DXC Technology Reports Third Quarter Fiscal 2020 Results

Adjusted Free Cash Flow

A reconciliation of net cash provided by operating activities to adjusted free cash flow is as follows:

(in millions)	Three Months Ended December 31, 2019			Nine Months Ended December 31, 2019
Net cash provided by operating activities	$	477		$	2,062
Net cash used in investing activities ⁽¹⁾	(75		)	(2,047		)
Acquisitions, net of cash acquired	76			1,997
Payments on capital leases and other long-term asset financings	(225		)	(646		)
Payments on transaction, separation and integration-related costs	68			203
Payments on restructuring costs	76			273
Gain on arbitration award	—			(632		)
Adjusted free cash flow	$	397		$	1,210
__________
⁽¹⁾ Excludes short-term investments.

Non-GAAP Results

A reconciliation of reported results to non-GAAP results is as follows:

	Three Months Ended December 31, 2019
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration- Related Costs			Amortization of Acquired Intangible Assets		Goodwill Impairment Losses		Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	3,827		$	—	$	—		$	—	$	—	$	—		$	3,827
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)	518			—		(68		)	—		—		—			450
Income from continuing operations before income taxes	127			74		68			146		53		—			468
Income tax expense	37			10		16			34		53		(10		)	140
Net income	90			64		52			112		—		10			328
Less: net income attributable to non-controlling interest, net of tax	8			—		—			—		—		—			8
Net income attributable to DXC common stockholders	$	82		$	64	$	52		$	112	$	—	$	10		$	320

Effective tax rate	29.1		%													29.9		%

Basic EPS from continuing operations	$	0.32		$	0.25	$	0.20		$	0.44	$	—	$	0.04		$	1.25
Diluted EPS from continuing operations	$	0.32		$	0.25	$	0.20		$	0.44	$	—	$	0.04		$	1.25

Weighted average common shares outstanding for:
Basic EPS	255.09			255.09		255.09			255.09		255.09		255.09			255.09
Diluted EPS	256.05			256.05		256.05			256.05		256.05		256.05			256.05

	Nine Months Ended December 31, 2019
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration- Related Costs			Amortization of Acquired Intangible Assets		Goodwill Impairment Losses		Gain on Arbitration Award			Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	11,128		$	—	$	—		$	—	$	—	$	—		$	—		$	11,128
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	1,514			—		(226		)	—		—		—			—			1,288
(Loss) income from continuing operations before income taxes	(1,666		)	248		226			435		2,940		(632		)	—			1,551
Income tax expense	191			42		43			99		53		—			(39		)	389
Net (loss) income	(1,857		)	206		183			336		2,887		(632		)	39			1,162
Less: net income attributable to non-controlling interest, net of tax	17			—		—			—		—		—			—			17
Net (loss) income attributable to DXC common stockholders	$	(1,874	)	$	206	$	183		$	336	$	2,887	$	(632	)	$	39		$	1,145

Effective Tax Rate	(11.5		)%																25.1		%

Basic EPS from continuing operations	$	(7.20	)	$	0.79	$	0.70		$	1.29	$	11.09	$	(2.43	)	$	0.15		$	4.40
Diluted EPS from continuing operations	$	(7.20	)	$	0.79	$	0.70		$	1.28	$	11.03	$	(2.42	)	$	0.15		$	4.38

Weighted average common shares outstanding for:
Basic EPS	260.24			260.24		260.24			260.24		260.24		260.24			260.24			260.24
Diluted EPS	260.24			261.69		261.69			261.69		261.69		261.69			261.69			261.69

	Three Months Ended December 31, 2018
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration- Related Costs			Amortization of Acquired Intangible Assets		Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	3,725		$	—	$	—		$	—	$	—		$	3,725
Selling, general and administrative (excludes depreciation and amortization and restructuring costs)	491			—		(107		)	—		—			384
Income from continuing operations before income taxes	469			76		107			134		—			786
Income tax expense	3			18		26			36		77			160
Income from continuing operations	466			58		81			98		(77		)	626
Income from discontinued operations, net of tax	—			—		—			—		—			—
Net income	466			58		81			98		(77		)	626
Less: net income attributable to non-controlling interest, net of tax	4			—		—			—		—			4
Net income attributable to DXC common stockholders	$	462		$	58	$	81		$	98	$	(77	)	$	622

Effective Tax Rate	0.6		%											20.4		%

Basic EPS from continuing operations	$	1.68		$	0.21	$	0.29		$	0.36	$	(0.28	)	$	2.26
Diluted EPS from continuing operations	$	1.66		$	0.21	$	0.29		$	0.35	$	(0.28	)	$	2.23

Weighted average common shares outstanding for:
Basic EPS	275.66			275.66		275.66			275.66		275.66			275.66
Diluted EPS	278.99			278.99		278.99			278.99		278.99			278.99

	Nine Months Ended December 31, 2018
(in millions, except per-share amounts)	As Reported			Restructuring Costs		Transaction, Separation and Integration- Related Costs			Amortization of Acquired Intangible Assets		Tax Adjustment			Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)	$	11,110		$	—	$	—		$	—	$	—		$	11,110
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)	1,500			—		(305		)	—		—			1,195
Income from continuing operations before income taxes	1,161			418		305			401		—			2,285
Income tax expense	205			100		72			101		44			522
Income from continuing operations	956			318		233			300		(44		)	1,763
Income from discontinued operations, net of tax	35			—		—			—		—			35
Net income	991			318		233			300		(44		)	1,798
Less: net income attributable to non-controlling interest, net of tax	8			—		—			—		—			8
Net income attributable to DXC common stockholders	$	983		$	318	$	233		$	300	$	(44	)	$	1,790

Effective Tax Rate	17.7		%											22.8		%

Basic EPS from continuing operations	$	3.38		$	1.13	$	0.83		$	1.07	$	(0.16	)	$	6.26
Diluted EPS from continuing operations	$	3.33		$	1.12	$	0.82		$	1.05	$	(0.15	)	$	6.16

Weighted average common shares outstanding for:
Basic EPS	280.47			280.47		280.47			280.47		280.47			280.47
Diluted EPS	284.70			284.70		284.70			284.70		284.70			284.70

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