EX-99.1 2 dxcfy20q1pressrelease.htm EXHIBIT 99.1 Exhibit






Exhibit 99.1
 
Moved on Business Wire
 
August 8, 2019



DXC Technology Reports First Quarter Results with
Strong Digital Revenue and Pipeline Growth


•
Q1 earnings per share from continuing operations was $0.61, including the cumulative impact of certain items of $(1.13) per share, reflecting restructuring costs, transaction, separation and integration-related costs, and amortization of acquired intangible assets
•
Q1 non-GAAP earnings per share was $1.74
•
Q1 income from continuing operations was $168 million, including the cumulative impact of certain items of $(304) million, reflecting restructuring costs, transaction, separation and integration-related costs, and amortization of acquired intangible assets
•
Q1 non-GAAP income from continuing operations was $472 million
•
Q1 EBIT of $267 million, adjusted for certain items is $652 million and adjusted EBIT margin was 13.3%, compared with 15.2% in the prior year
•
Q1 net cash used in operating activities was $66 million
•
Q1 adjusted free cash flow was $72 million

TYSONS, Va., August 8, 2019 - DXC Technology (NYSE: DXC) today reported results for the first quarter of fiscal year 2020, representing the period from April 1 through June 30, 2019.

“In the first quarter of fiscal 2020, DXC Technology continued to build momentum in our Digital business with Digital revenue growth of 35% and Digital pipeline growth of 80%,” said Mike Lawrie, chairman, president and CEO. “We continue to invest in Digital talent, capabilities, and offerings, and we are seeing strong demand for these solutions. During the quarter, we also completed the acquisition of Luxoft, which brings differentiated offerings and platforms, deep vertical expertise, and world-class talent to strengthen DXC’s unique value proposition as a leading end-to-end IT services provider.”
 
Financial Highlights - First Quarter Fiscal 2020
•
Diluted earnings per share from continuing operations was $0.61 in the first quarter, including $(0.42) per share of restructuring costs, $(0.31) per share of transaction, separation and integration-related costs, and $(0.40) per share of amortization of acquired intangible assets. This compares with $0.78 in the year ago period.
•
Non-GAAP diluted earnings per share from continuing operations was $1.74. This compares with $1.93 in the year ago period.
•
Revenue in the first quarter was $4,890 million. Revenue decreased 7.4% compared with $5,282 million in the prior year.
•
Income from continuing operations before income taxes was $206 million in the first quarter, including $(142) million of restructuring costs, $(105) million of transaction, separation and integration-related costs, and $(138) million of amortization of acquired intangibles. This compares with $360 million in the year ago period.
•
Non-GAAP income from continuing operations before income taxes was $591 million compared with $750 million in the year ago period.
•
Net income was $168 million for the first quarter, including $(114) million of restructuring costs, $(83) million of transaction, separation and integration-related costs and $(107) million of amortization of acquired intangibles. This compares with $266 million in the prior year period.
•
Non-GAAP net income was $472 million.
•
Adjusted EBIT was $652 million in the first quarter compared with $803 million in the prior year. Adjusted EBIT margin was 13.3% compared with 15.2% in the year ago quarter.


1






•
Net cash used in operating activities was $66 million in the first quarter, compared with net cash provided by operating activities of $369 million in the year ago period.
•
Adjusted free cash flow was $72 million in the first quarter.

Global Business Services (GBS)
GBS revenue was $2,159 million in the quarter compared with $2,213 million for the prior year. GBS revenue decreased 2.4% year-over-year, including an unfavorable foreign currency exchange rate impact of 2.9%. GBS revenues increased 0.5% year-over-year at constant currency as a result of continued growth in our Enterprise and Cloud applications business and contributions from acquisitions. This was offset by continued headwinds in our traditional application maintenance and management business. GBS profit margin in the quarter was 17.0%, down from 18.2% in the prior year, reflecting investments to support Digital hiring and capabilities. New business awards for GBS were $2.4 billion in the first quarter.

Global Infrastructure Services (GIS)
GIS revenue was $2,731 million in the quarter compared with $3,069 million for the prior year. GIS revenues decreased 11.0% year-over-year, including an unfavorable foreign currency exchange rate impact of 3.4%. GIS revenues decreased 7.6% year-over-year at constant currency as a result of the acceleration of client savings on several large contracts as well as continued decline in our IT outsourcing services business as clients shift to cloud environments. GIS profit margin in the quarter was 12.4%, down from 15.4% in the prior year, reflecting investments in the business and less impact from cost improvement actions. New business awards for GIS were $1.8 billion in the first quarter.

Returning Capital to Shareholders
During the first quarter, DXC Technology returned $451 million to shareholders, consisting of $51 million in common stock dividends and $400 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 800-367-2403. Callers who reside outside of the United States should dial +1-334-777-6978. The passcode for all participants is 6653201. 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 15, 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 6653201. 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
DXC Technology, the world's leading independent, end-to-end IT services company, manages and modernizes mission-critical systems, integrating them with new digital solutions to produce better business outcomes. The company’s global reach and talent, innovation platforms, technology independence and extensive partner network enable more than 6,000 private and public-sector clients in 70 countries to thrive on change. For more information, visit dxc.technology.

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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, 2019, 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, 2019. 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.






# # #

Contact:
Richard Adamonis, Corporate Media Relations, +1-862-228-3481, radamonis@dxc.com
Jonathan Ford, Investor Relations, +1-703-245-9700, jonathan.ford@dxc.com



3







Condensed Consolidated Statements of Operations
(preliminary and unaudited)
 
 
Three Months Ended
(in millions, except per-share amounts)
 
June 30, 2019
 
June 30, 2018
 
 
 
 
 
Revenues
 
$
4,890

 
$
5,282

 
 
 
 
 
Costs of services
 
3,622

 
3,867

Selling, general and administrative
 
507

 
440

Depreciation and amortization
 
470

 
471

Restructuring costs
 
142

 
185

Interest expense
 
91

 
85

Interest income
 
(30
)
 
(32
)
Other income, net
 
(118
)
 
(94
)
Total costs and expenses
 
4,684

 
4,922

 
 
 
 
 
Income from continuing operations before income taxes
 
206

 
360

Income tax expense
 
38

 
129

Income from continuing operations
 
168

 
231

Income from discontinued operations, net of tax
 
—

 
35

Net income
 
168

 
266

Less: net income attributable to non-controlling interest, net of tax
 
5

 
7

Net income attributable to DXC common stockholders
 
$
163

 
$
259

 
 
 
 
 
Income per common share:
 
 
 
 
Basic:
 
 
 
 
     Continuing operations
 
$
0.61

 
$
0.79

     Discontinued operations
 
—

 
0.12

 
 
$
0.61

 
$
0.91

Diluted:
 
 
 
 
     Continuing operations
 
$
0.61

 
$
0.78

     Discontinued operations
 
—

 
0.12

 
 
$
0.61

 
$
0.90

 
 
 
 
 
Cash dividend per common share
 
$
0.21

 
$
0.19

 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
   Basic EPS
 
267.00

 
284.44

   Diluted EPS
 
268.97

 
289.30



4







Selected Consolidated Balance Sheet Data
(preliminary and unaudited)
 
 
As of
(in millions)
 
June 30, 2019
 
March 31, 2019
Assets
 
 
 
 
Cash and cash equivalents
 
$
1,868

 
$
2,899

Receivables, net
 
5,234

 
5,181

Prepaid expenses
 
728

 
627

Other current assets
 
360

 
359

Total current assets
 
8,190

 
9,066

 
 
 
 
 
Intangible assets, net
 
6,468

 
5,939

Operating right-of-use assets, net
 
1,591

 
—

Goodwill
 
8,806

 
7,606

Deferred income taxes, net
 
356

 
355

Property and equipment, net
 
3,628

 
3,179

Other assets
 
3,538

 
3,429

Total Assets
 
$
32,577

 
$
29,574

 
 
 
 
 
Liabilities
 
 
 
 
Short-term debt and current maturities of long-term debt
 
$
1,511

 
$
1,942

Accounts payable
 
1,517

 
1,666

Accrued payroll and related costs
 
746

 
652

Current operating lease liabilities
 
586

 
—

Accrued expenses and other current liabilities
 
3,183

 
3,355

Deferred revenue and advance contract payments
 
1,609

 
1,630

Income taxes payable
 
186

 
208

Total current liabilities
 
9,338

 
9,453

 
 
 
 
 
Long-term debt, net of current maturities
 
7,893

 
5,470

Non-current deferred revenue
 
309

 
256

Non-current operating lease liabilities
 
1,129

 
—

Non-current income tax liabilities and deferred tax liabilities
 
1,281

 
1,184

Other long-term liabilities
 
1,410

 
1,486

Total Liabilities
 
21,360

 
17,849

 
 
 
 
 
Total Equity
 
11,217

 
11,725

 
 
 
 
 
Total Liabilities and Equity
 
$
32,577

 
$
29,574



5






Condensed Consolidated Statements of Cash Flows
(preliminary and unaudited)
 
 
Three Months Ended
(in millions)
 
June 30, 2019
 
June 30, 2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
168

 
$
266

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


 


Depreciation and amortization
 
474

 
509

Operating right-of-use expense
 
176

 
—

Share-based compensation
 
18

 
22

Gain on dispositions
 
(8
)
 
(46
)
Unrealized foreign currency exchange gains
 
(14
)
 
(16
)
Other non-cash charges, net
 
(5
)
 
12

Changes in assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
 
Increase in assets
 
(335
)
 
(300
)
Decrease in operating lease liability
 
(174
)
 
—

Decrease in other liabilities
 
(366
)
 
(78
)
Net cash (used in) provided by operating activities
 
(66
)
 
369

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(105
)
 
(79
)
Payments for transition and transformation contract costs
 
(72
)
 
(92
)
Software purchased and developed
 
(63
)
 
(49
)
Payments for acquisitions, net of cash acquired
 
(1,911
)
 
(43
)
Business dispositions
 
—

 
(65
)
Cash collections related to deferred purchase price receivable
 
371

 
137

Proceeds from sale of assets
 
21

 
19

Short-term investing
 
(75
)
 
—

Other investing activities, net
 
12

 
(8
)
Net cash used in investing activities
 
(1,822
)
 
(180
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Borrowings of commercial paper
 
1,401

 
633

Repayments of commercial paper
 
(1,401
)
 
(633
)
Borrowings on long-term debt, net of discount
 
2,198

 
483

Principal payments on long-term debt
 
(509
)
 
(1,278
)
Payments on finance leases and borrowings for asset financing
 
(210
)
 
(259
)
Borrowings for USPS spin transaction
 
—

 
1,114

Proceeds from stock options and other common stock transactions
 
7

 
9

Taxes paid related to net share settlements of share-based compensation awards
 
(12
)
 
(1
)
Repurchase of common stock and advance payment for accelerated share repurchase
 
(500
)
 
(314
)
Dividend payments
 
(51
)
 
(51
)
Other financing activities, net
 
(36
)
 
(3
)
Net cash provided by (used in) financing activities
 
887

 
(300
)
Effect of exchange rate changes on cash and cash equivalents
 
(30
)
 
(39
)
Net decrease in cash and cash equivalents
 
(1,031
)
 
(150
)
Cash and cash equivalents at beginning of year
 
2,899

 
2,729

Cash and cash equivalents at end of period
 
$
1,868

 
$
2,579



6






Segment Results

The following table summarizes segment revenue for the three months ended June 30, 2019 as compared to the three months ended June 30, 2018:
Segment Revenue
 
 
 
 
 
 
 
 
(in millions)
 
June 30, 2019
 
June 30, 2018
 
% Change
 
% Change in Constant Currency
Global Business Services
 
$
2,159

 
$
2,213

 
(2.4
)%
 
0.5%
Global Infrastructure Services
 
2,731

 
3,069

 
(11.0
)%
 
(7.6)%
Total Revenues
 
$
4,890

 
$
5,282

 
(7.4
)%
 
(4.2)%

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 include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation and integration-related costs and amortization of acquired intangible assets.

Segment Profit
 
 
 
 
 
 
Three Months Ended
(in millions)
 
June 30, 2019
 
June 30, 2018
Profit
 

 
 
GBS profit
 
$
366

 
$
403

GIS profit
 
340

 
474

All other loss
 
(54
)
 
(74
)
Interest income
 
30

 
32

Interest expense
 
(91
)
 
(85
)
Restructuring costs
 
(142
)
 
(185
)
Transaction, separation and integration-related costs
 
(105
)
 
(70
)
Amortization of acquired intangible assets
 
(138
)
 
(135
)
Income from continuing operations before income taxes
 
$
206

 
$
360

 
 
 
 
 
Segment profit margins
 
 
 
 
GBS
 
17.0
%
 
18.2
%
GIS
 
12.4
%
 
15.4
%







7







Non-GAAP Financial Measures

We present non-GAAP financial measures of performance which are derived from the statements of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes ("EBIT"), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income and non-GAAP EPS, constant currency revenues and net debt-to-total capitalization.

We present these non-GAAP financial measures to provide investors with meaningful supplemental financial information, in addition to the financial information presented on a GAAP basis. DXC management believes these non-GAAP measures allow investors to better understand the financial performance of DXC exclusive of the impacts of corporate wide strategic decisions. DXC management believes that adjusting for these items provides investors with additional measures to evaluate the financial performance of our business operations on a comparable basis from period to period. DXC management believes the non-GAAP measures provided are also considered important measures by financial analysts covering DXC as equity research analysts continue to publish estimates and research notes based on our non-GAAP commentary, including our guidance around non-GAAP EPS targets.

Non-GAAP financial measures exclude certain items from GAAP results which DXC management believes are not indicative of operating performance such as the amortization of acquired intangible assets and transaction, separation and integration-related costs.

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 intangibles 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 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.

There are limitations to the use of the non-GAAP financial measures presented in this report. 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.

Reconciliation of Non-GAAP Financial Measures

DXC's non-GAAP adjustments include:
•
Restructuring costs - reflects costs, net of reversals, related to workforce optimization and real estate charges.
•
Transaction, separation and integration-related costs - reflects costs related to integration planning, financing, and advisory fees associated with the HPES Merger and other acquisitions and costs related to the separation of USPS.
•
Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations.
•
Tax adjustment - reflects the estimated non-recurring benefit of the Tax Cuts and Jobs Act of 2017 for fiscal 2019.




8







EBIT and Adjusted EBIT

A reconciliation of net income to adjusted EBIT is as follows:
 
 
Three Months Ended
(in millions)
 
June 30, 2019
 
June 30, 2018
Net income
 
$
168

 
$
266

Income from discontinued operations, net of taxes
 
—

 
(35
)
Income tax expense
 
38

 
129

Interest income
 
(30
)
 
(32
)
Interest expense
 
91

 
85

EBIT
 
267

 
413

Restructuring costs
 
142

 
185

Transaction, separation, and integration-related costs
 
105

 
70

Amortization of acquired intangible assets
 
138

 
135

Adjusted EBIT
 
$
652

 
$
803

 
 
 
 
 
Adjusted EBIT margin
 
13.3
%
 
15.2
%
EBIT margin
 
5.5
%
 
7.8
%

Adjusted Free Cash Flow

A reconciliation of net cash provided by operating activities to adjusted free cash flow is as follows:
(in millions)
 
Three Months Ended June 30, 2019
Net cash used in operating activities
 
$
(66
)
Net cash used in investing activities (1)
 
(1,747
)
Acquisitions, net of cash acquired
 
1,911

Payments on capital leases and other long-term asset financings
 
(210
)
Payments on transaction, separation and integration-related costs
 
94

Payments on restructuring costs
 
92

Sale of accounts receivables
 
(2
)
Adjusted free cash flow
 
$
72

        

(1) Excludes short-term investments.





9






Non-GAAP Results

A reconciliation of reported results to non-GAAP results is as follows:
 
 
Three Months Ended June 30, 2019
(in millions, except per-share amounts)
 
As Reported
 
Restructuring Costs
 
Transaction, Separation and Integration-Related Costs
 
Amortization of Acquired Intangible Assets
 
Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
3,622

 
$
—

 
$
—

 
$
—

 
$
3,622

Selling, general and administrative (excludes depreciation and amortization and restructuring costs)
 
507

 
—

 
(105
)
 
—

 
402

 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
 
206

 
142

 
105

 
138

 
591

Income tax expense
 
38

 
28

 
22

 
31

 
119

Net income
 
168

 
114

 
83

 
107

 
472

Less: net income attributable to non-controlling interest, net of tax
 
5

 
—

 
—

 
—

 
5

Net income attributable to DXC common stockholders
 
$
163

 
$
114

 
$
83

 
$
107

 
$
467

 
 
 
 
 
 
 
 
 
 
 
Effective tax rate
 
18.4
%
 
 
 
 
 
 
 
20.1
%
 
 
 
 
 
 
 
 
 
 
 
Basic EPS from continuing operations
 
$
0.61

 
$
0.43

 
$
0.31

 
$
0.40

 
$
1.75

Diluted EPS from continuing operations
 
$
0.61

 
$
0.42

 
$
0.31

 
$
0.40

 
$
1.74

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
Basic EPS
 
267.00

 
267.00

 
267.00

 
267.00

 
267.00

Diluted EPS
 
268.97

 
268.97

 
268.97

 
268.97

 
268.97











10






 
 
Three Months Ended June 30, 2018
(in millions, except per-share amounts)
 
As Reported
 
Restructuring Costs
 
Transaction, Separation and Integration-Related Costs
 
Amortization of Acquired Intangible Assets
 
Tax Adjustment
 
Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
3,867

 
$
—

 
$
—

 
$
—

 
$
—

 
$
3,867

Selling, general and administrative (excludes depreciation and amortization and restructuring costs)
 
440

 
—

 
(70
)
 
—

 
—

 
370

 
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
 
360

 
185

 
70

 
135

 
—

 
750

Income tax expense
 
129

 
41

 
16

 
33

 
(33
)
 
186

Income from continuing operations
 
231

 
144

 
54

 
102

 
33

 
564

Income from discontinued operations, net of tax
 
35

 
—

 
—

 
—

 
—

 
35

Net income
 
266

 
144

 
54

 
102

 
33

 
599

Less: net income attributable to non-controlling interest, net of tax
 
7

 
—

 
—

 
—

 
—

 
7

Net income attributable to DXC common stockholders
 
$
259

 
$
144

 
$
54

 
$
102

 
$
33

 
$
592

 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
35.8
%
 
 
 
 
 
 
 
 
 
24.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS from continuing operations
 
$
0.79

 
$
0.51

 
$
0.19

 
$
0.36

 
$
0.12

 
$
1.96

Diluted EPS from continuing operations
 
$
0.78

 
$
0.50

 
$
0.19

 
$
0.35

 
$
0.11

 
$
1.93

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
 
284.44

 
284.44

 
284.44

 
284.44

 
284.44

 
284.44

Diluted EPS
 
289.30

 
289.30

 
289.30

 
289.30

 
289.30

 
289.30





11