DXC Technology Company

Good evening. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the DXC Technology Q3 FY22 earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 once again. Thank you, John Sweeney, Vice President of Investor Relations. You may begin your conference.

Thank you, and good afternoon, everybody. I'm pleased that you're joining us for DXC Technologies' third quarter 2022 earnings call. Our speakers on the call today will be Mike Salvino, our president and CEO, and Ken Sharp, our EVP and CFO. This call is being webcast at dxc.com, Investor Relations, and the webcast includes slides that will accompany this discussion 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 provide a reconciliation of these measures in your respective and most directly comparable GAAP measures. These reconciliations can be found in the tables including today's earnings release and in the webcast slides. Certain comments we make on the call will be forward-looking. 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 will include in our annual report on Form 10-K and our SEC filings. I'd now 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 with that, I'd like to introduce DXC Technology's 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 an update on Q3, which was another strong quarter of operational execution for DXE. Next, I will cover how we are consistently delivering on our transformation journey. As a result of this execution, organic revenue, margin, and EPS all continue to improve. In addition, you will see the outstanding results for book-to-bill and free cash flow. The best part about this performance is we expect it to be sustainable. Then I will hand the call over to Ken to share our Q3 results along with our Q4 and full-year guidance. Finally, I will add some closing remarks before opening the call up for questions. Regarding our Q3 performance, our revenues were $4.09 billion compared to $4.03 billion in Q2. Our organic revenue continued to improve as we progressed from minus 2.4% in Q2 to minus 1.4% in Q3. I see this as significant improvement, as only a year ago our organic revenues were minus 9.7%. I was also very pleased to see the organic revenue growth in GBS accelerate from positive 3.4% in Q2 to positive 7% in Q3. Our strategy to grow DXC relies on GBS consistently growing, and we are clearly delivering against this piece of our growth strategy. Our adjusted even margin was 8.7%, up 170 basis points as compared to last year, driven by our operational work that we are doing to optimize our business. Our non-GAAP diluted EPS was $0.92 in the quarter, which is up 10% as compared to $0.84 last year. While the quarter was strong across the board, the two strongest financial results were book-to-bill and free cash flow generations. We delivered $5 billion in bookings for a book to bill of 1.23. This gets us to a book to bill of 1.08 on a trailing 12-month basis. And in Q3, we delivered $550 million in free cash flow. Now let me turn to the progress we are making on our transformation journey. The first step of the journey is to inspire and take care of our colleagues. Hiring was a major focus of ours, and we ramped up our hiring engine to meet the high level of demand and to activate more project work. In the quarter, we increased our headcount by 3% and increased project work by 13%. We continue to see our people-first strategy and our virtual-first model is resonating in the market and helping us in our recruiting efforts. We recently hired Christy Grinnell as our new CIO, and she specifically called out our virtual first model as one of the key items that drew her to DXE. In addition, I am pleased with how we continue to deliver for our people through the COVID pandemic. It is due to all these points that our attrition at DXE has stabilized, and it remains below industry average. Focus on the customer is the next step of our transformation journey and continues to be the primary driver of our success in improving organic revenue. A key metric that we measure is our net promoter score, and I'm happy to report that we continue to see improvement. Currently, our 12-month rolling NPS score is at the upper end of the industry best practice range of 20 to 30. Another piece of our growth strategy is to run our customers' mission-critical systems, which mainly make up our GIS business, and ultimately have these customers award us new work. Running these mission-critical systems builds trust with our customers. This strategy is being successful because we are winning more work from our customers in both GIS and GBS, and our revenues are clearly not going backwards. A great example of this strategy working is the new agreement with Lloyd's. When I started DXE a little over two years ago, Lloyd's was contemplating a significant reorganization without DXE, which would have caused a negative impact to our revenue. Running Lloyd's mission-critical systems well has built trust that enabled us to be chosen to build the future at Lloyd's, which will be the most advanced insurance marketplace in the world. DHC will re-architect and develop a cloud-native platform running on AWS to replace their legacy mainframe platform. Simply put, leveraging the trust we have built with our customers by running their mission-critical systems is how we are stabilizing our revenues and setting ourselves up for growth. Now let me turn to our cost optimization program. We continue to make progress in optimizing our costs and delivering for our customers without disruption. Managing our costs includes executing portfolio shaping initiatives. We have identified businesses with roughly 500 million in revenues that are not strategic and will not help us grow. Selling these businesses will improve our organic revenue growth and our overall margin. We expect the sale of these businesses to result in an additional $500 million in proceeds within the next 12 months. At the same time, we are focused on prudently investing in assets that will enable us to grow. A great example of this is our recently announced relationship with ServiceNow. Here we are leveraging our proprietary technology called PlatformX. which is a data-driven, intelligent automation platform that helps us detect, prevent, and address issues before they happen within our customers' cloud and on-prem IT estates. Nelson Hall named DXC's PlatformX as a leader in cognitive and self-healing IT infrastructure management, reflecting DXC's ability to deliver immediate results through automation. We believe that the ServiceNow relationship will help us execute on a unique opportunity to drive growth in the enterprise service management market due to our capability with PlatformX. Next, seize the market is where we are focused on cross-selling to our existing customers and winning new work. We had a strong quarter of bookings totaling $5 billion and a book-to-bill of 1.23%. 58% of the bookings were new work and 42% were renewals. We're winning in the ITO market, and this is helping us with our organic revenue growth, significantly limiting the declines from double-digit to low single-digit negative declines. Modern workplace is following a very similar path. Our strong 12-month book-to-bill of 1.1 gives us confidence that like ITO, we can take this business from double-digit to low single-digit decline in the next 12 months. Analytics and engineering is a great story as we are converting our strong book to bill of 1.29 on a 12-month basis and growing this business 18.7% in Q3, which is helping us consistently grow our GBS business. We are seeing increased opportunities in the market. We have shown the ability to win, and the investment we have made in execution is paying off, with good deals turning into good revenue, as you can see in ITO and analytics and engineering. Now, let me turn the call over to Ken.