"I was very pleased with our first quarter results as we exceeded our revenue and EPS targets along with delivering a strong book-to-bill of 1.2x. This is clear evidence that we are executing on our transformation journey,” said Mike Salvino, president and chief executive officer of DXC. “Our focus on customers is allowing us to stabilize revenues, expand margins, and bring the “new DXC” to the market, helping us win more work. We are also making solid progress on our strategic alternatives. We remain on-track to complete the sale of the US State and Local Health and Human Services business in the second quarter. The recent announcement of the sale of our healthcare software business will further enhance our financial flexibility. Finally, I am very proud of how our people have been delivering for our customers during COVID-19.”
Salvino added that the company expects to build on the current momentum in the second quarter by stabilizing revenues, improving margins and targeting a book-to-bill of 1x.
Financial Highlights - First Quarter Fiscal 2021
Revenue in the first quarter was $4,502 million.
Net loss was $199 million for the first quarter including $72 million in restructuring costs, $110 million in transaction and separation costs and $148 million in amortization of acquired intangibles.
Non-GAAP net income was $59 million, excluding those special items.
Diluted earnings per share was $(0.81) in the first quarter; non-GAAP diluted earnings per share was $0.21.
Net cash provided by operating activities was $119 million in the first quarter.
Adjusted free cash flow was $(28) million in the first quarter.
Financial Information by Segment
Global Business Services (GBS)
GBS bookings for the quarter totaled $3.5 billion for a book-to-bill ratio of 1.6x.
GBS revenue was $2,174 million in the quarter. GBS revenue increased 0.7% year-over-year, despite an unfavorable foreign currency exchange rate impact of 1.8%.
In constant currency, GBS revenues increased 2.5% year-over-year and decreased 5.2% sequentially.
GBS profit margin in the quarter was 9.9%, compared with 17.0% in the prior year, reflecting one-time accruals related to certain customer disputes and impact of prior terminations, price-downs and run-offs.
Global Infrastructure Services (GIS)
GIS bookings for the quarter was $1.8 billion for a book-to-bill ratio of 0.8x.
GIS revenue was $2,328 million in the quarter. GIS revenues decreased 14.8% year-over-year, including an unfavorable foreign currency exchange rate impact of 2.4%.
In constant currency, GIS revenues decreased 12.4% year-over-year and decreased 6.1% sequentially.
GIS profit margin in the quarter was 1.0%, compared with 12.4% in the prior year due to the impact of prior terminations, price-downs and run-offs as well as the timing of cost take out initiatives.
Earnings
EBIT and adjusted EBIT in the quarter were $(142) million and $190 million, respectively. EBIT and adjusted EBIT margins were (3.2)% and 4.2%, respectively. Adjusted EBIT margins in the quarter were better than anticipated, benefitting from accelerated cost optimization initiatives which helped offset accruals related to the resolution of certain prior customer disputes.
Diluted EPS and non-GAAP diluted EPS were $(0.81) and $0.21, respectively, in the quarter. Non-GAAP diluted EPS was impacted by a higher than usual tax rate of 45% due to mix of income, a tax accrual related to final return to provision adjustment as well as valuation allowances in certain foreign jurisdiction.
Cash Flow
Net cash provided by operating activities was $119 million in the first quarter and adjusted free cash flow was $(28) million. Adjusted free cash flow reflects the timing of annual payments for software licenses and maintenance, and also a slight increase in working capital in the current COVID environment.
