DXC Technology Delivers Sequential Growth in Revenue, Bookings, EBIT and Earnings per Share

Global Business Services (GBS)

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 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 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 Technology’s 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 company’s 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, DXC’s 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,
2018

   

December 31,
2017

December 31,
2018

   

December 31,
2017

 
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 Company’s consolidated statement of cash flows. Previously, those proceeds were included in cash flows from operating activities.

 

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