DXC Technology Company

Good day, everyone, and thank you for standing by. Welcome to today's DXC Technology Third Quarter Fiscal Year 2021 Earnings Call. A quick reminder that today's conference is being recorded, and at this time, I'd like to turn the floor over to Shailesh Murali. Please go ahead, sir.

Thank you, and good afternoon, everyone. I'm pleased that you are joining us for DXC Technology's Third Quarter Fiscal 2021 Earnings Call. Our speakers on today's call will be Mike Salvino, our President and Chief Executive Officer, and Ken Sharp, our Executive Vice President and Chief Financial Officer. This call is being webcast at dxc.com slash investor relations, and the webcast includes slides that will accompany the discussion today. After the call, we will post these slides to the investor relations section of our website. Slide two informs our participants that DXC Technologies' presentation includes certain non-GAAP financial measures, which we believe provides 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 GAAP measures. These reconciliations can be found in the tables included in today's earnings release and the webcast slides. 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 D&C 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 Technologies President and CEO, Mike Salvina. Mike?

Thank you, Shelesh, and I appreciate everyone joining the call today, and I hope you and your families are doing well. I will walk through today's agenda in a moment, but before I do that, I want to briefly discuss the press release we issued on Monday, February 1st. As we announced last month, we received an unsolicited and non-binding proposal from ATOS to purchase DXE. Our board reviewed the proposal carefully with our financial and legal advisors and found it to be inadequate and lacking certainty, given the value our board believes we can create on a standalone basis by executing on our transformation journey. After sharing some high-level information with Atos to help them understand why their proposal undervalued DXE, Atos and DXE agreed to discontinue further discussions. We are confident in our transformation journey, and our Q3 results show strong evidence that our team is executing. We are flattered that Atos saw the value we are creating and clearly has taken notice of our new leadership team, and how we are delivering for our customers and winning in the market. I was pleased with how we managed the proposal. As it did not linger, we stayed focused on our business, and it helped highlight some areas where we can accelerate our transformation journey and create additional value. With the new leadership team in place, I am looking forward to sharing the details of our FY22 full year plan, and longer term expectations on our Q4 earnings call. We are also planning an investor day to discuss in more detail our plans and introduce you to our leadership team. Now let me turn to today's agenda. I will start by giving you a quick update on our strong Q3 performance. Next, I will highlight the progress we are making on our transformation journey. Our strong Q3 results were driven by executing against the three key areas of our transformation journey, which are focus on customers, optimize costs, and seize the market. I will then hand the call over to our new CFO, Ken Sharp, to share our detailed Q3 financial results and guidance for Q4. Finally, I will make some closing remarks before opening the call up for questions. Regarding our Q3 performance, our revenues were 4.29 billion, approximately 90 million above the top end of our guidance. This is the second straight quarter of revenue stabilization, and we expect this trend to continue in Q4. Our sequential revenue stabilization is positive evidence that we will achieve year-on-year revenue stability. Concerning adjusted EBIT margin, we delivered 7%, also higher than the top end of our guidance. Like revenue, we expect margins to continue to expand in Q4. Book to bill for the quarter was 1.13, underscoring the success of bringing the new DXE, which focuses on our customers and people, to the market. This is the third straight quarter that we've delivered a 1.0 or better book to bill And we also expect this trend to continue in Q4. I'm pleased about the level of stability and momentum we are achieving. We have done well attracting talent, improving the environment for our people, strengthening our customer relationships, taking out cost without disruption, and continuing to win in the market. Now before I go through the progress of our transformation journey, I would like to comment on two recent hires that have allowed me to finalize our new leadership team. We completed our CFO search and hired Ken Sharp. Ken returns to DXC after being the CFO of Northrop Grumman's defense systems business. Prior to that, Ken was SVP of finance at Orbital ATK and has over a decade of experience in our industry. Ken has a strong operational focus and has led large-scale finance transformations. These skills are important to us as we continue executing on our transformation journey. We also added Michael Corcoran to our team. Michael has joined us as Chief Strategy Officer and is a track record of transforming and growing businesses. Michael joins us from WPP where he led strategy and operations. Prior to WPP, Michael was at Accenture where he spent a number of years with me and created the strategy for Accenture operations. The amount of transformation and industry experience of this team is substantial and they are the main reason for our strong execution and results. You will hear in a moment why Ken joined DXE and his comments concerning the opportunity to create value do a really nice job capturing why talent joins DXE. Now I will cover the good progress we are making on our transformation journey, starting with our customers. Our focus on customers continues to be the primary driver of revenue stabilization. As I've said time and time again, when we deliver for our customers and are seen as a trusted partner, customers are more likely to renew existing work and consider us for new work. Let me give you two good examples that have happened in Q3. Molson Coors renewed two pieces of work with us this quarter. The first is in application management, and the second is across multiple layers of the enterprise technology stack, including ITO, modern workplace, cloud, and security. Next, our strong relationship and flexible delivery model led to an expanded agreement with Pacific Life Insurance, which includes application development and support for its retirement and life divisions, enabling them to reduce cost and improve efficiency. These are two perfect examples of the great job we're doing, strengthening our customer relationships, and gives us confidence that we can continue to stabilize revenue. Now let me turn to our cost optimization program. We will achieve our goal of $550 million of cost savings this year. Our cost optimization program was responsible for our strong adjusted EBIT margin of 7% in Q3. We were able to expand margins despite a 200 basis point headwind from the sale of the US state and local health and human services business. We have done well optimizing our costs and continuing to deliver for our customers without disruption. Seize the market is the final area of our transformation journey. In this area, we are focused on cross-selling to our existing accounts and winning work with new customers. The 1.13 book-to-bill number that we delivered this quarter is consistent evidence that our plan is working. In Q3, 55% of our bookings were new work and 45% were renewals. Let me give you a good example of new work with a new customer. We signed a three-year deal with Ferrari where we will modernize their IT platforms with services including security and modern workplace. Our ability to deliver a consistent book-to-bill number of over 1.0 in the first three quarters of FY21 is clear evidence that our transformation journey is not only working, but we can absolutely win in the IT services market. Turning now to our healthcare provider software business, we are on track to complete the sale of this business and use the roughly $450 million of net proceeds to pay down debt, further strengthening our balance sheet. Now, before I turn the call over to Ken, I would like to thank our people, customers, and shareholders for supporting us throughout our transformation journey. Now, let me turn the call over to Ken. Thank you, Mike.