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DXC Technology Reports Third Quarter Fiscal Year 2023 Results

ASHBURN, Va. — (BUSINESS WIRE) — February 1, 2023 — Today, DXC Technology (NYSE: DXC) reported results for the third quarter of fiscal year 2023.

Mike Salvino, DXC Chairman, President and Chief Executive Officer commented: "I am very pleased with our strong third quarter results, where our execution drove strong bookings, along with Adjusted EBIT margin, Adjusted EPS, and free cash flow that all exceeded expectations. In addition, we continue to execute on our portfolio shaping initiatives, and intend to use our cash to reduce our debt, strengthen our investment grade profile, and to complete our $1 billion share repurchase program. We have created momentum, and we believe that the business is heading to an inflection at the end of FY23. Getting to this point was no small task, and my management team and I are proud of the quality company we have created, and we are clear and excited about delivering the business we envisioned in FY24."

Financial Highlights(1)

 

Q3 FY23

 

Q3 FY22

Revenue

 

$

3,566

 

 

$

4,089

 

YoY Revenue Growth

 

 

(12.8

)%

 

 

(4.6

)%

YoY Organic Revenue Growth(2)

 

 

(3.8

)%

 

 

(1.4

)%

 

 

 

 

 

Net Income

 

$

61

 

 

$

102

 

Net Income as a % of Sales

 

 

1.7

%

 

 

2.5

%

 

 

 

 

 

EBIT(2)

 

$

117

 

 

$

189

 

EBIT Margin %(2)

 

 

3.3

%

 

 

4.6

%

 

 

 

 

 

Adjusted EBIT(2)

 

$

309

 

 

$

355

 

Adjusted EBIT Margin %(2)

 

 

8.7

%

 

 

8.7

%

 

 

 

 

 

Earnings Per Share (Diluted)

 

$

0.25

 

 

$

0.38

 

Non-GAAP EPS (Diluted)(2)

 

$

0.95

 

 

$

0.92

 

 

 

 

 

 

Book-to-Bill (TTM)

 

1.06x

 

1.08x

Book-to-Bill

 

1.34x

 

1.23x

(1) In millions, except per-share amounts and numbers presented as percentages and ratios

(2) Reconciliation of GAAP to Non-GAAP measures provided in Non-GAAP Results.

Financial Highlights - Third Quarter of Fiscal Year 2023

Revenue was $3.57 billion for the third quarter of fiscal year 2023, down 12.8% as compared to prior year period, and down 3.8% on an organic basis. The third quarter of fiscal 2023 was impacted by a difficult comparison related to lower resale, a perpetual license sale in the prior year quarter, and lower than anticipated levels of project revenue this year.

Net income was $61 million, or 1.7% of sales for the third quarter of fiscal year 2023, compared to $102 million, or 2.5% of sales, in the prior year quarter. EBIT was $117 million or 3.3% of sales. Net income and EBIT in the quarter included the following items: amortization of acquired intangible assets of $100 million, restructuring costs of $49 million, merger related indemnification and arbitration charges of $20 million, a loss on disposition of $9 million, an impairment charge of $8 million, and transaction, separation, and integration costs of $6 million. Excluding these items, Adjusted EBIT margin was 8.7% in the third quarter, flat as compared to the prior year quarter.

Diluted earnings per share was $0.25 and Non-GAAP diluted earnings per share was $0.95 for the third quarter of fiscal year 2023. Compared to the prior year quarter, diluted earnings per share and non-GAAP diluted earnings per share were positively impacted by a lower share count and lower net interest expense, partially offset by foreign exchange headwinds and lower sales volumes.

On a trailing twelve months basis, the company delivered a book to bill of 1.06x.

Financial Information by Segment

Global Business Services ("GBS")(1)

 

Q3 FY23

 

Q3 FY22

Revenue

 

$

1,738

 

 

$

1,946

 

YoY Revenue Growth

 

 

(10.7

)%

 

 

1.3

%

YoY Organic Revenue Growth(2)

 

 

0.2

%

 

 

7.0

%

 

 

 

 

 

Segment Profit

 

$

244

 

 

$

315

 

Segment Profit Margin

 

 

14.0

%

 

 

16.2

%

 

 

 

 

 

Book-to-Bill (TTM)

 

1.16x

 

1.17x

Book-to-Bill

 

1.21x

 

1.28x

(1) In millions, except numbers presented as percentages and ratios

(2) Reconciliation of GAAP to Non-GAAP measures provided in Non-GAAP Results.

GBS segment revenue was $1,738 million in the third quarter of fiscal year 2023, down 10.7% compared to the prior year period and up 0.2% on an organic basis. GBS performance was driven by continued growth in the Analytics & Engineering business, where revenue increased 11.7% on an organic basis. GBS segment profit was $244 million and segment profit margin was 14.0%, down 220 bps compared to prior year period, due to a difficult comparison resulting from a perpetual license sale in the prior year quarter. GBS bookings for the quarter were $2.1 billion for a book-to-bill of 1.21x, and 1.16x on a trailing twelve months basis.

Global Infrastructure Services ("GIS")(1)

 

Q3 FY23

 

Q3 FY22

Revenue

 

$

1,828

 

 

$

2,143

 

YoY Revenue Growth

 

 

(14.7

)%

 

 

(9.5

)%

YoY Organic Revenue Growth(2)

 

 

(7.4

)%

 

 

(8.3

)%

 

 

 

 

 

Segment Profit

 

$

123

 

 

$

102

 

Segment Profit Margin

 

 

6.7

%

 

 

4.8

%

 

 

 

 

 

Book-to-Bill (TTM)

 

0.97x

 

1.01x

Book-to-Bill

 

1.46x

 

1.18x

(1) In millions, except numbers presented as percentages and ratios

(2) Reconciliation of GAAP to Non-GAAP measures provided in Non-GAAP Results.

GIS segment revenue was $1,828 million in the third quarter of fiscal year 2023, down 14.7% compared to the prior year period, and down 7.4% on an organic basis. GIS segment revenue performance was driven by lower Modern Workplace and Cloud Infrastructure & ITO revenues. GIS segment profit was $123 million with a segment profit margin of 6.7%, a 190 bps margin expansion as compared to third quarter of fiscal year 2022, as a result of our cost optimization program, asset sales, and a favorable commercial settlement. GIS bookings were $2.7 billion in the quarter for a book-to-bill of 1.46x, and 0.97x on a trailing twelve months basis.

Offering Highlights

The results for our six offerings are as follows:

Offerings Revenues(1)

 

Q3 FY23

 

Q2 FY23

 

Q1 FY23

 

Q4 FY22

 

Q3 FY22

Analytics and Engineering

 

$

535

 

$

524

 

$

503

 

$

529

 

$

506

Applications

 

 

832

 

 

825

 

 

882

 

 

904

 

 

969

Insurance Software & BPS

 

 

371

 

 

363

 

 

368

 

 

385

 

 

383

Security

 

 

112

 

 

108

 

 

105

 

 

120

 

 

116

Cloud Infrastructure & ITO

 

 

1,283

 

 

1,309

 

 

1,395

 

 

1,479

 

 

1,460

Modern Workplace

 

 

433

 

 

436

 

 

448

 

 

507

 

 

555

Subtotal

 

 

3,566

 

 

3,565

 

 

3,701

 

 

3,924

 

 

3,989

M&A and Divestitures

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

1

 

 

6

 

 

84

 

 

100

Total Revenues

 

$

3,566

 

$

3,566

 

$

3,707

 

$

4,008

 

$

4,089

(1)In millions

Cash Flow

Cash Flow(1)

 

Q3 FY23

 

Q3 FY22

Cash Flow from Operations

 

$

625

 

 

$

696

 

Less Capital Expenditures:

 

 

 

 

Purchase of property and equipment

 

 

(66

)

 

 

(52

)

Transition and transformation contract costs

 

 

(52

)

 

 

(45

)

Software purchased or developed

 

 

(44

)

 

 

(49

)

Free Cash Flow

 

$

463

 

 

$

550

 

(1)In millions

Cash flow from operations was $625 million in the third quarter of fiscal year 2023, as compared to $696 million in the third quarter of fiscal year 2022, and capital expenditures were $162 million in the third quarter of fiscal year 2023, as compared to $146 million in the third quarter of fiscal year 2022. Free cash flow (cash flow from operations, less capital expenditures) was $463 million in the third quarter of fiscal year 2023, as compared to $550 million in the third quarter of fiscal year 2022. On a year to date basis, operating cash flow and free cash flow were impacted by lower deposits at the German Banks of approximately $70 million.

Guidance

The Company's guidance for the fourth quarter and full fiscal year 2023 is as follows:

Key Metrics(1)

 

Q4 FY23 Guidance

 

FY23 Guidance

 

Lower End

Higher End

Q4 FY22

 

Lower End

Higher End

FY22

Organic Revenue Growth %

 

(3.1)%

(2.6)%

(2.8)%

 

(2.7)%

(2.6)%

(2.6)%

Adjusted EBIT Margin

 

8.7%

9.2%

8.5%

 

8.0%

8.1%

8.5%

Non-GAAP Diluted EPS

 

$1.00

$1.05

$0.84

 

$3.45

$3.50

$3.50

Free Cash Flow(2)

 

 

$93

 

~$630

$743

Revenue

 

 

 

 

 

 

Revenue

 

$3,615

$3,635

$4,008

 

$14,460

$14,470

$16,265

Acquisition & Divestitures Impact on Revenues

 

(3.6)%

(2.8)%

 

(2.6)%

(6.5)%

Foreign Exchange Impact on Revenues

 

(3.1)%

(3.0)%

 

(5.8)%

0.8%

Others

 

 

 

 

 

 

Pension Income Benefit(3)

 

~$40

$80

 

~$180

$298

Net Interest Expense

 

~$20

$29

 

~$68

$139

Non-GAAP Tax Rate

 

~21%

31.9%

 

~25%

26.6%

Weighted Average Diluted Shares Outstanding

 

232

233

248

 

233

234

255

Restructuring & TSI Expense

 

 

 

 

$300

$344

Capital Lease / Asset Financing payments

 

 

 

 

~$500

$990

Foreign Exchange Assumptions

 

Current Estimate

Q4 FY22

 

Current Estimate

FY22

$/Euro exchange rate

 

$1.08

$1.12

 

$1.04

$1.16

$/GBP exchange rate

 

$1.24

$1.34

 

$1.21

$1.37

$/AUD exchange rate

 

$0.69

$0.72

 

$0.69

$0.74

(1) In millions except for ratios, rates and per share numbers

(2) Includes a $70 million adjustment for the reduction in German bank deposits, which directly reduced FY23 FCF, and was not contemplated in original guidance

(3)Pension benefit is split between Cost Of Sales (COS) & Other Income:

Fiscal year 2023: $75 million service cost in COS, $255 million pension benefit in Other income

Fiscal year 2022: $88 million service cost in COS, $386 million pension benefit in Other income

The Company's preliminary fiscal year 2024 expectation is:

DXC does not provide a reconciliation of Non-GAAP measures that it discusses as part of its guidance because certain significant information required for such reconciliation is not available without unreasonable efforts or at all, including, most notably, the impact of significant non-recurring items. Without this information, DXC does not believe that a reconciliation would be meaningful.

Earnings Conference Call and Webcast

DXC Technology senior management will host a conference call and webcast to discuss these results on February 1, 2023, at 5:00 p.m. EDT. The dial-in number for domestic callers is +1 (888) 330-2455. Callers who reside outside of the United States should dial +1 (240) 789-2717. The passcode for all participants is 4164760. The webcast audio and any presentation slides will be available on DXC Technology’s Investor Relations website.

A replay of the conference call will be available from approximately two hours after the conclusion of the call until February 8, 2023. The phone number for the replay is +1 (800) 770-2030 or +1 (647) 362-9199. The replay passcode is 4164760.

About DXC Technology

DXC Technology (NYSE: DXC) helps global companies run their mission-critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private, and hybrid clouds. The world’s largest companies and public sector organizations trust DXC to deploy services to drive new levels of performance, competitiveness, and customer experience across their IT estates. Learn more about how we deliver excellence for our customers and colleagues at DXC.com.

Forward-Looking Statements

All statements and assumptions contained in this press release that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” Forward-looking statements often include words such as “anticipates,” “believes,” “estimates,” “expects,” “forecast,” “goal,” “intends,” “objective,” “plans,” “projects,” “strategy,” “target,” and “will” and words and terms of similar substance in discussions of future operating or financial performance. These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved.

Forward-looking statements include, among other things, statements with respect to our future financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, divestitures, competitive position, growth opportunities, share repurchases, dividend payments, plans and objectives of management and other matters. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by the coronavirus disease 2019 (“COVID-19”) crisis and the impact of varying private and governmental responses that affect our customers, employees, vendors and the economies and communities where they operate.

Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to:

No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law.

About Non-GAAP Measures

In an effort to provide investors with supplemental financial information, in addition to the preliminary and unaudited financial information presented on a GAAP basis, we have also disclosed in this press release preliminary Non-GAAP information including: earnings before interest and taxes ("EBIT"), EBIT margin, Adjusted EBIT, Adjusted EBIT margin, Non-GAAP diluted EPS, organic revenue growth, and free cash flow.

We believe EBIT, EBIT margin, Adjusted EBIT, Adjusted EBIT margin, and Non-GAAP diluted EPS provide investors with useful supplemental information about our operating performance after excluding certain categories of expenses. Free cash flow represents cash flow from operations, less capital expenditures.

One category of expenses excluded from Adjusted EBIT, Adjusted EBIT margin, and Non-GAAP diluted EPS, incremental amortization of intangible assets acquired through business combinations, may result in a significant difference in period over period amortization expense on a GAAP basis. We exclude amortization of certain acquired intangible assets as these non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Although DXC management excludes amortization of acquired intangible assets primarily customer-related intangible assets, from its Non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and support revenue generation. Any future transactions may result in a change to the acquired intangible asset balances and associated amortization expense.

Another category of expenses excluded from Adjusted EBIT, Adjusted EBIT margin, and Non-GAAP diluted EPS, impairment losses, may result in a significant difference in period over period expense on a GAAP basis. We exclude impairment losses as these non-cash amounts, reflect generally an acceleration of what would be multiple periods of expense and do not expect to occur frequently. Further assets such as goodwill may be significantly impacted by market conditions outside of management’s control.

We believe organic revenue growth provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S. dollars and the effects of acquisitions and divestitures in the periods presented. See below for a description of the methodology we use to present organic revenues.

Selected references are made to revenue growth on an “organic basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates and without the impacts of acquisitions and divestitures from “organic basis” financial results, thereby providing comparisons of operating performance from period to period of the business that we have owned during all periods presented. Organic revenue growth is calculated by dividing the year-over-year change in GAAP revenues attributed to organic growth by the GAAP revenues reported in the prior comparable period. This approach is used for all results where the functional currency is not the U.S. dollar.

There are limitations to the use of the Non-GAAP financial measures presented in this press release. One of the limitations is that they do not reflect complete financial results. We compensate for this limitation by providing a reconciliation between our Non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in accordance with GAAP. Additionally, other companies, including companies in our industry, may calculate Non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes between companies.

 

Condensed Consolidated Statements of Operations

(preliminary and unaudited)

 

 

Three Months Ended

 

Nine Months Ended

(in millions, except per-share amounts)

 

December 31,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

 

 

 

 

 

 

 

Revenues

 

$

3,566

 

 

$

4,089

 

 

$

10,839

 

 

$

12,257

 

 

 

 

 

 

 

 

 

 

Costs of services (excludes depreciation and amortization and restructuring costs)

 

 

2,799

 

 

 

3,179

 

 

 

8,504

 

 

 

9,522

 

Selling, general and administrative (excludes depreciation and amortization and restructuring costs)

 

 

315

 

 

 

340

 

 

 

988

 

 

 

1,093

 

Depreciation and amortization

 

 

375

 

 

 

424

 

 

 

1,144

 

 

 

1,294

 

Restructuring costs

 

 

49

 

 

 

36

 

 

 

135

 

 

 

248

 

Interest expense

 

 

56

 

 

 

38

 

 

 

137

 

 

 

161

 

Interest income

 

 

(41

)

 

 

(15

)

 

 

(89

)

 

 

(51

)

Debt extinguishment costs

 

 

 

 

 

2

 

 

 

 

 

 

311

 

Loss (gain) on disposition of businesses

 

 

9

 

 

 

4

 

 

 

12

 

 

 

(373

)

Other income, net

 

 

(98

)

 

 

(85

)

 

 

(270

)

 

 

(290

)

Total costs and expenses

 

 

3,464

 

 

 

3,923

 

 

 

10,561

 

 

 

11,915

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

102

 

 

 

166

 

 

 

278

 

 

 

342

 

Income tax expense

 

 

41

 

 

 

64

 

 

 

86

 

 

 

145

 

Net income

 

 

61

 

 

 

102

 

 

 

192

 

 

 

197

 

Less: net income attributable to non-controlling interest, net of tax

 

 

2

 

 

 

4

 

 

 

4

 

 

 

9

 

Net income attributable to DXC common stockholders

 

$

59

 

 

$

98

 

 

$

188

 

 

$

188

 

 

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.26

 

 

$

0.39

 

 

$

0.82

 

 

$

0.74

 

Diluted

 

$

0.25

 

 

$

0.38

 

 

$

0.80

 

 

$

0.73

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for:

 

 

 

 

 

 

 

 

Basic EPS

 

 

229.54

 

 

 

250.27

 

 

 

230.65

 

 

 

252.44

 

Diluted EPS

 

 

233.00

 

 

 

254.82

 

 

 

234.38

 

 

 

257.59

 

 

Selected Condensed Consolidated Balance Sheet Data

(preliminary and unaudited)

 

 

As of

(in millions)

 

December 31, 2022

 

March 31, 2022

Assets

 

 

 

 

Cash and cash equivalents

 

$

2,091

 

$

2,672

Receivables, net

 

 

3,454

 

 

 

3,854

 

Prepaid expenses

 

 

653

 

 

 

617

 

Other current assets

 

 

218

 

 

 

268

 

Assets held for sale

 

 

577

 

 

 

35

 

Total current assets

 

 

6,993

 

 

 

7,446

 

 

 

 

 

 

Intangible assets, net

 

 

2,741

 

 

 

3,378

 

Operating right-of-use assets, net

 

 

954

 

 

 

1,133

 

Goodwill

 

 

535

 

 

 

617

 

Deferred income taxes, net

 

 

219

 

 

 

221

 

Property and equipment, net

 

 

2,044

 

 

 

2,412

 

Other assets

 

 

4,653

 

 

 

4,850

 

Assets held for sale - non-current

 

 

115

 

 

 

82

 

Total Assets

 

$

18,254

 

 

$

20,139

 

 

 

 

 

 

Liabilities

 

 

 

 

Short-term debt and current maturities of long-term debt

 

$

873

 

 

$

900

 

Accounts payable

 

 

852

 

 

 

840

 

Accrued payroll and related costs

 

 

520

 

 

 

570

 

Current operating lease liabilities

 

 

320

 

 

 

388

 

Accrued expenses and other current liabilities

 

 

1,932

 

 

 

2,882

 

Deferred revenue and advance contract payments

 

 

969

 

 

 

1,053

 

Income taxes payable

 

 

166

 

 

 

197

 

Liabilities related to assets held for sale

 

 

538

 

 

 

23

 

Total current liabilities

 

 

6,170

 

 

 

6,853

 

 

 

 

 

 

Long-term debt, net of current maturities

 

 

3,850

 

 

 

4,065

 

Non-current deferred revenue

 

 

804

 

 

 

862

 

Non-current operating lease liabilities

 

 

691

 

 

 

815

 

Non-current income tax liabilities and deferred tax liabilities

 

 

784

 

 

 

994

 

Other long-term liabilities

 

 

992

 

 

 

1,136

 

Liabilities related to assets held for sale - non-current

 

 

11

 

 

 

39

 

Total Liabilities

 

 

13,302

 

 

 

14,764

 

 

 

 

 

 

Total Equity

 

 

4,952

 

 

 

5,375

 

 

 

 

 

 

Total Liabilities and Equity

 

$

18,254

 

 

$

20,139

 

 

Condensed Consolidated Statements of Cash Flows

(preliminary and unaudited)

 

 

Nine Months Ended

(in millions)

 

December 31, 2022

 

December 31, 2021

Cash flows from operating activities:

 

 

 

 

Net income

 

$

192

 

 

$

197

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

1,169

 

 

 

1,309

 

Operating right-of-use expense

 

 

311

 

 

 

371

 

Pension & other post-employment benefits, actuarial & settlement losses

 

 

 

 

 

7

 

Share-based compensation

 

 

81

 

 

 

77

 

Deferred taxes

 

 

(170

)

 

 

17

 

Gain on dispositions

 

 

(43

)

 

 

(402

)

Unrealized foreign currency exchange loss (gain)

 

 

80

 

 

 

(20

)

Impairment losses and contract write-offs

 

 

31

 

 

 

21

 

Debt extinguishment costs

 

 

 

 

 

311

 

Other non-cash charges, net

 

 

(3

)

 

 

2

 

Changes in assets and liabilities, net of effects of acquisitions and dispositions:

 

 

 

 

Decrease in assets

 

 

84

 

 

 

386

 

Decrease in operating lease liability

 

 

(311

)

 

 

(371

)

Decrease in other liabilities

 

 

(421

)

 

 

(675

)

Net cash provided by operating activities

 

 

1,000

 

 

 

1,230

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(212

)

 

 

(217

)

Payments for transition and transformation contract costs

 

 

(166

)

 

 

(152

)

Software purchased and developed

 

 

(154

)

 

 

(211

)

Business dispositions

 

 

52

 

 

 

519

 

Proceeds from sale of assets

 

 

165

 

 

 

95

 

Short-term investing

 

 

 

 

 

24

 

Other investing activities, net

 

 

16

 

 

 

35

 

Net cash (used in) provided by investing activities

 

 

(299

)

 

 

93

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings of commercial paper

 

 

1,363

 

 

 

840

 

Repayments of commercial paper

 

 

(1,312

)

 

 

(821

)

Borrowings on long-term debt

 

 

 

 

 

19

 

Principal payments on long-term debt

 

 

 

 

 

(2,872

)

Payments on finance leases and borrowings for asset financing

 

 

(399

)

 

 

(855

)

Proceeds from bond issuance

 

 

 

 

 

2,918

 

Proceeds from stock options and other common stock transactions

 

 

1

 

 

 

12

 

Taxes paid related to net share settlements of share-based compensation awards

 

 

(15

)

 

 

(15

)

Payments for debt extinguishment costs

 

 

 

 

 

(344

)

Repurchase of common stock

 

 

(325

)

 

 

(352

)

Other financing activities, net

 

 

(6

)

 

 

10

 

Net cash used in financing activities

 

 

(693

)

 

 

(1,460

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(95

)

 

 

25

 

Net decrease in cash and cash equivalents including cash classified within current assets held for sale

 

 

(87

)

 

 

(112

)

Change in cash classified within current assets held for sale

 

 

(494

)

 

 

63

 

Net decrease in cash and cash equivalents

 

 

(581

)

 

 

(49

)

Cash and cash equivalents at beginning of year

 

 

2,672

 

 

 

2,968

 

Cash and cash equivalents at end of period

 

$

2,091

 

 

$

2,919

 

Segment Profit

We define segment profit as segment revenues less costs of services, segment selling, general and administrative, depreciation and amortization, and other income (excluding the movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges). The Company does not allocate to its segments certain operating expenses managed at the corporate level. These unallocated costs generally include certain corporate function costs, stock-based compensation expense, pension and other post-retirement benefits (“OPEB”) actuarial and settlement gains and losses, restructuring costs, transaction, separation and integration-related costs, and amortization of acquired intangible assets.

 

 

Three Months Ended

 

Nine Months Ended

(in millions)

 

December 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

GBS profit

 

$

244

 

 

$

315

 

 

$

672

 

 

$

885

 

GIS profit

 

 

123

 

 

 

102

 

 

 

364

 

 

 

351

 

All other loss

 

 

(58

)

 

 

(62

)

 

 

(199

)

 

 

(203

)

Subtotal

 

$

309

 

 

$

355

 

 

$

837

 

 

$

1,033

 

Interest income

 

 

41

 

 

 

15

 

 

 

89

 

 

 

51

 

Interest expense

 

 

(56

)

 

 

(38

)

 

 

(137

)

 

 

(161

)

Restructuring costs

 

 

(49

)

 

 

(36

)

 

 

(135

)

 

 

(248

)

Transaction, separation and integration-related costs

 

 

(6

)

 

 

(11

)

 

 

(12

)

 

 

(23

)

Amortization of acquired intangible assets

 

 

(100

)

 

 

(106

)

 

 

(305

)

 

 

(325

)

Merger related indemnification

 

 

(11

)

 

 

 

 

 

(21

)

 

 

 

SEC Matter

 

 

 

 

 

 

 

 

(8

)

 

 

 

(Losses) gains on dispositions

 

 

(9

)

 

 

(4

)

 

 

(12

)

 

 

343

 

Arbitration loss

 

 

(9

)

 

 

 

 

 

(9

)

 

 

 

Impairment losses

 

 

(8

)

 

 

 

 

 

(8

)

 

 

(10

)

Debt extinguishment costs

 

 

 

 

 

(2

)

 

 

 

 

 

(311

)

Pension and OPEB actuarial and settlement losses

 

 

 

 

 

(7

)

 

 

(1

)

 

 

(7

)

Income before income taxes

 

$

102

 

 

$

166

 

 

$

278

 

 

$

342

 

 

 

 

 

 

 

 

 

 

Segment profit margins

 

 

 

 

 

 

 

 

GBS

 

 

14.0

%

 

 

16.2

%

 

 

12.9

%

 

 

15.5

%

GIS

 

 

6.7

%

 

 

4.8

%

 

 

6.5

%

 

 

5.4

%

Reconciliation of Non-GAAP Financial Measures

Our Non-GAAP adjustments include:

(1)

TSI-Related costs include fees and other internal and external expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential acquisitions, dispositions and strategic investments, whether or not announced or consummated.

 

 

 

The TSI-Related costs for the third quarter of fiscal 2023 include $6 million of costs incurred in connection with activities related to acquisitions and divestitures.

 

 

 

The TSI-Related costs for the first nine months of fiscal 2023 include $12 million of costs incurred in connection with activities related to acquisitions and divestitures.

 

 

 

The TSI-Related costs for the third quarter of fiscal 2022 include $10 million of costs incurred in connection with activities related to acquisitions and divestitures; and $1 million of expenses related to integration projects from the HPES merger.

 

 

 

The TSI-Related costs for the first nine months of fiscal 2022 include $13 million of costs to execute the strategic alternatives; $4 million of legal costs; a $14 million credit towards the Peraton Arbitration settlement; $5 million in expenses related to integration projects resulting from the HPES merger (including costs associated with continuing efforts to separate certain IT systems); and $15 million of costs incurred in connection with activities related to other acquisitions and divestitures.

 

 

(2)

See Note 19 – “Commitments and Contingencies,” Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company; and Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise.

 

 

(3)

See Note 19 – “Commitments and Contingencies,” SEC Matter.

 

 

(4)

Gains and losses on dispositions for the first nine months of fiscal 2023 include a net loss of $12 million on dispositions related to certain insignificant businesses.

 

 

 

Gains and losses on dispositions for the first nine months of fiscal 2022 include a $337 million gain on sale of the HPS business, gains of $19 million on other dispositions partially offset by $13 million of adjustments relating to the sale of the HHS business.

 

 

(5)

Impairment losses on dispositions for the first nine months of fiscal 2023 include an $8 million impairment charge for customer related intangible assets.

 

 

 

Impairment losses on dispositions for the first nine months of fiscal 2022 include a $10 million impairment charge of undeployed assets related to TSI-related capitalized costs.

 

 

(6)

Debt extinguishment costs were $2 million and $311 million for the third quarter and first nine months of fiscal 2022, respectively, for the partial and full redemption of term loans, senior notes, and extinguishment of debt associated with asset financing.

 

 

(7)

Tax adjustment for the first nine months of fiscal 2022 reflects net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

Non-GAAP Results

A reconciliation of reported results to Non-GAAP results is as follows:

 

 

Three Months Ended December 31, 2022

(in millions, except per-share amounts)

 

As

Reported

 

Restructuring

Costs

 

Transaction,

Separation and

Integration-Related Costs

 

Amortization

of Acquired

Intangible

Assets

 

Merger Related Indemnification and Arbitration Loss

 

Gains and Losses on Dispositions

 

Impairment Losses

 

Non-GAAP

Results

Income before income taxes

 

$

102

 

$

49

 

$

6

 

$

100

 

$

20

 

$

9

 

$

8

 

$

294

Income tax expense (benefit)

 

 

41

 

 

 

10

 

 

 

1

 

 

 

20

 

 

 

4

 

 

 

(7

)

 

 

1

 

 

 

70

 

Net income

 

 

61

 

 

 

39

 

 

 

5

 

 

 

80

 

 

 

16

 

 

 

16

 

 

 

7

 

 

 

224

 

Less: net income attributable to non-controlling interest, net of tax

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Net income attributable to DXC common stockholders

 

$

59

 

 

$

39

 

 

$

5

 

 

$

80

 

 

$

16

 

 

$

16

 

 

$

7

 

 

$

222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

40.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.26

 

 

$

0.17

 

 

$

0.02

 

 

$

0.35

 

 

$

0.07

 

 

$

0.07

 

 

$

0.03

 

 

$

0.97

 

Diluted EPS

 

$

0.25

 

 

$

0.17

 

 

$

0.02

 

 

$

0.34

 

 

$

0.07

 

 

$

0.07

 

 

$

0.03

 

 

$

0.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

229.54

 

 

 

229.54

 

 

 

229.54

 

 

 

229.54

 

 

 

229.54

 

 

 

229.54

 

 

 

229.54

 

 

 

229.54

 

Diluted EPS

 

 

233.00

 

 

 

233.00

 

 

 

233.00

 

 

 

233.00

 

 

 

233.00

 

 

 

233.00

 

 

 

233.00

 

 

 

233.00

 

 

 

 

Nine Months Ended December 31, 2022

(in millions, except per-share amounts)

 

As

Reported

 

Restructuring

Costs

 

Transaction,

Separation and

Integration-Related Costs

 

Amortization

of Acquired

Intangible

Assets

 

Merger Related Indemnification, Arbitration Loss, and SEC Matter

 

Gains and

Losses on

Dispositions

 

Impairment Losses

 

Pension and OPEB Actuarial and Settlement Gains and Losses

 

Non-GAAP

Results

Income before income taxes

 

$

278

$

135

 

$

12

 

$

305

 

$

38

 

$

12

 

$

8

 

$

1

 

$

789

Income tax expense

 

 

86

 

 

 

28

 

 

 

2

 

 

 

62

 

 

 

7

 

 

 

24

 

 

 

1

 

 

 

 

 

 

210

 

Net income (loss)

 

 

192

 

 

 

107

 

 

 

10

 

 

 

243

 

 

 

31

 

 

 

(12

)

 

 

7

 

 

 

1

 

 

 

579

 

Less: net income attributable to non-controlling interest, net of tax

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Net income (loss) attributable to DXC common stockholders

 

$

188

 

 

$

107

 

 

$

10

 

 

$

243

 

 

$

31

 

 

$

(12

)

 

$

7

 

 

$

1

 

 

$

575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

30.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.82

 

 

$

0.46

 

 

$

0.04

 

 

$

1.05

 

 

$

0.13

 

 

$

(0.05

)

 

$

0.03

 

 

$

0.00

 

 

$

2.49

 

Diluted EPS

 

$

0.80

 

 

$

0.46

 

 

$

0.04

 

 

$

1.04

 

 

$

0.13

 

 

$

(0.05

)

 

$

0.03

 

 

$

0.00

 

 

$

2.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

 

 

230.65

 

Diluted EPS

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

234.38

 

 

 

 

Three Months Ended December 31, 2021

(in millions, except per-share amounts)

 

As

Reported

 

Restructuring

Costs

 

Transaction,

Separation and

Integration-Related Costs

 

Amortization

of Acquired

Intangible

Assets

 

Gains and Losses on Dispositions

 

Debt

Extinguishment

Costs

 

Pension and OPEB Actuarial and Settlement Losses

 

Tax Adjustment

 

Non-GAAP

Results

Income before income taxes

 

$

166

 

$

36

 

$

11

 

$

106

 

$

4

 

$

2

 

$

7

 

 

 

$

332

Income tax expense

 

 

64

 

 

 

4

 

 

 

1

 

 

 

13

 

 

 

 

 

 

 

 

 

1

 

 

 

10

 

 

 

93

 

Net income

 

 

102

 

 

 

32

 

 

 

10

 

 

 

93

 

 

 

4

 

 

 

2

 

 

 

6

 

 

 

(10

)

 

 

239

 

Less: net income attributable to non-controlling interest, net of tax

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Net income attributable to DXC common stockholders

 

$

98

 

 

$

32

 

 

$

10

 

 

$

93

 

 

$

4

 

 

$

2

 

 

$

6

 

 

$

(10

)

 

$

235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

38.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.39

 

 

$

0.13

 

 

$

0.04

 

 

$

0.37

 

 

$

0.02

 

 

$

0.01

 

 

$

0.02

 

 

$

(0.04

)

 

$

0.94

 

Diluted EPS

 

$

0.38

 

 

$

0.13

 

 

$

0.04

 

 

$

0.36

 

 

$

0.02

 

 

$

0.01

 

 

$

0.02

 

 

$

(0.04

)

 

$

0.92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

 

 

250.27

 

Diluted EPS

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

254.82

 

 

 

 

Nine Months Ended December 31, 2021

(in millions, except per-share amounts)

 

As

Reported

 

Restructuring

Costs

 

Transaction,

Separation and

Integration-Related Costs

 

Amortization

of Acquired

Intangible

Assets

 

Gains and

Losses on

Dispositions

 

Impairment Losses

 

Debt

Extinguishment

Costs

 

Pension and OPEB Actuarial and Settlement Losses

 

Tax Adjustment

 

Non-GAAP

Results

Income before income taxes

 

$

342

 

$

248

 

$

23

 

$

325

 

$

(343

)

 

$

10

 

$

311

 

$

7

 

$

 

 

$

923

Income tax expense

 

 

145

 

 

 

48

 

 

 

6

 

 

 

63

 

 

 

(91

)

 

 

2

 

 

 

73

 

 

 

1

 

 

 

(18

)

 

 

229

 

Net income

 

 

197

 

 

 

200

 

 

 

17

 

 

 

262

 

 

 

(252

)

 

 

8

 

 

 

238

 

 

 

6

 

 

 

18

 

 

 

694

 

Less: net income attributable to non-controlling interest, net of tax

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Net income attributable to DXC common stockholders

 

$

188

 

 

$

200

 

 

$

17

 

 

$

262

 

 

$

(252

)

 

$

8

 

 

$

238

 

 

$

6

 

 

$

18

 

 

$

685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

 

42.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.74

 

 

$

0.79

 

 

$

0.07

 

 

$

1.04

 

 

$

(1.00

)

 

$

0.03

 

 

$

0.94

 

 

$

0.02

 

 

$

0.07

 

 

$

2.71

 

Diluted EPS

 

$

0.73

 

 

$

0.78

 

 

$

0.07

 

 

$

1.02

 

 

$

(0.98

)

 

$

0.03

 

 

$

0.92

 

 

$

0.02

 

 

$

0.07

 

 

$

2.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

 

 

252.44

 

Diluted EPS

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

 

 

257.59

 

The above tables serve to reconcile the Non-GAAP financial measures to the most directly comparable GAAP measures. Please refer to the “About Non-GAAP Measures” section of the press release for further information on the use of these Non-GAAP measures.

 

Year-over-Year Organic Revenue Growth

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

December 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

Total revenue growth

 

(12.8

)%

 

(4.6

)%

 

(11.6

)%

 

(8.1

)%

Foreign currency

 

6.6

%

 

1.0

%

 

6.6

%

 

(2.1

)%

Acquisitions and divestitures

 

2.4

%

 

2.2

%

 

2.4

%

 

7.6

%

Organic revenue growth

 

(3.8

)%

 

(1.4

)%

 

(2.6

)%

 

(2.6

)%

 

 

 

 

 

 

 

 

 

GBS revenue growth

 

(10.7

)%

 

1.3

%

 

(8.7

)%

 

(10.0

)%

Foreign currency

 

6.4

%

 

1.3

%

 

6.6

%

 

(1.5

)%

Acquisitions and divestitures

 

4.5

%

 

4.4

%

 

4.2

%

 

15.5

%

GBS organic revenue growth

 

0.2

%

 

7.0

%

 

2.1

%

 

4.0

%

 

 

 

 

 

 

 

 

 

GIS revenue growth

 

(14.7

)%

 

(9.5

)%

 

(14.1

)%

 

(6.5

)%

Foreign currency

 

6.7

%

 

0.9

%

 

6.7

%

 

(2.5

)%

Acquisitions and divestitures

 

0.6

%

 

0.3

%

 

0.6

%

 

0.5

%

GIS organic revenue growth

 

(7.4

)%

 

(8.3

)%

 

(6.8

)%

 

(8.5

)%

 

EBIT and Adjusted EBIT

 

 

 

Three Months Ended

 

Nine Months Ended

(in millions)

 

December 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

Net income

 

$

61

 

 

$

102

 

 

$

192

 

 

$

197

 

Income tax expense

 

 

41

 

 

 

64

 

 

 

86

 

 

 

145

 

Interest income

 

 

(41

)

 

 

(15

)

 

 

(89

)

 

 

(51

)

Interest expense

 

 

56

 

 

 

38

 

 

 

137

 

 

 

161

 

EBIT

 

 

117

 

 

 

189

 

 

 

326

 

 

 

452

 

Restructuring costs

 

 

49

 

 

 

36

 

 

 

135

 

 

 

248

 

Transaction, separation and integration-related costs

 

 

6

 

 

 

11

 

 

 

12

 

 

 

23

 

Amortization of acquired intangible assets

 

 

100

 

 

 

106

 

 

 

305

 

 

 

325

 

Merger related indemnification

 

 

11

 

 

 

 

 

 

21

 

 

 

 

SEC Matter

 

 

 

 

 

 

 

 

8

 

 

 

 

Losses (gains) on dispositions

 

 

9

 

 

 

4

 

 

 

12

 

 

 

(343

)

Arbitration loss

 

 

9

 

 

 

 

 

 

9

 

 

 

 

Impairment losses

 

 

8

 

 

 

 

 

 

8

 

 

 

10

 

Debt extinguishment costs

 

 

 

 

 

2

 

 

 

 

 

 

311

 

Pension and OPEB actuarial and settlement losses

 

 

 

 

 

7

 

 

 

1

 

 

 

7

 

Adjusted EBIT

 

$

309

 

 

$

355

 

 

$

837

 

 

$

1,033

 

 

 

 

 

 

 

 

 

 

EBIT margin

 

 

3.3

%

 

 

4.6

%

 

 

3.0

%

 

 

3.7

%

Adjusted EBIT margin

 

 

8.7

%

 

 

8.7

%

 

 

7.7

%

 

 

8.4

%

Source: DXC Technology
Category: Investor Relations



Contact:

John Sweeney, CFA, Head of Marketing and Investor Relations, +1-980-315-3665, john.sweeney@dxc.com
Sean B. Pasternak, Corporate Media Relations, +1-647-975-7326, sean.pasternak@dxc.com