CSC Delivers Revenue Growth and Sequential Commercial Margin Expansion in Second Quarter 2017
News Release -- November 03, 2016
- Q2 Earnings per Share from Continuing Operations of $0.10 includes Cumulative Impact of Certain Items of $(0.51) per Share
- Q2 Non-GAAP Earnings per Share from Continuing Operations was $0.61, compared with $0.55 in prior year
- Income from Continuing Operations of $21 Million includes Certain Items of $(73) Million
- Consolidated Segment Commercial Operating Income of $109 Million, adjusted for Certain Items is $171 Million and Consolidated Segment Commercial Operating Margin on the same basis is 9.1%, compared with 9.9% in the prior year
- Q2 Net Cash from Operating Activities of $192 Million
- Adjusted Free Cash Flow of $75 Million for Q2
- FY17 Non-GAAP EPS from Continuing Operations Target Remains $2.75 to $3.00
TYSONS, Va., November 3, 2016 – CSC (NYSE: CSC) today reported results for the second quarter of fiscal year 2017.
“In the second quarter, CSC delivered revenue growth and sequential margin improvement as we continue to execute on our transformation strategy," said Mike Lawrie, chairman, president and CEO. "We have integrated our recent acquisitions, and are growing our next generation offerings, such as Business Process Services. Recent wins such as MetLife are a strong confirmation of our leadership in the insurance market and other sectors. Today, we announced a global alliance with PwC to deliver end-to-end digital transformation solutions to our clients. Finally, we remain on track to close our proposed merger with the Enterprise Services business of Hewlett Packard Enterprise on or about April 1st.”
- Diluted earnings per share from continuing operations were $0.10 in the second quarter, compared with $0.66 in the year-ago period. Diluted earnings per share from continuing operations included $(0.13) per share of restructuring costs and $(0.38) per share of transaction and other integration-related costs.
- Non-GAAP diluted earnings per share from continuing operations excluding these items were $0.61, compared with $0.55 in the prior period.
- (Loss) income from continuing operations before taxes was $(1) million for the second quarter, compared with $47 million in the prior year and includes $(25) million of restructuring and $(78) million of transaction and other integration-related costs. Excluding the impact of these items, non-GAAP income from continuing operations, before taxes was $102 million compared with $95 million a year ago.
- Consolidated segment adjusted commercial operating income, which includes GBS and GIS, excluding certain items, was $171 million compared with $173 million in the second quarter of fiscal 2016. Consolidated segment adjusted commercial operating margin on the same basis was 9.1% compared to 9.9% in the prior year.
- Net cash provided by operating activities was $192 million in the second quarter, compared to $122 million in the prior year.
- Adjusted free cash flow was $75 million in the second quarter, compared to $58 million in the prior year. During the second quarter of fiscal 2016, CSC’s net cash provided by operating activities and adjusted free cash flow included the results of its since-divested U.S. federal IT services business, CSRA.
Global Business Services
GBS revenue of $1,035 million in the quarter compares with $891 million in the year ago quarter, an increase of 16.2%. GBS revenue increased 19.2% year-over-year in constant currency. The GBS revenue increase included the contributions of our recent acquisitions. GBS consolidated segment operating margin in the quarter, excluding the impact of certain items, was 10.1% compared to 12.3% in the prior year. New business awards for GBS were $2 billion in the second quarter.
Global Infrastructure Services
GIS revenue of $836 million in the quarter compares with $854 million in the year-ago quarter, a decrease of 2.1%. GIS revenue increased 1.1% year-over-year in constant currency. The GIS revenue increase was driven by the growth in our next generation offerings and the inclusion of our recent acquisitions. GIS consolidated segment operating margin in the quarter, excluding the impact of certain items, was 7.9% up from 7.4% in the prior year. New business awards for GIS were $0.5 billion in the second quarter.
Returning Capital to Shareholders
During the second quarter, CSC returned $20 million to shareholders consisting of common stock dividends.
CSC had 140,770,133 basic shares outstanding on September 30, 2016.
Earnings Conference Call and Webcast
CSC senior management will host a conference call and webcast today at 5 p.m. EDT. The dial-in number for domestic callers is 800-218-2154. Callers who reside outside of the United States or Canada should dial 913-981-5550. The passcode for all participants is 7167172. 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 November 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 7167172. 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, consolidated segment operating income, consolidated segment commercial operating income, consolidated segment commercial operating margin, consolidated segment adjusted operating income, consolidated segment operating and adjusted operating margin, earnings before interest and taxes (EBIT), adjusted EBIT, EBIT and adjusted EBIT margin, adjusted 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.