Item 1. Business
ITEM 1. BUSINESS
Overview
DXC, a Nevada corporation, is a global IT services market leader. We provide mission-critical IT services that transform global businesses. We deliver excellence for our customers and colleagues around the world.
Our more than 130,000 people in approximately 70 countries are entrusted by our customers, who represent approximately half of today’s Fortune 500 companies. We operate through two segments: Global Business Services ("GBS") and Global Infrastructure Services ("GIS"), to provide solutions across our six differentiated offerings that modernize operations and drive innovation across our customers' entire IT estate.
DXC was formed on April 1, 2017 by the merger of CSC and HPES (the "HPES Merger").
Transformation Journey
DXC's transformation journey focuses on building stronger relationships with customers, its people, and unlocking value across our six offerings.
Key transformation journey priorities include:
• Inspire and Take Care of our Colleagues – Continuing to bring in new technology, account and delivery talent across the world, and making investments that recognize and reward our people
• Focus on Customers – Strengthening our customer relationships and ensuring we are proactively delivering for customers
• Optimize Costs – Optimizing value to better serve our customers by eliminating confusion and complexity
• Seize the Market – Seizing the market opportunity by cross-selling and expanding what we do with our customers across the six offerings
• Financial Foundation – Unlocking value by pursuing strategic alternatives, rationalizing our portfolio, and strengthening our balance sheet through creating a firm foundation that reflects our commitment to running a long-term sustainable business
The Company will continue to focus on execution of its transformation journey in the next fiscal year, with a continued focus on our people, revenue stabilization, cost optimization and winning in the market. The Company is continuing with its portfolio-shaping efforts, making the right investments and divesting assets that the Company does not believe are well integrated with the six offerings and its strategic direction in order to better focus on its strategy.
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Important Divestitures
During the fourth quarter of fiscal 2023, DXC completed the sale of its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ") for €308 million (approximately $329 million), resulting in a pre-tax gain of approximately $215 million.
During the first quarter of fiscal 2022, DXC completed the sale of its healthcare provider software business (“HPS” or the “HPS Business”) to Dedalus Holding S.p.A. (“Dedalus”) for €468 million (approximately $551 million), resulting in a pre-tax gain on sale of $331 million.
During fiscal 2021, DXC completed the sale of its U.S. State and Local Health and Human Services business ("HHS" or the "HHS Business") to Veritas Capital Fund Management, L.L.C. ("Veritas Capital") for approximately $5.0 billion, resulting in a pre-tax gain on sale of $2,014 million.
See Note 2 - "Divestitures" for further information on divestitures.
Segments and Services
Our reportable segments are GBS and GIS.
Global Business Services
GBS provides innovative technology solutions that help our customers address key business challenges and accelerate transformations tailored to each customer’s industry and specific objectives. GBS offerings include:
• Analytics and Engineering. Our portfolio of analytics services and extensive partner ecosystem help customers gain rapid insights, automate operations, and accelerate their transformation journeys. We provide software engineering, consulting, and data analytics solutions that enable businesses to run and manage their mission-critical functions, transform their operations, and develop new ways of doing business.
• Applications. We help simplify, modernize and accelerate mission-critical applications that support business agility and growth through our Applications services. We are the engineers that enable our customers to take advantage of the latest digital platforms with both customized and pre-packaged applications, ensure resiliency, launch new products and enter new markets with minimal disruption. We help customers define, execute and manage their enterprise applications strategy.
• Insurance Software and Business Process Services ("BPS"). We partner with insurance clients, to modernize and run IT systems, provide proprietary modular insurance software and platforms, and operate the full spectrum of insurance business process services. We also help operate and continuously improve bank cards, payment and lending processes and operations, and customer experience operations.
Global Infrastructure Services
GIS provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. GIS offerings include:
• Security. Our Security services help customers assess risk and proactively address all facets of the security environment, from threat intelligence to compliance. We leverage proven methodologies, intelligent automation and industry-leading partners to tailor security solutions to customers’ unique business needs. Our experts weave cyber resilience into IT security, operations and culture. Whether migrating to the cloud, protecting data with a Zero Trust strategy or managing a security operations center, our Security services enable our customers to focus on their business.
• Cloud Infrastructure and IT Outsourcing (“ITO”) . We enable customers to do Cloud Right™, making the right investments at the right time and on the right platforms. We orchestrate hybrid cloud and multicloud environments, ensuring private and public clouds, servers and mainframes operate effectively together. We provide companies with tailored plans for cloud migration and optimization to enable successful transformation. We leverage our deep expertise in legacy IT and drive innovation with reliable, secure, mission-critical IT Outsourcing services – from compute and data center, to storage and backup, to network, to mainframe and to business continuity – providing a clear path to modernization.
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• Modern Workplace. Our Modern Workplace services put the employee experience first, helping them achieve new levels of productivity, engagement and collaboration while working seamlessly and securely on any device. Organizations are empowered to deliver a consumer-like experience, centralize IT management and support services, and improve the total cost of ownership.
See Note 20 - "Segment and Geographic Information" for additional information related to our reportable segments, including the disclosure of segment revenues, segment profit, and financial information by geographic area.
Sales and Marketing
We market and sell our services to customers through our direct sales force, which operates out of various locations around the world. Our customers include commercial businesses of many sizes and across many industries, as well as public sector enterprises. No individual customer exceeded 10% of our consolidated revenues for fiscal 2023, fiscal 2022, or fiscal 2021.
Seasonality
General economic conditions have an impact on our business and financial results. The markets in which we sell our solutions, services and products occasionally experience weak economic conditions that may negatively affect sales. We also experience some seasonal trends in the sale of our services. For example, contract awards and certain revenue are often tied to the timing of our customers' fiscal year-ends, and we also experience seasonality related to our own fiscal year-end selling activities.
Competition
The IT and professional services markets we compete in are highly competitive and are not dominated by a single company or a small number of companies. A substantial number of companies offer services that overlap our offerings and are competitive with our services. In addition, the increased importance of offshore labor centers has brought several foreign-based competitors into our markets.
Our competitors include:
• large multinational enterprises that offer some or all of the services and solutions that we offer;
• smaller companies that offer focused services and solutions similar to those that we offer;
• offshore service providers in lower-cost locations, particularly in India that sell directly to end-users;
• solution or service providers that compete with us in a specific industry segment or service area; and
• in-house functions of corporations that use their own resources rather than engaging an outside IT services provider.
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The principal methods of competition in the markets for our solutions and services include:
• vision and strategic advisory ability;
• integrated solutions capabilities;
• performance and reliability;
• global and diverse talent;
• delivery excellence and ongoing support;
• responsiveness to customer needs;
• competitive pricing of services;
• technical and industry expertise;
• reputation and experience;
• quality of solutions and services; and
• financial stability and strong corporate governance.
Our ability to obtain new business and retain existing business is dependent upon the following:
• technology, industry and systems know-how with an independent perspective on best solutions across software, hardware, and service providers;
• ability to offer improved strategic frameworks and technical solutions;
• investments in our services and solutions;
• focus on responsiveness to proactively address customer needs, provide quality services and competitive prices;
• successful management of our relationships with leading strategic and solution partners in hardware, networking, cloud, applications and software;
• project management experience and capabilities, including delivery;
• end-to-end spectrum of IT and professional services we provide; and
• financial stability and strong corporate governance.
Intellectual Property
We rely on a combination of trade secrets, patents, copyrights, and trademarks, as well as contractual protections to protect our business interests. While our technical services and products are not generally dependent upon patent protection, we do selectively seek patent protection for certain inventions likely to be incorporated into products and services or where obtaining such proprietary rights will improve our competitive position.
As our patent portfolio has been built over time, the remaining terms of the individual patents across the patent portfolio vary. We believe that our patents and patent applications are important for maintaining the competitive differentiation of our solutions and services and enhancing our freedom to sell solutions and services in markets in which we choose to participate.
Additionally, we own or have rights to various trademarks, service marks, and trade names that are used in the operation of our business. We also own or have the rights to copyrights that protect the content of our products and other proprietary materials.
In addition to developing our intellectual property portfolio, we license intellectual property rights from third parties as we deem appropriate. We have also granted and plan to continue to grant licenses to others under our intellectual property rights when we consider these arrangements to be in our interest.
Environmental, Social and Governance (ESG)
The governance of DXC's ESG program is a multitiered process involving our Board of Directors (the "Board"), members of our executive staff and internal leadership. Our Board provides oversight of our ESG program, enabling us to have the governance, long-term strategy and processes to manage ESG outcomes and meet the needs of our stakeholders. The Nominating/Corporate Governance Committee of our Board has specific oversight of ESG. Our ESG leadership team regularly updates the committee on ESG status and provides an update to the full board annually.
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Our ESG strategy reflects our ongoing commitment to being a responsible corporate citizen. DXC has been a signatory of the UN Global Compact ("UNGC") since the inception of our Company, and we are committed in our alignment with the UNGC's Ten Principles for responsible business practices. We are proud to be part of the global movement to reduce the impact of climate change on the world, and we are dedicated to driving sustainable growth by setting ambitious, science-based emissions reduction targets.
We strive to reduce our impact on the environment and improve resource efficiency in the areas of energy consumption, data center management and travel and transportation. Our conservation efforts are supported in part by our shift to a virtual-first operating model, which enables our workforce to be largely remote and helps us reduce our overall energy consumption, which in turn helps to reduce our greenhouse gas emissions. While the virtual-first model mainly helps reduce the size of our office footprint, we are also pursuing efficiency programs for data centers and data center rationalization programs to reduce energy consumption.
DXC also partners with customers to help them achieve their own climate-related goals. In response to shifting customer demand, we offer a number of products and services that can have a significant impact on our customers’ sustainability objectives, delivering climate-related benefits far greater than what we could achieve alone through our internal carbon-reduction efforts. Offerings such as DXC Modern Workplace, cloud migration services and data-driven sustainability services can directly reduce carbon emissions for our customers, based on reports from our customers.
Additional information about our ESG initiatives is available on our website at http://dxc.com/us/en/about-us/corporate-responsibility . The information on our website, including our voluntary ESG-related reporting, is not incorporated by reference into, and is expressly not a part of, this report.
Environmental Regulation
Our operations are subject to regulation under various federal, state, local, and foreign laws concerning the environment and sustainability, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, and the clean-up of contaminated sites. Environmental costs and accruals are presently not material to our operations, cash flows or financial position; and, we do not currently anticipate material capital expenditures for environmental control facilities. However, we could incur substantial costs including clean-up costs, fines and civil or criminal sanctions and third-party damage or personal injury claims if we were to violate or become liable under existing and future environmental laws or legislation. To limit future risks, DXC has committed to set near-term company-wide emission reductions in line with the Science Based Targets initiative (SBTi).
Human Capital Management
As a leading global information technology services company, we attract highly skilled and educated people. As of March 31, 2023, we employed more than 130,000 people worldwide. At DXC we value our people and the opportunity to engage with them - we are at our best when our people feel valued and respected.
Value of Employee Engagement
We value our people and take various actions for employee engagement. Based on feedback received through periodic engagement surveys, management has implemented several initiatives to improve the employee experience through rewards and recognition, open communications and process improvement. Various platforms like Global Talent Management, Coaching & Mentoring, Career Development programs, and global recognition are also used to improve employee experiences and engagement.
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Training and Education
We view professional development as a corporate responsibility - a strategic investment in our employees’ and the company’s future. Through our global learning management ecosystem, we offer hundreds of learning programs as well as a career development system to help employees reach their potential. Providing ways to learn, grow, and explore new and challenging opportunities contributes to our ability to retain a motivated, knowledgeable workforce. Assessing employee abilities and contributions is a cornerstone of development at DXC. Our self-directed learning culture encourages employees to learn at their own pace and in a learning environment of their preference. Key to our people development is the role managers play - we remain focused on equipping and enabling our people leaders so that our people have leaders that guide and support them in their development and success.
Inclusion & Diversity
We are committed to an inclusive and diverse workforce. The DXC Global Diversity and Non-Discrimination Policy guides our engagement in management and hiring practices that promote diversity and inclusion.
Human Rights
We are committed to the protection and advancement of human rights and to enabling our operations in communities around the world to function with integrity. DXC is firmly committed to seeking to prevent modern slavery and the exploitation of vulnerable groups. Our main human rights–related focus areas are adopting policies and practices aimed at preventing human rights abuses through our large and diverse global supply chain and supporting a diverse and inclusive corporate culture.
Available Information
We use our corporate website, www.dxc.technology , as a routine channel for distributing important information, including detailed company information, financial news, SEC filings, Annual Reports, historical stock information and links to a recent earnings call webcast. DXC’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and the Proxy Statements for our Annual Meetings of Stockholders are made available, free of charge, on our corporate website as soon as reasonably practicable after such reports have been filed with or furnished to the SEC. They are also available through the SEC at www.sec.gov. Our corporate governance guidelines, Board committee charters (including the charters of the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee) and code of ethics entitled "Code of Conduct" are also available on our website. The information on our website is not incorporated by reference into, and is not a part of, this report.
Information About Our Executive Officers
Name Age Year First Elected as Officer Term as an Officer Position Held with the Registrant as of the filing date Family Relationship
Michael J. Salvino 57 2019 Indefinite Chairman, President and Chief Executive Officer None
Kenneth P. Sharp 52 2020 Indefinite Executive Vice President and Chief Financial Officer None
Mary E. Finch 54 2019 Indefinite Executive Vice President, Chief Human Resources Officer and Global Lead, Marketing None
William L. Deckelman, Jr. 65 2017 Indefinite Executive Vice President and General Counsel None
James M. Brady 56 2023 Indefinite Executive Vice President and Chief Operating Officer None
Christopher R. Drumgoole 48 2021 Indefinite Global Lead, Cloud Infrastructure and ITO None
Christopher A. Voci 51 2021 Indefinite Senior Vice President, Corporate Controller and
Principal Accounting Officer None
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Business Experience of Executive Officers
Michael J. Salvino serves as Chairman, President and Chief Executive Officer of DXC. He was appointed President and Chief Executive Officer of DXC in September 2019, has been a member of the Board since May 2019 and was appointed Chairman of the Board in July 2022. Prior to joining DXC, Mr. Salvino served as managing director of Carrick Capital Partners from 2016 to 2019, where he was directly involved with Carrick's portfolio companies and in sourcing new investments, growing and managing large scale tech-enabled services businesses, specifically business process outsourcing, security and machine learning. Prior to his tenure at Carrick, from 2009 to 2016, Mr. Salvino served as group chief executive of Accenture Operations, where he led a team of more than 100,000 consulting and outsourcing professionals focused on providing business process outsourcing, infrastructure, security and cloud services to deliver business value and drive productivity and digital improvements for clients. P rior to that, he held leadership roles in the HR outsourcing business at Hewitt Associates Inc. and as president of the Americas Region at Exult Inc. Mr. Salvino is a board member of the Atrium Health Foundation, the largest healthcare system in the Carolinas, where he serves on the Investment Oversight Committee for both the hospital and the foundation. Mr. Salvino graduated from Marietta College with a Bachelor of Science degree in industrial engineering. He is a member of the Board of Visitors of the Duke University Pratt School of Engineering.
Kenneth P. Sharp became the Executive Vice President and Chief Financial Officer of DXC in November 2020. Prior to joining DXC, Mr. Sharp served as Vice President and Chief Financial Officer, Defense Systems Sector for Northrop Grumman (“NOC”) from June 2018 to November 2020. From January 2016 to June 2018, Mr. Sharp served as Senior Vice President, Finance of Orbital ATK (subsequently purchased by NOC). Prior to that, he served as Senior Vice President, Chief Accounting Officer and Corporate Controller of Leidos, Inc. (formerly SAIC, Inc.). Before joining Leidos, Mr. Sharp spent a decade at CSC, the predecessor company to DXC and eight years at Ernst & Young. Mr. Sharp also served in the United States Marine Corps.
Mary E. Finch serves as Executive Vice President, Chief Human Resources Officer and Global Lead, Marketing of DXC since April 2023. She previously served as Executive Vice President and Chief Human Resources Officer of DXC from October 2019 to April 2023. Before joining DXC, Ms. Finch served as Executive Vice President and Chief Human Resources Officer of AECOM from September 2015 to October 2019. Prior to that, she served at Accenture as Senior Managing Director from September 2013 to August 2015 and as Managing Director Human Resources from January 2001 to September 2013, where she held various roles across the company including COO of Human Resources where she drove global delivery of HR services, overseeing operations supporting approximately 320,000 employees across 56 countries and multiple Accenture businesses. Ms. Finch also served as VP Human Resources of Abilizer Solutions Inc. from 2000 to 2001.
William L. Deckelman, Jr. serves as Executive Vice President and General Counsel of DXC since September 2020. He previously served as Executive Vice President, General Counsel and Secretary of DXC since the completion of the HPES Merger. Prior to that, Mr. Deckelman served as Executive Vice President, General Counsel and Secretary of CSC. Mr. Deckelman joined CSC in January 2008 and served as Vice President, General Counsel and Secretary from 2008 to 2012, as Executive Vice President and General Counsel from 2012 to 2014, and as Executive Vice President, General Counsel and Secretary from August 2014 until the completion of the HPES Merger. Prior to joining CSC, Mr. Deckelman served as Executive Vice President and General Counsel of Affiliated Computer Services Inc. from 2000 to 2008, served as a director from 2000 to 2003, and previously held various executive positions there from 1989 to 1995.
James M. Brady serves as Executive Vice President and Chief Operating Officer of DXC since April 2023. He previously served as Executive Vice President of Global Delivery from April 2022 to April 2023 and as President of the Americas Region from June 2020 to April 2022. Before joining DXC, he served as Chief Operating Officer of Accumen Inc., a tech-enabled healthcare performance company, from July 2012 until June 2020. Before joining Accumen Inc., Mr. Brady served in a variety of leadership positions at Accenture from June 2006 until July 2012. Prior to that, Mr. Brady served 20 years at Honeywell in a variety of leadership roles, most recently as vice president of Integrated Supply Chain for the aerospace engines business.
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Christopher R. Drumgoole was appointed Global Lead, Cloud Infrastructure and ITO in April 2023. He previously served as Executive Vice President and Chief Operating Officer of DXC from August 2021 to April 2023 and as Executive Vice President and Chief Information Officer of DXC from April 2020 to August 2021. Before joining DXC, Mr. Drumgoole served as Chief Information Officer at GE from May 2018 to April 2020, where he led the company’s global technology operations, including applications, infrastructure, and related shared services. Prior to that role, he was GE’s Chief Technology Officer from April 2014 to April 2018. Mr. Drumgoole joined GE from Verizon, where he was Chief Operating Officer of Verizon’s Terremark subsidiary, a cloud, hosting, and data center provider, from January 2012 to April 2014. Mr. Drumgoole serves on the Board of Directors of PetSmart; on the Advisory Board of Florida International University’s College of Engineering & Computing; and on the Board of Directors of ONUG, a forum for IT business leaders interested in open technologies.
Christopher A. Voci was appointed Senior Vice President, Corporate Controller and Principal Accounting Officer in June 2021. Before joining DXC, Mr. Voci served as Senior Vice President, Corporate Controller and principal accounting officer for CACI International Inc. from November 2018 to May 2021. From June 2018 to November 2018, Mr. Voci served as Vice President and Controller for the Innovation Systems Sector of Northrop Grumman Corporation. From 2016 to June 2018, Mr. Voci served first as Vice President, Finance and then as Controller and Chief Accounting Officer of Orbital ATK (subsequently purchased by Northrop Grumman). Prior to that, he spent eleven years at Air Products and Chemicals, Inc. (“APD”). While at APD from 2004 to 2015, Mr. Voci was Global Controller Industrial Gases from 2014 to 2015, Global Controller Merchant Gases from 2011 to 2014, Director, Financial Planning & Analysis from 2007 to 2011 and Global Healthcare Controller from 2004 to 2007. Mr. Voci served as Senior Manager, Audit and Risk Advisory Services at KPMG LLP from 2002 to 2004 and in various roles at Arthur Andersen LLP from 1994 to 2002.
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