- Revenues of $3.45 billion for Q1 FY24, down 7.0% as compared to
prior year period, and down 3.6% on an organic basis
- Diluted Earnings Per Share was $0.17 and Non-GAAP Diluted
Earnings Per Share was $0.63 in Q1 FY24
- Q1 FY24 operating cash flow of $127 million, less capital
expenditures of $202 million, results in $(75) million of free cash
flow
- Book-to-bill ratio of 0.89x and trailing twelve-month
book-to-bill of 1.03x
- Returned $280 million to shareholders by repurchasing 11.0
million shares in Q1 FY24. Remain on-track to complete the $1
billion share repurchase program in FY24
DXC Technology (NYSE: DXC) today reported results for the first
quarter of fiscal year 2024.
Mike Salvino, DXC Chairman, President and Chief Executive
Officer commented: “Our first quarter FY24 financial performance
was mixed. While revenue and margin fell short of our expectations,
free cash flow was better than expected. Our performance was
impacted by lower than anticipated resale and project revenues. As
a result of these factors, today we are reducing our guidance to
reflect the challenging economic environment."
Mr. Salvino continued: “We are proud of the continued strong
performance of our higher margin GBS segment. With our new
operating model in place, we are confident that we can drive
continued strong business momentum for GBS and improve the
performance of GIS. We remain confident in our execution and are
committed to delivering on our $1 billion share repurchase, which
we believe will drive significant value for our shareholders."
Financial Highlights(1)
Q1 FY24
Q1 FY23
Revenue
$
3,446
$
3,707
YoY Revenue Growth
(7.0
)%
(10.5
)%
YoY Organic Revenue Growth(2)
(3.6
)%
(2.6
)%
Net Income
$
42
$
103
Net Income as a % of Sales
1.2
%
2.8
%
EBIT(2)
$
95
$
139
EBIT Margin %(2)
2.8
%
3.7
%
Adjusted EBIT(2)
$
224
$
259
Adjusted EBIT Margin %(2)
6.5
%
7.0
%
Earnings Per Share (Diluted)
$
0.17
$
0.43
Non-GAAP EPS (Diluted)(2)
$
0.63
$
0.75
Book-to-Bill (TTM)
1.03x
1.06x
Book-to-Bill
0.89x
0.87x
(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 - First Quarter of Fiscal Year
2024
Revenue was $3.45 billion for the first quarter of fiscal year
2024, down 7.0% as compared to prior year period, and down 3.6% on
an organic basis. First quarter revenues and organic revenue growth
came in below the guidance range, primarily due to a slowdown in
client expenditures that are, in the short term, discretionary.
This included the resale of IT equipment, such as PCs, and services
project work. These are projects that are typically below $5
million in size, and are sold into our existing account base.
Net income was $42 million, or 1.2% of sales for the first
quarter of fiscal year 2024, compared to $103 million, or 2.8% of
sales, in the prior year quarter. EBIT was $95 million or 2.8% of
sales. Net income and EBIT in the quarter included the following
items: amortization of acquired intangible assets of $89 million,
restructuring costs of $20 million, tax indemnification charges of
$11 million, impairment charges of $3 million, a loss on
disposition of $5 million, and transaction, separation, and
integration costs of $1 million. Excluding these items, Adjusted
EBIT margin was 6.5% in the first quarter, a reduction of 50 bps as
compared to the prior year quarter.
Diluted earnings per share was $0.17 and Non-GAAP diluted
earnings per share was $0.63 for the first quarter of fiscal year
2024. GAAP and Non-GAAP earnings per share were adversely impacted
by lower revenues, and higher than expected tax expense, partially
offset by a lower share count.
On a trailing twelve months basis, the company delivered a book
to bill of 1.03x.
During the first quarter of fiscal year 2024, the Company
repurchased 11.0 million shares of common stock for a total of $280
million. The Company has retired 21% of its shares outstanding
since the start of fiscal year 2022.
Financial Information by Segment
Global Business Services
("GBS")(1)
Q1 FY24
Q1 FY23
Revenue
$
1,703
$
1,758
YoY Revenue Growth
(3.1
)%
(6.8
)%
YoY Organic Revenue Growth(2)
3.3
%
2.8
%
Segment Profit
$
192
$
210
Segment Profit Margin
11.3
%
11.9
%
Book-to-Bill (TTM)
1.01x
1.17x
Book-to-Bill
0.84x
0.98x
(1) In millions
(2) Reconciliation of GAAP to Non-GAAP
measures provided in Non-GAAP Results.
GBS segment revenue was $1,703 million in the first quarter of
fiscal year 2024, down 3.1% compared to the prior year period and
up 3.3% on an organic basis. The GBS performance was driven by
strong growth in the Analytics & Engineering offering. GBS
segment profit was $192 million and segment profit margin was
11.3%, down 60 bps compared to prior year, reflecting investments
in building the skills and capacity required to continue to drive
future growth, as well as the impact of lower pension income. GBS
bookings for the quarter were $1.4 billion for a book-to-bill of
0.84x, and 1.01x on a trailing twelve months basis.
Global Infrastructure Services
("GIS")(1)
Q1 FY24
Q1 FY23
Revenue
$
1,743
$
1,949
YoY Revenue Growth
(10.6
)%
(13.5
)%
YoY Organic Revenue Growth(2)
(9.9
)%
(7.2
)%
Segment Profit
$
91
$
127
Segment Profit Margin
5.2
%
6.5
%
Book-to-Bill (TTM)
1.04x
0.96x
Book-to-Bill
0.94x
0.77x
(1) In millions
(2) Reconciliation of GAAP to Non-GAAP
measures provided in Non-GAAP Results.
GIS segment revenue was $1,743 million in the first quarter of
fiscal year 2024, down 10.6% compared to the prior year period, and
down 9.9% on an organic basis. GIS segment revenue performance was
impacted by declines in Cloud Infrastructure & ITO, and
moderating declines in Modern Workplace. GIS segment profit was $91
million with a segment profit margin of 5.2%, a 130 bps margin
compression as compared to first quarter of fiscal year 2023. GIS
bookings were $1.7 billion in the quarter for a book-to-bill of
0.94x, and 1.04x on a trailing twelve months basis.
Offering Highlights
The results for our six offerings are as follows:
Offerings Revenues
Q1 FY24
Q4 FY23
Q3 FY23
Q2 FY23
Q1 FY23
Analytics and Engineering
$
546
$
558
$
535
$
524
$
503
Applications
770
780
762
755
785
Insurance Software & BPS
382
390
371
363
367
Security
111
113
112
108
105
Cloud Infrastructure & ITO
1,209
1,270
1,283
1,309
1,396
Modern Workplace
423
457
433
436
448
Subtotal
3,441
3,568
3,496
3,495
3,604
M&A and Divestitures
Revenues
5
23
70
71
103
Total Revenues
$
3,446
$
3,591
$
3,566
$
3,566
$
3,707
Cash Flow
Cash Flow
Q1 FY24
Q1 FY23
Cash Flow from Operations
$
127
$
163
Less Capital Expenditures:
Purchase of property and equipment
(55
)
(68
)
Transition and transformation contract
costs
(62
)
(57
)
Software purchased or developed
(85
)
(50
)
Free Cash Flow
$
(75
)
$
(12
)
Cash flow from operations was $127 million in the first quarter
of fiscal year 2024, as compared to $163 million in the first
quarter of fiscal year 2023, and capital expenditures were $202
million in the first quarter of fiscal year 2024, as compared to
$175 million in the first quarter of fiscal year 2023. Free cash
flow (cash flow from operations, less capital expenditures) was
$(75) million in the first quarter of fiscal year 2024, as compared
to $(12) million in the first quarter of fiscal year 2023.
Guidance
The Company's guidance for the second quarter and full fiscal
year 2024 is as follows:
Key Metrics
Q2 FY24 Guidance
FY24 Guidance
Lower
End
Higher
End
Q2
FY23
Lower
End
Higher
End
FY23
Organic Revenue Growth %
(5.5)%
(4.5)%
(1.5)%
(4.0)%
(3.0)%
(2.7)%
Adjusted EBIT Margin
6.5%
7.0%
7.5%
7.0%
7.5%
8.0%
Non-GAAP Diluted EPS
$0.65
$0.70
$0.75
$3.15
$3.40
$3.47
Free Cash Flow
$17
$800
$737
Revenue
Revenue $
$3,430
$3,460
$3,566
$13,880
$14,030
$14,430
Acquisition & Divestitures Revenues
%
(2.0)%
(2.5)%
(1.8)%
(2.6)%
Foreign Exchange Impact on Revenues %
3.6%
(7.4)%
2.1%
(6.0)%
Others
Pension Income Benefit*
~$20
$43
~$80
$178
Net Interest Expense
~$23
$16
~$90
$65
Non-GAAP Tax Rate
~34%
~29%
Weighted Average Diluted Shares
Outstanding
203
207
233
196
205
233
Restructuring & TSI Expense
$57
~$100
$232
Capital Lease / Asset Financing
payments
$115
~$440
$511
Foreign Exchange
Assumptions
Current Estimate
Q2
FY23
Current Estimate
FY23
$/Euro exchange rate
$1.11
$1.01
$1.11
$1.04
$/GBP exchange rate
$1.28
$1.18
$1.28
$1.21
$/AUD exchange rate
$0.68
$0.68
$0.68
$0.69
*Pension benefit is split between Cost Of
Sales (COS) & Other Income:
Fiscal year 2024: Net pension
benefit of $80 million; $65 million service cost in COS, $145
million pension benefit in Other income
Fiscal year 2023: Net pension
benefit of $178 million; $73 million service cost in COS, $251
million pension benefit in Other income
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 August 2, 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
August 9, 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 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.
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. 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. 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 ongoing coronavirus disease 2019 (“COVID-19”)
pandemic 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: the uncertainty of the magnitude, duration, geographic
reach of the COVID-19 crisis, its impact on the global economy and
the impact of current and potential travel restrictions,
stay-at-home orders, vaccine mandates and economic restrictions
implemented to address the crisis; our inability to succeed in our
strategic objectives; the risk of liability or damage to our
reputation resulting from security incidents, including breaches,
and cyber-attacks to our systems and networks and those of our
business partners, insider threats, disclosure of sensitive data or
failure to comply with data protection laws and regulations in a
rapidly evolving regulatory environment, in each case, whether
deliberate or accidental; our inability to develop and expand our
service offerings to address emerging business demands and
technological trends, including our inability to sell
differentiated services amongst our offerings; our inability to
compete in certain markets and expand our capacity in certain
offshore locations and risks associated with such offshore
locations such as Russia’s recent invasion of Ukraine and our exit
from the Russian market; failure to maintain our credit rating and
ability to manage working capital, refinance and raise additional
capital for future needs; our indebtedness; the competitive
pressures faced by our business; our inability to accurately
estimate the cost of services, and the completion timeline of
contracts; execution risks by us and our suppliers, customers, and
partners; the risks associated with natural disasters; our
inability to retain and hire key personnel and maintain
relationships with key partners; the risks associated with
prolonged periods of inflation; the risks associated with our
international operations, such as risks related to currency
exchange rates and Brexit; our inability to comply with
governmental regulations or the adoption of new laws or
regulations, including social and environmental responsibility
regulations, policies and provisions; our inability to achieve the
expected benefits of our restructuring plans; inadvertent
infringement of third-party intellectual property rights or our
inability to protect our own intellectual property assets; our
inability to procure third-party licenses required for the
operation of our products and service offerings; risks associated
with disruption of our supply chain; our inability to maintain
effective internal control over financial reporting; potential
losses due to asset impairment charges; our inability to pay
dividends or repurchase shares of our common stock; pending
investigations, claims and disputes and any adverse impact on our
profitability and liquidity; disruptions in the credit markets,
including disruptions that reduce our customers’ access to credit
and increase the costs to our customers of obtaining credit; our
failure to bid on projects effectively; financial difficulties of
our customers and our inability to collect receivables; our
inability to maintain and grow our customer relationships over time
and to comply with customer contracts or government contracting
regulations or requirements; our inability to succeed in our
strategic transactions; changes in tax laws and any adverse impact
on our effective tax rate; risks following the merger of Computer
Sciences Corporation and Enterprise Services business of Hewlett
Packard Enterprise Company's businesses, including anticipated tax
treatment, unforeseen liabilities and future capital expenditures;
and risks following the spin-off of our former U.S. Public Sector
business and its related mergers with Vencore Holding Corp. and
KeyPoint Government Solutions in June 2018 to form Perspecta Inc.,
which was acquired by Peraton in May 2021. 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, 2023, and any updating information in subsequent SEC filings,
including DXC’s upcoming Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2023.
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 revenues,
organic revenue growth, free cash flow, and non-GAAP tax rate.
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.
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 are not expected 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, 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. Organic revenue is
calculated as constant currency revenue excluding the impact of
mergers, acquisitions or similar transactions until the one-year
anniversary of the transaction and excluding revenues of
divestitures during the reporting period. This approach is used for
all results where the functional currency is not the U.S.
dollar.
Free cash flow represents cash flow from operations, less
capital expenditures. Free cash flow is utilized by our management,
investors, and analysts to evaluate cash available to pay debt,
repurchase shares, and provide further investment in the
business.
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
(in millions, except per-share
amounts)
June 30, 2023
June 30, 2022
Revenues
$
3,446
$
3,707
Costs of services
2,719
2,930
Selling, general and administrative
327
349
Depreciation and amortization
344
389
Restructuring costs
20
33
Interest expense
66
37
Interest income
(49
)
(20
)
Loss (gain) on disposition of
businesses
5
(29
)
Other income, net
(64
)
(104
)
Total costs and expenses
3,368
3,585
Income before income taxes
78
122
Income tax expense
36
19
Net income
42
103
Less: net income attributable to
non-controlling interest, net of tax
6
1
Net income attributable to DXC common
stockholders
$
36
$
102
Income per common share:
Basic
$
0.17
$
0.44
Diluted
$
0.17
$
0.43
Weighted average common shares outstanding
for:
Basic EPS
210.11
232.48
Diluted EPS
213.75
237.38
Selected Condensed Consolidated Balance
Sheet Data
(preliminary and unaudited)
As of
(in millions)
June 30, 2023
March 31, 2023
Assets
Cash and cash equivalents
$
1,576
$
1,858
Receivables, net
3,285
3,441
Prepaid expenses
652
565
Other current assets
231
255
Assets held for sale
—
5
Total current assets
5,744
6,124
Intangible assets, net
2,441
2,569
Operating right-of-use assets, net
849
909
Goodwill
539
539
Deferred income taxes, net
512
460
Property and equipment, net
1,922
1,979
Other assets
3,281
3,247
Assets held for sale - non-current
5
18
Total Assets
$
15,293
$
15,845
Liabilities
Short-term debt and current maturities of
long-term debt
$
694
$
500
Accounts payable
701
782
Accrued payroll and related costs
613
569
Current operating lease liabilities
303
317
Accrued expenses and other current
liabilities
1,587
1,836
Deferred revenue and advance contract
payments
1,008
1,054
Income taxes payable
151
120
Liabilities related to assets held for
sale
—
9
Total current liabilities
5,057
5,187
Long-term debt, net of current
maturities
3,891
3,900
Non-current deferred revenue
749
788
Non-current operating lease
liabilities
598
648
Non-current income tax liabilities and
deferred tax liabilities
579
587
Other long-term liabilities
816
912
Liabilities related to assets held for
sale - non-current
—
3
Total Liabilities
11,690
12,025
Total Equity
3,603
3,820
Total Liabilities and Equity
$
15,293
$
15,845
Condensed Consolidated Statements of
Cash Flows
(preliminary and unaudited)
Three Months Ended
(in millions)
June 30, 2023
June 30, 2022
Cash flows from operating activities:
Net income
$
42
$
103
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
351
398
Operating right-of-use expense
90
106
Share-based compensation
23
28
Deferred taxes
(50
)
(38
)
Gain on dispositions
(9
)
(62
)
Provision for losses on accounts
receivable
2
2
Unrealized foreign currency exchange
loss
23
46
Impairment losses and contract
write-offs
7
—
Other non-cash charges, net
(2
)
3
Changes in assets and liabilities, net of
effects of acquisitions and dispositions:
Decrease (Increase) in assets
63
(69
)
Decrease in operating lease liability
(90
)
(106
)
Decrease in other liabilities
(323
)
(248
)
Net cash provided by operating
activities
127
163
Cash flows from investing activities:
Purchases of property and equipment
(55
)
(68
)
Payments for transition and transformation
contract costs
(62
)
(57
)
Software purchased and developed
(85
)
(50
)
Business dispositions, net of cash
sold
(7
)
(36
)
Proceeds from sale of assets
11
14
Short-term investing
(3
)
—
Other investing activities, net
2
5
Net cash used in investing activities
(199
)
(192
)
Cash flows from financing activities:
Borrowings of commercial paper
546
292
Repayments of commercial paper
(305
)
(239
)
Payments on finance leases and borrowings
for asset financing
(131
)
(159
)
Proceeds from stock options and other
common stock transactions
—
1
Taxes paid related to net share
settlements of share-based compensation awards
(33
)
(12
)
Repurchase of common stock and advance
payment for accelerated share repurchase
(285
)
(272
)
Other financing activities, net
(2
)
(5
)
Net cash used in financing activities
(210
)
(394
)
Effect of exchange rate changes on cash
and cash equivalents
—
(50
)
Net decrease in cash and cash equivalents
including cash classified within current assets held for sale
(282
)
(473
)
Cash classified within current assets held
for sale
—
10
Net decrease in cash and cash
equivalents
(282
)
(463
)
Cash and cash equivalents at beginning of
year
1,858
2,672
Cash and cash equivalents at end of
period
$
1,576
$
2,209
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
(in millions)
June 30, 2022
June 30, 2021
GBS profit
$
192
$
210
GIS profit
91
127
All other loss
(59
)
(78
)
Subtotal
$
224
$
259
Interest income
49
20
Interest expense
(66
)
(37
)
Restructuring costs
(20
)
(33
)
Transaction, separation and
integration-relation costs
(1
)
(2
)
Amortization of acquired intangible
assets
(89
)
(104
)
Merger related indemnification
(11
)
(10
)
(Loss) gain on disposition of
businesses
(5
)
29
Impairment losses
(3
)
—
Income before income taxes
$
78
$
122
Segment profit margins
GBS
11.3
%
11.9
%
GIS
5.2
%
6.5
%
Reconciliation of Non-GAAP Financial Measures
Our Non-GAAP adjustments include:
- Restructuring costs – includes costs, net of reversals, related
to workforce and real estate optimization and other similar
charges.
- Transaction, separation and integration-related (“TSI”) costs –
includes costs related to integration, separation, planning,
financing and advisory fees and other similar charges associated
with mergers, acquisitions, strategic investments, joint ventures,
and dispositions and other similar transactions incurred within one
year of such transactions closing, except for costs associated with
related disputes, which may arise more than one year after
closing.
- Amortization of acquired intangible assets – includes
amortization of intangible assets acquired through business
combinations.
- Merger related indemnification - in fiscal 2024, represents the
Company’s current estimate of potential liability to HPE for a tax
related indemnification; and in fiscal 2023, represents the
Company’s estimate of potential liability to HPE for
indemnification following the outcome of the Oracle v. HPE
litigation in June 2022. These obligations are pursuant to the HPES
merger.
- Gains and losses on dispositions – gains and losses related to
dispositions of businesses, strategic assets and interests in less
than wholly-owned entities.(1)
- Impairment losses – non-cash charges associated with the
permanent reduction in the value of the Company’s assets (e.g.,
impairment of goodwill and other long-term assets including fixed
assets and impairments to deferred tax assets for discrete changes
in valuation allowances). Future discrete reversals of valuation
allowances are likewise excluded.(2)
- Tax adjustments – discrete tax adjustments to impair or
recognize certain deferred tax assets and adjustments for changes
in tax legislation. Income tax expense (benefit) of merger and
divestitures is separately computed based on the underlying
transaction. Income tax expense of all other (non-discrete)
non-GAAP adjustments is computed by applying the jurisdictional tax
rate to the pre-tax adjustments on a jurisdictional basis.
(1)
During the first quarter of fiscal 2024
and fiscal 2023, the Company sold insignificant businesses that
resulted in a loss of $5 million and a gain of $38 million,
respectively. During the first quarter of fiscal 2023, the Company
also classified certain insignificant businesses as held for sale
and recognized a loss of $9 million.
(2)
Impairment losses for the first quarter of
fiscal 2024 include a $3 million and $4 million impairment charge
associated with two strategic investments accounted for within
Other income, net and Net income attributable to non-controlling
interest, net of tax, respectively.
Non-GAAP Results
A reconciliation of reported results to Non-GAAP results is as
follows:
Three Months Ended June 30,
2023
(in millions, except per-share
amounts)
As
Reported
Restructuring
Costs
Transaction,
Separation and
Integration-Related
Costs
Amortization
of Acquired
Intangible
Assets
Merger Related
Indemnification
Gains and
Losses on
Dispositions
Impairment Losses
Tax
Adjustments
Non-GAAP
Results
Income before income taxes
$
78
$
20
$
1
$
89
$
11
$
5
$
3
$
—
$
207
Income tax expense
36
5
—
21
11
—
1
(3
)
71
Net income
42
15
1
68
—
5
2
3
136
Less: net income attributable to
non-controlling interest, net of tax
6
—
—
—
—
—
(4
)
—
2
Net income attributable to DXC common
stockholders
$
36
$
15
$
1
$
68
$
—
$
5
$
6
$
3
$
134
Effective Tax Rate
46.2
%
34.3
%
Basic EPS
$
0.17
$
0.07
$
—
$
0.32
$
—
$
0.02
$
0.03
$
0.01
$
0.64
Diluted EPS
$
0.17
$
0.07
$
—
$
0.32
$
—
$
0.02
$
0.03
$
0.01
$
0.63
Weighted average common shares outstanding
for:
Basic EPS
210.11
210.11
210.11
210.11
210.11
210.11
210.11
210.11
210.11
Diluted EPS
213.75
213.75
213.75
213.75
213.75
213.75
213.75
213.75
213.75
Three Months Ended June 30,
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
Gains and
Losses on
Dispositions
Non-GAAP
Results
Income before income taxes
$
122
$
33
$
2
$
104
$
10
$
(29
)
$
242
Income tax expense
19
8
—
24
2
9
62
Net income
103
25
2
80
8
(38
)
180
Less: net income attributable to
non-controlling interest, net of tax
1
—
—
—
—
—
1
Net income attributable to DXC common
stockholders
$
102
$
25
$
2
$
80
$
8
$
(38
)
$
179
Effective Tax Rate
15.6
%
25.6
%
Basic EPS
$
0.44
$
0.11
$
0.01
$
0.34
$
0.03
$
(0.16
)
$
0.77
Diluted EPS
$
0.43
$
0.11
$
0.01
$
0.34
$
0.03
$
(0.16
)
$
0.75
Weighted average common shares outstanding
for:
Basic EPS
232.48
232.48
232.48
232.48
232.48
232.48
232.48
Diluted EPS
237.38
237.38
237.38
237.38
237.38
237.38
237.38
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
June 30, 2023
June 30, 2022
Total revenue growth
(7.0
)%
(10.5
)%
Foreign currency
0.7
%
5.8
%
Acquisition and divestitures
2.7
%
2.1
%
Organic revenue growth
(3.6
)%
(2.6
)%
GBS revenue growth
(3.1
)%
(6.8
)%
Foreign currency
0.8
%
5.9
%
Acquisition and divestitures
5.6
%
3.7
%
GBS organic revenue growth
3.3
%
2.8
%
GIS revenue growth
(10.6
)%
(13.5
)%
Foreign currency
0.7
%
5.8
%
Acquisition and divestitures
—
%
0.5
%
GIS organic revenue growth
(9.9
)%
(7.2
)%
EBIT and Adjusted EBIT
Three Months Ended
(in millions)
June 30, 2023
June 30, 2022
Net income
$
42
$
103
Income tax expense
36
19
Interest income
(49
)
(20
)
Interest expense
66
37
EBIT
95
139
Restructuring costs
20
33
Transaction, separation and
integration-related costs
1
2
Amortization of acquired intangible
assets
89
104
Merger related indemnification
11
10
Loss (gain) on disposition of
businesses
5
(29
)
Impairment losses
3
—
Adjusted EBIT
$
224
$
259
EBIT margin
2.8
%
3.7
%
Adjusted EBIT margin
6.5
%
7.0
%
Source: DXC Technology
Category: Investor Relations
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802395160/en/
John Sweeney, CFA, VP of Investor Relations, +1-980-315-3665,
john.sweeney@dxc.com Sean B. Pasternak, Corporate Media Relations,
+1-647-975-7326, sean.pasternak@dxc.com
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