DXC Technology reported results for the second quarter of fiscal year 2023.
Mike Salvino, DXC Chairman, President and Chief Executive Officer commented: "I am pleased with our second quarter results where we delivered organic revenue, margin, and EPS at the top end of our guidance range. This is the kind of strong performance that we are accustomed to, as our revenue performance is one of the best results we have delivered, and our margins are clearly benefiting from our cost optimization program. All of this gives us confidence that we have built a quality company that is well positioned to achieve our short-term and long-term goals."
Financial Highlights - Second Quarter of Fiscal Year 2023
Revenue was $3.57 billion for the second quarter of fiscal year 2023, down 11.4% as compared to prior year period, and down 1.5% on an organic basis. Second quarter revenues came in within our guidance range.
Net income was $28 million, or 0.8% of sales for the second quarter of fiscal year 2023, compared to $(187) million, or (4.6)% of sales, in the prior year quarter. EBIT was $70 million or 2.0% of sales. Net income and EBIT in the quarter included the following items: amortization of acquired intangible assets of $101 million, restructuring costs of $53 million, loss on disposition of $32 million, a settlement charge of $8 million, a mark-to-market pension charge of $1 million, and transaction, separation, and integration costs of $4 million. Excluding these items, Adjusted EBIT margin was 7.5% in the second quarter, a reduction of 110 bps as compared to the prior year quarter.
Diluted earnings per share was $0.12 and Non-GAAP diluted earnings per share was $0.75 for the second quarter of fiscal year 2023. Compared to the prior year quarter, non-GAAP diluted earnings per share was adversely impacted by unfavorable currency fluctuations, lower pension income, and higher than expected tax expense, partially offset by lower interest expenses and a lower share count.
On a trailing twelve months basis, the company delivered a book to bill of 1.04x.
Financial Information by Segment
GBS segment revenue was $1,713 million in the second quarter of fiscal year 2023, down 8.5% compared to the prior year period and up 3.4% on an organic basis. GBS performance was driven by strong growth in the Analytics & Engineering business, where revenue increased 14.0% on an organic basis. GBS segment profit was $218 million and segment profit margin was 12.7%, down 320 bps compared to prior year period, due mainly to investments in our workforce and the costs related to the exit of our business in Russia. GBS bookings for the quarter were $1.7 billion for a book-to-bill of 0.96x, and 1.18x on a trailing twelve months basis.
GIS segment revenue was $1,853 million in the second quarter of fiscal year 2023, down 14.0% compared to the prior year period, and down 5.8% on an organic basis. GIS segment organic revenue performance improved slightly, due to a lower level of declines in Cloud Infrastructure & ITO revenues, which declined by 0.9% on an organic basis. GIS segment profit was $114 million with a segment profit margin of 6.2%, a 70 bps margin expansion as compared to second quarter of fiscal year 2022. GIS bookings were $1.3 billion in the quarter for a book-to-bill of 0.71x, and 0.91x on a trailing twelve months basis.
Guidance
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 Earnings Per Share 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.
Earnings Conference Call and Webcast
DXC Technology senior management will host a conference call and webcast to discuss these results on November 3, 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 November 10, 2022. The phone number for the replay is +1 (800) 770-2030 or +1 (647) 362-9199. The replay passcode is 4164760.
