CSC Delivers Revenue Growth and Commercial Margin Expansion in First Quarter 2017
News Release -- August 08, 2016
- Q1 (Loss) Earnings per Share from Continuing Operations of $(0.15), Includes Cumulative Impact of Certain Items of $(0.68) per Share
- Q1 Non-GAAP Diluted Earnings per Share from Continuing Operations was $0.53, up 13% YoY
- (Loss) Income from Continuing Operations, Before Taxes of $(36) Million Includes Certain Items of $(127) Million
- Commercial Operating Income of $69 Million, Adjusted for Certain Items is $161 Million and Commercial Operating Margin on the Same Basis is 8.3%, up 80 Basis Points YoY
- Net Cash from Operating Activities of $50 Million and Free Cash Flow of $32 Million
- FY17 Non-GAAP EPS from Continuing Operations Target Remains $2.75 to $3.00
TYSONS, Va., Aug. 8, 2016–CSC (NYSE: CSC) today reported results for the first quarter of fiscal year 2017.
“CSC's first-quarter results reflected the transformative steps we have taken with our recent acquisitions of UXC and Xchanging," said Mike Lawrie, chairman, president and CEO. "Revenue was up 9% in constant currency driven by contributions from acquisitions as well as strong momentum within our next-generation offerings. Commercial operating margins were up over the prior year on a comparable basis, as we continue to drive greater operating efficiencies while reinvesting in key areas of the business. Our merger with the Enterprise Services segment of Hewlett Packard Enterprise is progressing as planned with a targeted close of late March 2017.”
- Diluted (loss) earnings per share from continuing operations were $(0.15) in the first quarter, compared with $0.46 in the year-ago period. Diluted earnings per share from continuing operations included $(0.32) per share of restructuring costs and $(0.36) per share of transaction and integration-related costs.
- Non-GAAP diluted earnings per share from continuing operations excluding these items were $0.53, up 13% percent over the prior year.
- (Loss) Income from continuing operations before taxes was $(36) million for the first quarter, compared with $72 million in the prior year, and includes $(57) million of restructuring and $(70) million of transaction and integration-related costs. Excluding the impact of these items, Non-GAAP income from continuing operations, before taxes was $91 million compared with $97 million a year ago.
- Commercial operating income, which is operating income of the combined GBS and GIS segments, excluding certain items, was $161 million compared with $136 million in the first quarter of fiscal 2016. Commercial Operating Margin on the same basis was 8.3%, up from 7.5% in the prior year.
- Net cash provided by operating activities was $50 million in the first quarter, compared with $362 million in the prior year.
- Free cash flow was $32 million in the first quarter, compared with $158 million in the prior year. During the first quarter of fiscal 2016, CSC’s net cash provided by operating activities and free cash flow included the results of its since-divested U.S. federal IT services business, CSRA.
Global Business Services
GBS revenue of $1,049 million in the quarter compares with $919 million in the year ago quarter, an increase of 14.1%. GBS revenue increased 16.4% year-over-year in constant currency. The GBS revenue increase was driven by the contributions from our recent acquisitions. GBS operating margin in the quarter, excluding the impact of certain items, was 10.5% up from 10.1% in the prior year. New business awards for GBS were $0.7 billion in the first quarter.
Global Infrastructure Services
GIS revenue of $881 million in the quarter compares with $885 million in the year-ago quarter, a decrease of 0.5%. GIS revenue increased 1.7% year-over-year in constant currency, driven by the contributions from our recent acquisitions as well as growth in our next-generation offerings, which helped offset contract completions and price-downs. GIS operating margin in the quarter, excluding the impact of certain items, was 5.8% compared with 4.9% in the prior year. New business awards for GIS were $0.9 billion in the quarter.
Returning Capital to Shareholders
During the first quarter, CSC returned $20 million to shareholders, consisting of common stock dividends.
CSC had 140,317,261 basic shares outstanding on July 1, 2016.
Earnings Conference Call and Webcast
CSC senior management will host a conference call and webcast on the same day at 5 p.m. EDT. The dial-in number for domestic callers is 888-631-5930. Callers who reside outside of the United States or Canada should dial 913-312-0831. The passcode for all participants is 5423942. The webcast audio and any presentation slides will be available on CSC’s Investor Relations website.
A replay of the conference call will be available from approximately two hours after the conclusion of the call until August 15, 2016. The replay dial-in number is 888-203-1112 for domestic callers and 719-457-0820 for callers who reside outside of the United States and Canada. The replay passcode is also 5423942. A replay of this webcast will also be available on CSC’s website.
In an effort to provide investors with additional information regarding the Company’s preliminary and unaudited results as determined by U.S. generally accepted accounting principles (GAAP), the Company has also disclosed in this press release preliminary non-GAAP information, and certain further adjustments thereto, which management believes provides useful information to investors, including: constant currency, operating income, commercial operating income and margin, adjusted operating income, operating and adjusted operating margin, adjusted commercial operating income and margin, EBIT, adjusted EBIT, EBIT and adjusted EBIT margin, free cash flow, and non-GAAP results including non-GAAP income from continuing operations and non-GAAP diluted earnings per share from continuing operations. Reconciliations of the preliminary non-GAAP measures to the respective and most directly comparable GAAP measures, as well as the rationale for management’s use of non-GAAP measures, are included below.
CSC (NYSE: CSC) leads clients on their digital transformation journeys. The company provides innovative next-generation technology services and solutions that leverage deep industry expertise, global scale, technology independence and an extensive partner community. CSC serves leading commercial and international public sector organizations throughout the world. CSC is a Fortune 500 company and ranked among the best corporate citizens. For more information, visit the company's website at www.csc.com.
All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” These statements represent the Company’s intentions, plans, expectations and beliefs, and are subject to risks, uncertainties and other factors, many of which are outside the Company’s control. These factors could cause actual results to differ materially from such forward looking statements. For a written description of these factors, see the section titled “Risk Factors” in CSC’s Form 10-K for the fiscal year ended April 1, 2016 and any updating information in subsequent SEC filings. The Company disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent events or otherwise, except as required by law.