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1August 11, 20151st Quarter FY 2016 Earnings Presentation
1st QUARTER FY 2016EARNINGS PRESENTATIONAugust 11, 2015
2August 11, 20151st 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.
3August 11, 20151st Quarter FY 2016 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, 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.
4August 11, 20151st Quarter FY 2016 Earnings Presentation
1st QUARTER FY 2016EARNINGS PRESENTATION
Mike LawrieChief Executive Officer
5August 11, 20151st Quarter FY 2016 Earnings Presentation
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
6August 11, 20151st Quarter FY 2016 Earnings Presentation
1st QUARTER FY 2016EARNINGS PRESENTATION
Paul SalehChief Financial Officer
7August 11, 20151st Quarter FY 2016 Earnings Presentation
$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
8August 11, 20151st Quarter FY 2016 Earnings Presentation
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)
9August 11, 20151st Quarter FY 2016 Earnings Presentation
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
*Adjusted for full impact of extra week in prior year
10August 11, 20151st Quarter FY 2016 Earnings Presentation
Q1 FY16 Q1 FY15
Revenue ($M) 885$ 1,131$ – YoY growth - GAAP (21.8%)– YoY growth - cc* (12.0%)– QoQ growth - GAAP (4.7%)
Operating Income ($M)– As reported 53 71
Operating Margin (%) – As reported 6.0% 6.3%
Bookings ($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
*Adjusted for full impact of extra week in prior year
11August 11, 20151st Quarter FY 2016 Earnings Presentation
Q1 FY16 Q1 FY15
Revenue ($M) 957$ 1,018$ – YoY growth - GAAP (6.0%)– YoY growth* (2.3%)– QoQ growth - GAAP (4.3%)
Operating Income ($M)– As reported 136 151
Operating Margin (%) – As reported 14.2% 14.8%
Bookings ($B) 1.0$ 0.3$
North American Public Sector (NPS)
NPS 35%
GBS33%
GIS32%
Offerings
Enterprise IT Services
Mission Services
*Adjusted for full impact of extra week in prior year
DoD 54%Civil 38%Other 8%
12August 11, 20151st Quarter FY 2016 Earnings Presentation
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
13August 11, 20151st Quarter FY 2016 Earnings Presentation
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 – $5.05
*Non-GAAP EPS from continuing operations excludes net actuarial pension and OPEB gains/losses, separation costs, a gain on divestiture and SEC settlement-related items
14August 11, 20151st Quarter FY 2016 Earnings Presentation
1st QUARTER FY 2016EARNINGS PRESENTATION
Supplemental Information
15August 11, 20151st Quarter FY 2016 Earnings Presentation
Q1 FY16 Non-GAAP ReconciliationOperating Income ($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%
16August 11, 20151st Quarter FY 2016 Earnings Presentation
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
17August 11, 20151st Quarter FY 2016 Earnings Presentation
$M Q1 FY16 Q1 FY15Net cash provided by operating activities 324$ 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
18August 11, 20151st Quarter FY 2016 Earnings Presentation
$B
North American Public SectorNPSGlobal Business ServicesGBS Global Infrastructure ServicesGIS
Bookings*
*Segment bookings may not add to total due to rounding
FY15 FY16
19August 11, 20151st Quarter FY 2016 Earnings Presentation
• 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
20August 11, 20151st Quarter FY 2016 Earnings Presentation
1st QUARTER FY 2016EARNINGS PRESENTATION
Thank You