DXC Technology Company

Good day, ladies and gentlemen, and welcome to the DXC Fiscal Year 23rd Quarter Results Conference Call. Today's call is being recorded. At this time, I would like to hand things over to Mr. Shelesh Murali. Please go ahead, sir.

Thank you, and good afternoon, everyone. I'm pleased that you're joining us for DXC Technologies' third quarter fiscal 2020 earnings call. Our speakers on today's call will be Mike Silvino, our President and Chief Executive Officer and Paul Saleh, our chief financial officer. This call is being webcast at dxc.com slash investor relations, and the webcast includes slides that'll accompany the discussion today. After the call, we will post these slides on the investor relations section of our website. Slide two informs our participants that DXC Technologies' presentation includes certain non-GAAP financial measures and certain further adjustments to these measures, which we believe provide useful information to our investors. In accordance with SEC rules, we have provided a reconciliation of these measures to their respective and most directly comparable gap measures. These reconciliations can be found in the tables included in today's earnings release. On slide three, you will see that certain comments we make on the call will be forward-looking. These statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those expressed on the call. A discussion of these risks and uncertainties is included in our annual report on Form 10-K and other SEC filings. I would like to remind our listeners that DXC Technology assumes no obligation to update the information presented on the call except as required by law. And now I'd like to introduce DXC Technology's President and CEO, Mike Salvino.

Mike? Thank you, Shelesh. and I appreciate everyone joining the call today. As I mentioned on my first earnings call, my style is one of focus and clarity, and our comments today concerning the corner will follow that direction. Let me quickly outline the agenda for today's call. I will update you on the progress against the priorities discussed during our Q2 earnings call. These priorities of running the business and unlocking value represent the transformational journey that we're on at DXC. We call this our focus strategy. Paul will then take you through the financial details of our third quarter results and our business outlook for the fourth quarter and full fiscal year. I will then make some closing remarks concerning what's next on the transformational journey before we take questions. Turning to our third quarter, I'm pleased with the initial progress we've made on the priorities of running the business and unlocking value. through reported financial results in line with our plan. Simply put, we did what we said we were going to do, and we are executing nicely against our new focus strategy. Revenue is up 3% sequentially in constant currency. We also delivered on our profitability expectations, and our book-to-bill ratio of 1.06 was our best in three quarters. As I've discussed with you before, this transformation will not be a quick fix, but I am confident that our new focus strategy will position DXE to compete in the IT services space. Let me give you a little color now around the progress we are making with our customers, people, operational execution, and unlocking value. As I continue to meet customers, I am most impressed with the types of services our customers have entrusted us with for years. The applications and infrastructure we are running are at the heart of our customers' businesses. I've used the phrase inside of DXE that we have the courage to deliver the critical for our customers. This is truly unique in the IT services space. Without the work that our people do every day for our customers, planes don't fly, hospitals don't operate, and Black Friday sales are not completed. During our last call, I mentioned that we needed to leverage our ITO business and make investments to improve our delivery and regain trust with some of our customers. I have a fundamental belief that by running our customers' critical systems smoothly, we will earn the right to win additional business. This is one of the key tenets of our focus strategy, leveraging our ITO business to grow DXC. We have been focusing on account management and delivery capabilities, and we're making good progress. My original assessment had 20 to 30 accounts in the challenge category, meaning we were not meeting service levels or customers were not pleased with our performance. We started doing in-depth reviews and saw some partial terminations and two accounts that terminated completely. During this quarter, we established a very focused program that includes 40 accounts to address these issues. These accounts represent about a quarter of our revenue. Overall, this program is off to a good start with seven accounts graduating out of this program. We expect the majority of these accounts to be turned around by the end of Q4 and the program to be completed in the first half of fiscal 21. I've been receiving positive comments during my check-in calls. I've done 92 in total. And this program has clearly created positive momentum with our customers. In fact, we have already been awarded over $500 million of business from several of these accounts in the form of renewals and new work. Some of this new work was previously put on hold. and some of the new work is in analytics, which is at the top of the enterprise technology stack. This is solid evidence that leveraging the ITO business and focusing on our customers, people, and operational execution is the right strategy to grow DXE. Turning now to our people, we have held town halls in every region this past quarter, and we have completed a global employee survey. received over 140,000 comments representing that our people are engaged. They're telling us that they are seeing positive changes and are feeling optimistic. Our current focus areas for our people are learning opportunities, career prospects, and compensation. During this quarter, a great example of our action and investment was implementing salary increases for our Indian delivery centers ahead of our typical salary review cycle. Another area where we're making progress is attracting new talent. In Q3, we added roughly 50 leaders to DXE in the areas of account management, delivery, and corporate functions. We also added two more senior leaders to our leadership team. Both Carla and Chris have impeccable resumes, broad experience, and played broader roles in their prior companies, but joined DXE to be a part of the transformation journey. Carla is our chief risk officer and leads physical and virtual security, ethics and compliance, and overall enterprise risk management. And Chris will be our CIO and will lead our IT transformation to deliver tools to our people to better serve our customers. I've also made a couple of key leadership changes. Vinod is now leading global delivery, and Steve is accountable for our business in UKI EMEA. All of these hires are integrating well with the existing team, and the total team is making an immediate and positive impact. Our book to bill of 1.06 for this quarter is evidence that we are working well as a team. We're also seeing a positive shift in the market about DXC's brand perception. This is evidenced by DXC alumni rejoining us and others reaching out to join the transformation journey. I am thrilled that Ian Reid, The retired chairman and CEO of Pfizer will be joining us as our new chairman. Ian brings a wealth of experience, particularly in the area of leading large public companies through transformations. All of this gives me confidence that we can attract, integrate, and retain top talent to execute on our focus strategy. Another key component to running the business is operational executions. We are taking steps to improve delivery execution. Benot and his team are examining our delivery footprint, utilization, and talent to improve our quality, speed, and cost of delivery. Ultimately, our goal is to consolidate and further scale our delivery operations. We are now also moving to a regionally focused operating model with a tighter management system. designed to speed up decision-making and increase accountability. From an industry perspective, we are bringing together our automotive and banking capabilities with Luxoft under Dimitri's leadership to take advantage of the opportunities in those two industries. As I previously mentioned, we are leveraging our ITO business to begin to grow DXE. Let me give you a little bit more detail on the plan. We are using our unique industry capability of virtual clarity to assess the IT estate of our top 200 accounts. These assessments will allow us to have fact-based dialogue with our customers concerning the migration of their IT estate to the cloud. In these discussions, we talk about technical feasibility, risk, the value proposition, and the ability of our customers to execute such a migration. along with their need for assistance. In the fourth quarter, we will complete these assessments for 30 of our top accounts, and we will be in the market engaging with our customers. This work will allow us to have productive and proactive discussions with our customers and give us hard numbers concerning how fast our IPO business, which has a large amount of mission-critical applications and infrastructure in it, will move to the cloud. Now let me turn my comments to the area of unlocking value. The clarity of our strategy to focus on the enterprise technology stack has given us an opportunity to engage with our customers and better align with their needs. We are introducing our customers to the breadth of our offerings across the enterprise technology stack. And customers are reacting positively by communicating to us and industry players that they have an interest in trying our services. We are also executing well in pursuing strategic alternatives for three businesses and are on track to hit the timeline we set for ourselves. We have retained several world-class advisors to help us with this effort, and our plan is to be in the market this month. Let me comment briefly on the three businesses. In state and local health and human services, it's been business as usual, and we are in the final stage of adding one new state to our portfolio. In the other two business, horizontal BPS and workplace and mobility, results were mixed, but they were in line with our expectations. On the positive side, some customers have awarded us new work or have renewed existing contracts However, there's been a few cases where customers are pushing out renewals, insourcing the work, or have indicated their intent not to renew with us. Now I'm going to hand the call over to Paul to take you through the third quarter results and our business outlook for the fourth and full year.