GBS revenue was $2,169 million in the quarter compared with $2,315 million for the prior year. GBS revenue decreased 6.3% year-over-year, driven by the ongoing headwinds in the traditional Applications Services business. GBS profit margin in the quarter was 18.2%, which was roughly flat year-over-year, reflecting the investments DXC is making to drive Digital growth. New business awards for GBS were $2.3 billion in the third quarter.
Global Infrastructure Services (GIS)
GIS revenue was $3,009 million in the quarter compared to $3,145 million for the prior year. GIS revenues decreased 4.3% year-over-year, reflecting the completion of several large transformation projects and the ongoing decline in legacy infrastructure services. GIS profit margin in the quarter was 17.5%, up from 14.3% in the prior year, reflecting actions DXC has taken to drive greater operating efficiencies, including our Bionix automation program, labor pyramid improvements, supply chain actions, and delivery center rationalization. It also reflects the benefit of final milestone achievement on several contracts. New business awards for GIS were $3.4 billion in the third quarter.
Returning Capital to Shareholders
During the third quarter, DXC Technology returned $851 million to shareholders, consisting of $54 million in common stock dividends and $797 million in share repurchases.
Earnings Conference Call and Webcast
DXC Technology senior management will host a conference call and webcast to discuss these results today at 5 p.m. EDT. The dial-in number for domestic callers is 888-254-3590. Callers who reside outside of the United States should dial +1-323-994-2093. The passcode for all participants is 6249774. The webcast audio and any presentation slides will be available on DXC Technologys Investor Relations website.
A replay of the conference call will be available from approximately two hours after the conclusion of the call until February 14, 2019. The replay dial-in number is 888-203-1112 for domestic callers and +1-719-457-0820 for callers who reside outside of the United States. The replay passcode is also 6249774. A replay of this webcast will also be available on DXC Technologys Investor Relations website.
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: constant currency, earnings before interest and taxes ("EBIT"), adjusted EBIT, adjusted EBIT margin, adjusted free cash flow, and non-GAAP results including non-GAAP income from continuing operations before taxes, non-GAAP income from continuing operations and non-GAAP EPS from continuing operations.
About DXC Technology
As the world's leading independent, end-to-end IT services company, DXC Technology (NYSE: DXC) leads digital transformations for clients by modernizing and integrating their mainstream IT, and by deploying digital solutions at scale to produce better business outcomes. The companys technology independence, global talent, and extensive partner network enable 6,000 private and public-sector clients in 70 countries to thrive on change. DXC is a recognized leader in corporate responsibility. For more information, visit dxc.technology and explore THRIVE, DXCs digital destination for changemakers and innovators.
All statements in this press release that do not directly and exclusively relate to historical facts constitute forward-looking statements. These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved. 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. For a written description of these factors, see the section titled Risk Factors in DXC's Annual Report on Form 10-K for the fiscal year ended March 31, 2018, and DXC's Form 10-Q for the quarterly periods ended June 30 and September 30, 2018 and any updating information in subsequent SEC filings, including DXC's upcoming Form 10-Q for the quarter ended December 31, 2018. 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.
Condensed Consolidated Statements of Operations | ||||||||||||||||||||
(preliminary and unaudited) |
||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(in millions, except per-share amounts) |
December 31,
|
December 31,
|
December 31,
|
December 31,
|
||||||||||||||||
Revenues | $ | 5,178 | $ | 5,460 | $ | 15,473 | $ | 16,149 | ||||||||||||
Costs of services | 3,725 | 4,051 | 11,110 | 12,230 | ||||||||||||||||
Selling, general and administrative | 491 | 447 | 1,500 | 1,484 | ||||||||||||||||
Depreciation and amortization | 508 | 440 | 1,463 | 1,264 | ||||||||||||||||
Restructuring costs | 76 | 210 | 418 | 585 | ||||||||||||||||
Interest expense | 81 | 73 | 249 | 220 | ||||||||||||||||
Interest income | (27 | ) | (27 | ) | (92 | ) | (59 | ) | ||||||||||||
Other income, net | (145 | ) | (75 | ) | (336 | ) | (291 | ) | ||||||||||||
Total costs and expenses | 4,709 | 5,119 | 14,312 | 15,433 | ||||||||||||||||
Income from continuing operations before income taxes | 469 | 341 | 1,161 | 716 | ||||||||||||||||
Income tax expense (benefit) | 3 | (365 | ) | 205 | (303 | ) | ||||||||||||||
Income from continuing operations | 466 | 706 | 956 | 1,019 | ||||||||||||||||
Income from discontinued operations, net of tax | | 73 | 35 | 198 | ||||||||||||||||
Net income | 466 | 779 | 991 | 1,217 | ||||||||||||||||
Less: net income attributable to non-controlling interest, net of tax | 4 | 3 | 8 | 26 | ||||||||||||||||
Net income attributable to DXC common stockholders | $ | 462 | $ | 776 | $ | 983 | $ | 1,191 | ||||||||||||
Income per common share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Continuing operations | $ | 1.68 | $ | 2.46 | $ | 3.38 | $ | 3.48 | ||||||||||||
Discontinued operations | | 0.26 | 0.12 | 0.70 | ||||||||||||||||
$ | 1.68 | $ | 2.72 | $ | 3.50 | $ | 4.18 | |||||||||||||
Diluted: | ||||||||||||||||||||
Continuing operations | $ | 1.66 | $ | 2.43 | $ | 3.33 | $ | 3.43 | ||||||||||||
Discontinued operations | | 0.25 | 0.12 | 0.68 | ||||||||||||||||
$ | 1.66 | $ | 2.68 | $ | 3.45 | $ | 4.11 | |||||||||||||
Cash dividend per common share | $ | 0.19 | $ | 0.18 | $ | 0.57 | $ | 0.54 | ||||||||||||
Weighted average common shares outstanding for: | ||||||||||||||||||||
Basic EPS | 275.66 | 285.38 | 280.47 | 284.70 | ||||||||||||||||
Diluted EPS | 278.99 | 289.77 | 284.70 | 289.53 | ||||||||||||||||
Selected Consolidated Balance Sheet Data | ||||||||
(preliminary and unaudited) |
||||||||
As of | ||||||||
(in millions) | December 31, 2018 | March 31, 2018 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 2,475 | $ | 2,593 | ||||
Receivables and contract assets, net | 5,096 | 5,481 | ||||||
Prepaid expenses | 626 | 496 | ||||||
Other current assets | 325 | 469 | ||||||
Assets of discontinued operations | | 581 | ||||||
Total current assets | 8,522 | 9,620 | ||||||
Intangible assets, net | 6,770 | 7,179 | ||||||
Goodwill | 7,593 | 7,619 | ||||||
Deferred income taxes, net | 407 | 373 | ||||||
Property and equipment, net | 3,186 | 3,363 | ||||||
Other assets | 2,393 | 2,404 | ||||||
Assets of discontinued operations - non-current | | 3,363 | ||||||
Total Assets | $ | 28,871 | $ | 33,921 | ||||
Liabilities | ||||||||
Short-term debt and current maturities of long-term debt | $ | 1,580 | $ | 1,918 | ||||
Accounts payable | 1,345 | 1,513 | ||||||
Accrued payroll and related costs | 705 | 744 | ||||||
Accrued expenses and other current liabilities | 3,228 | 3,120 | ||||||
Deferred revenue and advance contract payments | 1,542 | 1,641 | ||||||
Income taxes payable | 122 | 127 | ||||||
Liabilities of discontinued operations | | 789 | ||||||
Total current liabilities | 8,522 | 9,852 | ||||||
Long-term debt, net of current maturities | 5,980 | 6,092 | ||||||
Non-current deferred revenue | 273 | 795 | ||||||
Non-current income tax liabilities and deferred tax liabilities | 1,171 | 1,166 | ||||||
Other long-term liabilities | 1,569 | 1,723 | ||||||
Liabilities of discontinued operations - long-term | | 456 | ||||||
Total Liabilities | 17,515 | 20,084 | ||||||
Total Equity | 11,356 | 13,837 | ||||||
Total Liabilities and Equity | $ | 28,871 | $ | 33,921 | ||||
Condensed Consolidated Statements of Cash Flows | ||||||||||
(preliminary and unaudited) |
||||||||||
Nine Months Ended | ||||||||||
(in millions) | December 31, 2018 | December 31, 2017 | ||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 991 | $ | 1,217 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 1,514 | 1,387 | ||||||||
Share-based compensation | 57 | 76 | ||||||||
Gain on dispositions | (137 | ) | | |||||||
Unrealized foreign currency exchange (gains) losses | (32 | ) | 44 | |||||||
Other non-cash charges, net | (21 | ) | 23 | |||||||
Changes in assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||
Increase in assets (1) |
(1,012 |
) | (365 | ) | ||||||
Decrease in liabilities | (325 | ) | (372 | ) | ||||||
Net cash provided by operating activities |
1,035 |
2,010 | ||||||||
Cash flows from investing activities: | ||||||||||
Purchases of property and equipment | (219 | ) | (175 | ) | ||||||
Payments for transition and transformation contract costs | (294 | ) | (259 | ) | ||||||
Software purchased and developed | (183 | ) | (157 | ) | ||||||
Cash acquired through Merger | | 974 | ||||||||
Payments for acquisitions, net of cash acquired | (332 | ) | (193 | ) | ||||||
Business dispositions | (65 | ) | | |||||||
Cash collections related to deferred purchase price receivable (1) |
761 |
531 | ||||||||
Proceeds from sale of assets | 283 | 29 | ||||||||
Other investing activities, net | 9 | 20 | ||||||||
Net cash (used in) provided by investing activities |
(40 |
) | 770 | |||||||
Cash flows from financing activities: | ||||||||||
Borrowings of commercial paper | 1,853 | 1,822 | ||||||||
Repayments of commercial paper | (1,853 | ) | (1,706 | ) | ||||||
Repayment of borrowings under lines of credit | | (335 | ) | |||||||
Borrowings on long-term debt, net of discount | 1,646 | 621 | ||||||||
Principal payments on long-term debt | (2,619 | ) | (1,291 | ) | ||||||
Payments on capital leases and borrowings for asset financing | (710 | ) | (732 | ) | ||||||
Borrowings for USPS spin transaction | 1,114 | | ||||||||
Proceeds from bond issuance | 753 | 647 | ||||||||
Proceeds from stock options and other common stock transactions | 40 | 107 | ||||||||
Taxes paid related to net share settlements of share-based compensation awards | (52 | ) | (75 | ) | ||||||
Repurchase of common stock | (1,253 | ) | (66 | ) | ||||||
Dividend payments | (159 | ) | (123 | ) | ||||||
Other financing activities, net | 57 | (5 | ) | |||||||
Net cash used in financing activities | (1,183 | ) | (1,136 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (66 | ) | 44 | |||||||
Net (decrease) increase in cash and cash equivalents | (254 | ) | 1,688 | |||||||
Cash and cash equivalents at beginning of year | 2,729 | 1,268 | ||||||||
Cash and cash equivalents at end of period | $ | 2,475 | $ | 2,956 | ||||||
(1) |
Upon adoption of ASU 2016-15, cash proceeds from the collection of deferred purchase price receivables (DPP) are classified in investing activities in the Companys consolidated statement of cash flows. Previously, those proceeds were included in cash flows from operating activities. |
|