on divestiture, and SEC settlement-related items (see slides 7, 15 – 17 for non-GAAP reconciliations)


Q1 FY16 Q1 FY15

Revenue ($M) 919$ 1,088$ – YoY growth - GAAP (15.5%)– YoY growth - cc* (4.3%)– QoQ growth - GAAP (6.2%)

Operating Income ($M)– As reported 97 108

Operating Margin (%) – As reported 10.6% 9.9%

Bookings ($B) 0.9$ 1.2$

NPS 35%

GIS32%

GBS33%

Global Business Services (GBS)

Offerings

Technology and Business Consulting

Industry Software and Solutions

Applications Testing, Development, and Maintenance Services



Q1 FY16 Q1 FY15

Revenue ($M) 885$ 1,131$ – YoY growth - GAAP (21.8%)– YoY growth - cc* (12.0%)– QoQ growth - GAAP (4.7%)



Bookings ($B) 1.4$ 1.2$

Global Infrastructure Services (GIS)

NPS 35%

GIS32%

GBS33%

Offerings

Platform

Workplace Services

Network Solutions

Enterprise Service Management

Next-Generation Cyber and Cloud Solutions



Q1 FY16 Q1 FY15

Revenue ($M) 957$ 1,018$ – YoY growth - GAAP (6.0%)– YoY growth* (2.3%)– QoQ growth - GAAP (4.3%)



Bookings ($B) 1.0$ 0.3$

North American Public Sector (NPS)

NPS 35%

GBS33%

GIS32%

Offerings

Enterprise IT Services

Mission Services


DoD 54%Civil 38%Other 8%


Q1 FY16 Q1 FY15

Free Cash Flow $120M $70M

Cap Ex — Including Capital Leases $172M $203M

Cap Ex as a % of Revenue 6.2% 6.3%

Cash Flow Performance

Financial Highlights

Q1 FY16 Q1 FY15

Cash and Equivalents $2.2B $2.4B

Net Debt to Capital Ratio 7.4% 6.3%

Capital Structure

Q1 FY16 Q1 FY15

Dividends $32M $34M

Share Repurchases1.8M shares

$118M2.4M shares

$150M

Capital to Shareholders


FY 2016 Targets

Free Cash Flow $750 – $800 million

RevenueFlat to slightly down (cc)• NPS slightly up• Commercial flat to slightly down in cc

Non-GAAP EPS from Continuing Operations* $4.75 – $5.05

*Non-GAAP EPS from continuing operations excludes net actuarial pension and OPEB gains/losses, separation costs, a gain on divestiture and SEC settlement-related items



Supplemental Information


Q1 FY16 Non-GAAP ReconciliationOperating Income ($M) Q1 FY16 Q1 FY15

Operating income 298$ 304$ Corporate G&A (54) (56) Pension & OPEB actuarial & settlement losses - (1) Separation costs (18) - Interest expense (35) (39) Interest income 11 5 Other income, net 26 1 Income from continuing operations before taxes 228$ 214$

Earnings Before Interest and Taxes ($M) Q1 FY16 Q1 FY15

Adjusted EBIT 245$ 248$ Separation costs (18) - Gain on divestiture 22 - SEC settlement-related items 3 - EBIT 252$ 248$

Interest expense (35) (39) Interest income 11 5 Income tax expense (64) (55) Income from continuing operations 164$ 159$

Margin % Q1 FY16 Q1 FY15

Revenue ($M) 2,761$ 3,237$ Operating margin 10.8% 9.4%Adjusted EBIT margin 8.9% 7.7%EBIT margin 9.1% 7.7%


Q1 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 Separation costs

Gain on divestiture

SEC settlement-related items

Non-GAAPresults

Costs of services (excludes depreciation and amortization and restructuring costs) 2,026$ -$ -$ -$ 2,026$

Selling, general and administrative (excludes restructuring costs) 284$ -$ -$ 3$ 287$

Income (loss) from continuing operations, before taxes 228$ (18)$ 22$ 3$ 221$ Income tax expense (benefit) 64$ (6)$ 8$ 1$ 61$ Income (loss) from continuing operations 164$ (12)$ 14$ 2$ 160$

Net income (loss) 164$ (12)$ 14$ 2$ 160$ Less: net income attributable to noncontrolling interest, net of tax 4$ -$ -$ -$ 4$ Net income (loss) attributable to CSC common stockholders 160$ (12)$ 14$ 2$ 156$

Effective tax rate 28.1% 34.6% 34.6% 34.6% 27.9%

Basic EPS from continuing operations* 1.16$ (0.09)$ 0.10$ 0.01$ 1.13$ Diluted EPS from continuing operations* 1.14$ (0.09)$ 0.10$ 0.01$ 1.11$

Weighted average common shares outstanding for:Basic EPS 137.917 137.917 137.917 137.917 137.917 Diluted EPS 140.801 140.801 140.801 140.801 140.801


$M Q1 FY16 Q1 FY15Net cash provided by operating activities 324$ 273$ Net cash used in investing activities (84) (114) Business dispositions (34) (5) Payments on capital leases and other long-term asset financings (69) (84) Separation-related payments 11 - Payments on special restructuring costs 19 - SEC settlement-related payments 186 - Sale of NPS accounts receivable (233) - Free Cash Flow 120$ 70$

Selected Cash Flow Items and Non-GAAP Reconciliation


$B

North American Public SectorNPSGlobal Business ServicesGBS Global Infrastructure ServicesGIS

Bookings*

*Segment bookings may not add to total due to rounding

FY15 FY16


• Operating income: Revenue less costs of services, segment selling, general and administrative (G&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 costs

• Operating income margin: Operating income as a percentage of revenue

• Earnings before interest and taxes (EBIT): Income from continuing operations less interest expense, interest income and income taxes

• EBIT margin: EBIT as a percentage of revenue

• Adjusted EBIT: EBIT excluding the impact of certain first quarter fiscal 2016 items including separation costs, the gain on an NPS divestiture, and SEC settlement-related items

• 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) separation-related payments, (ii) payments related to the fiscal 2015 fourth quarter special restructuring, (iii) SEC settlement-related payments, and (iv) the sale of NPS accounts receivables

• Capital expenditures: Equal to sum of purchases of property, equipment, and software, and payments on outsourcing contracts, less proceeds from sales of assets

• 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



Thank You

1st quarter fy 2016 earnings presentation · 1st quarter fy 2016 earnings presentation august 11,...

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