DXC Technology Reports Fourth Quarter and Fiscal 2020 Results

News Release -- May 28, 2020

• Q4 earnings per share from continuing operations was $(13.79), including the cumulative impact of certain items of $(14.99) per share, reflecting goodwill impairment, restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets, pension and OPEB actuarial and settlement gains, and a tax adjustment
• Q4 non-GAAP earnings per share was $1.20
• FY20 earnings per share from continuing operations was $(20.76), including the cumulative impact of certain items of $(26.34)
• FY20 non-GAAP earnings per share from continuing operations was $5.58
• Q4 net cash from operating activities was $288 million and FY20 net cash from operating activities was $2,350 million
• Q4 adjusted free cash flow was $131 million and FY20 adjusted free cash flow was $1,341 million
• FY20 capital returned to shareholders was $214 million in dividends and $736 million in share repurchases
   

TYSONS, Va., May 28, 2020 - DXC Technology (NYSE: DXC) today reported results for the three and twelve months ended March 31, 2020.

“I am very proud of how our team at DXC has navigated this world crisis, with an industry leading 99% of our people enabled to work virtually from home,” said Mike Salvino, president and CEO. “If COVID-19 taught us anything, it reinforces that what we do is incredibly relevant to today’s market. Our people have done a phenomenal job taking care of themselves and their families, while helping our customers enable their employees to work from home, fix needed upgrades to their IT infrastructure estates, stand-up cloud environments, deal with sudden surges of demand, and innovate. I am pleased with where we ended FY20. We have taken steps to ensure a strong financial position and enhance our financial flexibility. We are making good progress with our transformation journey to deliver and build stronger relationships with our customers, optimize our costs to better serve our customers, and capture a unique market opportunity by cross-selling the services that we do every day for our customers. The actions we are taking set up a solid foundation for growth.”

Financial Highlights - Fourth Quarter Fiscal 2020

• Diluted earnings per share from continuing operations was $(13.79) in the fourth quarter, including $(0.01) per share of restructuring costs, $(0.28) per share of transaction, separation and integration-related costs, $(0.45) per share of amortization of acquired intangible assets, $(15.00) per share of goodwill impairment, $0.76 per share of pension and OPEB actuarial and settlement gains, and $0.02 per share of tax adjustment. This compares with $1.01 in the year ago period.
• Non-GAAP diluted earnings per share from continuing operations was $1.20.
• Revenue in the fourth quarter was $4,815 million compared with $5,280 million in the year ago period.
• Loss from continuing operations before income taxes was $(3,562) million for the fourth quarter, including $(4) million of restructuring costs, $(92) million of transaction, separation and integration-related costs, $(148) million of amortization of acquired intangibles, $(3,854) million of goodwill impairment, and $244 million of pension and OPEB actuarial and settlement gains. This compares with $354 million in the year ago period.
• Non-GAAP income from continuing operations before income taxes was $292 million compared with $778 million in the year ago period.
• Net loss was $(3,501) million for the fourth quarter, including $(2) million of restructuring costs, $(72) million of transaction, separation and integration-related costs, $(114) million of amortization of acquired intangibles, $(3,812) million of goodwill impairment, $193 million of pension and OPEB actuarial and settlement gains, and $6 million of tax adjustment. This compares with $271 million in the prior year period.
• Non-GAAP net income was $300 million.
• Adjusted EBIT was $352 million in the fourth quarter compared with $827 million in the prior year. Adjusted EBIT margin was 7.3% compared with 15.7% in the year ago quarter.
• Net cash provided by operating activities was $288 million in the fourth quarter, compared with $748 million in the year ago period.
• Adjusted free cash flow was $131 million in the fourth quarter.

Financial Highlights - Fiscal 2020

• Diluted earnings per share from continuing operations was $(20.76) in fiscal 2020, including $(0.80) per share of restructuring costs, $(0.98) per share of transaction, separation and integration-related costs, $(1.73) per share of amortization of acquired intangible assets, $(25.78) per share of goodwill impairment, $2.43 per share of gain on arbitration award, $0.74 per share of pension and OPEB actuarial and settlement gains, and $(0.13) per share of tax adjustment. This compares with $4.35 in the year ago period.
• Non-GAAP diluted earnings per share from continuing operations was $5.58.
• Revenue in fiscal 2020 was $19,577 million compared with $20,753 million in the year ago period.
• Loss from continuing operations before income taxes was $(5,228) million for fiscal 2020, including $(252) million of restructuring costs, $(318) million of transaction, separation and integration-related costs, $(583) million of amortization of acquired intangibles, $(6,794) million of goodwill impairment, $632 million of gain on arbitration award, and $244 million of pension and OPEB actuarial and settlement gains. This compares with $1,515 million in the year ago period.
• Non-GAAP income from continuing operations before income taxes was $1,843 million compared with $3,063 million in the prior year.
• Net loss was $(5,358) million for fiscal 2020, including $(208) million of restructuring costs, $(255) million of transaction, separation and integration-related costs, $(450) million of amortization of acquired intangibles, $(6,699) million of goodwill impairment, 632 million of gain on arbitration award, $193 million of pension and OPEB actuarial and settlement gains, and $(33) million of tax adjustment. This compares with $1,262 million in the prior year period.
• Non-GAAP net income was $1,462 million.
• Adjusted EBIT was $2,061 million in fiscal 2020 compared with $3,269 million in the prior year. Adjusted EBIT margin was 10.5% compared with 15.8% in the prior year.
• Net cash provided by operating activities was $2,350 million in fiscal 2020, compared with $1,783 million in the prior year.
• Adjusted free cash flow was $1,341 million in fiscal 2020.

Global Business Services (GBS)

GBS revenue was $2,308 million in the quarter compared to $2,191 million for the prior year. GBS revenues increased 5.3% year-over-year, reflecting the contribution from the Luxoft acquisition which was closed in June 2019. GBS profit margin in the quarter was 9.7%, down from 20.4% in the prior year, reflecting the impact of the resolution of certain customer disputes, the profit impact of lower revenue in our traditional applications business, and higher cost-take out activities in the prior year. New business awards for GBS were $2,185 million in the fourth quarter. 

Global Infrastructure Services (GIS)

GIS revenue was $2,507 million in the quarter compared to $3,089 million for the prior year. GIS revenues decreased 18.8% year-over-year. The GIS revenue reflects the run-off and termination of certain accounts,. GIS profit margin in the quarter was 7.7%, down from 14.1% in the prior year, primarily driven by the profit impact from lower revenue.  New business awards for GIS were $2,183 million in the fourth quarter. 

Returning Capital to Shareholders; Suspension of Dividend

During the fourth quarter, DXC Technology returned $53 million to shareholders in the form of common stock dividends. To enhance the company’s financial flexibility under current uncertain market conditions the company has elected to suspend payment of a quarterly dividend. This decision will be reevaluated by the Board of DXC Technology as market conditions stabilize. 

Earnings Conference Call and Webcast

DXC Technology senior management will host a conference call and webcast today at 4:45 p.m. EDT. The dial-in number for domestic callers is (800) 368-1029. Callers who reside outside of the United States should dial +1 (334) 777-6981. The passcode for all participants is 145605. 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 June 4, 2020. The replay passcode is 7889820.

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 (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. With decades of driving innovation, the world’s largest companies trust DXC to deploy our enterprise technology stack to deliver new levels of performance, competitiveness and customer experiences. Learn more about the DXC story and our focus on people, customers and operational execution at www.dxc.technology.

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. 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 recent outbreak of the novel coronavirus (“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. For a written description of these factors, see the section titled “Risk Factors” in DXC's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2019, September 30, 2019, December 31, 2019 and any updating information in subsequent SEC filings, including DXC's upcoming Form 10-K for the fiscal year ended March 31, 2020. 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.