DXC Technology reported results for the third quarter of fiscal year 2024.
Raul Fernandez, Chief Executive Officer commented: “I am pleased to report that DXC delivered strong performance in the third quarter of fiscal '24. We achieved or exceeded our third quarter organic revenue, adjusted EBIT and non-GAAP EPS guidance and delivered $585 million of free cash flow in the quarter. The team is focused on building on this progress as we evolve the operating model to strengthen our go-to-market presence across the offerings. We are committed to continuing the strategy and capital allocation program that we have previously outlined. DXC has an abundance of world class mission critical and digital solutions, deployed and operating every day around the world. I am fully convinced that this rich combination of talent and capabilities will enable DXC to compete and win in the marketplace, and drive significant value for our colleagues, customers and shareholders."
|
Financial Highlights(1) |
Q3 FY24 |
Q3 FY23 |
||||||
|
Revenue |
$ |
3,399 |
$ |
3,566 |
||||
|
YoY Revenue Growth |
(4.7 |
)% |
(12.8 |
)% |
||||
|
YoY Organic Revenue Growth(2) |
(4.5 |
)% |
(3.8 |
)% |
||||
|
Net Income |
$ |
140 |
$ |
61 |
||||
|
Net Income as a % of Sales |
4.1 |
% |
1.7 |
% |
||||
|
EBIT(2) |
$ |
234 |
$ |
117 |
||||
|
EBIT Margin % (2) |
6.9 |
% |
3.3 |
% |
||||
|
Adjusted EBIT(2) |
$ |
258 |
$ |
309 |
||||
|
Adjusted EBIT Margin % (2) |
7.6 |
% |
8.7 |
% |
||||
|
Earnings Per Share (Diluted) |
$ |
0.81 |
$ |
0.25 |
||||
|
Non-GAAP EPS (Diluted)(2) |
$ |
0.87 |
$ |
0.95 |
||||
|
Book-to-Bill (TTM) |
0.93x |
1.06x |
||||||
|
Book-to-Bill |
0.99x |
1.34x |
||||||
|
(1) |
In millions, except per-share amounts and numbers presented as percentages and ratios |
|
(2) |
Reconciliation of GAAP to Non-GAAP measures provided in Non-GAAP Results. |
Financial Highlights - Third Quarter of Fiscal Year 2024
Revenue was $3.40 billion for the third quarter of fiscal year 2024, down 4.7% as compared to prior year period, and down 4.5% on an organic basis. Third quarter organic revenue growth came in at the midpoint of DXC's guidance range.
Net income was $140 million, or 4.1% of sales for the third quarter of fiscal year 2024, compared to $61 million, or 1.7% of sales, in the prior year quarter. Net income was higher due to increased gains on the sale of businesses, lower depreciation and amortization and lower restructuring costs. EBIT was $234 million or 6.9% of sales. Net income and EBIT in the quarter included the following items: amortization of acquired intangible assets of $88 million, restructuring costs of $36 million, net gains on dispositions of $104 million, merger related indemnification charges of $2 million, and transaction, separation, and integration costs of $2 million. Excluding these items, adjusted EBIT was $258 million and adjusted EBIT margin was 7.6% in the third quarter of fiscal year 2024, above the Company’s guidance range. Adjusted EBIT was $51 million below the prior year quarter, mainly driven by $18 million lower non-cash pension income, $9 million expense related to executive separation costs, and lower gains on asset sales of $14 million ($14 million gain on asset sales in Q3 FY24 vs. $28 million in Q3 FY23).
Diluted earnings per share was $0.81 and non-GAAP diluted earnings per share was $0.87 for the third quarter of fiscal year 2024.
During the third quarter of fiscal year 2024, the Company repurchased 11 million shares of common stock for a total of $252 million. DXC has retired over 30% of its shares outstanding since the start of fiscal year 2022.
Financial Information by Segment
|
Global Business Services ("GBS")(1) |
Q3 FY24 |
Q3 FY23 |
||||||
|
Revenue |
$ |
1,696 |
$ |
1,738 |
||||
|
YoY Revenue Growth |
(2.4 |
)% |
(10.7 |
)% |
||||
|
YoY Organic Revenue Growth(2) |
0.3 |
% |
0.2 |
% |
||||
|
Segment Profit |
$ |
202 |
$ |
244 |
||||
|
Segment Profit Margin |
11.9 |
% |
14.0 |
% |
||||
|
Book-to-Bill (TTM) |
0.97x |
1.16x |
||||||
|
Book-to-Bill |
1.26x |
1.21x |
||||||
|
(1) |
In millions |
|
(2) |
Reconciliation of GAAP to Non-GAAP measures provided in Non-GAAP Results. |
GBS segment revenue was $1,696 million in the third quarter of fiscal year 2024, down 2.4% compared to the prior year period and up 0.3% on an organic basis. The GBS organic growth was driven by continued growth in the Analytics & Engineering and Insurance offerings. GBS segment profit was $202 million and segment profit margin was 11.9%, down 210 bps compared to prior year. GBS bookings for the quarter were $2.1 billion for a book-to-bill of 1.26x, and 0.97x on a trailing twelve months basis.
|
Global Infrastructure Services ("GIS")(1) |
Q3 FY24 |
Q3 FY23 |
||||||
|
Revenue |
$ |
1,703 |
$ |
1,828 |
||||
|
YoY Revenue Growth |
(6.8 |
)% |
(14.7 |
)% |
||||
|
YoY Organic Revenue Growth(2) |
(8.9 |
)% |
(7.4 |
)% |
||||
|
Segment Profit |
$ |
121 |
$ |
123 |
||||
|
Segment Profit Margin |
7.1 |
% |
6.7 |
% |
||||
|
Book-to-Bill (TTM) |
0.90x |
0.97x |
||||||
|
Book-to-Bill |
0.73x |
1.46x |
||||||
|
(1) |
In millions |
|
(2) |
Reconciliation of GAAP to Non-GAAP measures provided in Non-GAAP Results. |
GIS segment revenue was $1,703 million in the third quarter of fiscal year 2024, down 6.8% compared to the prior year period, and down 8.9% on an organic basis. GIS segment revenue performance was impacted by organic revenue declines in Cloud Infrastructure & ITO, and in Modern Workplace. GIS segment profit was $121 million with a segment profit margin of 7.1%, up 40 bps as compared to prior year. GIS bookings were $1.3 billion in the quarter for a book-to-bill of 0.73x, and 0.90x on a trailing twelve months basis.
Offering Highlights
The results for our six offerings are as follows:
|
Offerings Revenues |
Q3 FY24 |
Q2 FY24 |
Q1 FY24 |
Q4 FY23 |
Q3 FY23 |
||||||||||
|
Analytics and Engineering |
$ |
555 |
$ |
561 |
$ |
546 |
$ |
558 |
$ |
535 |
|||||
|
Applications |
759 |
762 |
770 |
780 |
762 |
||||||||||
|
Insurance Software & BPS |
382 |
386 |
382 |
390 |
371 |
||||||||||
|
Security |
109 |
109 |
111 |
113 |
112 |
||||||||||
|
Cloud Infrastructure & ITO |
1,168 |
1,209 |
1,209 |
1,270 |
1,283 |
||||||||||
|
Modern Workplace |
426 |
409 |
423 |
457 |
433 |
||||||||||
|
Subtotal |
3,399 |
3,436 |
3,441 |
3,568 |
3,496 |
||||||||||
|
M&A and Divestitures |
|||||||||||||||
|
Revenues |
— |
— |
5 |
23 |
70 |
||||||||||
|
Total Revenues |
$ |
3,399 |
$ |
3,436 |
$ |
3,446 |
$ |
3,591 |
$ |
3,566 |
|||||
Guidance
The Company's guidance for the fourth quarter and full fiscal year 2024 is presented in the table below. The full year guidance has been reduced, for organic revenue growth to a range of (4.5)% - (4.3)%, adjusted EBIT margin to 7.1% - 7.2%, and non-GAAP diluted EPS to $3.00 to $3.05. We are maintaining FY24 free cash flow guidance of $800 million.
|
Key Metrics |
Q4 FY24 |
FY24 |
||||
|
Lower |
Higher |
Lower |
Higher |
|||
|
Organic Revenue Growth % |
(6.5)% |
(5.5)% |
(4.5)% |
(4.3)% |
||
|
Adjusted EBIT Margin |
7.0% |
7.5% |
7.1% |
7.2% |
||
|
Non-GAAP Diluted EPS |
$0.80 |
$0.85 |
$3.00 |
$3.05 |
||
|
Free Cash Flow |
$800 |
|||||
|
Revenue |
||||||
|
Revenue $ |
$3,350 |
$3,390 |
$13,630 |
$13,670 |
||
|
Acquisition & Divestitures Revenues % |
(0.7)% |
(1.8)% |
||||
|
Foreign Exchange Impact on Revenues % |
0.5% |
0.9% |
||||
Earnings Conference Call and Webcast
DXC Technology senior management will host a conference call and webcast to discuss these results on February 1, 2024, at 5:00 p.m. EST. 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 8, 2024. The phone number for the replay is +1 (800) 770-2030 or +1 (647) 362-9199. The replay passcode is 4164760.
