DXC Technology Reports Third Quarter Fiscal Year 2022 Results

  • Revenues of $4.09 billion for Q3 FY22, down 4.6% as compared to prior year period, and down 1.4% on an organic basis
  • Diluted EPS was $0.38 and Non-GAAP diluted EPS was $0.92 in Q3 FY22
  • Bookings of $5.0 billion and book-to-bill ratio of 1.23x in Q3 FY22
  • Operating cash flow of $696 million, less capital expenditures of $146 million, results in $550 million of free cash flow
  • Repurchased 6.8 million shares for $213 million in Q3 FY22, bringing YTD repurchases to $363 million or  10.6 million shares
  • DXC intends to self-fund $1 billion of additional share repurchases over the next twelve months

ASHBURN, VA, February 2, 2022 – DXC Technology (NYSE: DXC) today reported results for the third quarter fiscal year 2022.

“Our third quarter results show the strong progress we are making with our transformation journey. Our focus on operational execution drove continued improvement in revenue, margins, and EPS, as well as an exceptionally strong bookings quarter of $5 billion (for a book-to-bill of 1.23x), and an outstanding cash flow result,” said Mike Salvino, DXC President and Chief Executive Officer.  “By operating a more disciplined and focused organization, we continue to strengthen both our position in the market and our balance sheet, resulting in improved margins and substantial free cash flow.  Finally, I would like to thank my colleagues across the organization for continuing to deliver excellence for our customers in the midst of COVID-19 challenges.”

Financial Highlights - Third Quarter of Fiscal Year 2022

Revenue was $4.09 billion for the third quarter of fiscal year 2022, down 4.6% as compared to prior year period, and down 1.4% on an organic basis.  Third quarter revenues came in at the bottom of the previous guidance range, as the strengthening of the U.S. dollar reduced third quarter fiscal year 2022 revenues by $26 million as compared to the currency rates used in our prior earnings guidance. 

Net income was $102 million, or 2.5% of sales, for the third quarter of fiscal year 2022, compared to $1,103 million, or 25.7% of sales, in the prior year quarter.  EBIT was $189 million or 4.6% of sales.  Net income and EBIT in the quarter included the following items: amortization of intangible assets of $106 million, debt extinguishment costs of $2 million, restructuring costs of $36 million, mark-to-market pension loss of $7 million, loss on disposition of $4 million, and transaction, separation, and integration costs of $11 million.  Excluding these items, Adjusted EBIT margin was 8.7% in the third quarter, an improvement of 170 bps as compared to the prior year quarter.  Third quarter adjusted EBIT margin came in within our guidance range.  In the third quarter of fiscal year 2021, net income and EBIT benefited from the sale of a business.

Diluted earnings per share was $0.38 and Non-GAAP diluted earnings per share was $0.92 for the third quarter of fiscal year 2022, driven by the improvement in margins, lower interest expense, and the lower number of outstanding shares.  Non-GAAP EPS met the Company's previous guidance range.

Book-to-bill for the quarter was 1.23x.  Over the trailing four quarters, the company delivered a book to bill of 1.08x.

During the third quarter, the Company repurchased 6.8 million shares of common stock for a total of $213 million.  Year-to-date, the company repurchased 10.6 million shares for a total of $363 million.

Financial Information by Segment

GBS segment revenue was $1.946 billion in the third quarter of fiscal year 2022, up 1.3% compared to prior year period and up 7.0% on an organic basis.  The GBS performance was driven by strong growth in the Analytics & Engineering businesses, where revenue increased 17.3% and by continued improvement in our Applications business, where revenue increased 3.6% as compared to prior year period.  GBS segment profit was $315 million and segment profit margin was 16.2%, up 200 bps as compared to the third quarter of fiscal year 2021.  GBS bookings for the quarter were $2.48 billion for a book-to-bill of 1.28x.

GIS segment revenue was $2.143 billion in the third quarter of fiscal year 2022, down 9.5% compared to prior year period, and down 8.3% on an organic basis.  GIS segment performance was driven by improving ITO revenues, which declined by 2.7%.  GIS segment profit was $102 million with a segment profit margin of 4.8%, a 110 bps margin expansion as compared to third quarter of fiscal year 2021. GIS bookings were $2.53 billion in the quarter for a book-to-bill of 1.18x.

Enterprise Technology Stack Highlights

The components of the Enterprise Technology Stack are as follows:

Cash Flow

Cash flow from (used in) operations was $696 million in the third quarter of fiscal year 2022, as compared to $(187) million in the third quarter of fiscal year 2021, and capital expenditures were $146 million in the third quarter of fiscal year 2022.  Free cash flow (cash flow from operations, less capital expenditures) was $550 million in the third quarter of fiscal year 2022, as compared to $(406) million in the third quarter of fiscal year 2021.  Third quarter of fiscal year 2022 operating cash flow included two previously disclosed payments totaling approximately $130 million.  The third quarter benefited from stronger cash flow performance resulting from favorable timing on both payments and receipts in the quarter.  Fourth quarter cash flows are expected to be negatively impacted as this timing impact reverses.


The Company's guidance for the fourth quarter and full fiscal year 2022 is as follows:

The Company reaffirmed its longer-term guidance:

  • Positive organic revenue growth of 1% to 3% for fiscal year 2024
  • Adjusted EBIT margin of 10% to 11% in fiscal year 2024
  • Non-GAAP diluted EPS of $5.00 to $5.25 in fiscal year 2024
  • Free cash flow of approximately $1.5 billion in fiscal year 2024
  • Restructuring and TSI of approximately $100 million in fiscal year 2024

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.

Ken Sharp, Chief Financial Officer, commented: “Our focus driving the business in a disciplined fashion is yielding results.  We have made solid progress addressing our debt and related interest expense, restructuring expense, transaction, separation and integration expense, capital expenditures, capital lease originations and our facility footprint. These initiatives, and the ongoing strong business execution of our DXC colleagues, allowed us to deliver robust cash flows in the quarter.  With our improved cash flow, coupled with the progress we are making on our portfolio shaping efforts, we expect to have $1 billion in excess cash that we intend to use to repurchase our shares over the next twelve months."

Earnings Conference Call and Webcast

DXC Technology senior management will host a conference call and webcast to discuss these results on February 2, 2022, 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 February 9, 2022. 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 across the Enterprise Technology Stack to drive new levels of performance, competitiveness, and customer experience. 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. 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, 2021, and any updating information in subsequent SEC filings, including DXC’s upcoming Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021.

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 presentation or to reflect the occurrence of unanticipated events except as required by law.

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 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.

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, planning, financing and advisory fees and other similar charges associated with mergers, acquisitions, strategic investments, joint ventures, and dispositions and other similar transactions.(1)
  • Amortization of acquired intangible assets – includes amortization of intangible assets acquired through business combinations.
  • Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and interests in less than wholly-owned entities.(2)
  • Impairment losses – impairment losses on assets classified as long-term on the balance sheet.(3)
  • Debt extinguishment costs – costs associated with early retirement, redemption, repayment or repurchase of debt and debt-like items including any breakage, make-whole premium, prepayment penalty or similar costs as well as solicitation and other legal and advisory expenses.(4)
  • Pension and OPEB actuarial and settlement gains and losses – pension and OPEB actuarial mark to market adjustments and settlement gains and losses.
  • Tax adjustments – discrete tax adjustments to impair or recognize certain deferred tax assets, adjustments for changes in tax legislation and the impact of merger and divestitures. Income tax expense of all other (non-discrete) Non-GAAP adjustments is based on the difference in the GAAP annual effective tax rate (AETR) and overall Non-GAAP provision (consistent with the GAAP methodology).(5)

(1) TSI-Related Costs include fees and other internal and external expenses associated with legal, accounting, consulting, due diligence, investment banking advisory, and other services, as well as financing fees, retention incentives, and resolution of transaction related claims in connection with, or resulting from, exploring or executing potential acquisitions, dispositions and strategic investments, whether or not announced or consummated.

The TSI-Related costs for the third quarter of fiscal 2022 include $10 million of costs incurred in connection with activities related to other acquisitions and divestitures; and $1 million of expenses related to integration projects from the HPES merger.

The TSI-Related costs for the first nine months of fiscal 2022 include $13 million of costs to execute the strategic alternatives; $4 million legal costs and ($14 million) credit towards Peraton Arbitration settlement, $5 million in expenses related to integration projects resulting from the HPES merger (including costs associated with continuing efforts to separate certain IT systems) and $15 million of costs incurred in connection with activities related to other acquisitions and divestitures.

(2) Gains and losses on dispositions for the first nine months of fiscal 2022 include a $337 million gain on sale of the HPS business, gains of $19 million on other dispositions and ($13 million) of adjustments relating to the sale of the HHS business.

(3) Impairment losses on dispositions for the first nine months of fiscal 2022 includes a $10 million impairment charge of capitalized transition and transformation costs.

(4) Debt extinguishment costs adjustments for the third quarter of fiscal 2022 include $2 million related to the decrease in our revolving credit facility limit.

Debt extinguishment costs adjustments for the first nine months of fiscal 2022 reflects $2 million related to the decrease in our revolving credit facility limit, $18 million to fully redeem two series of our 4.45% senior notes due fiscal 2023, $7 million associated with asset financing, $1 million to fully redeem our Euro-denominated term loan facility, $41 million to fully redeem our 4.25% senior notes due fiscal 2025, $26 million to fully redeem our 2.75% senior notes due fiscal 2025, $58 million to fully redeem our 4.125% senior notes due fiscal 2026, $87 million to fully redeem our 4.750% senior notes due fiscal 2028, and $71 million to fully redeem our 7.45% senior notes due fiscal 2030.

(5) Tax adjustment for the first nine months of fiscal 2022 reflects net revaluation of deferred taxes resulting from changes in non-US jurisdiction tax rates.

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.

John Sweeney
CFA, Vice President, Investor Relations
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Jim Pasinski
Corporate Media Relations
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