1ST QUARTER FY 2017 EARNINGS PRESENTATION · Financial Highlights Q1 FY17 Q1 FY16 Free Cash Flow...

1ST QUARTER FY 2017EARNINGS PRESENTATION

August 8, 2016

2 August 8, 20161st Quarter FY 2017 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 differmaterially 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, adjusted operating income, operating and adjusted operating margin, commercial operating income, adjusted commercial operating income, commercial operating and adjusted commercial 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 coveringCSC 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.


Mike LawrieChief Executive Officer


Key Messages

*Non-GAAP EPS from continuing operations excludes restructuring costs, transaction and integration-related costs, certain CSRA overhead costs,impact of transfer of U.S. Pension and OPEB assets to CSRA, SEC settlement-related items, and tax adjustment

(see slides 7, 14 – 17 for non-GAAP reconciliations)

Q1 FY17 revenue up YoY and sequentially, inclusive of acquisitions

Q1 FY17 commercial operating margin up YoY

Q1 FY17 non-GAAP EPS* of $0.53, up 13% YoY

UXC and Xchanging integration underway; CSC/HPE-ES merger on track

Positive momentum in next-gen offerings

FY17 non-GAAP EPS* target of $2.75 – $3.00

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5

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Paul SalehChief Financial Officer


Reconciliation of Non-GAAP Results

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

Q1 FY17

$M Except EPS GAAP Restructuringcosts

Transaction and integration-

related costs Non-GAAP

results

(Loss) income from continuing operations, before taxes (36) (57) (70) 91

Income tax (benefit) expense (16) (12) (19) 15

(Loss) income from continuing operations (20) (45) (51) 76

Diluted EPS from continuing operations* $ (0.15) (0.32) (0.36) $ 0.53

Q1 FY16

$M Except EPS GAAP Restructuringcosts

Transaction and integration-

related costs

CertainCSRA

overheadcosts

U.S. Pensionand OPEB

SEC settlement-related items

Taxadjustment

Non-GAAPresults

Income from continuing operations, before taxes 72 - (3) (33) 14 (3) - 97

Income tax expense 7 - (1) (13) 5 (1) (14) 31

Income from continuing operations 65 - (2) (20) 9 (2) 14 66

Diluted EPS from continuing operations* $ 0.46 - (0.01) (0.14) 0.06 (0.01) 0.10 $ 0.47


1st Quarter Results

*Non-GAAP results exclude, as applicable, restructuring costs, transaction and integration-related costs, certain CSRA overhead costs,impact of transfer of U.S. Pension & OPEB assets to CSRA, SEC settlement-related items, and tax adjustment

(see slides 7, 14 – 17 for non-GAAP reconciliations)

Q1 FY17 Q1 FY16Revenue ($M) 1,930$ 1,804$

YoY Growth – GAAP 7.0%

YoY Growth – cc 9.2%

QoQ Growth – GAAP 6.8%

Adjusted Commercial Operating Income ($M)* 161 136

Adjusted Commercial Operating Margin (%)* 8.3% 7.5%

Adjusted Operating Income ($M)* 144 148

Adjusted Operating Margin (%)* 7.5% 8.2%

Adjusted EBIT ($M)* 106 116

Adjusted EBIT Margin (%)* 5.5% 6.4%

Non-GAAP Income from Continuing Operations ($M)* 76 66

Non-GAAP EPS from Continuing Operations* 0.53$ 0.47$

Bookings ($B) 1.6$ 2.2$


$0.9 $0.7

Q1 FY16 Q1 FY17

$919 $1,049

Q1 FY16 Q1 FY17

10.1% 10.5%

Q1 FY16 Q1 FY17

Growth in cc of 16.4%

*Adjusted operating income and margin exclude, as applicable, restructuring costs, transaction and integration-related costs, and impact of transfer of U.S. Pension & OPEB assets to CSRA

Global Business Services (GBS)

Adjusted OI Margin %*Revenue ($M) Bookings ($B)

Q1 FY17 Q1 FY16Revenue ($M) 1,049$ 919$ – YoY growth - GAAP 14.1%– YoY growth - cc 16.4%– QoQ growth - GAAP 11.5%

Operating Income ($M)– Adjusted* 110 93

Operating Margin (%) – Adjusted* 10.5% 10.1%

Bookings ($B) 0.7$ 0.9$


$1.4 $0.9

Q1 FY16 Q1 FY17

$885 $881

Q1 FY16 Q1 FY17

Adjusted OI Margin %*Revenue ($M) Bookings ($B)

4.9% 5.8%

Q1 FY16 Q1 FY17

Growth in cc of 1.7%

Global Infrastructure Services (GIS)

*Adjusted operating income and margin exclude, as applicable, restructuring costs, transaction and integration-related costs, and impact of transfer of U.S. Pension & OPEB assets to CSRA

Q1 FY17 Q1 FY16Revenue ($M) 881$ 885$ – YoY growth - GAAP (0.5%)– YoY growth - cc 1.7%– QoQ growth - GAAP 1.7%

Operating Income ($M)– Adjusted* 51 43

Operating Margin (%) – Adjusted* 5.8% 4.9%

Bookings ($B) 0.9$ 1.4$


Financial Highlights

Q1 FY17 Q1 FY16

Free Cash Flow $32M $158M

Cap Ex — Including Capital Leases $148M $152M

Cap Ex as a % of Revenue 7.7% 8.4%

Cash Flow Performance

Q1 FY17 Q1 FY16

Dividends $20M $32M

Share Repurchases – 1.8M shares$118M

Capital to Shareholders

Q1 FY17 Q1 FY16

Cash and Equivalents $1.0B $2.2B

Net Debt-to-Total Capitalization Ratio 41.0% 7.4%

Capital Structure


Up low double digits (cc)Revenue

FY 2017 Targets

$2.75 – $3.00Non-GAAP EPS from Continuing Operations

100%+ of Adj. Net IncomeFree Cash Flow


Supplemental Information


Q1 FY17 Non-GAAP Reconciliation

Operating Income ($M) Q1 FY17 Q1 FY16

Adjusted Operating income 144$ 148$ Restructuring costs (57) - Transaction and integration-related costs (35) - Certain CSRA overhead costs - (18) U.S. Pension and OPEB - 14 Operating income 52$ 144$ Corporate G&A (70) (57) Pension and OPEB actuarial and settlement losses (1) - Interest expense (25) (30) Interest income 10 11 Other (expense) income, net (2) 4 (Loss) income from continuing operations, before taxes (36)$ 72$

Earnings Before Interest and Taxes ($M) Q1 FY17 Q1 FY16

Adjusted EBIT 106$ 116$ Restructuring costs (57) - Transaction and integration-related costs (70) (3) Certain CSRA overhead costs - (33) U.S. Pension and OPEB - 14 SEC settlement-related items - (3) EBIT (21)$ 91$ Interest expense (25) (30) Interest income 10 11 Income tax benefit (expense) 16 (7) (Loss) income from continuing operations (20)$ 65$ Income from discontinued operations, net of taxes - 102 Net (loss) income (20)$ 167$

Operating Margin % Q1 FY17 Q1 FY16

Adjusted Operating margin 7.5% 8.2%Operating margin 2.7% 8.0%

EBIT Margin % Q1 FY17 Q1 FY16

Adjusted EBIT margin 5.5% 6.4%EBIT margin (1.1%) 5.0%


Q1 FY17 Non-GAAP Results


$M Except EPS GAAP Restructuring costs

Transaction and integration-related costs

Non-GAAP results

Costs of services (excludes depreciation and amortization and restructuring costs) 1,421$ -$ -$ 1,421$

Selling, general and administrative (excludes depreciation and amortization, restructuring costs) 305 - (56) 249

(Loss) income from continuing operations, before taxes (36) (57) (70) 91 Income tax (benefit) expense (16) (12) (19) 15 (Loss) income from continuing operations (20) (45) (51) 76

Net (loss) income (20) (45) (51) 76 Less: net income attributable to noncontrolling interest, net of tax 1 - - 1 Net (loss) income attributable to CSC common stockholders (21)$ (45)$ (51)$ 75$

Effective Tax Rate 44.4% 16.5%

Basic EPS from continuing operations* (0.15)$ (0.32)$ (0.37)$ 0.54$ Diluted EPS from continuing operations* (0.15)$ (0.32)$ (0.36)$ 0.53$

Weighted average common shares outstanding for:Basic EPS 138.98 138.98 138.98 138.98Diluted EPS 138.98 142.43 142.43 142.43


Q1 FY16 Non-GAAP Results


$M Except EPS GAAP

CertainCSRA

overheadcosts

U.S. Pensionand OPEB

Transaction and integration-related costs

SEC settlement-related items

Taxadjustment

Non-GAAP results

Costs of services (excludes depreciation and amortization and restructuring costs) 1,272$ (17)$ 12$ -$ -$ -$ 1,267$

Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 271 (16) 2 (3) (3) - 251

Income from continuing operations, before taxes 72 (33) 14 (3) (3) - 97 Income tax expense 7 (13) 5 (1) (1) (14) 31 Income from continuing operations 65 (20) 9 (2) (2) 14 66

Net income 167 (20) 9 (2) (2) 14 168 Less: net income attributable to noncontrolling interest, net of tax 4 - - - - - 4 Net income attributable to CSC common stockholders 163$ (20)$ 9$ (2)$ (2)$ 14$ 164$

Effective Tax Rate 9.7% 32.0%

Basic EPS from continuing operations* 0.47$ (0.15)$ 0.07$ (0.01)$ (0.01)$ 0.10$ 0.48$ Diluted EPS from continuing operations* 0.46$ (0.14)$ 0.06$ (0.01)$ (0.01)$ 0.10$ 0.47$

Weighted average common shares outstanding for:Basic EPS 137.92 137.92 137.92 137.92 137.92 137.92 137.92Diluted EPS 141.39 141.39 141.39 141.39 141.39 141.39 141.39


Selected Cash Flow Items and Non-GAAP Reconciliation

*Excludes capital expenditures financed through CSC Finco and other investments

$M Q1 FY17 Q1 FY16Net cash provided by operating activities 50$ 362$

Net cash used in investing activities* (524) (84)

Acquisitions, net of cash acquired 423 -

Business dispositions - (34)

Payments on capital leases and other long-term asset financings (45) (69)

Payments for transaction and integration-related costs 93 11

Restructuring payments 35 19

SEC settlement-related payments - 186

Sale of NPS accounts receivables - (233)

Free cash flow 32$ 158$


$B

Global Business ServicesGBS Global Infrastructure ServicesGIS

Bookings*

*Segment bookings may not sum to total due to rounding

$1.4

$0.7 $1.0 $1.2

$0.9

$0.9

$0.7

$1.6 $1.1

$0.7

$2.2

$1.4

$2.7

$2.3

$1.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17

FY16 FY17


• 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, pension and OPEB actuarial and settlement losses

• Operating margin: Operating income as a percentage of revenue• Adjusted operating income: Operating income excluding restructuring costs, transaction and integration-related costs, certain CSRA overhead costs, and U.S. Pension

and OPEB• Adjusted operating margin: Adjusted operating income as a percentage of revenue• Commercial operating income: Operating income for the combined GBS and GIS segments• Commercial operating margin: Commercial operating income as a percentage of revenue• Adjusted commercial operating income: Adjusted operating income for the combined GBS and GIS segments• Adjusted commercial operating margin: Adjusted commercial operating income as a percentage of revenue• Earnings before interest and taxes (EBIT): Net income less income from discontinued operations, net of taxes, income tax benefit (expense), interest expense and

interest income• EBIT margin: EBIT as a percentage of revenue• Adjusted EBIT: EBIT excluding the impact of certain items, including restructuring costs, transaction and integration-related costs, certain CSRA overhead costs, U.S.

Pension and OPEB, 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 infrequently occurring cash flow items, such as (i) payments for transaction and integration-related costs, (ii) restructuring payments, (iii) SEC settlement-related payments and (iv) cash receipts from the sale of accounts receivables

• 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, excluding prior year CSRA capital expenditures

• Net debt: Total debt, less cash and cash equivalents• Net debt-to-total capitalization ratio: Calculated as the ratio of net debt to total capitalization

Non-GAAP and Other Definitions


Thank You

1ST QUARTER FY 2017 EARNINGS PRESENTATION · Financial Highlights Q1 FY17 Q1 FY16 Free Cash Flow...

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