DXC Technology Reports Third Quarter Fiscal 2021 Results

Third quarter revenues of $4.3 billion

Diluted EPS was $4.29 and non-GAAP diluted EPS was $0.84

Bookings of $4.9 billion and book-to bill ratio of 1.13x

Revenue, margin and non-GAAP EPS exceeded our guidance range

Paid down debt of $3.5 billion, strengthening the balance sheet

 

TYSONS, Va., February 4, 2021 - DXC Technology (NYSE: DXC) today reported results for the third quarter and first nine months of fiscal year 2021.

“Our strong third quarter results demonstrate the good progress we are making executing on our transformation journey. We have done well attracting talent, improving the environment for our people, strengthening our customer relationships, taking out cost without disruption, and winning in the market,” said Mike Salvino, DXC president and chief executive officer. “I am pleased with the solid level of stability and momentum we are achieving and want to thank our people, customers, and shareholders for their support of the 'new DXC'.” 

Financial Highlights - Third Quarter Fiscal 2021

  • Revenue in the third quarter was $4,288 million.
  • Net income was $1,103 million for the third quarter. Non-GAAP net income was $221 million, excluding special items, net of tax.
  • Diluted earnings per share was $4.29; non-GAAP diluted earnings per share was $0.84.
  • Net cash used in operating activities was $(187) million.


Financial Information by Segment

Global Business Services (GBS)

  • Bookings for the quarter totaled $2.7 billion for a book-to-bill ratio of 1.35x.
  • Revenue was $1,921 million, down 18.6% year-over-year, and down 7.0% on an organic basis.
  • Profit margin was 14.2%, an increase of 0.1% vs. the second quarter. Year-over-year, margins were down 0.8%, reflecting project terminations and price-downs offset by the timing of cost take out initiatives.


Global Infrastructure Services (GIS)

  • Bookings for the quarter was $2.2 billion for a book-to-bill ratio of 0.95x.
  • Revenue was $2,367 million, down 11.1% year-over-year, and down 13.2% on an organic basis.
  • Profit margin in the quarter was 3.7%, an increase of 2.1% vs. the second quarter. Year-over-year, margins were down 5.0% reflecting project terminations and price-downs offset by the timing of cost take out initiatives.


Earnings

  • EBIT and adjusted EBIT in the quarter were $2,032 million and $300 million, respectively. EBIT and adjusted EBIT margins were 47.4% and 7.0%, respectively. Adjusted EBIT margin exceeded our guidance, due to solid execution on our cost optimization initiatives.
  • Diluted EPS and non-GAAP diluted EPS were $4.29 and $0.84. Non-GAAP diluted EPS exceeded our guidance range due to improved operational execution and a better than anticipated tax rate.
     

Ken Sharp, chief financial officer, commented: “I am truly excited to join DXC. The strength of the team, and the effectiveness of our transformation journey is clearly visible in our Q3 results. We see continued stabilization of revenues and improving margins, as we bring the ‘new DXC’, which focuses on our people and our customers, to the market.”

Earnings Conference Call and Webcast

DXC Technology senior management will host a conference call and webcast to discuss these results today at 5:00 p.m. EST. The dial-in number for domestic callers is 800-949-2175. Callers who reside outside of the United States should dial +1-323-994-2131. The passcode for all participants is 4526218. 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 11, 2021. The replay passcode is 4526218.

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 provide services across the 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.

Forward-Looking Statements

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 Annual Report on Form 10-K for the fiscal year ended March 31, 2020, 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, 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.

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: revenues in constant currency, organic revenues, 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.

We present these 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"), EBIT margin, adjusted EBIT, adjusted EBIT margin, non-GAAP income before income taxes, non-GAAP net income, non-GAAP EPS and adjusted free cash flow.

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. Non-GAAP financial measures exclude certain items from GAAP results which DXC management believes are not indicative of core operating performance. 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 core 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 diluted 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, transaction, separation and integration-related costs, and gains and losses on dispositions of businesses.

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.

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.

Selected references to revenues are made on a “constant currency basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. In addition, references are made to revenues on a “organic basis” to exclude the impacts of acquisitions and divestitures from “constant currency basis” financial results, thereby providing comparisons of operating performance from period to period of the business that we have owned during all periods presented. Revenues on a “constant currency basis” and “organic constant currency basis” are non-GAAP financial measures calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This approach is used for all results where the functional currency is not the U.S. dollar.

FY21 Q3 Charts (PDF)