1May 24, 20164th Quarter FY 2016 Earnings Presentation
4th QUARTER FY 2016EARNINGS PRESENTATIONMay 24, 2016
2May 24, 20164th 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.
3May 24, 20164th 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
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 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.
4May 24, 20164th Quarter FY 2016 Earnings Presentation
4th QUARTER FY 2016EARNINGS PRESENTATION
Mike LawrieChief Executive Officer
5May 24, 20164th Quarter FY 2016 Earnings Presentation
Key Messages
Q4 FY16 revenue up sequentially, good book-to-bill
FY16 non-GAAP EPS* of $2.52 up 12%
UXC and Xchanging acquisitions now complete, with synergies to come
FY16 operating margin flat YoY despite ongoing investments
Positive sustained momentum in next-gen offerings
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, 14 – 18 for non-GAAP reconciliations)
6May 24, 20164th Quarter FY 2016 Earnings Presentation
4th QUARTER FY 2016EARNINGS PRESENTATION
Paul SalehChief Financial Officer
7May 24, 20164th Quarter FY 2016 Earnings Presentation
Reconciliation of Non-GAAP ResultsQ4 FY16 and FY16
*EPS from continuing operations and per-share values of certain items may not add to non-GAAP EPS due to rounding
Q4 FY16
$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
Debt extinguishment
costs
Tax valuation allowance & adjustments
Non-GAAP results
Income (loss) from continuing operations, before taxes (187) - - (78) (118) - (100) - 109
Income tax expense (benefit) (86) - - (14) (24) - (40) (14) 6
Income (loss) from continuing operations (101) - - (64) (94) - (60) 14 103
Diluted EPS from continuing operations* $ (0.73) - - (0.45) (0.66) - (0.42) 0.10 $ 0.73
FY16
$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
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
Diluted EPS from continuing operations* $ 0.45 (0.38) 0.16 (0.85) (0.57) (0.02) (0.42) 0.03 $ 2.52
8May 24, 20164th Quarter FY 2016 Earnings Presentation
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 ($M)* 138 196 632 687
Adjusted Operating Margin (%)* 7.6% 10.3% 8.9% 8.5%
Adjusted EBIT ($M)* 123 151 503 513
Adjusted EBIT Margin (%)* 6.8% 7.9% 7.1% 6.3%
Non-GAAP Income from Continuing Operations ($M)* 103 102 356 326
Non-GAAP EPS from Continuing Operations* 0.73$ 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, 14 – 18 for non-GAAP reconciliations)
9May 24, 20164th Quarter FY 2016 Earnings Presentation
Global Business Services (GBS)
$4.7 $4.3
FY15 FY16
$4,036 $3,637
FY15 FY16
OI Margin %*Revenue ($M) Bookings ($B)FY 2016
12.7% 11.6%
FY15 FY16
Decline in cc of 3.8%
FY16 FY15 FY16 FY15
Revenue ($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 ($M)– Adjusted* 104 160 423 514
Operating Margin (%) – Adjusted* 11.1% 16.3% 11.6% 12.7%
Bookings ($B) 1.1$ 1.1$ 4.3$ 4.7$
Q4 Full Year
*Adjusted operating income and margin exclude impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring & other transaction costs
10May 24, 20164th Quarter FY 2016 Earnings Presentation
Global Infrastructure Services (GIS)
$4.1 $4.3
FY15 FY16
$4,081$3,469
FY15 FY16
5.9% 6.8%
FY15 FY16
FY 2016Decline in cc of 9.6%
OI Margin %*Revenue ($M) Bookings ($B)
FY16 FY15 FY16 FY15
Revenue ($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 ($M)– Adjusted* 52 54 237 239
Operating Margin (%) – Adjusted* 6.0% 5.8% 6.8% 5.9%
Bookings ($B) 1.2$ 1.2$ 4.3$ 4.1$
Q4 Full Year
*Adjusted operating income and margin exclude impact of transfer of U.S. Pension & OPEB assets to CSRA, separation, restructuring & other transaction costs
11May 24, 20164th Quarter FY 2016 Earnings Presentation
Financial Highlights
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%
Cash Flow Performance
Q4 FY16 FY16
Dividends $20M $430M**
Share Repurchases1.5M shares
$45M3.8M shares
$173M
Capital to Shareholders
*Excludes $101M CSRA capital expenditures **$313M special dividend paid by CSC during Q3 FY16 in connection with the separation of CSRA
Q4 FY16 Q4 FY15
Cash and Equivalents $1.2B $2.1B
Net Debt to Capital Ratio 31.3% 8.1%
Capital Structure
12May 24, 20164th Quarter FY 2016 Earnings Presentation
FY 2017 Targets
Free Cash Flow 100% or more of Adj. Net Income
Revenue Up low double digits (cc)
Non-GAAP EPS from Continuing Operations $2.75 – $3.00
13May 24, 20164th Quarter FY 2016 Earnings Presentation
4th QUARTER FY 2016EARNINGS PRESENTATION
Supplemental Information
14May 24, 20164th Quarter FY 2016 Earnings Presentation
Q4 Non-GAAP Reconciliation
Operating Income ($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 86 297 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%)
15May 24, 20164th Quarter FY 2016 Earnings Presentation
FY16 Non-GAAP Reconciliation
Operating Income ($M) FY16 FY15
Adjusted operating Income 632$ 687$ Certain CSRA overhead costs (48) (38) U.S. Pension & OPEB 38 51 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 38 20 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 38 51 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 38 20 Income tax expense 55 454 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%)
16May 24, 20164th Quarter FY 2016 Earnings Presentation
Q4 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
$M Except EPS GAAP
Separation, restructuring &
other transaction costs
Pension & OPEB actuarial &
settlement losses
ASU 2016-09 Impact
Debt extinguishment
costs
Non-GAAPresults
Revenues 1,807$ -$ -$ -$ -$ 1,807$
Costs of services (excludes depreciation and amortization and restructuring costs) 1,460$ -$ (116)$ -$ -$ 1,344$
Selling, general and administrative (excludes depreciation and amortization, SEC settlement related charges and restructuring costs) 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 138.05 138.05 138.05 138.05 138.05 138.05Diluted EPS 138.05 141.61 141.61 141.61 141.61 141.61
17May 24, 20164th Quarter FY 2016 Earnings Presentation
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
$M Except EPS GAAP Certain CSRA overhead costs
U.S. Pension & OPEB
Separation, restructuring &
other transaction costs
Pension & OPEB actuarial &
settlement losses
SEC settlement related items
Debt extinguishment
costs
Tax valuation allowance & adjustments
Non-GAAP results
Revenues 7,106$ -$ -$ -$ -$ -$ -$ -$ 7,106$
Costs of services (excludes depreciation and amortization and restructuring costs) 5,185$ (41)$ 32$ (5)$ (100)$ -$ -$ -$ 5,071$
Selling, general and administrative (excludes depreciation and amortization, SEC settlement related charges and restructuring costs) 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 12 - - - - - - - 12 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 138.28 138.28 138.28 138.28 138.28 138.28 138.28 138.28 138.28Diluted EPS 141.33 141.33 141.33 141.33 141.33 141.33 141.33 141.33 141.33
18May 24, 20164th Quarter FY 2016 Earnings Presentation
Selected Cash Flow Items and Non-GAAP Reconciliation
$M Q4 FY16 Q4 FY15 FY16 FY15Net cash provided by operating activities 60$ 295$ 802$ 1,473$
Net cash used in investing activities (447) (137) (1,126) (536)
Acquisitions, net of cash acquired 289 14 554 49
Business dispositions - - (37) 13
Short-term investments (1) - 70 -
Payment on capital leases and other long-term asset financings (31) (49) (166) (242)
Payments on separation and other transaction costs 8 - 79 -
Payments on special restructuring costs 56 - 173 -
SEC settlement-related payments - - 187 -
Sale of NPS accounts receivables - - (239) -
Certain CSRA overhead costs - - 22 -
Free Cash Flow (66)$ 123$ 319$ 757$
19May 24, 20164th Quarter FY 2016 Earnings Presentation
$B
Global Business ServicesGBS Global Infrastructure ServicesGIS
Bookings*
FY15 FY16
*Segment bookings may not add to total due to rounding
20May 24, 20164th Quarter FY 2016 Earnings Presentation
• 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)
Non-GAAP and Other Definitions
21May 24, 20164th Quarter FY 2016 Earnings Presentation
4th QUARTER FY 2016EARNINGS PRESENTATION
Thank You