DXC Technology Company

Good day. Thank you for standing by and welcome to the XC Technology Q1 Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 on your telephone keypad. As a reminder, there is a limit of one question per analyst. If you require any further assistance, please press star zero. Thank you. I would now like to hand the conference over to your speaker today, Mr. John Sweeney, Vice President of Investor Relations. The floor is yours.

Thank you, and good afternoon, everyone. I'm pleased that you're joining us for DXC Technologies' first quarter 2022 earnings call. Our speakers on the call today will be Mike Salvino, our president and CEO, and Ken Sharp, our executive vice president and CFO. This call is being webcast at dxc.com slash investor relations, and the webcast includes slides that will accompany the presentation today. Today's presentation includes certain non-GAAP financial measures which we believe provide useful information to our investors. In accordance with SEC rules, we provided a reconciliation of these measures to their respective and most direct comparable GAAP measures. These reconciliations can be found in the tables included in today's earnings release and on the webcast slides. Certain comments we make on the call will be forward-looking statements. These statements are subject to known and uncertain 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'd now like to remind our listeners that DXC technology assumes no obligation to update the information presented on this call, except as required by law. And with that, I'd like to introduce DXC Technologies President and CEO, Mike Salvino.

Mike. Thanks, John. And I appreciate everyone joining the call today. And I hope you and your families are doing well. Today's agenda will begin with a quick update on our solid Q1 performance, which continues to show that revenue, adjusted EBIT margin, book-to-bill, and non-GAAP EPS all have a positive trajectory compared to past quarters. During our investor day in June, we gave you additional insights into the steps of our transformation journey, and those steps are inspire and take care of our colleagues, focus on our customers, optimize costs, seize the market, and build a strong financial foundation. I will give updates on each step and then hand the call over to Ken to share our Q1 financial results, guidance, and more details on how we are building a strong financial foundation. Finally, I will make some closing remarks before opening the call up for questions. Regarding our Q1 performance, our revenues were $4.14 billion, and our adjusted EBIT margin was 8%. This represents the fourth straight quarter of both revenue stabilization and sequential margin expansion, and we expect both trends to continue in Q2. Book-to-bill for the quarter was 1.12. This is the fifth straight quarter that we have delivered a 1.0 or better book-to-bill and we expect our success of winning in the market to continue in Q2. Our non-GAAP EPS was 84 cents in the quarter, which is up 300% as compared to 21 cents that we delivered in Q1 of FY21. The positive trajectory of all four of these numbers gives us confidence that our playbook is working. As a refresher, our playbook has three phases. The stabilization phase was completed in FY21. This phase enabled us to make great progress with our colleagues, customers, on revenue, margin, book to bill, and reducing our debt. We are now focused on the foundation phase. This phase focuses on the steps that will allow us to deliver growth. The goals of this phase are, first, continue to increase our employee engagement, all while we attract and retain highly talented colleagues. Second, stabilize year-on-year organic revenue. Third, expand adjusted EBIT margins. Fourth, consistently deliver a book-to-bill number of 1.0 or greater with a nice mix of new work and renewals. And finally, under Ken's leadership, deliver a financial foundation that increases discipline and improves our cash flow and earnings power. Now, I will discuss the good progress we are making on each step of our transformation journey, beginning with inspire and take care of our colleagues. We are executing a people-first strategy. Attracting and retaining talent is fundamental to enable our growth. Our refreshed leadership team has deep industry experience and is delivering. Brenda, who is our chief marketing officer, is our newest addition. Brenda is a strategic results-oriented leader who brings deep marketing experience to DXE. Seventy-five percent of our leadership team is now new to DXE and bringing in talent based on their personal credibility as talent follows talent. What the team is finding is that the new DXE story is resonating in the market, and new hires are wanting to join DXE because they see the opportunity to progress their careers with a company that's on the right trajectory. We mentioned during our investor call that nearly 50% of our vice presidents across the company are new to DXE within the last 22 months. Also, we are investing in our people. This quarter, we rewarded high performance by paying annual bonuses that benefit roughly 45,000 of our colleagues. In Q2, we are planning merit increases that will benefit roughly 77,000 of our colleagues. In addition to these investments, we're doing a great job of taking care of our colleagues and their families during the pandemic. This focus on our colleagues is unique and builds trust with them, increases employee engagement, allows us to compete for talent, and enables us to deliver for our customers. Focus on our customers is the second step of our transformation journey. Our investment in our customers is the primary driver of revenue stabilization. During the Investor Day presentation, I couldn't be more proud to have you hear from American Airlines, FedEx, P&G, Lloyd's, Bright House, Deutsche Bank, Campbell's, and Microsoft. And I want to thank them again for their support and partnership. It was clear from their comments that the new DXC story is resonating with them because we are a delivery. These are all large global companies, and they are saying that their IT estates are important. In fact, they use the word critical. Our strategy of delivering ITO services builds customer intimacy and develops trust that when our customers want to further transform their business, they turn to us and allows us to move them up the enterprise technology stack. Additional evidence that our strategy is working is the nice progress we have made on our GBS business along with the cloud and security layer of our GIS business. All of this gives us confidence that we will deliver on our financial commitments. Now let me turn to our cost optimization program. We continue to do well optimizing our costs and delivering for our customers without disruption. We're focused on four cost levers, which are contractor conversion, real estate, scaling our GIDCs, and automation through Platform X. These levers have helped us expand our margins going from 7.5% last quarter to 8% this quarter. You will hear from Ken that we expect to continue to expand margins in Q2. Next, seize the market is where we are focused on cross-selling to our existing customers and winning new work. The 1.12 book-to-bill that we delivered this quarter is evidence that our plan is working. In Q1, 57% of our bookings were new work and 43% were renewals. You will see that we are running specific sales campaigns. An example of these campaigns is ITO Modernization, which is focused on improving the performance of our customers' IT estates. Another example is our campaign to show our customers how to think about cloud, which combines on-prem, private cloud, and public cloud technology. Our ability to deliver a consistent book-to-bill of 1.0 in each of the last five quarters is evidenced that these sales campaigns are working and that we can win in the IT services industry. This momentum and success in the market gives us confidence that we will deliver another book to bill of 1.0 or greater in Q2. Now let me turn the call over to Ken.