DXC Technology (DXC) 1 Feb 242024 Q3 Earnings call transcript

Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXC Technology Q3 Earnings Call. [Operator Instructions]

I would now like to turn the floor over to John Sweeney, Vice President of Investor Relations. your begin may you conference. John,

good Thank you're XXXX I'm that everybody. us you, Earnings for Year and joining Fiscal DXC pleased Quarter afternoon, Technology's Call. Third

and will speakers will and EVP accompany slides website, call at today. Raul Our and call webcast The Rob today this being Investor the Fernandez, Bene, discussion on CFO. President that DXC's CEO; is our the and Del includes be Relations webcast

to our presentation of believe included information can the Today's tables respective in the certain slides. provide rules, comparable SEC reconciliations measures, non-GAAP these directly found measures. GAAP in their reconciliation webcast In we which investors. today's we includes financial to and a earnings with most in and be These accordance useful provide measures release

make from will cause is that as the which expressed other now uncertainties, These comments our be risks the to materially on information except SEC on could remind call. subject uncertainties discussion Certain Form law. like these call by no differ forward-looking. those known to the risks to included are filings. listeners XX-K statements and and of and presented A report on actual our Technology to results update I'd assumes call obligation the in required DXC on annual we

that, with Raul? and I'd Fernandez. And like Raul to President introduce Technology's CEO, DXC

of you Thank everyone. Fernandez, today's CEO joining evening, and good for call. and John, DXC. Thanks, President Raul I'm

I start, would thank Salvino DXC. we Before to to his Mike for like contributions

President of I excited those am the has Interim therefore, me Board positions Directors no and in saw appointed CEO to call issued the DXC. the today, be and, you press the honored CEO. take I before As release longer am to of and

sharing our Let agenda call. by will you DXC. me through start observations of my commentary for my I take the

you offerings. detail. review with business then finally, I and financial X Rob more leave in We will call discuss And key up opening takeaways each our before will then questions. results performance will the a our few of the discuss for

Slide quarter. came we year. guidance solid XX% cash was midpoint EPS the quarter, on up As margin third of you $XXX had our revenue range. in growth see above EBIT Adjusted Free both guidance the excellent non-GAAP performance flow can and range. an X, were result prior in as million at our compared to in the Organic and

As a DXC of you Board since have may Corporate Nominating Chairman as the Compensation Committee member as Governance know, been previously having Committee. XXXX, of Member a and I served and the

XX XX In Interim little President was days and have investors. partners CEO. ago, appointed my A I over met and employees, I first days with plus, customers,

technologies sense talents, an a world. as director, a the good operator, deeper its values and work and and every go around our that of fully great you As employees do appreciate challenges. you business, its get to get day But the the

a elevate get good also smarter we of sense how work really our You performance. can and

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goal. and this The achieve testing by to bringing XX% Sabadell and Banco reduced cost time by applications team accelerated development Legacy XX%. modernization speed with increased reduced into application application partnered of by production the DXC XX%.

other As a bank critical operations. result business of our into is engagement initial success, this the expanding

minutes The Now priorities an focus share will DXC customer actions near-term take satisfaction. to is and and few customers, our delivery we I my IT delivering excellence. we is intense of mission-critical are foundation to trusted for on delivery with the services a and will continue service business our drive taking.

that clear sharpen performance. has execution to While and our of accelerate our and people, assets, an company technology impressive we collection it's our need

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to closely customers great insights that to and have our to As ideas the the can company take be is to imperative they CEO, connected as next level. stay it harnessed our employees and

ongoing to this time the invest to feedback an get basis. going I'm on

investing will objectives, on credit our delivering rating, and allow allocation these back on Board capital maintaining allocation the strategy. priorities including achieve are us financial I business to our aligned and our The our buybacks. fully solid into capital investment-grade Focusing on priorities,

global and to services, move X and operations let's great our GIS our for GBS said, offerings. X Engineering, & that In Analytics products, With engineer brands. review experiences we

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and require tools data to More customers be our better more functions. faster and business across

that. great base We to help with experienced global talent have a

aspects As impact value all society. the term, all will know, in AI positioned we near to large from are with extract of customers But AI. sets best data

customers improved global data leverage this expertise large have with for many insights innovation. sets, extract optimize and the we and data operations to and actionable efficiency have We to help them

Insurance GBS our Software little a excited segment, off our more round you about detail bit To to & give BPS offering. I'm

of Fortune companies. Our insurance facilitates XX% operations the XXX software insurance unit of business

in and solutions platform out customers. stickiness customer with with SaaS-based those of year and customers. fiscal Our provide work to cases, building additional demonstrating our customers. customers We our We're with co-developing our valued is of 'XX, in our and, our earned insurance our by many appreciated the about products renewals features portfolio XXX solutions are

GIS. to Turning

incidents. our with offering. start and their state-sponsored a C-suite security security increase Let's the concern in top Cybersecurity want ecosystem. Customers given simplicity in global is

to tools implement possible participate security to work and We a are which create need seamlessly deliver have customer's where environment each the them that best security through degree grow, in our with than able in each to we growth to solutions expect devise we continues needs. we the better security setup security for and this a to historically. fully for best-of-suite for other The

this industry. organization closer our automation, interventions. is of with in to to & In professionals are ITO, space DXC service customer, geographic the the sales leverage to our largest Cloud focused share. one experienced increasing providers we key required handle working can is delivery new The in that on being in With IT the conjunction

We to environment. able support and current to capabilities as right IT And the to all have provide we transitions. your experienced modernize clients' platforms live we cloud with are our our streamline team, enable

fashion. Next, we have in big modern workplace. enabling here, greater AI issue have a ticket automated an will resolution impact

in and to move support Our solve like enables onboard, customer We expect one traditional Employees IT a in experience. in location-agnostic that to work employees using frictionless mechanisms model. a models service work from and place aim IT near support and embracing a support logging provide model and touch expect customers to problems employees tickets. calling mobility; without working X distributed,

hit to that on metrics With are metrics engagement These this approach, the enhance we important sentiment. our employee are and productivity, customers. and

with focus level financial including higher By of driving directly the services, revenue reducing mix. is automation. improving Our and I mean and a this, business AI on low-margin resale those further associated

I call discuss the Okay. turn to financials. With the will that, over to Rob

performance a with came with at growth third ahead midpoint revenue was Organic our our Raul. which line guidance. of provide quarter organic our down XQ now in you, I'll results of X.X% review in the year-over-year, Thank of you revenue guidance. or

to basis the quarter-to-quarter. a year-to-year points resale guidance asset severance basis basis basis revenues, the decline and XX pension down a from X.X% a EBIT to with came basis XX XX noncash decline. up the was continue by level Our basis range income, margin of costs. X.X%, Margin nonrecurring of lower results decline and points executive was in XXX point point which XX from sales lower impact impact year-to-year point be Adjusted of above our at impacted due impact XX points of a

million, capital EPS capital. control Without flow been and $X.XX above improving guidance the quarter $XXX operational impacts, $X.XX these expenditures sequentially. working disciplined cash of was and Free range have would up management year-to-year. $X.XX, Non-GAAP the X for result of and was up our margins

our trailing cash of the the X.XX. weighted the year. performance out year second book-to-bill on from played XX-month in half As The of and calls, is I've mentioned the with previous Book-to-bill are improved seasonally free was quarter. flows half that the X.XX to fiscal first

to metrics. Now moving key financial our

and in asset income, separation foreign lower costs. were lower XXX of points asset nonlabor investment our points was are Other labor reductions. million Our margin year-to-year, of XX maintaining nearly decreased cost we the SG&A benefiting on decline margins basis third dollars on a slide, levels. pension pension absolute due X.X% first mentioned by gains $XX as EBIT quarter XX.X% from primarily flat our income, I revenues, executive was gross exchange. driven income and to, as Adjusted down lower in basis ongoing up noncash sales sales go-to-market year-over-year, and

$X.XX expense sequentially. the interest $XX was higher as to down expense Net of $X.XX a benefit debt. executive of EPS year-to-year, $X.XX such partially of a Net interest from with primarily noncontrolling rate income, $X.XX, and interest. due reduced million Non-GAAP sales main increase level an severance year-over-year, and $X by decreases expense. was lower short-term $X.XX variable million, asset expense impacts of from interest share offset These higher $X lower count were a of tax gains on being a $X.XX interest decreases million improved other an pension benefit on higher and

to our turning results. Now segment

organically. from our points performance trend environment. points year. with a half was higher-margin deceleration GBS GBS of GBS grew and the the the profit are XX reflection consistent X equal ago. Our growth to at GBS market the segment of the XX.X%, continues segments business challenging to rate almost year XX.X%, XXX up now margin mix basis the a from basis organic first with GBS is in The

growth managing our We are future capture levels opportunities. to GBS resource

margin GIS. points revenue basis from to first driven ongoing execution the year-over-year, a profit performance. increased GIS of cost by reduction modest X.X%, now declined Turning improvement half initiatives. XX Organic

our Now offerings. moving on to individual

First in GBS.

quarter, an has Engineering has of environment, A&E of low improved we & by validation renewals, a been single rate Analytics did team. impacted which which to and of due Our industry the economic volume capabilities our by the strong high world-class the field growth have In design engineering, digits. team, is the value bringing a client in the book-to-bill to delivered

to the renewals, of X% to large Applications and the Revenue X.XXx offering. In quarters. half our performance our of new number we in is of for improved first consistent bookings year the a client the book-to-bill Moving declined with quarter, services. and X reflective the last with increase an acquisitions our project-based and of

in significantly based up timing was Our up on large performance. grow, offering this organic to first insurance quarter Bookings to half X.XXx, continues business vary revenue from quarter renewals. X.X%. of the with our Book-to-bill from

and reflecting our strong significant we software had of of the value capabilities. X XQ, platform customer recognition In renewals, services

SaaS rate fourth X% to insurance growing of moderate expect fiscal perpetual the business we performance, to quarter In strong Our quarter, 'XX. in temporarily due sale the IP continued license in its quarter. onetime the the growth fourth

Now Bookings year-to-year, quarter-to-quarter moving X.X% were declined with to year. our revenue GIS first line segment. with and Security in the half of the X.XXx. flat

declined continues quarter, X/X Cloud will continue be Infrastructure This the fourth revenue and of into and that business we by shorter-term over Outsourcing resale was resale long-term year-to-year. decline, XX.X% the decreases the In lower-margin this in quarter. IT & anticipate impacted revenues. market trend to third declines

reflected excess is capacity economics in and We book-to-bill and capital contract continue in to results, XQ. evaluate management This was reduce opportunities which our requirements. to are taking approach approach to and X.XX a we'll very deal disciplined

X.X% Next, driven anticipate in Workplace, X which content improvement which to in by was recur quarter. we Modern The have fourth large which included performance we year-to-year. transactions, quarter-to-quarter the resale declined don't

Looking fourth of the ahead, of a fourth 'XX. fiscal high the revenues comparison due a 'XX, to quarter difficult level we in resale of quarter fiscal face

quarter. Modern the result upcoming in mid-teens difficult in fourth decline comp, Workplace a we the to expect As the of

on Net up rate Now turning in stable borrowings. compared prior to higher $X the reflecting $X.X of short-term year have about the from financial million interest beginning the foundation. billion. to levels Debt was at quarter million year, the $XX of remained as environment interest our the

million year-to-year million, management and revenues, our expenditures of declined Operating down management $XXX of $XX were $XX payments sequentially. originations estate lease lease disciplined our expenditures a indicative XX% and $X footprint. of the reflecting leasing million $XX X% expenses capital sequentially. revenue, quarter, related were expense capital flat and Finance Restructuring percentage were the $XX as down and lease commitments. was million, year-to-year year-to-year, down continued million, capital of In TSI expenditures million prudent originations and to and of and real

deployment that XX.X which repurchased and to Turning addition X.X% we In and over to million million We XX% XQ. has shares our of in of $XXX 'XX DXC in repurchased outstanding, XX.X% 'XX, is shares the shares. capital repurchased in fiscal deployed 'XX. fiscal in

million through sales. As in communicated repurchase our 'XX cash combination of prior of and targeted we're free we've calls, share a funding flow program fiscal $X asset $XXX billion

our sales million. Through the third $XXX is proceeds now asset quarter of approximately the fiscal from year,

capital additional sales our into have no extend And shareholders. managing the is targeted, our strategy. we'll to adjust capital of operations company accordingly. which in returning plans or fiscal our rating, 'XX. capital We We so, remain approach There may investment-grade of appropriately priorities deployment if our our and 'XX to to the credit investing change repurchase deployment committed

the to GBS, to improved, outlook. In caution turning we're continued our XQ fourth reflects Now the on longer-than-anticipated quarter while conversion seeing bookings part which revenue, customers. of

GIS quarter, quarter. total resale to lower to to revenue X.X% minus to third to compared the is third decelerate organic As largely performance a minus Workplace Modern similar due X.X%. GBS brings year-over-year we year-over-year revenues. organic growth This expect expected result, to be QX to revenue

adjusted We to third are expecting EPS a somewhat X.X% X.X%. margins And $X.XX. and EBIT to finally, of quarter compared similar $X.XX anticipate non-GAAP to range of diluted the

Turning to guidance. our 'XX year full

lowered to $X.XX, $X.XX. X.X%. impact XX% growth guidance rate to X.X% year is EBIT guidance XX%, has and $X margin EPS We are reflecting revenue X.X% versus organic minus which EPS minus tax X.X% to Adjusted reducing of prior to to our of an full of to a

cash are flow of $XXX free maintaining guidance We our million.

for the turn back me to let takeaways. that, key Raul call With

to leading a be have I the convinced this enhance here I'm for we execution your to how opportunity excited want Rob, that am detailed you, DXC. Thank I to of company. significant express update.

We to have I every thank DXC us trust the work. our of right succeed. customers enable thousands to capabilities team mission-critical place who want to for day and the their this the right also in team

the call open operator, questions. that, With please for

question [Operator Your Bergin Cowen. Bryan of first line the comes of Instructions] from

just you month. to you be you items here you've just about in a may And with changes portfolio? meet for or the to offerings, do the And over specific to maybe top consider we'll CEO, action the currently think near term? you daily considering? you. what you nice remain sense as the X here. Maybe of talk be But all DXC what you here X start been can operations as I of that for strategy about the become do the Raul, have officially make offerings close Kind in understand to

add looking can business that deliver; faster, we and solution; a the of more that how impact. big how Yes. areas efficient we sell; a operational frameworks becomes And lot can some of hours, frameworks. we revenue; geographies, with profitable. time a times the at on those replicable more spending ultimately, lot I've I rates solutions. business times and individually, at on lot how turns been a a execution, how There's into with that This excellence. pace: units a has of a revenue become up I how execute little rates but focus focus that we become things, think Those can things think and hours make

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studies, case solutions, brands. sit we deploy wins content, the it's and global and great great maintain, systems great we of develop, incredible for I that I as great amount mission-critical think an hear great

in study undersold And and ourselves area. the storytelling we have case really

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efficiency speed, delivering about it's and So and faster. better

Do a question all And offerings. make Raul, the sense? there's they on

Yes.

offerings the make all sense. think I

I think they all have different comps.

a different value If across the next one that after back a whole XX you you'd company comps sit on have take the were private and would and I'll as in that. say board. only call this, you probably say, more of to to set here days. how I'm the

Okay. cash Rob, one free Makes just on Maybe, flow. sense.

talk So can and a the cash if as about can may you cash outlays here be a flow slower-spending else perhaps the free bit breakeven lease capital in drivers more think free growth you what distant maybe move we in to little optimize in on future environment, flow? about

Absolutely. to exhibited temporary discipline. That's working a discipline And that into well, prior a quarters was those going in third those continue requirements to lease we And bringing the the steady in cash management and the will into we free third capital commitments, I The continue. that's in think in It's we've contributing the capital well. not managing the demonstrated as that new that expenditures that and we and future made continue are as and improved and we've quarter flow. future. quarter will the down progress tightly march

think there the room drive. is and do for to we're I So that's continued going what improvement across board,

the from question next Susquehanna. from Friedman line comes Your James of

Raul. Congratulations,

in security. you it market. the I like to prepared potentially You the wider mentioned And think, anticipating in in remarks us language it your participating, seem were that does the underperformed has growth was

is growth wondering, there? to that accelerate you're just how going was I So it

nice Thanks, you. and meet to Sure. Great question.

great sold that we on as think the I unit it. It's people, stand-alone. did an ingredient and projects, case selling the have traditionally been not multiple have issues. great business of studies focus is we across how great there's a the a One sales have couple a

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and the is segment market. anywhere you growing, growing rate of know, that near not we're As the

here. think it additional abilities and we there's talent is and our the results some because we demand our that capabilities approach the backdrop upside the if there So people focus, right see right our and there are I with can those and

So the X connecting those step. is first

follow And could then on segment. I if up Insurance the

a child, darling the whole. So probably conversely, outperforming as market a the segments that's really other and been

curious, in segment, is of just I'm the But of that what remarks. You in when you what your at differentiates that So insurance it prepared marketplace? -- practice? kind qualities so the are comments look the that some standout had

at see you'd to if Insurance license the of and as perpetual it's think look were a that business maintenance. I a you mix standalone, traditional

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comes of from Your line Deutsche Keane next the Bryan question from Bank.

was of abrupt a Maybe Just on Mike wanted what can second leadership us with step almost And departure team. help he kind hired the to happened then you for exactly entire understand The Salvino. Mike. there. back

that now what's So would left? my expect worry that be you to I do And stick attrition people the like he's leadership guess for around team?

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happy team here. And so very the with I'm that's happy --

us I to continue to so move And just forward. expect

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Yes.

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to with data about impact, step large it's is most the the back in with organizations have near AI think sets. and term If where you going

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there. is the backdrop So demand

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matter. go finish a in, able what give next on and to up a would to the better metrics this minute into going formulating here business catching I to get deeper you're we be approaching is I'll at how days way unit to me of have that business As and this. look by think I finish call, XX

from from comes the Peller Wolfe question Darrin of Research. next Your line

Raul, Look, I but to some categories you've know the I in GIS. also process it's around had your on challenged want of days, just thought I the appreciate understand Board. guess experience been most XX some I

innovative that needle for on be So that faster. ITO. maybe just a able Cloud little if a until to you Infrastructure touch company growth if something It's revenue that might inflection -- you time. elusive just should perhaps little the Modern bit around bit move before if anything be the -- in think more front. And could a today a on Workplace or you the see we're from think change long on there's for an to been mind on I think And all anything in strategy what might & your hoping

So just great. any thoughts would be

tools much the some we relationship of when that again, you in ability have Modern thoughts. the I And about support I what Look, customer as a think them. Workplace, I the services impact has, and on of business all able time couple a apply and we're Yes. in become is to had think with capture will that tailwind of with still that make think ticketless, it -- that there I now should, more dig a intuitive, process But Microsoft, and think front the AI to if reverse haven't closely more decline. pretty that resolution ticket/issue on is to the a business efficient, Microsoft very human-centric partnership to self-service, take

expectations your I is manage to One of pledge Rob the things that and better.

have of set We haven't had in all the the out past. a record been great that hitting expectations track

we we want be want to also thoughtful it. be measured So to and about

or So more in time and to need can I'm we it. I talk But X into dig not those reversals do I because units numbers better. better we to will about going business know do

that I of and the Applications, could we typical and & Analytics just Engineering of is guess, very growth the quickly, the frankly, something encouraging. then progress think, success out I And Okay. see the

would are guess -- cross-selling, goes in And have the going is years, customers the sort it of from right? those your today? harvest different to that that improve heard that to they to provide some is some I that now, before from executive see but of and relationships to of so really back mean at take the perspective? over there something I'm well you in the trying that right? the leadership we've Or services I company you demand room company need GIS

we to it's There's it. to something If replicate that we response, engineering differentiated are not us ability but up is putting make margin; smarter where I come takes RFP, forward to a with an and hopefully, just an methodology, that's provides And an that something framework, examples at our more can we code that's something proactively. and of replicate we've that maybe not done are improve RFP, work technically; code? that how cross-selling, ultimately is it replicate definitely how a room we've before reuse think solutioning, being

technology across across write that to There's on other engagements use that and then of a it develop and that, basic optimization, but not just enter we lot the you company call verticals. want some if of how we

venture the use mid-'XXs of and of how they with we're again, engineers lot ran going from that in different to answer, we've We're at X the look great went so no got with magic, of someone do these who experiences differently. past, units in savings. backgrounds, myself one no one market differently. do and started digital And the fortunately, one capital, here magic oh, there models no I a in my things companies, one So professionals is with terms to going companies business thing they to

like I to know sell. to I like to scale. what know it's I exactly And know like what deliver. what I what it's it's the like to it's cash. know collect

should more can think that And then a our basic I of way can then so show I it the And in something bigger see here, doing smarter, are it, that it doing numbers elevate it profitable doing then here, results. I've lived accelerate financial we the that, and personally. path we in but through and is

of Your next from question JPMorgan. comes from Tien-Tsin the Huang line

working to here, forward with you Looking Raul.

on just going and lot curious a sort given great the here you'll of the mode bring systems already, businesses, don't people you've here sort if integration curious and what you from table a including of lot have you tech on a turnaround task media. about been of sort take and of I'm in it's to table you've that DXC have talked the just as bring you mind I'm of through what different as to to background you'll You specifically, what seen and a that. of learned

Sure. Look, experience I the it's up. operational from literally ground think

history. had tech to use I ready we're Board it's larger the not it for transitions working because capital one Broadcom the think we owner, incredible an we're those best does biggest an right like on one that not with M&A. planet, the of And I again, ready I knowing are the much But but it. shareholder, on if sat knowing what the we in get now. tell But companies, ready. as I've get work did to you also X both, of different a desire in ready over now that do allocation can as Obviously, way, a for way companies use can best-in-class. transactions as adviser, they're Look, will ready, even on wouldn't We years, we M&A. just

on a so setting we I'm will keep it then realistic by but business back ready, I'm I'm to I'm know and and small companies going going apply companies, to And to opportunity also dashboard that it get big to experiences here. your when something we're up But potentially that because and very the the foundation question, take just we'll to grounded, are and to of that front. an going open in unit do

I the around do think that seen traveled we referenceability, I've incredible one incredible the studies. have of excites is incredible that work brands, me as case things and we

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comes line next Ashwin from from Your Citi. Shirvaikar of question the

call you I earlier guess appointment. know public comment? this on you're Was about you at CEO you I better. entity Do some my to the approaching some DXC's how DXC how off look of might markets? If private parts more a of on first is look that could think question business. forward had assets comment on some to you differently. congratulations to light the in Raul, alludes the shed better getting the

getting to meet to Nice you, look together. Great. forward

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the from of of from Kupferberg Jason comes question line Bank America. next Your

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one. that's So

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you, the Rob, of line one know revenue with And Okay. organic middle your quarter. for right I That's maybe for in came the looking in just at third good color. range growth, you

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Faucette from the question James comes from Stanley. Morgan line last of And your

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going we have here, at to is to multiple I goal work again, very in have XXX%. if ourselves said to don't action first all make getting units like there's plans, we it and place. my across before, the get better, board. show win we that's But if There's them and their on detailed on -- up can will So we ways optimize it, business what that into on work right and the we and

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the to turn further questions, to like I'd floor with And back Raul over no Fernandez.

of communications be new to Part this you on thank to is much. engaged Thank so more tonight. us joining for Listen, you front. all approach our

and you the come along. I. and months and dialogue look in And having and days from Rob more You'll I person to that see of meeting forward more as weeks

thank Good again. So you night.

you. today's conference this conclude Thank And call. does